Hunting Annual Report 2015

FY2015 Annual Report · Hunting

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MANAGIN G
THE CY CLE

20 1 5 A NNUAL REPO RT AND AC C OU NT S

ABOUT THIS REPORT

HUNTING GENER ATES VALUE
THROUGH THE M ANUFAC TURE OF
PRODUC TS, SUPPLY OF RENTAL
EQUIPMENT AND PROVISION OF
REL ATED SERVICES TO THE UPSTRE A M
ENERGY SEC TOR ENABLING THE
EX TR AC TION OF OIL AND GA S.

THE FOLLOWING REPORT
PROVIDES AN OVERVIE W OF
OUR BUSINESS STR ATEGY AND
MODEL WITHIN THE ENERGY
SEC TOR AND DE TAILS OUR
AC TIVITIES AND PERFOR M ANCE
DURING 2015.

CONTENTS

STR ATEGIC REPORT

02 Operational and financial summary
04 Chairman’s statement
06 Chief Executive’s review and outlook
09 Our business model
20 Our business strategy
22 Risk management
31 Market review
34 Key performance indicators
36 Group performance and development
42 Group funding and position at year end
44 Corporate and social responsibility

I N F O R M AT I O N O N
O U R R I S K M A N AG E M E N T
P R O C E D U R E S C A N B E
F O U N D O N PAG E S 22 TO 3 0

FINANCIAL STATEMENTS

Independent auditors’ report
74
81 Consolidated income statement
82 Consolidated statement of comprehensive income
83 Consolidated balance sheet
84 Consolidated statement of changes in equity
85 Consolidated statement of cash flows
86 Notes to the consolidated financial statements
124 Company balance sheet
125 Company statement of changes in equity
126 Company statement of cash flows
127 Notes to the Company financial statements

I N F O R M AT I O N O N O U R
B U S I N E S S M O D E L A N D
S T R AT E GY C A N B E F O U N D
O N PAG E S 9 TO 21

CORPOR ATE GOVERNANCE

48 Board of Directors
50 Corporate governance report
54 Directors’ report
55 Audit committee report
59 Remuneration committee report
61 Directors’ remuneration policy summary
65 Annual report on remuneration

I N F O R M AT I O N O N O U R
G R O U P P E R F O R M A N C E
A N D D E V E LO PM E N T C A N B E
F O U N D O N PAG E S 3 6 TO 41

OTHER INFOR M ATION

133 Non-GAAP measures
138 Financial record
139 Shareholder and statutory information
142 Glossary
144 Professional advisers

OPER ATIONAL AND
FINANCIAL SUMM ARY

OPER ATIONAL

Continued development of global operating footprint
• commissioning commenced of high throughput premium
connections facility at Ameriport, US, in Q4 2015 to serve
North American energy markets;

• Cape Town, South Africa, facility commissioned

providing threading, storage and service for sub-Sahara
African markets;

• completion of facility expansion at Houma, US;
• expansion of Hunting Dearborn facility to reduce customer

lead times;

• AMG manufacturing capability established in Singapore;
• new Hunting Titan/Drilling Tools shared distribution and

service centre opened in Odessa, US.

New product innovations developed and
commercialised
• new H-1 perforating system trialled by customers in the year,

and commercialised during Q1 2016 by Hunting Titan;

• WEDGE-LOCK™ and SEAL-LOCK XD™ premium connections

sales increased following first roll out in early 2015;

• new high temperature/high pressure hydraulic couplings

developed and launched by Hunting Subsea;

• new directional drilling tools jointly developed by Drilling Tools,

Hunting Specialty and Hunting Titan businesses.

Cost reduction programme completed during the year
• 30% reduction in headcount in the year;
• four operating sites closed;
• three distribution centres being prepared for closure.

G L O B A L F A C I L I T Y F O O T P R I N T
( m s q f t )

N U M B E R O F C O U N T R I E S
O F O P E R A T I O N

M ARKE T DATA

A V E R A G E W T I C R U D E O I L P R I C E
( $ p e r b a r r e l )

3.2

2.8

48.01

92.91

97.61

2015

2014

2013

2015

2014

2013

2015

2014

2013

G L O B A L D R I L L I N G A N D P R O D U C T I O N E X P E N D I T U R E
( $ b n )

2015

2014

2013

Hunting PLC
2015 Annual Report and Accounts
02

267

391

370

FINANCIAL

Cost reductions and tight cash management achieved
in the year
• cost saving measures implemented across the Group;
• capital expenditure reduced to $81.1m as major projects

were completed.

Positive free cash flows* generated allowing pay down
of net debt*
• $118.0m of free cash generated to give closing net debt

of $110.5m;

• gearing of 9% reported, even with continued capital

investment.

Revenue of $810.5m recorded in the year, with
management actions limiting the impact on gross
margins
• revenue decline in line with reductions in US drilling and

production expenditure;

• 24% underlying gross margin achieved in the year.

Impairment and restructuring charges reflecting
current market conditions
• charges for restructuring costs and impairment to property,
plant and equipment, goodwill and other intangible assets
totalling $259.7m.

Underlying profit from operations* of $16.4m
• Reported loss from operations of $282.2m.

Final dividend of 4.0 cents per share proposed, subject
to shareholder approval
• subject to approval, the dividend will be paid on 6 July 2016,

with a cash cost of $5.9m;

• total dividends for the year 8.0 cents per share, with a total

cash cost of $11.8m.

Underlying – results for the year as reported under IFRS adjusted for the
amortisation of acquired intangibles and exceptional items.

Reported – results for the year under IFRS.

* Non-GAAP measure (“NGM”) (see pages 133 to 137).

R E V E NU E

$810.5m

2014 – $1,386.5m

UN D E R LY I NG PRO FIT
FRO M O P E R ATI O N S*

$16.4m

2014 – $217.8m

N E T D E B T *

$110.5m

2014 – $131.0m

DIV I D E N D S D E C L A R E D

8.0 cents

2014 – 31.0 cents

Hunting PLC
2015 Annual Report and Accounts
03

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCHAIR M AN’S STATEMENT

R I C H A R D H U N T I N G , C . B . E .
C H A I R M A N

“THE CURRENT OIL PRICE
WE AKNESS HA S REDUCED RE VENUE
AND PROFITS IN THE YE AR BUT OUR
STR ATEGY TO RETAIN OPER ATING
CAPACIT Y, IN ANTICIPATION OF
A RECOVERY, REM AINS IN PL ACE .”

Hunting PLC
2015 Annual Report and Accounts
04

Introduction
Hunting had a challenging year in 2015, with the downturn in oil
prices proving deeper and more prolonged than almost anyone
was predicting. Despite that, and the resulting need to rein in
both replacement and growth capital investment, the Company
has retained its manufacturing and production capabilities.

The Group has expanded into new regions, including Saudi
Arabia and sub-Sahara Africa, while aligning its existing
operations in North America with the current market conditions.

Capital investment during the year totalled $81.1m (2014 – $123.5m)
which allowed us to finish or continue projects already underway
in Texas, Louisiana, Maine and South Africa. Inevitably, in this
environment some projects have been deferred or held at the
initial operating capability stage. Nevertheless, our strategy of
retaining our core facilities and skills in readiness for the eventual
recovery in our markets remains unchanged.

U N D E R LY I N G P R O FI T B E F O R E TA X*

$9.4m

2 014 – $212 . 4 m

D I V I D E N D P E R S H A R E
F O R T H E Y E A R

8.0 cents

2 014 – 31. 0 c e n t s

C A P I TA L I N V E S TM E N T

$81.1m

2 014 – $123 . 5m

H U N T I N G H A S O P E N E D A N E W
FAC I LI T Y I N S O U T H A FR I C A I N
E A R LY 2 015

Performance
The year was one of two very different halves. In the first
six months, we were able to take advantage of the market
momentum and of orders received in 2014; but the decline in
business from customers, who were themselves under extreme
pressure, meant that the second half was very difficult.

Underlying profit before tax from continuing operations was
$9.4m (2014 – $212.4m), reflecting the overall difficult operating
environment in the year as a whole.

As with many of our peers, Hunting has undertaken a review of
the carrying values of property, plant and equipment, goodwill
and other intangible assets, leading to a total impairment of
$252.6m being charged to the Group’s income statement
(2014 – $60.9m). Amortisation of acquired intangible assets and
other exceptional items charged to the income statement in the
year totalled $46.0m (2014 – $43.0m). This has led to a reported
loss before tax from continuing operations of $289.2m (2014 –
$108.5m profit).

Dividend
The Board is recommending a final dividend of 4.0 cents per
share (2014 – 22.9 cents per share), representing a fine balance
between loyalty to our shareholders and our wish to maintain a
strong balance sheet. Total dividends declared for the year were
therefore 8.0 cents per share (2014 – 31.0 cents per share).

Governance
In February 2015 we welcomed two new independent non-
executive Directors to the Board, Annell Bay and Jay Glick.
Annell has extensive experience in the upstream exploration
segment of our industry, having worked previously with
integrated majors and large independent exploration companies.
Jay has also brought a wealth of energy-related manufacturing
experience to the Board, having led one of our US peers for
many years, prior to his retirement from executive duties. As
both these segments of the industry are Hunting’s partners,
competitors and customers, their combined insight has been
valuable during this volatile year.

The Board remains compact, capable and dedicated and
I thank all my fellow Directors for their wisdom during these
challenging times.

I am also pleased to note our enhanced Strategic Report which
describes how our current strategy creates long-term value,
combined with our approach to risk management. While the
energy industry is distressed at present, Hunting’s position in
the industry will be strong when the recovery occurs.

Further, I wish to record my gratitude to all of our people. For
those who have had to go, I express my deep regret. For those
remaining, I am extremely grateful. We do not know when the
return to normality in our markets will come, but come it
certainly will.

R I C H A R D H . H U N T I N G , C . B . E .
C H A I R M A N

* Non-GAAP measure (“NGM”) (see pages 133 to 137).

3 March 2016

Hunting PLC
2015 Annual Report and Accounts
05

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
CHIEF EXECUTIVE’S RE VIE W

D E N N I S P R O C T O R
C H I EF E X E C U T I V E

“THE SE VERIT Y AND SPEED
OF THE REDUC TION IN AC TIVIT Y,
PARTICUL ARLY ACROSS
NORTH A MERICA , HA S CRE ATED
CHALLENGES FOR ALL M ARKE T
PARTICIPANTS. THE GROUP HA S
ADAP TED QUICKLY TO THE
CHANGING M ARKE T ENVIRONMENT,
RE ADY TO RESPOND WHEN INDUSTRY
INVESTMENT RECOVER S.”

Hunting PLC
2015 Annual Report and Accounts
06

Introduction
2015 will be remembered in the global energy industry as a
generational decline in investment and activity levels. The severity
and speed of the reduction in activity, particularly across North
America, has created challenges for all market participants. The
Group has adapted quickly to the changing market environment,
and at the same time prepared for a return to growth, with its
manufacturing and service capabilities intact – ready to respond
when industry investment recovers.

In order to capture new business opportunities Hunting
completed and commissioned a new facility in Cape Town,
South Africa, which will enable the Group to access and serve
operators throughout sub-Sahara Africa with manufacturing,
service, repair and storage capabilities. A satellite repair facility
has been commissioned in Mombasa, Kenya, which will further
serve operators on the east coast of Africa, where significant
offshore gas discoveries will drive further exploration and
development activity in the coming years.

Hunting’s efforts in 2015 have focused on six strategic goals:

1. reducing its cost base to align with the short-term outlook

for the industry;

2. maintaining its global manufacturing capability;
3. investing in new facilities where strong future growth is

forecast;

4. demonstrating technological excellence with new products
launched to assist customers with the delivery of projects
in a more efficient and productive way;

5. maintaining margins where Hunting has product leadership;

and

6. reducing inventories to generate cash and manage net debt.

In Q1 2016, the Group also completed its new premium
connection manufacturing facility in Ameriport, US. The facility
has been designed as a high throughput plant, allowing for the
manufacture of premium connections with a wide range of
diameters, serving the North American and international markets.

Hunting has also built and commissioned a world-class premium
connection test facility to accelerate the in-house development of
new connections and thread forms. The facility can test high
pressure/high temperature connections, simulating deep water
drilling environments, which assists Hunting’s technology
development that include the recently developed SEAL-LOCK XD™
and WEDGE-LOCK™ premium connection product lines.

While the early part of 2016 continues to indicate a difficult
market environment, Hunting remains well placed to deliver
quality products and industry leading service to its customer
base, which will position the Group well for the eventual recovery.

The Group’s facility at Fryeburg, US, has been expanded to
increase its high precision manufacturing capabilities, including
MWD/LWD tools and critical aerospace parts. Final
commissioning of the facility will occur in Q1 2016.

Market Backdrop
The performance of all the businesses within the Group has been
impacted by the macro-economic drivers of the industry during
the year. WTI crude oil prices declined 30% in absolute terms
during 2015 to $37 per barrel; global rig counts have reduced
26% and global drilling and production expenditure has been
cut by 32% to c.$267bn during the year, leading to a decrease
in demand for Hunting’s products and services.

This environment has led to common themes being reported
by many businesses within the Hunting group, with industry
participants cancelling or deferring orders, demanding aggressive
price reductions across all product groups, and in-housing
production to increase pricing pressure on global vendors.

Our Response
Hunting’s response to the current market environment has been
clear. The Group has undertaken a major reduction in workforce
across all of its operations to align its businesses with these
lower activity levels. Headcount has reduced by 30% to 2,784
at the year end (2014 – 4,003).

Management reviewed the Group’s manufacturing operations
and in the year closed four facilities, including its Canada Drilling
Tools operation in Nisku, Canada, the US Manufacturing facility
at Woodlawn, Louisiana, and rationalised the US Drilling Tools
business. The Group has also initiated plans to close three
distribution centres. The Group will also continue to monitor its
global operational footprint to maximise its operating efficiency,
as new facilities are commissioned.

During 2015, Hunting’s Advanced Manufacturing Group (“AMG”)
commenced operations in Singapore, giving customers in the
region access to Hunting’s electronics product lines, including
MWD/LWD printed circuit boards.

Hunting Titan has commercialised and launched the H-1
perforating system for use in well completions. The system
draws on Hunting’s expertise in electronics, pressure control,
perforating and premium connections and delivers a safe,
reliable and efficient total perforating solution to Hunting’s
global customers.

While most businesses reported a decline in activity, Hunting
Subsea reported a good performance in the year, due to strong
momentum in the deep water drilling segment of the industry.

Our threading facility at Marrero, Louisiana, has also seen very
strong demand for large diameter threaded pipe for use in deep
water projects and had a busy order book in the year, which
continued in to the early months of 2016.

While the Group’s revenue has reduced in the year, as detailed
below, management have defended pricing and margins
wherever possible principally through reducing the cost base.

Financial Summary
Hunting’s performance in the year has seen revenue decline
42% from $1,386.5m in 2014 to $810.5m. This is broadly in line
with the reduction in industry expenditures reported by leading
sector commentators and data sources.

The Group has been firmly focused on cash generation to
allow it to continue to invest for the future, while at the same
time managing net debt levels appropriately. In 2015, Hunting
generated $118.0m of free cash flow resulting in year end net debt
of $110.5m to give gearing of 9% (2014 – 9%), even though capital
investments absorbed $81.1m (2014 – $123.5m) in the year.

While employee-related costs were reduced during the year,
total cost of sales and net other operating expenses were
$794.1m (2014 – $1,168.7m) leading to a decline in underlying
profit from continuing operations to $16.4m (2014 – $217.8m),
with underlying diluted earnings per share reducing from
100.0 cents in 2014 to 3.1 cents.

Hunting PLC
2015 Annual Report and Accounts
07

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCHIEF EXECUTIVE’S RE VIE W
C ONTIN UED

Underlying

Reported

2015
$m
810.5
61.9
16.4
9.4
4.0

–
4.0
3.1

2014
$m
1,386.5
269.8
217.8
212.4
155.2

0.3
155.5
100.0

2015
$m
810.5
54.8
(282.2)
(289.2)
(231.4)

4.2
(227.2)
(156.1)

2014
$m
1,386.5
269.6
113.9
108.5
71.8

1.4
73.2
44.8

Oversupply is driving this painful contraction and this oversupply
is driven by oil producing countries seemingly blind to their own
destructive actions globally and especially within their own
countries. Damage to future supplies requiring long lead times
is approaching permanence and any future demand growth
will require massive capital and oilfield service capacity.

During this bleak period, we will continue to protect gross
margins, emphasise quality and remain focused on health and
safety. Absent large volume intake, each of our facilities is
measured by free cash generation. Costs will be reduced to
maintain free cash until no option exists but to close or, if
possible, consolidate the product lines into another facility.

The Group maintains an excellent balance sheet, best-of-class
global manufacturing facilities, producing complex, proprietary
components led by an experienced management team. An
industry recovery is assured, followed by strong momentum,
but timing is elusive. The Group has and will continue to act
decisively to safeguard an exciting and profitable future.

Revenue
EBITDA
Profit (loss) from operations
Profit (loss) before tax
Profit (loss) for the year
Discontinued operations:
Profit for the year
Total profit (loss) for the year
Diluted EPS – continuing operations (cents)

Given the market backdrop and future market projections,
management has undertaken an asset impairment review. As a
result, the Board is reporting a number of non-cash impairments:
a goodwill impairment charge of $208.2m for the year in respect
of a number of Group businesses, an other intangible asset
impairment charge of $11.2m against customer relationships
relating to the Electronics and Doffing acquisitions, an impairment
charge to property, plant and equipment of $26.8m within the
Drilling Tools business and a $6.4m impairment charge against
the Group’s oil and gas related assets. Total exceptional charges,
comprising these impairments, together with amortisation of
acquired intangible assets of $38.9m and $7.1m restructuring
costs incurred during the year, were $298.6m (2014 – $103.9m).

The reported loss from continuing operations, before interest
and tax, in 2015 was therefore $282.2m (2014 – $113.9m profit)
leading to a reported diluted loss per share of 156.1 cents (2014
– earnings per share 44.8 cents) being recorded.

Outlook
Simply put: not good, certainly for the next few months. The
degree and speed of the oil and gas industry contraction,
coupled with project delays/cancellations, E&P bankruptcies,
currency volatility, full out oil production and geopolitical
influences, will strain the confidence of industry leaders, thus
freezing any positive decisions. We are in a wilderness without
a single path to guide us.

Certainly, $145 oil created enough new supply to drive prices to
the current $30 level. With equal certainty, $30 oil will strangle
production enough to drive the price back up. With such an
inelastic commodity, the outlook is always the same – a sudden
snapback comes when least expected.

Hunting PLC
2015 Annual Report and Accounts
08

OUR BUSINESS MODEL

A N OV E RVI E W
H OW W E CR E AT E , C A P TUR E
A ND DI S TR IBUT E VA LU E .

OIL AND GA S E X TR AC TION
F O CU S O N T H E W E L L B O R E

G O TO PAG E 14

R AW M AT E R I A L S

SUPPLI E R S

C A P I TA L E Q U I PM E N T

O U R P E O P L E

OUR R E S OURCE S
K N OW- H OW/ PAT E N T S

O P E R AT I N G FAC I LI T I E S

Our highly skilled people apply their sector know-how and market
knowledge across our globally distributed operating facilities.
G O TO PAG E 16

M A N U FAC T U R I N G

O PE R ATING PRO CE S S E S
T R A D I N G

E Q U I PM E N T R E N TA L

Our management approach is decentralised and empowers
our local businesses to react to local market conditions.
G O TO PAG E 18

OUTPUT S
Our diverse range of products and services.
G O TO PAG E 10

Categorised into six major product groups with distinct business characteristics.
G O TO PAG E 12

CUSTOM E R S
A broad customer base spread across the oil and gas value chain.
G O TO PAG E 15

SUSTAINABLE VALUE CR E ATION
We create value for:

O U R S H A R E H O L D E R S

O U R E M P LOY E E S

O U R CU S TO M E R S
A N D S U P P LI E R S

T H E CO M M U N I T I E S
A N D CO U N T R I E S I N W H I C H
W E O P E R AT E

Hunting PLC
2015 Annual Report and Accounts
09

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONOUR BUSINESS MODEL
C ONTIN UED

OUR DIV E R S E R A NG E O F
PRO DUC T S A ND S E RVI C E S

C A S ING
API and premium
threaded casing and
Oil Country Tubular
Goods.

CONN E C TI ON
T E CHN O LO GY
Proprietary range of
SEAL-LOCKTM
premium connections
for threaded pipe and
couplings.

A PR S
Proprietary Annular
Pressure Relief System.

DR ILLING
TO O L S
Mud motors, vibration
dampeners, stabilisers
and reamers.

M A NUFAC TUR ING
Completion accessories,
premium threading
services, OEM
manufacturing.

E LE C TRONI C S
MWD/LWD
components and down
hole power supply
units, PCB and
manufacturing
services.

W E DG E - LO C K ™
New proprietary
premium threading
products, research,
development and
testing.

D OWN H O LE
SUPPLY
Screens, MWD
electrical and running
gear components, float
valve assemblies and
handling equipment.

Hunting PLC
2015 Annual Report and Accounts
10

HUNTING I S A M A NU FAC TUR E R A N D
DI S TR IBUTO R O F INN OVATIV E O E M A N D
PRO PR I E TARY PRO DUC T S TO TH E UP S TR E A M
O IL A ND G A S IN DU S TRY

PR E CI S I ON
M ACHINING
Deep bore machining for
directional drilling and
geo-steering tools,
inserts and collars for
MWD/LWD tools.

PE R F O R ATING
SYS T E M S
Perforating guns and
setting tools, energetics,
wireline and TCP,
hardware and
accessories.

LO GGING
SYS T E M S
Production logging tools
and instruments.

SUB S E A
Hydraulic valves, couplings
and chemical injection
systems.

SWITCH G E A R
Wireline selective firing
systems, EBFire™
switches, RF safe
ControlFire™ and
shooting power
software.

W E LL
INT E RV E NTI ON
Pressure control
equipment, Bottom Hole
Assembly services,
slickline and wireline
tools.

S
T
R
A
T
E
G

R
E
P
O
R
T

C
O
R
P
O
R
A
T
E

G
O
V
E
R
N
A
N
C
E

F
I

N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

O
T
H
E
R

N
F
O
R
M
A
T
I

O
N

VA R IBALL
Proprietary rolling system
for the delivery of tools in
highly deviated wellbores.

TH RU -TUB ING
Advanced, tailored
solutions for a wide range
of work-over and coiled
tubing interventions.

Hunting PLC
2015 Annual Report and Accounts
11

OUR BUSINESS MODEL
C ONTIN UED

OUR O PE R ATING AC TIVITI E S
A ND PRO DUC T GROU P S

HUNTING’ S S IX M AJ O R
PRO DUC T GROUP S

HUNTING’ S TH R E E M AIN
O PE R ATING AC TIVITI E S

OV E RVI E W

O IL COUNTRY TUBUL AR
G O O D S (“O C TG” )

PE R F O R ATING SYS T E M S

A DVA N C E D

M A NUFAC TUR ING

G ROU P (“A M G” )

DR ILLING TO O L S

INT E RV E NTI ON TO O L S

SUB S E A

Manufacturing, Trading

Manufacturing

Equipment Rental, Trading

Manufacturing, Equipment

Manufacturing

Hunting Titan manufactures
perforating guns, energetics,
firing systems and logging
tools. Products are mainly used
in the completion phase of a
well. The production, storage
and distribution of energetics is
highly regulated and there are
significant barriers for new
entrants to the market. Hunting
Titan mainly “manufactures to
stock” and hence uses a wide
distribution network. Some
manufacturing is done to order,
including international telesales.

OCTG are steel alloy products
and comprise casing and tubing
used in the construction and
completion of the wellbore.
Hunting machines threads to
connect OCTG using flush or
semi-flush joints and can
manufacture premium connections
and accessories using our own
technologies such as SEAL-
LOCKTM and WEDGE-LOCKTM.
We are licensed to apply a variety
of competitor thread forms and
generic API threads. We source
OCTG products from a significant
number of the major global steel
producers and have strong,
long-term relationships in the US,
Europe and Asia. Hunting trades
pipe, which is a lower margin
activity, to help support customer
relationships.

This division includes the

Rental of a large portfolio of

A range of downhole

Hunting Dearborn business unit

downhole tools including mud

which carries out deep hole

motors, non-magnetic drill

drilling and precision machining

collars, vibration dampners,

of complex MWD, LWD and

formation evaluation tool

components, and the Hunting

Electronics division which

reamers and hole openers.

Tools are configured to the

customers’ specifications.

This business is capital

produces printed circuit boards

intensive and results are

capable of operating in extreme

dependent on fleet utilisation

conditions. The division works

collaboratively with customers

implementing their designs to

and rental rates. In limited

instances rental equipment

is sold outright.

their specification.

Rental and Trading

intervention tools including

slickline tools, e-line tools,

mechanical plant, coiled

tubing and pressure control

equipment. This business is

capital intensive and results

are dependent on asset

utilisation and rental rates.

Produces high quality products

and solutions for the global

subsea industry covering

hydraulic couplings, chemical

injection systems, specialty

valves and weldment services.

DI FFE R E NTIATO R S

Hunting is one of the largest
independent providers of OCTG
connection technology,
including premium connections.

Market leading position in the
US. Strong portfolio of patented
and unpatented technology.

Hunting Dearborn is a world

Leaders in progressive cavity,

Hunting offers a comprehensive

For more than 30 years a

leader in the deep drilling of high

positive displacement mud

motors.

range of tools, including

innovative and proprietary

technologies.

provider of high quality

metal-to-metal sealing hydraulic

coupling solutions to operate

in the harshest environments

with a strong, long-term

patent base.

grade, non-magnetic

components. As a Group,

Hunting has the ability to

produce fully integrated

advanced downhole tools and

equipment, manufactured,

assembled and tested to the

customer’s specifications using

its proprietary know-how.

GLO BAL O PE R ATING PR E S E N C E

O U R O P E R AT I O N S A N D M A R K E T S
PAG E S 16 A N D 17

R E L AT E D S TR AT E GI C F O CU S A R E A S

O U R S T R AT E GY
PAG E S 20 A N D 21

R E L AT E D PR IN CI PAL R I S K S

M O R E I N F O R M AT I O N O N R I S K
PAG E S 26 TO 29

Hunting has extensive
machining capacity in the US,
Canada, Europe, Asia and
Africa.

Manufacturing centres in the
US, Canada, Mexico and
China. Distribution centres in
the US, Canada, UK and Asia.

New products – develop the
full WEDGE-LOCK™ range,
complete the production and
test facility at Ameriport, US.

Enhance existing capacity, lean
manufacturing – new threading
facility at Ameriport, US.

Develop global presence –
establishing presence in Africa.

Sales synergies – enhancing
European distribution network.

Develop global presence –
developing sales organisation
in Australia.

New products – H-1
perforating system.

US, Asia.

US.

US, Canada, Europe, Asia,

US.

Middle East.

Develop global presence –

Cost control – closure of

Develop global presence –

New products – extreme high

AMG facility established

Canadian operations in 2015.

developing operating presence

pressure/high temperature

in Singapore.

in Africa, enhancing presence

subsea tree hydraulic coupling.

Enhance existing capacity –

Dearborn campus expansion.

in Asia.

New products – lightweight

pressure control equipment

system.

Commodity prices, Shale drilling,
Competition, Product quality.

Commodity prices, Shale
drilling.

Commodity prices,

Commodity prices, Shale

Commodity prices.

Commodity prices, Product

Competition, Product quality.

drilling.

quality.

Hunting PLC
2015 Annual Report and Accounts
12

HUNTING’ S S IX M AJ O R

PRO DUC T GROU P S

HUNTING’ S TH R E E M AIN

O PE R ATING AC TIVITI E S

OV E RVI E W

DI FFE R E NTIATO R S

G LO BAL O PE R ATING PR E S E N C E

O U R O P E R AT I O N S A N D M A R K E T S

PAG E S 16 A N D 17

R E L AT E D S TR AT E GI C F O CU S A R E A S

O U R S T R AT E GY

PAG E S 20 A N D 21

R E L AT E D PR IN CI PAL R I S K S

M O R E I N F O R M AT I O N O N R I S K

PAG E S 26 TO 29

OCTG are steel alloy products

Hunting Titan manufactures

and comprise casing and tubing

perforating guns, energetics,

used in the construction and

completion of the wellbore.

Hunting machines threads to

connect OCTG using flush or

semi-flush joints and can

firing systems and logging

tools. Products are mainly used

in the completion phase of a

well. The production, storage

and distribution of energetics is

manufacture premium connections

highly regulated and there are

and accessories using our own

significant barriers for new

technologies such as SEAL-

LOCKTM and WEDGE-LOCKTM.

entrants to the market. Hunting

Titan mainly “manufactures to

We are licensed to apply a variety

stock” and hence uses a wide

of competitor thread forms and

generic API threads. We source

distribution network. Some

manufacturing is done to order,

OCTG products from a significant

including international telesales.

number of the major global steel

producers and have strong,

long-term relationships in the US,

Europe and Asia. Hunting trades

pipe, which is a lower margin

activity, to help support customer

relationships.

Hunting is one of the largest

Market leading position in the

independent providers of OCTG

US. Strong portfolio of patented

connection technology,

and unpatented technology.

including premium connections.

Hunting has extensive

Manufacturing centres in the

machining capacity in the US,

US, Canada, Mexico and

Canada, Europe, Asia and

Africa.

China. Distribution centres in

the US, Canada, UK and Asia.

New products – develop the

full WEDGE-LOCK™ range,

complete the production and

test facility at Ameriport, US.

Sales synergies – enhancing

European distribution network.

Develop global presence –

developing sales organisation

Enhance existing capacity, lean

in Australia.

manufacturing – new threading

facility at Ameriport, US.

New products – H-1

perforating system.

Develop global presence –

establishing presence in Africa.

O IL COUNTRY TUBUL AR

PE R F O R ATING SYS T E M S

G O O D S (“O C TG” )

A DVA N C E D
M A NUFAC TUR ING
GROUP (“A M G” )

DR ILLING TO O L S

INT E RV E NTI ON TO O L S

SUB S E A

Manufacturing, Trading

Manufacturing

Equipment Rental, Trading

This division includes the
Hunting Dearborn business unit
which carries out deep hole
drilling and precision machining
of complex MWD, LWD and
formation evaluation tool
components, and the Hunting
Electronics division which
produces printed circuit boards
capable of operating in extreme
conditions. The division works
collaboratively with customers
implementing their designs to
their specification.

Rental of a large portfolio of
downhole tools including mud
motors, non-magnetic drill
collars, vibration dampners,
reamers and hole openers.
Tools are configured to the
customers’ specifications.
This business is capital
intensive and results are
dependent on fleet utilisation
and rental rates. In limited
instances rental equipment
is sold outright.

Manufacturing, Equipment
Rental and Trading

Manufacturing

A range of downhole
intervention tools including
slickline tools, e-line tools,
mechanical plant, coiled
tubing and pressure control
equipment. This business is
capital intensive and results
are dependent on asset
utilisation and rental rates.

Produces high quality products
and solutions for the global
subsea industry covering
hydraulic couplings, chemical
injection systems, specialty
valves and weldment services.

Hunting Dearborn is a world
leader in the deep drilling of high
grade, non-magnetic
components. As a Group,
Hunting has the ability to
produce fully integrated
advanced downhole tools and
equipment, manufactured,
assembled and tested to the
customer’s specifications using
its proprietary know-how.

Leaders in progressive cavity,
positive displacement mud
motors.

Hunting offers a comprehensive
range of tools, including
innovative and proprietary
technologies.

For more than 30 years a
provider of high quality
metal-to-metal sealing hydraulic
coupling solutions to operate
in the harshest environments
with a strong, long-term
patent base.

US, Asia.

US.

US, Canada, Europe, Asia,
Middle East.

US.

Develop global presence –
AMG facility established
in Singapore.

Enhance existing capacity –
Dearborn campus expansion.

Cost control – closure of
Canadian operations in 2015.

Develop global presence –
developing operating presence
in Africa, enhancing presence
in Asia.

New products – lightweight
pressure control equipment
system.

New products – extreme high
pressure/high temperature
subsea tree hydraulic coupling.

Commodity prices, Shale drilling,

Commodity prices, Shale

Competition, Product quality.

drilling.

Commodity prices,
Competition, Product quality.

Commodity prices, Shale
drilling.

Commodity prices.

Commodity prices, Product
quality.

Hunting PLC
2015 Annual Report and Accounts
13

S
T
R
A
T
E
G

R
E
P
O
R
T

C
O
R
P
O
R
A
T
E

G
O
V
E
R
N
A
N
C
E

F
I

N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

O
T
H
E
R

N
F
O
R
M
A
T
I

O
N

OUR BUSINESS MODEL
C ONTIN UED

O IL A ND G A S E X TR AC TI ON
F O CU S ON TH E W E LLB O R E .

W E LL CON S TRUC TI ON
The well construction phase
includes all activities related to
setting up the infrastructure of the
wellbore. Hunting supplies OCTG,
AMG and Drilling Tool products
from this segment.

W E LL CO M PLE TI ON
Well completion is the process
of initiating the flow of hydrocarbons
to the surface. Hunting supplies
OCTG and Titan products from
this segment.

W E LL INT E RV E NTI ON
Well intervention occurs while a well
is in production to enable the flow
to be maintained and to operate
efficiently. In this segment Hunting
supplies intervention tools to be
used downhole and provides
hydraulic subsea equipment.

REVENUE

UN DERL YIN G PROF IT
FROM OPE RA TIONS

A VE RAG E NU MBER
OF EM PLO YEES

1. W E L L CO N S T RU C T I O N

$211.4m

2 014 – $378 . 3 m

$1.9m

2 014 – $ 53 . 0 m

866

2 014 – 1, 0 81

2 . W E L L CO M P L E T I O N

$488.6m

2 014 – $ 8 62 . 6 m

$14.2m

2 014 – $14 0 . 8 m

1,877

2 014 – 2 , 237

3 . W E L L I N T E RV E N T I O N

$106.3m

2 014 – $135. 5m

$4.6m

2 014 – $23 . 8 m

Hunting PLC
2015 Annual Report and Accounts
14

499

2 014 – 4 83

OUR CU S TO M E R S A ND CH A NN E L S TO M A R K E T
HUNTING HA S A B ROAD R A NG E O F CU S TO M E R S
A ND A NUM B E R O F CH A NN E L S TO M A R K E T.

O PE R ATO R S
NOCs/IOCs/Independents

S E RVI C E CO M PA NI E S

S T E E L M ILL S/OTH E R

O PE R ATO R S
Operators are the end consumers
of our products and related services.
These include National Oil Companies
(“NOCs”), International Oil Companies
(“IOCs”) and Independents.
Approximately 30% of our sales
are made directly to operators.
Key direct customers include
Chevron, Apache and Maersk.

S E RVI C E CO M PA NI E S
Our primary route to market is
via other service providers which
generate c.60% of our revenue.
These include “1st tier” service
companies who can provide
project management services to
the operators. Key customers
include Halliburton, Baker Hughes,
Schlumberger and Weatherford.

S T E E L M ILL S/OTH E R
Steel mills are key suppliers to
our business, however, in some
circumstances we can perform threading
services for them or supply OCTG
products. Other sales include oil and
gas related sales through agents or
intermediaries together with non oil and
gas sector sales made by our Trenchless,
Dearborn and Electronics operations.

c.30%

o f o u r r e ve n u e

c.60%

o f o u r r e ve n u e

c.10%

o f o u r r e ve n u e

OUR TOP TEN C USTO MERS
REPRESENT c.4 1% OF REVENUE

OUR LA RGE ST C US TOM E R
REPR ESE NTS c.11% OF REV ENUE

Hunting PLC
2015 Annual Report and Accounts
15

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONOUR BUSINESS MODEL
C ONTIN UED

OUR O PE R ATI ON S A ND M AR K E T S
OUR BU S IN E S S E S N E E D TO B E
CLO S E TO OUR CU S TO M E R S
A ND A R E TH E R E F O R E BA S E D
IN O R N E A R TH E M AIN O IL A ND
G A S PRO DUCING R E GI ON S .

Conventional oil and gas basin

Unconventional oil and gas basin

Key Operating Locations

GLO BAL R E V E NU E

U S

C A NA DA

$810.5m

1. US
2. Canada
3. Europe
4. Middle East, Africa and Other
5. Asia Pacific

$511.2m
REVENUE

2,032
AVERAGE EMPLOYEES

$56.1m
REVENUE

180
AVERAGE EMPLOYEES

21
OPERATING SITES

1,707k
SQUARE FEET

1
OPERATING SITE

96k
SQUARE FEET

22
DISTRIBUTION CENTRES

302k
SQUARE FEET

9
DISTRIBUTION CENTRES

66k
SQUARE FEET

The Canadian market is highly seasonal
and can be impacted by prevailing weather
conditions. Many oil and gas projects in
the region are based on tar sands/heavy
oil and have high break-even costs,
therefore making the market sensitive to
changes in global commodity prices.

The US is our primary market and has the
broadest product portfolio. Our products
are used both onshore and in the Gulf of
Mexico. The US has the highest profitability
due to benefits of scale, the impact of the
Hunting Titan product lines and a higher
use of proprietary technologies. Through
the Hunting Titan acquisition in 2011 a
broad distribution network is available and
synergies are now being found with other
product lines.

Hunting PLC
2015 Annual Report and Accounts
16

S
T
R
A
T
E
G

R
E
P
O
R
T

C
O
R
P
O
R
A
T
E

G
O
V
E
R
N
A
N
C
E

F
I

N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

O
T
H
E
R

N
F
O
R
M
A
T
I

O
N

EURO PE

$134.6m
REVENUE

MIDDLE EAST, AFRICA AND OTHER

A S IA PACI FI C

468
AVERAGE EMPLOYEES

$18.5m
REVENUE

66
AVERAGE EMPLOYEES

$90.1m
REVENUE

565
AVERAGE EMPLOYEES

8
OPERATING SITES

206k
SQUARE FEET

5
OPERATING SITES

154k
SQUARE FEET

7
OPERATING SITES

530k
SQUARE FEET

3
DISTRIBUTION CENTRES

85k
SQUARE FEET

Our European operations principally
service the North Sea and are located in
the UK, the Netherlands and Norway.
OCTG are the major product for the region
and margins are impacted by the high
usage of third-party licensed threading
technology in this market. This region has
been at the forefront of developing our
well intervention products.

1
DISTRIBUTION CENTRE

5k
SQUARE FEET

We have an established operation in Dubai
supplying well intervention tools and
OCTG. We are expanding our operations
in the Middle East through a joint venture
in Saudi Arabia. We are also building a
presence in Africa with operations being
set up in South Africa and Kenya.

Asia Pacific is now our second largest
region and we have operations in
Singapore, China, Indonesia and
Thailand. The region is expanding from
its OCTG base and is developing
intervention tool and Hunting Titan
product sales. Plans are in place to
develop AMG capabilities.

Hunting PLC
2015 Annual Report and Accounts
17

OUR BUSINESS MODEL
C ONTIN UED

OUR M A NAG E M E NT
A PPROACH

D E V E LO P OUR PE O PLE
People are at the heart of our business.
Our broad product portfolio demands
experienced engineering and
production staff crossing many
manufacturing disciplines.

Hunting has established regional training
centres in North America and Asia Pacific
to ensure its workforce is at the forefront
of new industry developments.

E M P OW E R OUR O PE R ATING
BU S IN E S S UNIT S
The oil and gas industry is a fast paced
sector, where product requirements
and customer demands can operate
on short lead times.

Our business leaders are empowered to
react quickly to local market conditions
as and when opportunities arise.

A PPLY UNI FI E D
O PE R ATING S TA NDA R D S
A N D PRO C E DUR E S
Demanding safety and quality policies
are developed centrally and then applied
locally. We continually monitor and raise
our operating standards.

M AINTAIN A S TRONG
G OV E R NA N C E FR A M E WO R K
The Group’s leaders and their teams
operate within a tight framework of
controls, monitored and directed at both
a regional and central level and ultimately
under the direction of the Board.

Hunting PLC
2015 Annual Report and Accounts
18

Hunting PLC

2015 Annual Report and Accounts

S
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C
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P
O
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A
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G
O
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A
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C
E

F
I

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A
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A
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S
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S

O
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N
F
O
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M
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O
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D E V E LO P

OUR PE O PLE

E M P OW E R OUR
O PE R ATING
BU S IN E S S UNIT S

A PPLY UNI FI E D
O PE R ATING
S TA NDAR D S A N D
PRO C E DUR E S

M AINTAIN
A S TRONG
G OV E R NA N C E
FR A M E WO R K

Hunting PLC
2015 Annual Report and Accounts
19

OUR BUSINESS STR ATEGY

HUNTING’ S S TR AT E GI C PR I O R ITI E S A R E BA S E D ON A
BU S IN E S S M O D E L D E S IGN E D TO D E LIV E R SU S TAINA B LE
LONG -T E R M S HAR E H O LD E R VA LU E W HILE
R E CO GNI S ING OUR CO R P O R AT E R E S P ON S IB ILITI E S .

S TR AT E GI C PR I O R IT Y

S TR AT E GI C F O CU S A R E A S

2015 PRO GR E S S

R E L AT E D K PI s

R E L AT E D R I S K S

GROW TH
Our aim is to continue to develop
our global presence and supply a
comprehensive range of products for
use in the wellbore. We will grow through
capital investment in existing businesses
and through acquisitions.

• Extend global presence.
• Acquire complementary businesses.
• Enhance existing capacity.
• Develop new products.

O PE R ATI ONA L E XC E LLE N C E
We operate in a highly competitive and
cyclical sector which is high profile and
strongly regulated. To be successful we
must deliver high quality and reliable
products and services cost effectively.

• Leverage strong brand.
• Enhance quality control.
• Maintain operational flexibility.
• Leverage lean manufacturing.
• Increase strong relationships with

customers and suppliers.

S TRONG R E TUR N S
In normal phases of the oil and gas cycle
our business has the capability to produce
high levels of profitability, strong cash
generation, growing dividends for
shareholders and good returns on capital.

• Introduce new and

proprietary products.
• Develop sales synergies.
• Increase market share.
• Maintain close cost control.

CO R P O R AT E R E S P ON S IB ILIT Y
We are committed to act with high
standards of integrity and to create
positive, long-lasting relationships with our
customers, suppliers, employees and the
wider communities in which we operate.

• Retain experienced senior

management team.

• Skilled workforce.
• Safe operations.
• Protect the environment.
• Compliance.

• New facility in Cape Town, South

Africa, became operational.
• Joint venture in Saudi Arabia

established and trading commenced.
• Expansion at Houma, US, completed,

to serve the Gulf of Mexico.

• Final commissioning of premium

connection and test facility
commenced at Ameriport, US,
in December.

• AMG operation established

in Singapore.

• Global supply arrangements being
negotiated with key customers.
• Development of Hunting Titan
H-1 perforating system which
will increase safety and reduce
on site assembly times.
• WEDGE-LOCK™ premium
connections being sold in
commercial volumes, additional
sizes being developed.

• Product catalogues rationalised and
consistent Hunting branding applied.

• Returns in 2015 were adversely

impacted by the significant downturn
in activity levels.

• Cost reduction programmes have been
implemented with staffing levels reduced
by 30% resulting in annualised savings.
• Four operating sites have been closed

as part of the rationalisation as new sites
have become active.

• Three distribution centres are shortly
to be closed within Hunting Titan as a
result of the downturn.

• Awards granted under Hunting PSP.
• Implementing new legislative

requirements.

• Environmental initiatives implemented

at new facilities.

Hunting PLC
2015 Annual Report and Accounts
20

R E V E N U E

CO U N T R I E S W I T H

O P E R AT I O N S

C A P I TA L

I N V E S TM E N T

O P E R AT I N G

F O OT P R I N T

$810.5m

$81.1m

3.2m sq ft

2 014 – $1, 3 8 6 . 5m

2 014 – 12

2 014 – $123 . 5m

2 014 – 2 . 8 m s q f t

• Geopolitics

• Investment

• Competition

• Product quality

• Commodity prices

• Shale drilling

IS O 9 0 01 (QUALIT Y )

AC C R E D I T E D

O P E R AT I N G S I T E S

I N T E R N A L

M A N U FAC T U R I N G

R E J E C T R AT E

50%

2 014 – 51%

0.81%

2 014 – 0 . 81%

• Product quality

• Key executives

• Competition

U N D E R LY I N G

G R O S S M A RG I N

FR E E C A S H

FLOW

R E T U R N O N AV E R AG E

C A P I TA L E M P LOY E D

D I V I D E N D

D E C L A R E D

24%

$118.0m

8.0c

2 014 – 32%

2 014 – $18 2 . 3 m

2 014 – 13%

2 014 – 31. 0 c

• Commodity prices

• Competition

I N C I D E N T

R AT E

1.13

2 014 – 1.92

C A R B O N D I OX I D E

E M I S S I O N S

( k g /s q f t )

10.4

2 014 – 15. 0

• Key executives

• Health, safety and environment

FU R T H E R K P I I N F O R M AT I O N ,

I N C LU D I N G P E R F O R M A N C E T R E N D S

S EE PAG E S 3 4 A N D 35.

FU R T H E R I N F O R M AT I O N

O N T H E P R I N C I PA L R I S K S

S EE PAG E S 26 TO 29.

S TR AT E GI C PR I O R IT Y

S TR AT E GI C F O CU S A R E A S

2015 PRO GR E S S

R E L AT E D K PI s

R E L AT E D R I S K S

G ROW TH

Our aim is to continue to develop

our global presence and supply a

comprehensive range of products for

use in the wellbore. We will grow through

capital investment in existing businesses

and through acquisitions.

• Extend global presence.

• Acquire complementary businesses.

• Enhance existing capacity.

• Develop new products.

R E V E N U E

CO U N T R I E S W I T H
O P E R AT I O N S

C A P I TA L
I N V E S TM E N T

O P E R AT I N G
F O OT P R I N T

$810.5m

$81.1m

3.2m sq ft

2 014 – $1, 3 8 6 . 5m

2 014 – 12

2 014 – $123 . 5m

2 014 – 2 . 8 m s q f t

• Geopolitics
• Investment
• Competition
• Product quality
• Commodity prices
• Shale drilling

O PE R ATI ONA L E XC E LLE N C E

We operate in a highly competitive and

cyclical sector which is high profile and

strongly regulated. To be successful we

must deliver high quality and reliable

products and services cost effectively.

• Leverage strong brand.

• Enhance quality control.

• Maintain operational flexibility.

• Leverage lean manufacturing.

• Increase strong relationships with

customers and suppliers.

IS O 9 0 01 (QUALIT Y )
AC C R E D I T E D
O P E R AT I N G S I T E S

I N T E R N A L
M A N U FAC T U R I N G
R E J E C T R AT E

50%

2 014 – 51%

0.81%

2 014 – 0 . 81%

• Product quality
• Key executives
• Competition

S TRONG R E TUR N S

In normal phases of the oil and gas cycle

our business has the capability to produce

high levels of profitability, strong cash

generation, growing dividends for

shareholders and good returns on capital.

• Introduce new and

proprietary products.

• Develop sales synergies.

• Increase market share.

• Maintain close cost control.

U N D E R LY I N G
G R O S S M A RG I N

FR E E C A S H
FLOW

R E T U R N O N AV E R AG E
C A P I TA L E M P LOY E D

D I V I D E N D
D E C L A R E D

24%

$118.0m

8.0c

2 014 – 32%

2 014 – $18 2 . 3 m

2 014 – 13%

2 014 – 31. 0 c

• Commodity prices
• Competition

CO R P O R AT E R E S P ON S IB ILIT Y

• Retain experienced senior

We are committed to act with high

standards of integrity and to create

positive, long-lasting relationships with our

customers, suppliers, employees and the

wider communities in which we operate.

management team.

• Skilled workforce.

• Safe operations.

• Protect the environment.

• Compliance.

I N C I D E N T
R AT E

1.13

2 014 – 1.92

C A R B O N D I OX I D E
E M I S S I O N S
( k g /s q f t )

10.4

2 014 – 15 . 0

• Key executives
• Health, safety and environment

FU R T H E R K P I I N F O R M AT I O N ,
I N C LU D I N G P E R F O R M A N C E T R E N D S
S EE PAG E S 3 4 A N D 35.

FU R T H E R I N F O R M AT I O N
O N T H E P R I N C I PA L R I S K S
S EE PAG E S 26 TO 29.

Hunting PLC
2015 Annual Report and Accounts
21

• New facility in Cape Town, South

Africa, became operational.

• Joint venture in Saudi Arabia

established and trading commenced.

• Expansion at Houma, US, completed,

to serve the Gulf of Mexico.

• Final commissioning of premium

connection and test facility

commenced at Ameriport, US,

• AMG operation established

in December.

in Singapore.

• Global supply arrangements being

negotiated with key customers.

• Development of Hunting Titan

H-1 perforating system which

will increase safety and reduce

on site assembly times.

• WEDGE-LOCK™ premium

connections being sold in

commercial volumes, additional

sizes being developed.

• Product catalogues rationalised and

consistent Hunting branding applied.

• Returns in 2015 were adversely

impacted by the significant downturn

in activity levels.

• Cost reduction programmes have been

implemented with staffing levels reduced

by 30% resulting in annualised savings.

• Four operating sites have been closed

as part of the rationalisation as new sites

have become active.

• Three distribution centres are shortly

to be closed within Hunting Titan as a

result of the downturn.

• Awards granted under Hunting PSP.

• Implementing new legislative

• Environmental initiatives implemented

requirements.

at new facilities.

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONRISK M ANAGEMENT

RISK M ANAGEMENT ROLES
& RESPONSIBILITIES
TH E B OAR D HA S D E FIN E D R I S K M A NAG E M E NT RO LE S
A ND R E S P ON S IB ILITI E S A S ILLU S TR AT E D B E LOW.

B OA R D
• Determines the Group’s risk appetite and culture
• Sets the risk management framework
• Ensures the risk management processes and internal

controls are effective

AUDIT CO M M IT T E E
• Controls the Group’s risk management processes
• Reviews business risks
• Gains assurance that the risk management processes

and controls are effective

C E NTR AL & R E GI ONAL M A NAG E M E NT
• Establishes detailed Group policies and procedures
• Manages centrally controlled risks
• Reviews local business risks

LO C AL M A NAG E M E NT
• Ensures Group policies and procedures are applied
• Manages locally controlled risks

Hunting PLC
2015 Annual Report and Accounts
22

A S SUR A N C E – INT E R NAL
AUDIT D E PARTM E NT A ND
E X T E R NA L AUDITO R S
Reviews internal controls and
risk management processes for
their existence, relevance and
effectiveness. Actions are
recommended and graded in
terms of importance and timeliness
for change.

The oil and gas industry is tightly regulated and demands high
specification products, which meet stringent quality criteria,
given the challenging environments in which these products are
used. Hunting’s risk management and internal control processes
are therefore designed to appropriately mitigate the risks inherent
by operating in this sector while allowing the Group to achieve its
strategic objectives and deliver value to shareholders.

Central and regional management are responsible for ensuring
the risk management processes established by the Audit
Committee are implemented across the Group. Central
management is also responsible for managing group-wide
treasury related risks such as currency and interest rate
exposures and managing the global insurance programme.

The Board
The Board of Hunting has responsibility for developing and
maintaining a robust risk management framework and for
monitoring the Group’s system of internal control to ensure it
is effective. The Board is also responsible for developing the
Group’s strategic objectives. The balance between the Board’s
desire to meet these strategic objectives and its appetite for
risk creates the risk culture within the Group.

The Board’s appetite for risk is key to establishing an effective
system of internal control and risk management processes. By
appreciating the contributory factors that generate a particular
risk and the benefits earned from the exposure to that risk, the
Board establishes, through debate and delegation, the extent
to which the risk should be mitigated and at what cost to the
Group. The Board for example has little appetite for high levels
of exposure to geopolitical risk and consequently the Group’s
expansion strategy has avoided countries that are considered
to be significantly unstable or too high risk to maintain a
physical presence notwithstanding the potential benefits that
may be generated.

Advice on risk management is sought by the Board from both
internal and external sources. The risk management processes
are further supported by:

• understanding the current and evolving market environment;
• challenging executive management on new growth

opportunities;

• reviewing proposed new product developments and capital

investment projects.

Audit Committee
On behalf of the Board, the Audit Committee establishes and
carries out risk management processes within the framework set
out by the Board. As part of this, the Audit Committee conducts
a formal review of the Group’s business risk reporting three times
a year. In addition, once a year, the Audit Committee seeks
assurance with regard to the effectiveness of the internal financial
controls based on a self-assessment exercise carried out by
local management.

The Internal Audit department reports directly to the Audit
Committee, further details of which are contained within the
Audit Committee Report. The relationship with external audit is
also controlled by the Audit Committee, including the annual
review of effectiveness.

Central and Regional Management
Hunting requires that all Group business units operate in
accordance with the Hunting Group Manual which sets out
Group policies and procedures, together with related authority
levels, and identifies matters requiring approval or notification
to Hunting or the Board. Included within the Group Manual are
policies covering a range of areas including general finance
requirements, taxation responsibilities, information on Hunting’s
internal control and risk management framework and
governance. Compliance is also monitored and subject to
scrutiny by the internal audit function.

Local Management
The management of each business unit has the responsibility of
establishing an effective system of controls and processes for
their business which, at a minimum, meets the requirements set
out in the Group Manual and complies with any additional local
requirements. Local management is empowered under Hunting’s
de-centralised philosophy to manage the risks in their market.

Assurance
The Board use a number of functions and reporting procedures
to provide assurance that the risks identified by management are
appropriate and proportionate for the Group as a whole.

Hunting’s internal audit function covers the Group’s businesses
addressing the following operational areas, raising control
improvement recommendations where necessary:

• inventory management;
• purchasing supply chain;
• large project risk;
• IT controls;
• customer credit risk;
• ethics compliance, including bribery and corruption.

The Group’s risk management processes are further supported
by an internal Quality Assurance department that is headed by a
HS&E and Quality Assurance Director who reports directly to the
Chief Executive. This department also undertakes periodic audits
that monitor quality control within the Group’s product lines.

Hunting also receives guidance from a number of external
advisers. In particular, guidance from the Group’s principal
insurance broker has been implemented throughout the
business units that further strengthen the Group’s credit
management processes.

Hunting’s external auditors provide assurance to the Board
of the accuracy and probity of Hunting’s financial statements.
The auditor also reviews all of Hunting’s non-financial
statements, including governance disclosures and provides
recommendations on the financial controls in operation across
the Group.

Hunting’s legal advisers assist in ensuring that Hunting is compliant
with the UKLA’s Listing Rules, Disclosure and Transparency Rules,
UK Company Law and that there is an understanding across the
Group of the obligations under sanctions legislation. Additionally
Hunting relies on market and investor advice from its corporate
brokers and financial advisers.

The Board is satisfied that the above sources of assurance have
sufficient authority, independence and expertise to enable them
to provide objective advice and information to the Board.

Hunting PLC
2015 Annual Report and Accounts
23

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONRISK M ANAGEMENT
C ONTIN UED

RISK M ANAGEMENT PROCEDURES
TH E B OAR D HA S R E VI E W E D IT S R I S K M A NAG E M E NT
A ND INT E R NA L CONTRO L PRO C E DUR E S A N D
CON FIR M S THAT TH E PRO C E DUR E S IN PL AC E A R E
RO BU S T A ND PRO P O RTI ONAT E TO HUNTING’ S GLO BA L
O PE R ATI ON S A ND P O S ITI ON IN IT S C H O S E N M A R K E T.

Hunting’s internal control system, which has been in place
throughout 2015 and up to the date of approval of these
accounts, is an ongoing evolutionary process designed to
identify, evaluate and manage the significant risks to which the
Group is exposed.

This system of internal control is designed to manage rather than
eliminate risks, therefore it can only provide reasonable, but not
absolute, assurance against material misstatement or loss in the
financial statements and of meeting internal control objectives.

The Directors have reviewed the effectiveness of the Group’s
system of internal control and have taken into account feedback
from the Audit Committee for the period covered by the
financial statements.

The key elements of Hunting’s internal control system are
as follows:

Business Risk Reporting
Three times a year, local management formally reviews the
specific risks faced by their businesses, based on current
trading, future prospects and the local market environment.
The review is a qualitative assessment of the likelihood of a risk
materialising and the probable financial impact if such an event
were to arise. All assessments are performed on a pre- and
post-controls basis, which allows management to continually
assess the effectiveness of its internal controls with separate
regard to mitigating the likelihood of occurrence and the probable
financial impact. The risks are reported to central management.
The local risks that have the greatest potential impact on the
Group are identified from these assessments and incorporated
into the Group Risk Register, which is also reviewed by the Audit
Committee three times a year. An appropriate Director, together
with local management, is allotted responsibility to manage
each separate risk identified in the Group Risk Register.

Financial Controls Self-assessment
Local management completes an annual self-assessment of the
financial controls in place at their business units. The assessment
is qualitative and is undertaken in context with the recommended
controls identified within the Group Manual. Gaps between the
recommended controls and those in place are assessed and
improvements are actioned within a targeted time frame when
these are identified as a necessary requirement. Results of the
assessments are summarised and presented to the
Audit Committee.

Reporting and Consolidation
All subsidiaries submit detailed financial information in
accordance with a pre-set reporting timetable. This includes
weekly, bi-monthly and quarterly treasury reports, monthly
management accounts, annual budgets covering a two-year time
frame, together with half-year and annual statutory reporting. The
Group’s consolidation process is maintained and updated with
regular communication, including distribution of a Group Manual
to all reporting units. All data is subject to review and assessment
by management through the monitoring of key performance
ratios and comparison to targets and budgets. The Group
monitors and reviews new UK Listing Rules, Disclosure and
Transparency Rules, accounting standards, interpretations and
amendments and legislation and other statutory requirements.

Strategic Planning and Budgeting
Strategic plans, annual budgets and long-term viability financial
projections are formally presented to the Board for adoption and
approval and form the basis for monitoring performance. These
are supported by regularly updated forecasts that project for a
12-month period beyond the date of preparation.

Quality Assurance
Most of the business sectors within which the Group operates
are highly regulated and subsidiaries are invariably required to be
accredited, by the customer or an industry regulator, to national
or international quality organisations. These organisations
undertake regular audits and checks on subsidiary procedures
and practices ensuring compliance with regulatory requirements.

Health, Safety and Environment (“HS&E”)
All facilities have designated HS&E personnel appointed to
ensure the Group’s policies and procedures are adopted and
adhered to. All local HS&E personnel report to the Group’s HS&E
and Quality Assurance Director who in turn reports to the Chief
Executive. All facilities arrange regular training and review
sessions to ensure day to day risks are managed and eliminated
and shared with the wider work force.

Capital Investment and Divestment
All significant capital investment (business acquisitions and asset
purchases) and capital divestment are approved by the Chief
Executive. Major capital expenditures or divestments require
approval by the Board. Detailed compliance and assurance
procedures are completed during a capital investment
programme and project reviews and appraisals are completed to
ensure each capital investment has delivered the forecast value
for the Group.

During the year, the Group’s policies and procedures for financial
reporting, governance, ethics protocols and other policies, were
updated following publication of the revised UK Corporate
Governance Code. Updates to the Group’s policies and
procedures are communicated to the relevant personnel by way
of revisions to the Group Manual issued to all business units.

Hunting PLC
2015 Annual Report and Accounts
24

CURRENT STATUS OF THE GROUP ’S
PRINCIPAL RISK S

The status of Hunting’s exposure to each of its principal risks,
the movement in these risks (post-controls) during the year and
the effectiveness of the Group’s internal controls in mitigating
risks are summarised in the accompanying two graphs.

The extent of Hunting’s exposure to any one risk may increase
or decrease over a period of time. This movement is due either
to a shift in the extent of the risk arising from external influences,
or is due to a change in the effectiveness of the Group’s internal
control processes in mitigating the risk.

Detailed descriptions of each principal risk, the controls and
actions in place and the movement in the year are given in the
following section.

MOVEMENT IN RISKS (POST-CONTROLS) DURING THE YEAR

E F F E C T I V E N E S S O F I N T E R N A L C O N T R O L S

h
g
H

t
c
a
p
m

a
c
n
a
n
F

h
g
H

t
c
a
p
m

a
c
n
a
n
F

w
o
L

Low

Probability

High

Low

Probability

High

w
o
L

Current status

Prior year status

Post-control status

Pre-control status

1 Commodity prices
2 Shale drilling

3 Competition
4 Key executives

5 HS&E
6 Geopolitics

7 Investment
8 Product quality

Hunting PLC
2015 Annual Report and Accounts
25

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

RISK M ANAGEMENT
C ONTIN UED

PRINCIPAL RISK S
TH E GROUP ’ S PR IN CI PAL R I S K S A R E ID E NTI FI E D
B E LOW. W HILE W E HAV E PR E S E NT E D TH E S E A S
S E PAR AT E LY ID E NTI FI E D R I S K S , DI S C R E T E E V E NT S
WILL O F T E N A FFE C T MULTI PLE R I S K S A ND THI S I S
CON S ID E R E D BY TH E B OAR D W H E N A S S E S S ING
TH E I M PAC T ON TH E G ROU P.

1. CO M M O DIT Y PR I C E S

2 . S H ALE DR ILLING

3. CO M PE TITI ON

4. K E Y E XE CUTIV E S

M OV E M E NT IN TH E Y E AR
Hunting’s exposure to this risk remains as high as last year due
to the low activity levels as a result of low commodity prices.

M OV E M E NT IN TH E Y E AR
Shale drilling activity has experienced a significant slowdown
during 2015 due to the protracted decline in oil and gas prices.
Consequently the Group’s risk exposure increased during
the year.

Nature of the Risk
Hunting is exposed to the influence of oil and gas prices as the
supply and demand for energy is a key driver of demand for
Hunting’s products.

Oil and gas exploration companies may reduce or curtail
operations if prices become, or are expected to become,
uneconomical and therefore continuation of prices above these
levels is critical to the industry and the financial viability of the
Hunting Group.

Adverse movements in commodity prices may also heighten the
Group’s exposure to the risks associated with shale drilling (see
the risks associated with shale drilling).

Nature of the Risk
The Group provides products to the oil and gas shale drilling
industry. Although it is now an established industry in the US,
significant sections of the public continue to view this activity as
high risk and any consequent moratorium or new laws may
unfavourably impact the industry.

In addition, oil and gas produced from shale is a relatively
expensive source of hydrocarbons. Consequently, shale drilling is
more sensitive to a decline in commodity prices compared with
conventional sources and is more likely to be curtailed (see the
risks associated with commodity prices).

M OV E M E NT IN TH E Y E AR

During the year, the Group’s competitors did not introduce new

Changes have arisen during 2015 at the senior management

products or processes or open new sites that would threaten

level with all vacated positions being filled by competent

Hunting’s local operations. However, due to the tough trading

individuals who are anticipated to proactively contribute to

conditions, competitors have submitted to customer pressure

the success of the Group.

and have reduced prices, often substantially. This has increased

pressure from Hunting’s own customer base and pricing has

been amended in local markets. Consequently this risk has

heightened during the year.

from last year.

Due to the small turnover of key personnel, the Board has

assessed the risk of losing key executives as unchanged

Nature of the Risk

The provision of goods and services to the oil and gas drilling

The Group is highly reliant on the continued service of its key

companies is highly competitive. In current market conditions

executives and senior management, who possess commercial,

there are considerable pressures to reduce prices. Competitors

engineering, technical and financial skills that are critical to the

may also be customers and/or suppliers which can increase the

success of the Group.

risk of any potential impact.

Technological advancements in the oil and gas industry continue

at pace and failure to keep ahead will result in lost revenues and

market share.

Controls and Actions
Working capital, and in particular inventory levels, are closely
managed to ensure the Group remains sufficiently adaptable to
meet changes in demand.

Controls and Actions
The Board monitors public and political opinion and maintains an
awareness of the potential for changes to legislation especially
with regard to the US where the Group is mainly exposed.

The Group maintains three operating platforms: the Well
Construction and Well Completion segments expect to benefit
when exploration companies are active in their drilling operations,
and the Well Intervention segment benefits when wells are
subject to maintenance or require testing or repair work.

The Group maintains a diverse portfolio of products that extends
beyond supplying the shale drilling industry, including products
for conventional drilling and the manufacture of high precision
and advanced technology components for both the onshore and
offshore markets.

The decline in oil and gas prices over the last 18 months has
impacted the industry worldwide. Management has sought to
mitigate the impact by introducing a number of cost reduction
programmes throughout the Group and continues to adapt the
business to meet new challenges generated by the current
trading environment.

Many of the Group’s facilities have the flexibility to re-configure
their manufacturing processes to meet a change in the pattern
of demand.

Controls and Actions

Hunting has a number of high specification proprietary products

Remuneration packages are regularly reviewed to ensure

that offer operational advantages to its customers. The Group

that key executives are remunerated in line with market rates.

continually invests in research and development that enables it to

External consultants are regularly engaged to provide

provide a strong product offering and technological advancement.

guidance on best practice.

Hunting’s operations are established close to their markets which

Senior management regularly reviews the availability of the

enables the Group to offer reduced lead times and a focused

necessary skills within the Group and seek to engage suitable

product range appropriate to each region.

staff where they feel there is vulnerability.

Local management maintains an awareness of competitor pricing

and product offering. In addition, senior management maintains

close relationships with key customers and seeks to maintain the

highest level of service to preserve Hunting’s reputation for quality.

The Group has a wide customer base that includes many of

the major oil and gas service providers and no one customer

represents an overly significant portion of Group revenue.

FU R T H E R I N F O R M AT I O N O N T H E M OV E M E N T I N CO M M O D I T Y
P R I C E S D U R I N G T H E Y E A R I S D E TA I L E D O N PAG E 31.

T H E G R O U P ’ S O P E R AT I N G AC T I V I T I E S A R E D E S C R I B E D I N D E TA I L
O N PAG E S 9 TO 19.

T H E G R O U P ’ S O P E R AT I N G AC T I V I T I E S A R E D E S C R I B E D I N D E TA I L

DE TAIL S ON THE K E Y E XE CUTIVE S’ R E MUNER ATION AR E PROVIDED

O N PAG E S 9 TO 19.

IN THE R E MUNER ATION COM MIT TE E R E P ORT ON PAGE 66 .

Hunting PLC
2015 Annual Report and Accounts
26

No movement in risk

Increase in risk

Decrease in risk

1. CO M M O DIT Y PR I C E S

2 . S HALE DR ILLING

3. CO M PE TITI ON

4. K E Y E XE CUTIV E S

M OV E M E NT IN TH E Y E AR

Hunting’s exposure to this risk remains as high as last year due

Shale drilling activity has experienced a significant slowdown

to the low activity levels as a result of low commodity prices.

during 2015 due to the protracted decline in oil and gas prices.

Consequently the Group’s risk exposure increased during

the year.

Nature of the Risk

Hunting is exposed to the influence of oil and gas prices as the

The Group provides products to the oil and gas shale drilling

supply and demand for energy is a key driver of demand for

industry. Although it is now an established industry in the US,

Hunting’s products.

Oil and gas exploration companies may reduce or curtail

operations if prices become, or are expected to become,

significant sections of the public continue to view this activity as

high risk and any consequent moratorium or new laws may

unfavourably impact the industry.

uneconomical and therefore continuation of prices above these

In addition, oil and gas produced from shale is a relatively

levels is critical to the industry and the financial viability of the

expensive source of hydrocarbons. Consequently, shale drilling is

Hunting Group.

more sensitive to a decline in commodity prices compared with

conventional sources and is more likely to be curtailed (see the

Adverse movements in commodity prices may also heighten the

risks associated with commodity prices).

Group’s exposure to the risks associated with shale drilling (see

the risks associated with shale drilling).

M OV E M E NT IN TH E Y E AR
During the year, the Group’s competitors did not introduce new
products or processes or open new sites that would threaten
Hunting’s local operations. However, due to the tough trading
conditions, competitors have submitted to customer pressure
and have reduced prices, often substantially. This has increased
pressure from Hunting’s own customer base and pricing has
been amended in local markets. Consequently this risk has
heightened during the year.

M OV E M E NT IN TH E Y E AR
Changes have arisen during 2015 at the senior management
level with all vacated positions being filled by competent
individuals who are anticipated to proactively contribute to
the success of the Group.

Due to the small turnover of key personnel, the Board has
assessed the risk of losing key executives as unchanged
from last year.

Nature of the Risk
The provision of goods and services to the oil and gas drilling
companies is highly competitive. In current market conditions
there are considerable pressures to reduce prices. Competitors
may also be customers and/or suppliers which can increase the
risk of any potential impact.

Technological advancements in the oil and gas industry continue
at pace and failure to keep ahead will result in lost revenues and
market share.

Nature of the Risk
The Group is highly reliant on the continued service of its key
executives and senior management, who possess commercial,
engineering, technical and financial skills that are critical to the
success of the Group.

Controls and Actions

Working capital, and in particular inventory levels, are closely

The Board monitors public and political opinion and maintains an

managed to ensure the Group remains sufficiently adaptable to

awareness of the potential for changes to legislation especially

meet changes in demand.

with regard to the US where the Group is mainly exposed.

The Group maintains three operating platforms: the Well

The Group maintains a diverse portfolio of products that extends

Construction and Well Completion segments expect to benefit

beyond supplying the shale drilling industry, including products

when exploration companies are active in their drilling operations,

for conventional drilling and the manufacture of high precision

and the Well Intervention segment benefits when wells are

subject to maintenance or require testing or repair work.

offshore markets.

and advanced technology components for both the onshore and

The decline in oil and gas prices over the last 18 months has

Many of the Group’s facilities have the flexibility to re-configure

impacted the industry worldwide. Management has sought to

their manufacturing processes to meet a change in the pattern

mitigate the impact by introducing a number of cost reduction

of demand.

programmes throughout the Group and continues to adapt the

business to meet new challenges generated by the current

trading environment.

Controls and Actions
Hunting has a number of high specification proprietary products
that offer operational advantages to its customers. The Group
continually invests in research and development that enables it to
provide a strong product offering and technological advancement.

Controls and Actions
Remuneration packages are regularly reviewed to ensure
that key executives are remunerated in line with market rates.
External consultants are regularly engaged to provide
guidance on best practice.

Hunting’s operations are established close to their markets which
enables the Group to offer reduced lead times and a focused
product range appropriate to each region.

Senior management regularly reviews the availability of the
necessary skills within the Group and seek to engage suitable
staff where they feel there is vulnerability.

Local management maintains an awareness of competitor pricing
and product offering. In addition, senior management maintains
close relationships with key customers and seeks to maintain the
highest level of service to preserve Hunting’s reputation for quality.

The Group has a wide customer base that includes many of
the major oil and gas service providers and no one customer
represents an overly significant portion of Group revenue.

FU R T H E R I N F O R M AT I O N O N T H E M OV E M E N T I N CO M M O D I T Y

T H E G R O U P ’ S O P E R AT I N G AC T I V I T I E S A R E D E S C R I B E D I N D E TA I L

P R I C E S D U R I N G T H E Y E A R I S D E TA I L E D O N PAG E 31.

O N PAG E S 9 TO 19.

T H E G R O U P ’ S O P E R AT I N G AC T I V I T I E S A R E D E S C R I B E D I N D E TA I L
O N PAG E S 9 TO 19.

DE TAIL S ON THE K E Y E XE CUTIVE S’ R E MUNER ATION AR E PROVIDED
IN THE R E MUNER ATION COM MIT TE E R E P ORT ON PAGE 66 .

Hunting PLC
2015 Annual Report and Accounts
27

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONRISK M ANAGEMENT
C ONTIN UED

PRINCIPAL RISK S
C ONTIN UED

5. H E A LTH , SA FE T Y A ND TH E E NVIRONM E NT
(“H S & E” )

6 . G E O P O LITI C S

7. INV E S TM E NT

8 . PRO DUC T QUALIT Y

M OV E M E NT IN TH E Y E AR
The Group experienced a small number of minor HS&E incidents
in the year, which is significantly below the industry average and
is similar to the Group’s record in prior years. The risks
associated with HS&E have therefore not materially changed.

M OV E M E NT IN TH E Y E AR
Due to the Group’s already strong presence worldwide, the start
up programme in Africa has not had a noticeable impact on the
Group’s exposure to geopolitical risk.

M OV E M E NT IN TH E Y E AR

During 2015 the Board remained focused on organic expansion

The risk of poor product quality or reliability has remained

and a number of major programmes were completed through the

unchanged during the year with no significant issues raised by

year. No acquisitions were made. The Board continues to assess

the Group’s customers or during the Board’s internal monitoring

opportunities for growth and consequently this risk has not

process.

changed during the year.

Nature of the Risk
Due to the wide nature of the Group’s activities, it is subject to a
relatively high number of HS&E risks and the laws and regulations
issued by each of the jurisdictions in which the Group operates.

The Group’s exposure to risk therefore includes the potential for
the occurrence of a reportable incident, the financial risk of a
breach of HS&E regulations, and the risk of unexpected
compliance expenditure whenever a law or regulation is renewed
or enhanced.

Nature of the Risk
The locations of the Group’s markets are determined by the
location of Hunting’s customers’ drill sites – Hunting’s products
must go where the drilling companies choose to operate. To
compete effectively, Hunting often establishes a local operation
in those regions, however, significantly volatile environments
are avoided.

The Board has a strategy to develop its global presence and
diversify geographically.

Nature of the Risk

Investment through acquisitions and organic capital spend forms

The Group has an established reputation for producing high

the basis of the Group’s strategy of expansion and development.

quality products capable of withstanding high pressure, high

temperature environments.

If investments are not properly considered then lower returns

than anticipated may be made.

In addition, such activity incurs the potential for business

disruption, management distraction and interruption to IT

systems if these issues are not controlled properly.

A failure of any one of these products could adversely impact the

Group’s reputation and demand for the Group’s entire range of

products and services.

Operations have been established in Asia Pacific, the Middle East
and Africa, recognising the high growth potential these regions
offer. The Group carefully selects which countries in these
regions to operate from, however, these operations will face a
higher economic and geopolitical risk than the established
businesses in North America and Europe.

Controls and Actions
The Board targets to achieve a record of nil incidents and
maintains a policy of full compliance with the laws and
regulations in each jurisdiction in which the Group operates.

Every Group facility is overseen by a health and safety officer
with the responsibility for ensuring current and newly issued
HS&E standards are complied with.

The Board receives a Group HS&E compliance report at every
Board meeting.

Controls and Actions
Areas exposed to high political risk are noted by the Board and
are strategically avoided. Management and the Board closely
monitor projected economic trends in order to match capacity
to regional demand.

In order to mitigate geopolitical risk arising from the Group’s
current expansion programme in Africa, the new facility in
Mombasa, Kenya, is to be jointly operated in partnership with
a locally established business.

Controls and Actions

The Board reviews and challenges each potential investment,

Quality assurance standards are monitored, measured and

either organic or through an acquisition, prior to approval and

regulated within the Group under the authority of a Quality

frequently engages consultants to provide expert analysis of the

Assurance Director, who reports directly to the Chief Executive.

key issues.

The Board and senior management follow a rigorous process of

approving, managing and monitoring capital investments along

with planning for contingencies.

The success of each investment decision is assessed through a

formal post-investment review process that provides a learning

platform for future expansion projects.

T H E G R O U P ’ S H S & E P E R F O R M A N C E I S D E TA I L E D O N PAG E 35.
FU R T H E R CO M M E N T O N H S & E I S P R OV I D E D O N PAG E 4 6 .

T H E D I V E R S I T Y O F T H E G R O U P ’ S E X P O S U R E TO D I F F E R E N T
G E O G R A P H I C R E G I O N S I S D E S C R I B E D O N PAG E S 16 A N D 17.

D E TA I L S O N T H E G R O U P ’ S S T R AT E GY F O R G R OW T H A R E G I V E N

FU R T H E R CO M M E N T O N T H E G R O U P ’ S CO M M I TM E N T TO

O N PAG E S 2 0 A N D 21.

P R O D U C T Q UA LI T Y I S P R OV I D E D O N PAG E 4 6 .

Hunting PLC
2015 Annual Report and Accounts
28

No movement in risk

Increase in risk

Decrease in risk

5. H E A LTH , SA FE T Y A ND TH E E NVIRONM E NT

6 . G E O P O LITI C S

7. INV E S TM E NT

8 . PRO DUC T QUA LIT Y

(“H S & E” )

M OV E M E NT IN TH E Y E AR

The Group experienced a small number of minor HS&E incidents

Due to the Group’s already strong presence worldwide, the start

in the year, which is significantly below the industry average and

up programme in Africa has not had a noticeable impact on the

is similar to the Group’s record in prior years. The risks

associated with HS&E have therefore not materially changed.

Group’s exposure to geopolitical risk.

M OV E M E NT IN TH E Y E A R
During 2015 the Board remained focused on organic expansion
and a number of major programmes were completed through the
year. No acquisitions were made. The Board continues to assess
opportunities for growth and consequently this risk has not
changed during the year.

M OV E M E NT IN TH E Y E AR
The risk of poor product quality or reliability has remained
unchanged during the year with no significant issues raised by
the Group’s customers or during the Board’s internal monitoring
process.

Nature of the Risk

Due to the wide nature of the Group’s activities, it is subject to a

The locations of the Group’s markets are determined by the

relatively high number of HS&E risks and the laws and regulations

location of Hunting’s customers’ drill sites – Hunting’s products

issued by each of the jurisdictions in which the Group operates.

must go where the drilling companies choose to operate. To

compete effectively, Hunting often establishes a local operation

The Group’s exposure to risk therefore includes the potential for

in those regions, however, significantly volatile environments

the occurrence of a reportable incident, the financial risk of a

are avoided.

breach of HS&E regulations, and the risk of unexpected

compliance expenditure whenever a law or regulation is renewed

The Board has a strategy to develop its global presence and

or enhanced.

diversify geographically.

Nature of the Risk
Investment through acquisitions and organic capital spend forms
the basis of the Group’s strategy of expansion and development.

Nature of the Risk
The Group has an established reputation for producing high
quality products capable of withstanding high pressure, high
temperature environments.

If investments are not properly considered then lower returns
than anticipated may be made.

In addition, such activity incurs the potential for business
disruption, management distraction and interruption to IT
systems if these issues are not controlled properly.

A failure of any one of these products could adversely impact the
Group’s reputation and demand for the Group’s entire range of
products and services.

Operations have been established in Asia Pacific, the Middle East

and Africa, recognising the high growth potential these regions

offer. The Group carefully selects which countries in these

regions to operate from, however, these operations will face a

higher economic and geopolitical risk than the established

businesses in North America and Europe.

Controls and Actions

The Board targets to achieve a record of nil incidents and

maintains a policy of full compliance with the laws and

regulations in each jurisdiction in which the Group operates.

Areas exposed to high political risk are noted by the Board and

are strategically avoided. Management and the Board closely

monitor projected economic trends in order to match capacity

to regional demand.

Controls and Actions
The Board reviews and challenges each potential investment,
either organic or through an acquisition, prior to approval and
frequently engages consultants to provide expert analysis of the
key issues.

Controls and Actions
Quality assurance standards are monitored, measured and
regulated within the Group under the authority of a Quality
Assurance Director, who reports directly to the Chief Executive.

Every Group facility is overseen by a health and safety officer

with the responsibility for ensuring current and newly issued

HS&E standards are complied with.

The Board receives a Group HS&E compliance report at every

a locally established business.

Board meeting.

In order to mitigate geopolitical risk arising from the Group’s

current expansion programme in Africa, the new facility in

Mombasa, Kenya, is to be jointly operated in partnership with

The Board and senior management follow a rigorous process of
approving, managing and monitoring capital investments along
with planning for contingencies.

The success of each investment decision is assessed through a
formal post-investment review process that provides a learning
platform for future expansion projects.

T H E G R O U P ’ S H S & E P E R F O R M A N C E I S D E TA I L E D O N PAG E 35.

FU R T H E R CO M M E N T O N H S & E I S P R OV I D E D O N PAG E 4 6 .

T H E D I V E R S I T Y O F T H E G R O U P ’ S E X P O S U R E TO D I F F E R E N T

G E O G R A P H I C R E G I O N S I S D E S C R I B E D O N PAG E S 16 A N D 17.

D E TA I L S O N T H E G R O U P ’ S S T R AT E GY F O R G R OW T H A R E G I V E N
O N PAG E S 2 0 A N D 21.

FU R T H E R CO M M E N T O N T H E G R O U P ’ S CO M M I TM E N T TO
P R O D U C T Q UA LI T Y I S P R OV I D E D O N PAG E 4 6 .

Hunting PLC
2015 Annual Report and Accounts
29

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONRISK M ANAGEMENT
C ONTIN UED

VIABILIT Y A SSESSMENT AND
GOING CONCERN BA SIS

Viability Assessment
Introduction
Hunting has a wide global customer base underpinned by strong,
long-term relationships. The Group provides a large range of
products and services through its manufacturing and distribution
facilities which are located in a number of countries across the globe.

In considering the Group’s long-term viability, the Board regularly
assesses the risks to its business model, strategy, future
performance, solvency and liquidity. These assessments are
supported by the risk management processes described on
page 24 and include a review of the Group’s exposure to the oil
and gas industry, competitor action, customer plans and the
robustness of the supply chain.

Assessment Period
The Group’s customers are principally involved in the exploration
for and production of oil and gas. Given the nature of the industry
and the planning cycles involved, these activities can cover
periods of no more than several weeks up to several years from
start to end. Hunting’s management works closely with its
customers over this period, discussing their operational plans
and reviewing their longer-term capital expenditure programmes.

The outlook for the Group beyond this period is generated from
management’s assessment of industrial data and projections
published by industry commentators and analysts, including
statistics on footage drilled and rig activity. The Board believes
that a three-year forward looking period is the appropriate length
of time to reasonably assess the Group’s viability. The Group’s
annual budget process and mid-term projections cover this
period and help to support the Board’s assessment.

Consideration of Principal Risks
The nature of the Group’s operations exposes the business to
a variety of risks which are noted on pages 26 to 29. The Board
regularly reviews the principal risks and assesses the appropriate
controls and further actions as described on pages 24 and 25.
The Board has further considered their potential impact within
the context of the Group’s viability.

Assumptions
In assessing the long-term viability of the Group, the Board made
the following assumptions:

• The raw material pricing environment within the energy

industry remains weak in the short term and becomes positive
in the medium to long term, given the global outlook for oil
and gas demand, which is driven by growth within emerging
markets and sustained demand from developed markets.
These are the fundamental drivers of Hunting’s core business
of manufacturing, supplying and distributing products and
services which enable the extraction of oil and gas.

• Actions taken in 2015 to reduce the Group’s cost base enable
the business to endure the period of weak commodity prices
and reduced shale drilling activity.

• The development of the global shale drilling industry remains

focused in the US where government support remains positive.

• The Group will continue to have a medium to low exposure
to higher risk countries given the proportion of its current
revenues and profits derived from politically stable regions
such as North America, Europe and South East Asia.

In addition, the three-year financial projections were stress tested
to simulate a further deterioration in market conditions.

Conclusion
Despite the current downturn within the oil and gas industry, the
Board believes that the Group’s strategy for growth, its diverse
customer and product base, and the positive outlook for the oil
and gas industry in the medium term provide Hunting with a
strong platform on which to continue its business. The Directors
therefore have a reasonable expectation that Hunting will be able
to continue in operation and meet its liabilities as they fall due
over the three-year period of their assessment.

Going Concern Basis
Introduction
The Group’s principal cash outflows include capital expenditure,
labour costs, inventory purchases and dividends. The timing and
extent of these cash flows are controlled by local management
and the Board. The Group’s principal cash inflows are generated
from the sale of its products and services, the level of which is
dependent on the variety of its products and ability to retain strong
customer relationships. Cash inflows are further supported by the
Group’s credit insurance cover against customer default that at
31 December 2015 covered the majority of its trade receivables,
subject to certain limits.

Current and forecast cash/debt balances are reported on a
weekly basis by each of the business units to a centralised
treasury function that uses the information to manage the
Group’s day-to-day liquidity and longer-term funding needs
through effective cash management programmes.

The Group has access to sufficient financial resources including
a $350m committed bank facility of which $233.9m was
undrawn at 31 December 2015. The two main financial
covenants (page 42) attached to this facility are: EBITDA (as
defined in the bank facility agreement) should not be less than
four times net finance charges, and net debt should be no more
than three times adjusted EBITDA. At 31 December 2015, the
Group had sufficient headroom over both covenants.

Review
In conducting its review of the Group’s ability to remain as a
going concern, the Board assessed the Group’s recent trading
performance and its latest forecasts, and took account of
reasonably predictable changes in future trading performance.
The Board also considered the potential financial impact of the
estimates, judgements and assumptions that were used to
prepare these financial statements. The Board is satisfied that
all material uncertainties have been identified and they are not
considered to be sufficiently material to adversely impact
the Group.

Conclusion
The Board is satisfied that it has conducted a robust review of
the Group’s going concern and has a high level of confidence
that the Group has the necessary liquid resources to meet its
liabilities as they fall due. Consequently the Board considered it
appropriate to adopt the going concern basis of accounting in
preparing these consolidated financial statements.

Hunting PLC
2015 Annual Report and Accounts
30

M ARKE T RE VIE W

WITH TH E CONTINU E D D E C LIN E IN TH E PR I C E O F
GLO BAL CRUD E O IL S E E N TH ROUGH OUT 2015, TH E
E N E RGY INDU S TRY H A S S E E N A M AJ O R R E DUC TI ON
IN C A S H FLOWS, W HI CH IN TUR N HA S LE D TO A N
E S TI M AT E D 32% R E DUC TI ON IN C A PITA L E XPE NDITUR E
CO M M IT T E D TO ON S H O R E A ND O FFS H O R E
DR ILLING PRO GR A M M E S .

The severe decline in industry spend and particularly onshore rig
activity, has adversely impacted Hunting’s performance across
all segments and geographic regions as noted in the Group
Performance and Development summary on pages 36 to 41.

Almost without exception, all key industry metrics monitored by
the Group’s senior management team reported a decline in 2015
from the record levels seen in 2014, particularly in North America,
where the majority of Hunting’s operations are located. In Europe
and Asia Pacific similar market contraction has been observed
creating challenges for all businesses within the Hunting Group.

Commodity Prices
WTI crude oil prices started 2015 at $53.27 and closed at
$37.04, a 30.5% reduction across the year which, combined with
the decline in pricing seen during 2014, has meant that oil prices
reduced by 62.4% since the start of 2014.

W T I C R U D E O I L P R I C E
( $ p e r b a r r e l)

120
110
100
90
80
70
60
50
40

1 Jan 2014
Source: Bloomberg

1 Jan 2015

1 Jan 2016

Of note has been the production policies implemented by Saudi
Arabia which has attempted to maintain its global share of daily
crude oil production against the economic backdrop of slowing
demand growth from emerging countries such as China and
India. This has led to a material supply/demand imbalance being
active within the global oil market, which has exacerbated the
decline in crude oil prices and led to a large increase in global
inventories and storage throughout the year.

While the focus of industry commentary has been on global crude
oil prices, a similar decline for US natural gas prices has also been
observed. With a combination of production from existing wells,
weak US industrial natural gas demand, limited LNG exports and
mild winters, natural gas has also become oversupplied leading to
Henry Hub prices declining from an average of $4.26/mmBtu in
2014 to $2.48/mmBtu – some 42% – during 2015. This led to a
curtailing of gas focused drilling in the year.

Industry Spend
The reduction in commodity prices has not only led to operators
lowering capital spend to align to the new pricing environment,
but also to maintaining or increasing crude oil production levels
to minimise the reduction in total cash inflows required to service
debt obligations or shareholder distributions.

G L O B A L D R I L L I N G A N D P R O D U C T I O N E X P E N D I T U R E
( $b n)

400

350

300

250

200

150

100

2012

2013

2014

2015

North America
Central and South America
Europe
Africa

Middle East
Far East, China and Asia
Russia

Source: Spears and Associates – Drilling and Production Outlook: December 2015

The reduced oil price environment and consequential reduction
in activity commenced with onshore operators in the latter part
of 2014 and into early 2015, where a rapid decline in land-based
drilling was observed in the first half of the year – but then
impacting offshore activity levels in the second half of 2015,
where, for example, in the Gulf of Mexico, deep water drilling
also reduced as the sustained lower oil prices continued through
to the year end.

Global drilling and production expenditure across the energy
industry exceeded $391 billion in 2014, even as commodity
prices declined in the second half of the year. In 2015 global
drilling and production expenditure declined by an estimated
32% to c.$267 billion as operators adjusted their drilling plans
to new project economics.

In the US, drilling and production expenditure reduced by 49%
from $158 billion to $80 billion, while in Canada a similar
percentage reduction to $13 billion has been estimated by
market commentators during the year.

Across other regions double-digit reductions in drilling and
production expenditure have been recorded including Europe
and Asia Pacific where Hunting has key regional operating hubs.
The exception to this trend has been the Middle East, where a
marginal increase in drilling expenditure has been recorded for
oil and gas drilling and production expenditure, as activity levels
remain relatively unchanged.

Hunting PLC
2015 Annual Report and Accounts
31

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
M ARKE T RE VIE W
C ONTIN UED

Rig Counts
Global rig counts remain a key benchmark for industry
participants to monitor and as a consequence of the decline in
commodity pricing, rig counts steadily reduced throughout 2015.
The following table notes the reduction in global rig numbers.

In 2015, 592 million feet of wells were drilled globally, a decline of
29% compared to 2014, particularly in the US and Canada,
where many exploration wells remain uncompleted, as a result of
low commodity prices.

Global Rig Count (at year end)

G L O B A L F O O T A G E D R I L L E D
( m f t)

Onshore
Offshore
Total

2015
3,774
349
4,123

2014
5,165
415
5,580

Change
-27%
-16%
-26%

Source: Spears and Associates – Drilling and Production Outlook: December 2015

In the US the decline in rig counts was more acute given the
prolific onshore shale oil and gas industry. Land rig counts
declined an estimated 47% as operators curtailed drilling
operations while offshore rigs, predominantly focused on activity
in the Gulf of Mexico, reduced by 37% giving a total year-on-year
decline of 47% for the country.

In Canada, the market contracted at a similar rate to the US, as
higher cost heavy oil and tar sands projects were reduced, leading
to a 49% reduction in the number of active rigs to close the year
at 195 active units. Across Europe, where drilling activity is more
evenly split between onshore and offshore activity, the total
number of rigs reduced by 17% to 86.

2015

2014

2013

2012

592.5

839.7

811.7

817.7

Source: Spears and Associates – Drilling and Production Outlook: December 2015

Looking Ahead
The oil and gas industry has seen an overwhelming contraction
in activity levels during 2015 as commodity price declines led to
capital expenditure cuts, which in turn has led to a reduction in
drilling programmes and associated equipment purchasing.

In Asia Pacific, the declines in rig count were less than the more
developed North American and European markets – with
estimated rig counts declining 6% in the year to average 1,300
active units.

The sentiment of the industry in the early months of 2016 remains
the same, with commentators forecasting continued market
contraction for the year ahead albeit with the pace of
decline slowing.

While all of Hunting’s major regions of activity have seen material
declines in rig counts, the Middle East reported only a marginal
reduction in active rig units to close the year at 370 active units.
Saudi Arabia, which accounts for approximately one-third of all rig
units in the region, has increased its activity levels in the year,
offset by other countries impacted by deteriorating security and
in-country conflicts.

Global Footage Drilled
With the evolution of drilling technology over the past decade
and the move from drilling vertical to more horizontal/deviated
well configurations, footage drilled by the energy industry has
become an increasingly important metric for Hunting to monitor.
The increase in the number of well sections and the need to drill
through complex geological formations has increased the
concentration of equipment required for drilling and the
associated tools demanded for each well.

In 2014, the global total length of wells drilled was approximately
839 million feet, an increase of c.45% since 2005. This
comparison provides a frame to the level of expansion of global
drilling as commodity prices increased over the past decade.

In contrast to the short-term outlook, the medium-term outlook
remains resilient, with the International Energy Agency still
forecasting an increase in global daily crude oil demand to 98 –
100 million barrels by 2020, compared to a level of 92 million
barrels in 2015. The ability of the energy industry to deliver this
increased demand, on a sustained basis, cannot be
underestimated by governments, policy makers and industry
participants alike. While a global crude oil supply glut is making
newspaper headlines today, when the rate of depletion of
currently producing fields across the industry is factored in a
rebalancing of crude oil supply/demand has to be achieved in
the short to medium term, with the industry returning to growth
shortly thereafter.

Hunting is addressing the short-term market environment – but
also preparing for the future by maintaining its strategic positioning
with new products and state of the art global manufacturing
facilities, to enable its key position in the energy supply chain to
be maintained, and to deliver value to all stakeholders.

Hunting PLC
2015 Annual Report and Accounts
32

S
T
R
A
T
E
G

R
E
P
O
R
T

C
O
R
P
O
R
A
T
E

G
O
V
E
R
N
A
N
C
E

F
I

N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

O
T
H
E
R

N
F
O
R
M
A
T
I

O
N

A DVA N C E D A N D FL E X I B L E
M A N U FAC T U R I N G C A PA B I LI T Y
AT O U R S I N G A P O R E H U B

Hunting PLC
2015 Annual Report and Accounts
33

KE Y PERFOR M ANCE INDIC ATOR S

A NUM B E R O F M E TR I C S AR E U S E D TO CO M PA R E
TH E D E V E LO PM E NT, BU S IN E S S PE R F O R M A N C E A N D
P O S ITI ON O F TH E G ROUP. K PI s A R E R E GUL A R LY
R E VI E W E D TO E N SUR E TH E Y R E M AIN A PPRO PR IAT E
M E A SUR E S O F TH E G ROU P ’ S PE R F O R M A N C E . F O R
D E TAIL S ON TH E M OV E M E NT S O F TH E S E K PI s,
PLE A S E R E FE R TO TH E GROUP PE R F O R M A N C E A N D
D E V E LO PM E NT S E C TI ON O F TH E A NNUA L R E P O RT.

FINANCIAL

R E V E N U E ( $ m )

U N D E R L Y I N G E B I T D A * ( $ m )

U N D E R L Y I N G P R O F I T
F R O M O P E R A T I O N S * ( $ m )

2015

2014

2013

810.5

2015

1,386.5

2014

1,293.6

2013

61.9

2015

269.8

2014

244.0

2013

16.4

217.8

200.0

Revenue is earned from products and services sold
to customers from the Group’s principal activities in
continuing operations (see notes 3 and 4).

Underlying earnings before share of associates’
post-tax results, interest, tax, depreciation,
impairment and amortisation for continuing
operations (see NGM A).

Underlying profit from operations before net finance
costs and tax (see consolidated income statement
and note 7).

U N D E R L Y I N G O P E R A T I N G
M A R G I N * ( % )

U N D E R L Y I N G D I L U T E D E A R N I N G S
P E R S H A R E * ( c e n t s )

D I V I D E N D P E R S H A R E
D E C L A R E D ( c e n t s )

2015

2014

2013

2015

2014

2013

3.1

2015

100.0

2014

94.5

2013

8.0

31.0

29.5

Underlying profit from operations as a percentage
of revenue.

Underlying earnings attributable to ordinary shareholders,
divided by the weighted average number of ordinary
shares in issue during the year adjusted for all potentially
dilutive ordinary shares (see note 13).

Dividends per share declared in respect of the financial
year including the interim dividend, paid during the
year, and the final dividend, neither paid nor accrued at
year end (see NGM N).

* Non-GAAP measure (“NGM”) (see pages 133 to 137).

OPER ATIONAL

CO U N T R I E S W I T H
AC T I V E O P E R AT I O N S

O P E R AT I N G F O OT P R I N T
(m i l l i o n s q f t )

2 014 – 12

3.2

2 014 – 2 . 8

Y E A R E N D
E M P LOY E E S

2,784

2 014 – 4 , 0 03

I S O 9 0 01 (Q UA LI T Y )
AC C R E D I T E D O P E R AT I N G S I T E S

50%

2 014 – 51%

Countries in which Hunting has an
active operating site or distribution
centre. This does not include countries
that only have a sales presence.

Operation and distribution site square
footage at year end. This closely
corresponds to “roofline” and includes
administrative space within
operating units.

The December headcount for Hunting
employees, including part-time staff
(see note 9).

Percentage of operating sites with
ISO 9001 accreditation.

Hunting PLC
2015 Annual Report and Accounts
34

FINA N CIA L PE R F O R M A N C E M E A SUR E S A R E LO O K E D AT
F O R CONTINUING O PE R ATI ON S ON A N UN D E R LYING
BA S I S A ND, OTH E R THA N R E V E NU E , A R E N ON - G A A P
M E A SUR E S ( FURTH E R IN F O R M ATI ON ON FINA N CIA L
N ON - G A A P M E A SUR E S (“NG M s” ) C A N B E F OUN D ON
PAG E S 133 TO 137 ).

C A P I T A L I N V E S T M E N T ( $ m )

F R E E C A S H F L O W * ( $ m )

I N V E N T O R Y D A Y S *

2015

2014

2013

81.1

2015

118.0

2015

123.5

2014

94.8

2013

182.3

2014

145.6

2013

196

148

157

Cash spend on tangible non-current assets
(see NGM K).

Underlying profit from continuing operations adjusted
for working capital, tax, replacement capital
investment and interest (see NGM M).

Inventory at the year end divided by revenue per day,
adjusted for the impact of acquisitions and disposals
(see NGM D).

N E T D E B T * ( $ m )

G E A R I N G R A T I O * ( % )

R E T U R N O N A V E R A G E
C A P I T A L E M P L O Y E D * ( % )

2015

2014

2013

110.5

2015

131.0

2014

205.8

2013

2015

2014

2013

Net debt comprises bank overdrafts, current and
non-current borrowings less cash and cash
equivalents and investments (see NGM G).

Gearing is calculated as net debt as a percentage of
total equity (see NGM I).

Underlying profit before interest and tax from continuing
operations, adjusted for the share of associates post-tax
results, as a percentage of average gross capital
employed (see NGM P).

N O. O F R E CO R DA B L E
I N C I D E N T S

I N C I D E N T R AT E
(O S H A m e t h o d )

C A R B O N D I OX I D E E M I S S I O N S
( k g /s q f t )

I N T E R N A L M A N U FAC T U R I N G
R E J E C T R AT E

2 014 – 81

1.13

2 014 – 1.92

10.4

2 014 – 15. 0

0.81%

2 014 – 0 . 81%

An incident is recordable if it results in
death, days away from work or transfer to
another job, medical treatment beyond
first aid or loss of consciousness, or if
significant injuries or illnesses are
diagnosed by relevant medical authorities.

The US Occupational Safety and
Health Administration (“OSHA”) incident
rate is calculated by multiplying the
number of recordable incidents by
200,000 and then dividing that number
by the number of labour hours worked.

Scope 1 and 2 carbon dioxide
equivalent metric, reported as
kilogrammes per square foot of
operating footprint.

Percentage of parts rejected during
manufacturing processes.

Hunting PLC
2015 Annual Report and Accounts
35

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

GROUP PERFOR M ANCE
AND DE VELOPMENT

P E T E R R O S E
F I N A N C E D I R E C TO R

“IN THIS M ARKET
ENVIRONMENT A PRIM ARY
FOCUS FOR THE M ANAGEMENT
TE A M IS M AINTAINING THE
FINANCIAL HE ALTH OF THE
BAL ANCE SHEE T THROUGH
STRONG WORKING CAPITAL
CONTROLS AND CA SH
FLOW DISCIPLINES.”

Hunting PLC
2015 Annual Report and Accounts
36

Results from Continuing Operations
The Group’s revenue in 2015 was $810.5m, a decline of 42%
compared to 2014. This fall in activity levels has significantly
impacted profitability with underlying EBITDA falling to $61.9m
(2014 – $269.8m) and EBITDA margin reducing from 19% in 2014
to 8% in 2015.

Underlying profit from continuing operations reduced to $16.4m
in the year (2014 – $217.8m) and the underlying profit margin
correspondingly reduced to 2% in 2015 (2014 – 16%).

At the half-year, management carried out an impairment review,
which resulted in a charge to goodwill of $35.2m. Expectations
for a recovery in commodity prices and activity levels have
declined markedly since this review and in carrying out its year
end assessment, management have decided to reflect an
additional $173.0m impairment charge, bringing the total for the
year to $208.2m (2014 – $49.6m). Further details of the
impairment assessment can be found in note 15.

Management also carried out a review of the carrying value of
other intangible assets, which lead to the Group recognising an
impairment charge of $11.2m (2014 – $nil) for customer
relationships originally recognised on the Electronics and
Doffing acquisitions.

Reviews of the carrying value of assets held within the Group’s
Drilling Tools business were completed in the year, leading to a
$26.8m (2014 – $nil) impairment charge to property, plant and
equipment held by the Group. This assessment has not changed
at the year end.

The decline in commodity prices has also impacted the carrying
values of the Group’s oil and gas assets held by the Exploration
and Production business unit. An impairment charge of $6.4m
has been reflected for the year (2014 – $11.3m).

During the year, management acted to control costs with the
number of employees at December 2015 falling by 30% versus
December 2014. In addition, the Drilling Tools business in
Canada was closed. These actions gave rise to restructuring
costs of $7.1m (2014 – $nil).

The charge in the year for the amortisation of acquired intangible
assets held by the Group totalled $38.9m (2014 – $42.8m).

As a consequence of these charges Hunting has recorded a
reported loss from continuing operations of $282.2m (2014 –
$113.9m profit).

Net finance expense during the year was $6.8m (2014 – $4.9m),
principally reflecting interest on net borrowings. In October 2015
the Group refinanced its revolving credit facility, leading to a new
five year $350m facility being agreed with a syndicate of five
banks. The terms and covenants attached to the new facility are
similar to Hunting’s old facility, which was due to expire in
August 2016.

Underlying profit before tax was $9.4m (2014 – $212.4m).
Following the charges for asset impairments, intangible asset
amortisation and other exceptional items, the reported loss
before tax was $289.2m (2014 – $108.5m profit), which resulted
in a tax credit of $57.8m for the year (2014 – $36.7m charge).

The Group’s underlying tax rate has been adversely impacted by
the non recognition of tax relief on losses in some overseas
jurisdictions and the reversal of US production incentive tax
credits from prior years. The underlying effective tax rate was
57% (2014 – 27%).

Underlying diluted earnings per share decreased to 3.1 cents in
2015 (2014 – 100.0 cents) and the reported diluted loss per share
was 156.1 cents (2014 – earnings per share 44.8 cents).

Results from Discontinued Operations
The sale of Gibson Shipbrokers concluded on 31 March 2015,
with the Group recording a $3.8m gain on the sale in the 2015
income statement. Other items totalling $0.4m relating to the sale
of Gibson Energy in 2008 have been recorded in the year.

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

In 2015, Hunting Energy Services reported revenue of $806.3m
(2014 – $1,376.4m). Underlying profit from continuing operations
also declined to $20.7m (2014 – $217.6m). Charges for
amortisation of acquired intangible assets, impairments and
exceptional items recorded in the year totalled $292.2m (2014 –
$92.6m), leading to a reported loss from continuing operations
of $271.5m (2014 – $125.0m profit).

In total, amortisation, impairments and exceptional items charged
to the Group’s income statement were $298.6m in the year
(2014 – $103.9m).

A summary of the financial performance of each operating
segment is detailed below:

Business unit
Well Construction
Well Completion
Well Intervention

Total HES

Underlying
profit (loss)
from
continuing
operations
$m
1.9
14.2
4.6

2015

Amortisation1
and
Exceptional
Items
$m
(113.8)
(146.8)
(31.6)

Reported
loss from
continuing
operations
$m
(111.9)
(132.6)
(27.0)

20.7

(292.2)

(271.5)

Exploration and Production

Total Group

(4.3)

16.4

1. Relates to amortisation of acquired intangible assets.

(6.4)

(10.7)

(298.6)

(282.2)

217.8

(103.9)

Underlying
profit from
continuing
operations
$m
53.0
140.8
23.8

217.6

0.2

2014

Amortisation1
and
Exceptional

Items
$m
(57.1)
(34.7)
(0.8)

(92.6)

(11.3)

Reported (loss)
profit from
continuing
operations
$m
(4.1)
106.1
23.0

125.0

(11.1)

113.9

Hunting PLC
2015 Annual Report and Accounts
37

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONGROUP PERFOR M ANCE
AND DE VELOPMENT
C ONTIN UED

Hunting’s new facility at Ameriport, US, has now been
commissioned. This $48.9m facility allows for high throughput
threading activities to be undertaken and will serve activity in the
Gulf of Mexico and international deep water drilling programmes.
With the opening of this facility, Hunting’s Woodlawn
manufacturing facility has been closed and prepared for sale,
with further threading facilities in the Houston area to
be rationalised.

Drilling Tools
Hunting’s Drilling Tools business underwent a major restructuring
programme during the year to align the business with the lower
activity environment, with 63% of the workforce being released in
the year to contain costs. In Canada, due to the subdued market
for Hunting’s drilling tool product and service lines, a decision
was taken in October 2015 to close its operations in the country
and transfer all tools back to the US. As a consequence of this,
the Group’s facility in Nisku, Alberta, has been closed.

Construction OCTG
Hunting’s OCTG business has also reported a decline in the
footage sold or traded in the year compared to 2014.
Competition has also been aggressive during the year as global
steel mills have continued to supply product cheaply, in some
instances selling at a loss, to maintain production volumes.

In Africa, Hunting has completed and commissioned its
manufacturing, repair and storage facility in Cape Town, South
Africa. The local management team has marketed Hunting’s
capabilities across Africa, leading to enquiries being made. To
complement this new facility, a satellite service and repair facility
has been commissioned in Mombasa, Kenya, this being a 60:40
partnership arrangement with a local energy service group in the
country. The facility is aimed at assisting operators to develop the
extensive East African offshore gas fields.

Advanced Manufacturing Group
Hunting Dearborn has reported a good performance during the
year, as demand for precision machined products, including
housings for MWD/LWD measuring tools remained strong, with
demand declining as industry activity levels reduced during the
year. A strategic goal for the business has been to address the
long production lead times associated with the manufacture of its
products. To reduce this, the facility has been expanded by 44%
during 2015 to give a total manufacturing footprint of 213,600
square feet and the expansion is operational. Further equipment
rationalisation will be carried out during 2016 based on the level
of demand.

During 2015, Hunting Electronics continued to report subdued
activity with end users continuing to source components from
the Far East. To address this shift in purchasing, Hunting opened
a facility in Singapore to commence the manufacture of a range
of electronic components. In the US, the workforce within the
Electronics business was reduced by 41% in the year.

Well Construction

Revenue
Underlying profit from operations
Underlying profit margin
Reported loss from operations
Capital investment
Average employees
Year end employees

2015
$m 211.4
$m
1.9
1
%
$m (111.9)
$m
49.4
866
717

2014
378.3
53.0
14
(4.1)
69.0
1,081
1,122

The Well Construction segment includes Hunting’s Premium
Connections, Drilling Tools, Construction OCTG, AMG
(comprising Hunting Dearborn and Hunting Electronics), Hunting
Specialty and Hunting Trenchless business units.

During the year the segment reported a 44% decline in revenue
to $211.4m (2014 – $378.3m). With the exception of the Premium
Connections unit and Hunting Dearborn, all businesses within
the segment recorded a loss from operations in the year. In
addition, the segment absorbed $3.3m of start-up costs relating
to Africa and AMG in Asia (2014 – $1.6m). This led to a decline
in underlying profit from continuing operations of 96% to $1.9m
in the year (2014 – $53.0m). The impairments recorded against
goodwill for this segment totalled $66.1m (2014 – $49.6m), the
impairment of customer relationships in the Electronics and
Doffing businesses was $11.2m (2014 – $nil), and impairment of
property, plant and equipment within the Drilling Tools business
totalled $26.8m (2014 – $nil). Charges for the amortisation of
acquired intangibles and restructuring were $9.7m (2014 – $7.5m).
This led to a reported loss from continuing operations for the
segment of $111.9m (2014 – $4.1m). Capital investment within
the segment totalled $49.4m, mainly associated with the
construction of new facilities for the Group’s Premium
Connections unit and Hunting Dearborn. With the reduction in
workforce programme completed within the year, the year end
number of employees reduced by 36% to 717 (2014 – 1,122).

Premium Connections
Hunting’s Premium Connection business has reported a
reduction in activity levels, with onshore drilling declining rapidly
in the early part of the year, while offshore demand for Hunting’s
range of connections was more robust throughout 2015 but
gradually slowed over the course of the year.

Technical activity in the year has been led by the commercialisation
and driving of sales of Hunting’s SEAL-LOCK XD™ and WEDGE-
LOCK™ premium connections. During 2015, a range of diameters
within the SEAL-LOCK XD™ range were developed and tested
with a view to participating in a range of heavy oil programmes
across North America. The WEDGE-LOCK™ premium connection
has been utilised by a range of customers for deep water
applications and extensive development work has been underway
throughout the year to widen, test and certify this family of
connections. The commissioning of Hunting’s world-class
connection test facility late in 2015 will accelerate this process.

Of particular note has been the success at Hunting’s Marrero
facility, which reported strong demand for large diameter
premium connections for use in deep water projects in the Gulf
of Mexico. The facility has been busy throughout 2015 and has
an order book extending into 2016 as offshore projects in the
region continue.

Hunting PLC
2015 Annual Report and Accounts
38

Hunting Specialty
Hunting Specialty has been particularly impacted by the decline
in commodity prices and rig counts, leading to customers
demanding price reductions for many products. The business
addressed this market environment by reducing headcount by
44% in the year and brought in-house manufacturing processes
that were previously outsourced to third parties.

Hunting Trenchless
The Hunting Trenchless business has also reported a difficult
year resulting in an employee headcount reduction of 40%. The
business has worked with the Drilling Tools business to develop
and market a wider range of mud motors and is planning to
introduce a WEDGE-LOCK™ thread form to its customers
during 2016.

Well Completion

Revenue
Underlying profit from operations
Underlying profit margin
Reported (loss) profit from operations
Capital investment
Average employees
Year end employees

2015
$m 488.6
$m
14.2
%
3
$m (132.6)
$m
20.0
1,877
1,574

2014
862.6
140.8
16
106.1
42.5
2,237
2,298

The Well Completion segment comprises the Hunting Titan,
Manufacturing and Accessories and Hunting’s International
Completion businesses.

Revenue in the segment declined 43% in the year to $488.6m
(2014 – $862.6m), with underlying profit from continuing
operations reducing by 90% to $14.2m (2014 – $140.8m).
Impairment to the carrying value of goodwill for the Hunting Titan,
US Pipe and Indonesian businesses totalled $112.2m and other
charges, comprising amortisation of acquired intangibles assets
and restructuring costs, totalling $34.6m led to a reported loss
from continuing operations of $132.6m (2014 – $106.1m profit).

Capital investment within the segment totalled $20.0m, mainly
associated with the construction of new facilities. Following the
reduction in the workforce, the year end number of employees
reduced by 32% to 1,574 (2014 – 2,298).

Hunting Titan
Hunting Titan’s performance in the year was impacted by the
decline in the number of well completions being finalised in the
year. To align the business with the current market environment,
21% of the workforce across the business was released during
2015 and a number of sites are being prepared for closure.

Hunting Titan continues to leverage synergies through the
manufacture of perforating guns and associated components
throughout the Group’s global manufacturing network, including
Canada, Mexico and China, where lower production costs can
be achieved.

While a rationalisation of the number of distribution centres
across North America has been underway since Q4 2015,
Hunting Titan has opened two distribution centres in the US and
Clinterty, Scotland, to capture new opportunities. In Europe,
growth opportunities have been identified on the UK Continental
Shelf, where plug and abandonment programmes are expected
to increase over the coming years, leading to new requirements
for Titan’s perforating systems and accessories, while in Norway,
continued drilling and development activity on the Norwegian
Continental Shelf has created new markets for Titan’s whole
range of products.

During 2015, Hunting Titan completed the development and
launch of the H-1 perforating system. The system has the
potential to revolutionise perforating procedures completed by
customers, as it materially reduces the set up time and personnel
required in-field to configure a perforating gun procedure. The
technology utilises many of Hunting’s core competencies in
connections, electronics, perforation and pressure control
technologies. The H-1 perforating system completed a number
of successful field trials during Q4 2015, with positive feedback
being received by customers, leading to full commercialisation
and sales efforts being underway since the start of 2016.

Manufacturing and Accessories
Hunting’s Manufacturing and Accessories business reported
a strong performance in the early months of the year, but this
declined as the industry downturn persisted for the balance
of 2015.

International Completion
Hunting’s international completion businesses extend from
Canada through to Europe, the Middle East and Asia Pacific.
In the year, Hunting’s Asia Pacific businesses remained profitable
on an underlying basis, with losses being recorded in Canada
and the UK.

Hunting’s Canadian operations reported declining activity as
heavy oil and tar sand related programmes became unviable and
loss making with the reduced oil price, leading to the number of
wells being drilled declining by c.50% compared to 2014. Hunting
has aligned its operations with this lower level of activity, with a
52% reduction in workforce during the year. However, Hunting
has achieved a number of successes including the continued use
of Hunting’s premium connection in “Vacuum Insulated Tubing”
applications for the transportation of heavier oils. The business
has also collaborated with a major steel maker to jointly market
threaded pipe utilising Hunting’s 4040 premium connection.

In the Middle East, while the pricing environment for oil products
and services has been challenging, activity levels have been
sustained, with drilling and capital expenditures remaining
unchanged compared to 2014. In June 2015 Hunting signed a
joint venture agreement with SG Petroleum in Saudi Arabia which
will allow Hunting to manufacture certain product lines in the
kingdom and sell to the major companies operating in-country.
A facility has been commissioned and new personnel hired to
increase the Group’s business presence in the country.

Hunting PLC
2015 Annual Report and Accounts
39

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONGROUP PERFOR M ANCE
AND DE VELOPMENT
C ONTIN UED

Hunting Subsea
During the year, the Subsea business reported strong sales and
profits as deep water drilling programmes, mainly in the Gulf of
Mexico, continued. While business momentum remained strong
for the majority of the year, as the business entered Q4 2015, a
declining order book, due to the ongoing curtailment of drilling
by global operators, led to a reduction in workforce of 19% in
the year. The business continued to introduce new coupling
products, valves and chemical injector solutions to the market
throughout the year, which has contributed to the excellent
results being delivered.

Well Intervention
The well intervention business group has also been impacted by
the market sales of its pressure control system and Thru Tubing
intervention tools have continued throughout the year, with new
business being secured across the Middle East.

Hunting’s UK-based rental equipment business has been
adversely impacted during the year, but plans are being drawn
up to focus more on African drilling markets, where better market
opportunities are anticipated.

Exploration and Production
Hunting’s exploration and production business has oil and natural
gas well investments mainly in the Southern US and offshore
shallow waters in the Gulf of Mexico, holding equity interests in
47 producing properties. On a Barrel of Oil Equivalent basis
(“BOE”), production in the year was 118,000 BOE (2014 –
143,000 BOE), with reserves at 31 December 2015 being 0.6m
BOE (2014 – 0.9m BOE).

In 2015, the business reported an underlying loss from
operations of $4.3m (2014 – $0.2m profit). During 2015, the unit
participated in drilling one successful onshore development well
and a successful offshore recompletion.

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 $6.4m (2014 – $11.3m), which has been
shown as an exceptional item, reflecting a reduction in the value
of reserve estimates and higher retirement obligation cost
estimates. Reported loss from operations for 2015 was $10.7m
(2014 – $11.1m).

In Europe, Hunting’s UK operations have been affected by a
near decade low in new drilling activity but also the high taxation
of operators. Hunting has restructured its operations, including
a reduction in the workforce of 17% to align with the current
operating environment. While operations in the UK have been
depressed, new investment in the Group’s Netherlands facility
and entry into Norway in the year are targeting ongoing drilling
across the whole region, including the increasing number of plug
and abandonment programmes planned as production ceases
from older fields.

In Asia Pacific, Hunting maintains operations in Singapore,
Indonesia, Thailand and China. During the year, activity levels
declined with general market conditions. While the performance
of the business reduced in the year, which led to a 34% reduction
in employees across the region, Hunting has continued to develop
its presence in the area, particularly in Singapore. In March 2015,
the Hunting Board approved the investment in a major new
facility in Singapore, which will consolidate four locations into one
campus. The new campus will combine threading, manufacturing
and service capabilities and also include the electronics and
precision machining capabilities of Hunting’s AMG business
group. While the phasing of this investment has been moved into
late 2016 and 2017, due to the market environment, plans for the
consolidation of Hunting’s operations continue, with planning
applications being secured and early-stage investment made
throughout the year.

Well Intervention

Revenue
Underlying profit from operations
Underlying profit margin
Reported (loss) profit from operations
Capital investment
Average employees
Year end employees

2015
$m 106.3
$m
4.6
%
4
$m (27.0)
$m
8.6
499
428

2014
135.5
23.8
18
23.0
4.5
483
513

The Well Intervention segment comprises the Hunting Subsea
and well intervention businesses.

Revenue in the segment declined 22% in the year to $106.3m
(2014 – $135.5m), with underlying profit from continuing
operations reducing by 81% to $4.6m (2014 – $23.8m).
Impairment to the carrying value of goodwill totalled $29.9m and
other charges, comprising amortisation of acquired intangibles
and restructuring costs totalling $1.7m, led to a reported loss
from continuing operations of $27.0m (2014 – $23.0m profit).

Capital investment within the segment totalled $8.6m, mainly
associated with the construction of new facilities. With the
programme to reduce the workforce completed within the year,
the year end number of employees reduced by 17% to 428
(2014 – 513).

Hunting PLC
2015 Annual Report and Accounts
40

As a result of the above, free cash flow was $118.0m in the year
(2014 – $182.3m).

Expansion capital investment during 2015 was $59.1m (2014
– $54.5m) as the Group’s internal capital investment programme
progressed. The Group incurred $20.2m on its new premium
threading and test facility at Ameriport, US, $9.3m on the new
regional facility in Cape Town, South Africa, $6.4m at Hunting
Dearborn, $1.6m on the new AMG regional facility in Singapore,
$2.9m on drilling tools and rental equipment and $11.5m on
machinery and equipment. Other expansion capital investments
totalled $7.2m.

Total dividends paid in the year to PLC equity shareholders were
$39.8m. This comprises the payment of the final dividend for
2014 of 22.9 cents and the 2015 interim dividend of 4.0 cents.
Dividends will continue to be declared in cents, with a Sterling
equivalent paid, following a formal process of conversion. The
final dividend for 2015 is proposed at 4.0 cents, and, if approved
by shareholders, will result in an outflow of $5.9m.

Net debt has reduced by $20.5m to $110.5m (2014 – $131.0m) at
the end of the year.

Summary Group Cash Flow

EBITDA
Working capital movements
Net interest paid and bank fees
Tax paid
Restructuring costs
Replacement capital investment
Other operating cash and non-cash movements
Free cash flow
Expansion capital investment
Dividends to PLC equity holders
Other
Reduction in net debt in the year

2015
$m
61.9
96.0
(7.4)
(10.5)
(5.9)
(22.0)
5.9
118.0
(59.1)
(39.8)
1.4
20.5

2014
$m
269.8
3.8
(5.6)
(26.6)
–
(69.0)
9.9
182.3
(54.5)
(44.1)
(8.9)
74.8

Cash Flow
EBITDA was $61.9m (2014 – $269.8m), reflecting the weakness
in the global energy markets, leading to lower revenues and
profits for the Group.

Working capital movements generated $96.0m of cash inflows
(2014 – $3.8m), impacted by the decline in business activity
levels, but also reflecting the Group’s focus on working
capital management.

Net interest paid and bank fees increased in the year to
$7.4m from $5.6m in 2014, reflecting fees paid on the new
five-year facility.

Tax paid in the period decreased by $16.1m, reflecting the lower
levels of taxable income generated.

Restructuring costs gave rise to cash outflows of $5.9m (2014
– $nil) as a result of workforce reduction programmes.

Replacement capital investment decreased by 68% to $22.0m
in 2015 (2014 – $69.0m), as the Group cut non-essential
expenditures. Key components included $6.4m on the
manufacturing facility at Houma, US, $6.1m on drilling tools
and rental equipment and $6.3m on machinery and equipment.
Exploration and production capital investment totalled $3.0m
during the year.

Hunting PLC
2015 Annual Report and Accounts
41

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONGROUP FUNDING AND POSITION
AT YE AR END

C A S H HA S B E E N TIGHTLY M A NAG E D DUR ING TH E
Y E AR , TO E NA B LE TH E GROUP TO CONTINU E IT S
GLO BAL FACILIT Y INV E S TM E NT PRO GR A M M E BUT A L S O
TO PAY D OWN N E T D E B T A ND M A NAG E G E A R ING .
OV E R TH E Y E A R N E T D E B T R E DUC E D BY $20. 5M TO
E ND TH E Y E A R AT $110. 5M , R E FLE C TING G E A R ING
O F 9% AT 31 D E C E M B E R 2015 (2014 – 9%).

The ratio of net debt to EBITDA permitted under the RCF must
not exceed a multiple of three times. EBITDA must also cover
relevant finance charges by a minimum of four times. For
covenant testing purposes, the Group’s definition of EBITDA is
adjusted to exclude exceptional items, include the share of
associates’ post-tax results and exclude the fair value charge for
share awards. Similarly, net debt and finance expenses are
adjusted to accord with the definition within the facility
agreement. 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 2015 both these covenants
were met.

The Group’s net debt is monitored by the central treasury
function on a daily basis and a variety of cash forecasts, looking
at different time horizons, are prepared on a periodic basis.

Management’s judgement is that the level of headroom provided
by the Group’s total credit facilities remains 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 decreased to 1% in 2015, reflecting the decline in
trading (2014 – 13%).

The Board considers each dividend proposed based on 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 shareholders
and advisers.

Further detail on financial risks is provided within note 26 of the
2015 Annual Report and Accounts.

Financial Capital Management
Capital employed is managed in order to ensure an appropriate
level of financing is available for the Group’s activities. The balance
of debt and 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 and interest rate
exposures and cash management, together with the investment
of surplus cash.

The Group operates in a number of geographic territories and
results are generated in a number of different currencies. The US
dollar is the most significant functional currency, 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.

2015 has been a year of decline for the Group, as activity levels
materially decreased within its core markets leading to a
reduction in revenues and profits for the Group. However, cash
generation has remained strong and sufficient to continue to fund
the Group’s capital investment programme and reduce net debt
by $20.5m to $110.5m (2014 – $131.0m), with gearing being 9%
at 31 December 2015 (2014 – 9%).

Total equity
Net debt
Capital employed
Gearing

2015
$m
1,168.1
110.5
1,278.6
9%

2014
$m
1,438.3
131.0
1,569.3
9%

The Group’s financial position remains robust, with total credit
facilities of $414.6m in place (2014 – $649.8m) of which $350.0m
(2014 – $584.7m or £375.0m) is committed. A new five year
$350m revolving committed facility (“RCF”) was agreed in
October 2015 with a syndicate of five banks, comprising Lloyds,
Barclays, HSBC, Wells Fargo and DBS. The new facility, which
expires in October 2020, has similar terms and covenants to the
old facility. Further details regarding the new facility can be found
in note 26 of the 2015 Annual Report and Accounts.

H U N T I N G S U B S E A’ S
P R O D U C T T E S T I N G S TAT I O N

Hunting PLC
2015 Annual Report and Accounts
42

Other intangible assets have reduced by $44.4m, the main
movements being an amortisation charge for the year of $40.8m,
an impairment charge of $11.2m, and foreign exchange of $0.4m,
offset by the capitalisation of technology and software
development costs of $8.0m.

Property, plant and equipment has decreased by $12.2m.
Additions of $77.1m were offset by depreciation of $43.6m,
impairment of assets held within the Group’s Drilling Tools
business unit totalling $26.8m, impairment of oil and gas assets
of $6.4m and $0.2m transferred to inventories. The net book
value on disposals amounted to $5.9m and adverse foreign
exchange adjustments totalled $6.4m.

Working capital has decreased by $104.8m. The reduction in
activity levels, together with management’s focus on working
capital led to cash inflows of $96.0m. Foreign exchange had
$12.3m favourable impact on working capital, but this was offset
by $3.5m of non-cash adjustments.

Tax balances show net assets of $10.7m at 31 December 2015
(2014 – $55.2m net liabilities). This reflects the move from taxable
profits in 2014 to a recovery of tax paid in prior years utilising tax
losses generated during 2015.

Provisions have reduced by $6.7m principally due to the
settlement of vacant leasehold property obligations.

As a result of the above changes, capital employed in the Group
has reduced by $290.7m to $1,278.6m.

Cash generation has been well managed during the year,
resulting in an overall cash inflow in 2015, reducing net debt by
$20.5m to $110.5m at 31 December 2015.

Net assets at 31 December 2015 were $1,168.1m, which, after
non-controlling interests of $26.2m, result in equity shareholders’
funds of $1,141.9m (2014 – $1,408.1m). This is a decrease of
$266.2m over 31 December 2014, which reflects the loss for the
year attributable to equity shareholders of $226.6m and $39.8m
of dividend payments, offset by other items of $0.2m

Balance Sheet

2014
$m
440.6
Goodwill
224.8
Other intangible assets
473.0
Property, plant and equipment
470.6
Working capital
(55.2)
Taxation (current and deferred)
(24.7)
Provisions
40.2
Other net assets
1,278.6 1,569.3
Capital employed
(131.0)
Net debt
(110.5)
1,168.1 1,438.3
Net assets
Non-controlling interests
(30.2)
Equity attributable to owners of the parent 1,141.9 1,408.1

2015
$m
230.6
180.4
460.8
365.8
10.7
(18.0)
48.3

(26.2)

Given the severe downturn across the energy industry in 2015,
management undertook an impairment review exercise ahead of
the Group’s half and full-year results, as noted previously. Both
exercises analysed the carrying value of goodwill for each
relevant cash generating unit across the Group, based on future
cash projections, while adopting appropriate discount rates.
Impairment to goodwill recorded in the year totalled $208.2m.
Further details of the impairment are detailed in note 15 of the
2015 Annual Report and Accounts. Other changes to goodwill
relate to an adverse impact from foreign exchange of $1.8m.
As a result, the Group’s goodwill has decreased by $210.0m
compared to 2014.

H U N T I N G S U B S E A M A K E S
H I G H P E R F O R M A N C E VA LV E S
F O R U S E I N D E E P WAT E R
A P P LI C AT I O N S

Hunting PLC
2015 Annual Report and Accounts
43

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCORP OR ATE AND SO CIAL
RESPONSIBILIT Y

A S A N INT E R NATI ONA L PRO DUC T S A ND S E RVI C E S
PROVID E R , HUNTING R E LI E S ON IT S R E PUTATI ON
WITHIN TH E E N E RGY IN DU S TRY.

The relationships developed with stakeholders are critical to the
Group’s business success and in order to ensure its continued
growth, Hunting constantly evaluates ways to strengthen links
with investors, customers, suppliers, employees, governments
and the communities in which its businesses operate.

The responsibility for building and maintaining our reputation
with stakeholders extends from the Board, to our executive
management and to those employees working at an operational
level. Hunting continues to update and introduce policies on
governance, ethics and business conduct.

Further details on the Group’s governance framework can be
found within the Corporate Governance Report on pages 50
to 53.

The Board believes that the combined policies covering these
areas continued to remain effective during the year. The Board
also believes that the policies in place covering other key areas
such as human rights, bribery and corruption, sanctions and
compliance with all other relevant laws and regulations remained
effective in the period.

Code of Conduct
Through the Group’s Code of Conduct, Hunting has published
the basis on which our employees interact with our customers
and suppliers around the world. This commitment to do business
in an ethical and transparent way enables Hunting to occupy a
position of trust with our partners. As part of our established
procedures, the Code of Conduct is sent to all major trading
partners around the world.

Human Rights
Hunting is committed to upholding the Human Rights of all
stakeholders and in 2014 published its global Human Rights
Policy which is incorporated within the Group’s Code of Conduct.
This policy extends to:

• providing a safe working environment for all employees

and contractors;

• respecting the rights of the individual with a zero tolerance

to any form of discrimination, harassment or bullying;
• providing training and development programmes to the

global workforce;

• not employing child labour;
• promoting good relationships with all communities in

which we operate;

• operating in an environmentally responsible manner; and
• compliance with legislation in all relevant territories.

Investors
Communicating the position, performance and future strategy
with the Group’s shareholders is of key importance to the Board
of Directors. Communications include press releases issued to
the London Stock Exchange, industry analyst and institutional
investor presentations and webcasts and interacting with
shareholders at general meetings of the Company.

Other communications include an in-house corporate
publication, the Hunting Review, which is published twice a year.

The Company is quoted on the London Stock Exchange and has
a premium listing status, indicating its commitment to the UK’s
highest standards of regulation and corporate governance as
published by the Financial Conduct Authority. The Company is
also required to comply with the UK Corporate Governance
Code, UK Company Law and the laws and regulations of the
jurisdictions in which it operates.

PAT R I OT PAW S S E RV I C E
D O G S – H U N T I N G ’ S C H O S E N
C H A R I T Y F O R 2 015

Customers and Suppliers
Hunting’s customers and suppliers are an integral part of the
success of the Group. Developing relationships with these
partners is essential to our long-term growth. The Hunting way
of doing business is summarised in its Code of Conduct, with
openness and transparency being key components of its
reputation with long-term business partners.

Payments to Governments
The Group has implemented procedures to comply with the UK’s
Payments to Governments reporting requirements and will issue
a public statement in relation to this area by 30 June 2016.

Hunting is a signatory to the UK government’s Prompt Payment
Code and is committed to making timely payments to suppliers,
providing transparency and certainty to business partners.

Hunting PLC
2015 Annual Report and Accounts
44

U K

2015

2014

G E O G R A P H I C A L S P L I T O F E M P L O Y E E S
( Y E A R E N D A C T U A L S )

A S I A P A C I F I C

349

2015

424

2014

R E S T O F E U R O P E

C A N A D A

2015

2014

U S

2015

2014

2015

2014

O T H E R

1,680

2015

2,479

2014

457

694

138

276

The Board has established “whistleblowing” procedures for any
employee wishing to raise, in confidence, any concerns they may
have about possible financial improprieties, or other matters, with
the Chairman or Senior Independent Director. The Group also
has in place an independent and anonymous whistleblowing
reporting service operated by Safecall Limited with the contact
details communicated to all employees.

Diversity
Hunting’s diversity policy is detailed within the Corporate
Governance Report. The Group seeks to ensure equal
opportunities are given to its global workforce across the whole
spectrum of diversity areas, including gender.

The Group’s gender balance is presented in the table below:

Total number of
Directors/officers/
employees

2015
7

2014
6

146

140

2,784 4,003

Board
Senior
Management
Whole
Workforce

Males %

Females %

2015
86

2014
100

2015
14

2014
0

Hunting’s senior management is defined as those employees
who have influence in the daily running of the Group’s major
operational businesses and activities, including the number of
persons who are directors of subsidiary undertakings within
the Group.

In order to promote its standing within the oil and gas sector,
Group companies hold memberships with a variety of
organisations including:

• American Petroleum Institute
• Society of Petroleum Engineers
• The International Coiled Tubing Association
• American Society for Quality
• Investors in People

Employees
Hunting recognises that its success and reputation depends upon
the efforts, integrity and commitment of its global workforce.
Responsibility for employees lies with local management, which
allows local cultural issues to be appropriately managed and the
necessary development programmes to be structured accordingly.
The demographic of the Group’s employees reflects the global
nature of the oil and gas industry and the geographic diversity of
the Group’s activities.

At 31 December 2015, the Group had 2,784 employees (2014 –
4,003). During the year, and reflecting the downturn across
Hunting’s core energy markets, a reduction in work force
programme was implemented across the Group to reduce costs.

The Group seeks to adhere to all relevant local and jurisdictional
laws covering employment and minimum wage legislation. As
a responsible employer, full and fair consideration is given to
applications for positions from disabled persons and to their
training and career advancement. Every effort is made to retain
in employment those who become disabled while employed by
the Group.

It is important for the Group to retain key employees and to
recruit high quality candidates. The Group therefore provides
additional benefits to staff including participation in schemes that
provide healthcare and post-retirement benefits and, in certain
instances, participation in bonus arrangements when
outperformance in terms of operational excellence has been
achieved. Hunting has share award schemes in place as a
longer-term incentive and to encourage employees to participate
in the ownership of the Company.

Hunting PLC
2015 Annual Report and Accounts
45

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCORP OR ATE AND SO CIAL
RESPONSIBILIT Y
C ONTIN UED

Hunting’s Director of Health, Safety and Environment reports
directly to the Chief Executive and a report is considered by the
Board of Directors at each meeting.

The Group’s target is to achieve zero recordable incidents. Each
local business is required to develop tailored policies to suit their
environment. These incorporate the Group’s approach to putting
safety first and, at a minimum, to comply with local regulatory
requirements. Training is given to every employee throughout
the Group.

During the year, there were no fatalities across the Group’s
operations with 36 recordable incidents (2014 – 81). The incident
rate, as calculated from guidance issued by the Occupational
Safety and Health Administration in the US, was 1.13 compared
to 1.92 in 2014. The industry average incident rate in 2015 was
4.3 (2014 – 5.3).

Quality and Manufacturing Excellence
The Group is committed to enhancing its production and
operational quality with a number of facilities being certified
ISO 9001 (quality), 14001 (health and safety) and 18001
(environmental) compliant, indicating that globally recognised
standards and systems are in place. The table below presents
the adoption of the ISO accreditations across the Group’s
manufacturing facilities:

ISO Accreditation

ISO 9001
ISO 14001
ISO 18001

Number of
facilities
accredited
21
7
2

% of
manufacturing
facilities
50%
17%
5%

More facilities across the Group are working towards these
accreditations, continuing the Group’s commitment to monitoring
and reducing the environmental impact of its operations and
increasing HS&E standards.

Operational and production excellence is a key feature of our
relationship with customers, therefore quality assurance for
each component manufactured is a key indication of our drive
to be an industry leading provider of critical components and
measurement tools.

In 2015, the Group continued its programme to introduce lean
manufacturing processes into global operations. This resulted in
efficiency gains in a number of key business units.

Community
Hunting’s responsibilities to the communities in which it operates
extends on many fronts. The Group participates in a number
of initiatives and events that raise money for charities and
community projects around the world. In 2015, many Hunting
employees participated in local charitable events with associated
corporate support.

The Hunting Art Prize is an annual event hosted in Houston that
supports local community organisations. In 2015, Hunting’s
chosen charity was Patriot PAWS Service Dogs. Patriot is
dedicated to training dogs to assist disabled service veterans
and others with mobile disabilities. Patriot is also Hunting’s
designated charity for 2016.

The Group also makes donations to various UK charities through
the Chairman’s charitable trust committee, which comprises the
Chairman and former Hunting employees. In 2015, assistance
was granted to 18 charities. During 2015, the Group donated
$0.3m (2014 – $0.4m) to charities.

H U N T I N G ’ S S I N G A P O R E
O P E R AT I O N S S U P P O R T LO C A L
CO M M U N I T I E S I N C LU D I N G
O L D P E O P L E ’ S H O M E S

Health and Safety
The Group operates from 42 principal manufacturing facilities
and 35 service and distribution points across the globe and
all are committed to achieving and maintaining the highest
standards of safety for its employees, customers, suppliers and
the public.

Hunting has a proven culture of aiming for best practice and
employs rigorous health and safety practices. Health and Safety
policies include:

• Regular audit and maintenance reviews of facilities,

equipment, practices and procedures to ensure compliance
with prevailing standards and legislation and a safe
environment for all those who work within and around
our facilities;

• Seeking accreditation and aligning long-standing Company
programmes and procedures to internationally recognised
Quality Assurance standards;

• Monitoring, which is a management task, is documented

and reported at Board level;

• Appropriate training and education of all staff; and
• A Group policy on health, safety and environmental

matters, which can be found on the Company’s website
www.huntingplc.com.

Hunting PLC
2015 Annual Report and Accounts
46

Environment
The Group is committed to the protection of the environment and
developing manufacturing processes and procedures, which
ensure that any adverse effects on the environment are kept to
a minimum.

The Group’s environmental policy is to look for opportunities and
adopt practices that create a safer and cleaner environment. It is
particularly sensitive to the challenges of the industry in which it
operates. The Group has programmes in place to monitor the
environmental impact from its operational activities and remains
focused on ensuring environmental consideration is at the
forefront of its business practices.

Total emissions are converted to a carbon dioxide equivalent
figure, using guidance and conversion factors detailed in the UK
government’s Environmental Reporting Guidance as published
by DEFRA (www.gov.uk/defra).

The following table details Hunting’s Scope 1 and 2 emissions:

Carbon Dioxide Equivalent Emissions (tonnes)

Scope 1
Scope 2
Total controlled emissions

2015
6,381
26,329
32,710

2014
8,113
34,059
42,172

%
Change
-21.3
-22.7
-22.4

The Group also collects mains water usage data and in 2015
consumed 223k cubic metres (2014 – 290k cubic metres)
of water.

The Group’s emissions are primarily a function of the production
activity within its operating facilities, therefore the Group’s
facilities square footage has been adopted as the basis of the
intensity factor presented below:

Intensity Factor

Total controlled emissions (tonnes)
Facilities footprint (’000 square feet)
Intensity Factor

2015
32,710
3,151
10.4

2014
42,172
2,806
15.0

%
Change
-22.4
+12.3
-30.9

For 2016, Hunting is planning to enhance its greenhouse gas
reporting, in line with the European Union’s GHG Protocol, which
includes collecting individual Scope 2 emissions factor data for
each facility within the Group.

2015 has seen the Group continue to develop and enhance
its relationships with all stakeholders with a commitment from
all levels of the Group to deliver value for its partners in the
long term.

D E N N I S P R O C T O R
C H I EF E X E C U T I V E

P E T E R R O S E
F I N A N C E D I R E C TO R

3 March 2016

FR O M CO N C E P T I O N
TO CO M M I S S I O N I N G ,
E N V I R O N M E N TA L
CO N S I D E R AT I O N S
A R E AT T H E
F O R E FR O N T
O F O U R B U S I N E S S
P R AC T I C E S

Key aspects of our environmental policies include:

• Raising awareness of the environment within the workplace

through noticeboard communications;

• Encouraging the reduction of waste and emissions and
promoting awareness of recycled materials and use of
renewable resources;

• Each operating unit developing and implementing its own

procedures while conducting regular reviews to ensure that
they are maintained and refined;

• Encouraging employees to pay special regard to

environmental issues and requirements in the communities in
which the Group operates; and

• Incorporating health, safety and environment considerations

into the design of new facilities.

The Group monitors and collects data relating to greenhouse gas
emissions from across its operations and submits data to the UK’s
Carbon Disclosure Project. Further, during the year Hunting has
completed internal energy audits across its UK facilities to comply
with the UK government’s Energy Savings Opportunity Scheme.

In compliance with UK environmental legislation, each business
unit across the Group has reported Scope 1 and 2 emissions to
provide a consolidated total of each source of greenhouse gas
emissions for the year ended 31 December 2015. Scope 1
emissions result from direct sources such as fossil fuels
consumed onsite. Scope 2 emissions are indirect emissions
such as electricity consumed by a business. The reporting basis
for emissions has been presented on an operational control
basis, with data collected on the six greenhouse gases
highlighted by the Kyoto Protocol.

Hunting PLC
2015 Annual Report and Accounts
47

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

BOARD OF DIREC TOR S

R I C H A R D H U N T I N G C . B . E .
N O N - E X E C U T I V E C H A I R M A N

Nationality
British

Length of service
43 years; elected an executive Director and
Deputy Chairman on the formation of Hunting
PLC in 1989 and has been Chairman of the
Board since 1991. In 2011, Richard moved from
an executive to a non-executive role.

Skills and experience
Prior to his appointment as Chairman, Richard
held a variety of management positions around
the Hunting Group.

D E N N I S P R O C T O R
C H I EF E X E C U T I V E

Nationality
American

Length of service
23 years; appointed to the Board as a Director
in 2000 and Chief Executive in 2001. Dennis
was chief executive of Hunting Energy Services
from March 2000 after joining the Group
in 1993.

Skills and experience
Dennis has held senior positions in the oil
services industry in Europe, the Middle East
and North America.

P E T E R R O S E
F I N A N C E D I R E C TO R

Nationality
British

Length of service
19 years; appointed to the Board as Finance
Director in 2008.

Skills and experience
Peter is a Chartered Accountant and prior to
joining Hunting held senior financial positions
with Babcock International.

External appointments
None.

Committee membership
Nomination Committee (Chairman) and
by invitation.

External appointments
None.

Committee membership
Nomination Committee and by invitation.

External appointments
None.

Committee membership
By invitation.

J O H N H O F M E I S T E R
S EN I O R I N D EP EN D EN T D I R E C TO R A N D N O N - E X E C U T I V E D I R E C TO R

Nationality
American

Length of service
7 years; appointed to the Board as a
non-executive Director in 2009.

External appointments
John is the founder and chief executive officer
of the Washington D.C. registered not-for-profit
Citizens for Affordable Energy, Inc. and a
non-executive director of Erin Energy
Corporation and Applus Services SA.

Skills and experience
John is the former president of Shell Oil
Company and a former group director of Royal
Dutch Shell PLC in The Hague, Netherlands.

Committee membership
Audit Committee.
Nomination Committee.
Remuneration Committee (Chairman).

Hunting PLC
2015 Annual Report and Accounts
48

A N N E L L B A Y
N O N - E X E C U T I V E D I R E C TO R

Nationality
American

Length of service
1 year; appointed to the Board as a non-
executive Director in 2015.

Skills and experience
Annell was formerly a vice-president of global
exploration at Marathon Oil Corporation and
prior to that vice-president of Americas
Exploration at Shell Exploration and
Production Company.

J O H N G L I C K
N O N - E X E C U T I V E D I R E C TO R

Nationality
American

Length of service
1 year; appointed to the Board as a
non-executive Director in 2015.

Skills and experience
John (“Jay”) was formerly the president and
chief executive officer of Lufkin Industries Inc
and prior to that held several senior
management roles within Cameron
International Corporation.

J O H N N I C H O L A S
N O N - E X E C U T I V E D I R E C TO R

Nationality
British

Length of service
7 years; appointed to the Board as a
non-executive Director in 2009.

Skills and experience
John is a Fellow of the Association of Chartered
Certified Accountants. He was formerly the
group finance director of Tate & Lyle PLC and
prior to that the group finance director of
Kidde PLC.

External appointments
Annell is currently a non-executive director
of Apache Corporation, a global oil and gas
exploration and production company.

Committee membership
Audit Committee.
Nomination Committee.
Remuneration Committee.

External appointments
Jay is currently a non-executive director of
TETRA Technologies Inc, a geographically
diversified oil and gas services company.

Committee membership
Audit Committee.
Nomination Committee.
Remuneration Committee.

External appointments
John is currently the non-executive chairman
of Diploma PLC and a non-executive director
of Rotork PLC and Mondi plc.

Committee membership
Audit Committee (Chairman).
Nomination Committee.
Remuneration Committee.

Hunting PLC
2015 Annual Report and Accounts
49

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCORP OR ATE GOVERNANCE REPORT

“DUR ING 2015 HUNTING R E VI E W E D IT S
G OV E R NA N C E A ND R I S K M A NAG E M E NT
R E P O RTING FR A M E WO R K IN O R D E R TO E N SUR E
TH E HIGH E S T S TA NDAR D S O F CO R P O R AT E
G OV E R NA N C E AR E M AINTAIN E D AC RO S S TH E
GROU P. TH E B OAR D VI E W THI S A S E S S E NTIA L TO
SUPP O RTING LONG -T E R M S HA R E H O LD E R VA LU E .
HUNTING’ S E TH O S TH ROUGH OUT TH E
O RG A NI SATI ON I S TO AC T WITH H ON E S T Y
A ND INT E GR IT Y WITH ALL OUR BU S IN E S S
PARTN E R S – THI S WAY O F D O ING BU S IN E S S
PRO M OT E S OUR G OV E R NA N C E FR A M E WO R K
A ND VALU E S TO E ACH O F OUR S TA K E H O LD E R S .

W E HAV E AL S O R E VI S E D A ND E NHA N C E D
OUR S TR AT E GI C R E P O RT W HI C H I S AI M E D
AT IN CR E A S ING S HA R E H O LD E R UND E R S TA N DING
O F H OW W E CR E AT E VALU E A ND PL A N F O R
FUTUR E GROW TH . A S PA RT O F THI S PRO C E S S , A ND
IN LIN E WITH TH E R E VI S E D U K CO R P O R AT E
G OV E R NA N C E CO D E R E CO M M E NDATI ON S, W E
HAV E E NHA N C E D OUR R I S K M A NAG E M E NT
R E P O RTING TO SUPP O RT OUR G O ING CON C E R N
A ND VIAB ILIT Y S TAT E M E NT S .”

R I C H A R D H U N T I N G C . B . E .
C H A I R M A N

Compliance
The Board of Hunting PLC has adopted governance principles
aligned to the 2014 UK Corporate Governance Code (the
“Code”).

The Company is reporting its corporate governance compliance
against the Code. During the year, Hunting was compliant with
the provisions of the Code, with the exception of the following:

Provision A.3.1 requires the Chairman, on appointment, to be
independent. For information regarding non-compliance with this
provision see below. Provision C.3.7 requires the Company to put
the external audit contract out to tender at least once every
10 years. For information regarding non-compliance with this
provision refer to page 57 of the Audit Committee report.

Provisions C.3.1 and D.2.1 requires that the Audit and
Remuneration Committees comprise a minimum number of
independent directors. Up to the appointment of Jay Glick and
Annell Bay on 2 February 2015, the Company was not compliant
with these provisions.

Governance Framework
Subject to the Company’s Articles of Association, UK legislation
and any directions prescribed by resolution at a general meeting,
the business of the Company is managed by the Hunting Board.
The Board is responsible for the management and strategic
direction of the Company, with three committees to which it
delegates key governance and compliance procedures: the
Nomination Committee, whose activities are incorporated into
this report; the Audit Committee, whose report can be found on
pages 55 to 58; and the Remuneration Committee, whose report
can be found on pages 59 to 72.

Board Composition
The Board comprises the Chairman, Chief Executive, Finance
Director and four independent non-executive Directors, which
includes the Senior Independent Director.

There is a clear division of responsibilities between the Chairman
and Chief Executive. The Chairman is responsible for leading the
Board, including setting its agendas and ensuring that materials
are distributed in a timely manner. He also facilitates the
discussion of key matters between all the Directors. The Chief
Executive’s responsibilities include managing the day-to-day
running of the Company and recommending the strategic
direction of Hunting’s activities, whilst ensuring internal controls
and operating and financial reporting procedures are
implemented and remain appropriate.

The independent non-executive Directors of Hunting are a
key source of expertise and contribute to the delivery of the
Company’s strategic goals. Non-executive Directors are chosen
from the oil and gas industry and regulatory sectors in which
Hunting operates. Three non-executive Directors have a strong
track record within the US energy industry, where the majority of
Hunting’s operations are based and where a high proportion of
the Company’s results are derived.

All non-executive Directors of the Company are believed to be
independent, with the exception of the Chairman, who was an
executive Director of the Company from the formation of Hunting
PLC in 1989 until 2011. As at 31 December 2015, and excluding
the Chairman, the Board comprised of 67% independent
non-executive Directors. All the non-executive Directors have
access to professional advisers, at the Company’s expense, to
fulfil their various Board and Committee duties.

Hunting PLC
2015 Annual Report and Accounts
50

The Company Secretary is appointed by the Board and supports
the Chairman in providing all board materials and information flows
between the executive and non-executive Directors, specifically in
matters of governance and regulatory compliance. The Company
Secretary is also available to the Board and all its Committees for
advice and ensures that all procedures are followed.

Directors’ and Officers’ Liability Insurance
Hunting maintains insurance against certain liabilities, which
could arise from a negligent act or a breach of duty by the
Directors and Officers in the discharge of their duties. This is a
qualifying third-party indemnity provision which was in force
throughout the year.

Work Undertaken by the Board During 2015
The Board met six times in 2015 and each Director attended all
scheduled Board meetings. During 2015, the standing items and
other items for Board meetings included the following business:

Mar Apr

Jun Aug Oct Dec

Standing items
Chief Executive Update
Finance Director Report
Operational Reports
Quality, HS&E Reports
Shareholder Report
Other items
Annual Report and Final Dividend
Board Evaluation Results
Risk Review
AGM Preparation
Trading Statement
Strategy
Financial Personnel Succession
Half Year Report and Interim Dividend
Annual Budget
Non-executive Director Remuneration
Chairman/Senior Independent Director
Investor Feedback
Annual Board Evaluation

At each Board meeting the Chief Executive updates the Board
on key operational developments, provides an overview of the
market, reports on health and safety, and highlights important
milestones reached towards the delivery of Hunting’s strategic
objectives. The Finance Director provides an update on the
Group’s financial performance, banking arrangements, legal
issues, analyst discussions and statutory reporting developments
relevant to Hunting. These topics lead to discussion, debate and
challenge amongst the Directors.

The Directors, together with brief biographical details, are
identified on pages 48 and 49. All independent non-executive
Directors are appointed to all Board committees.

The attendance of the Directors at Board and Committee
meetings during 2015 is detailed in the table below:

Number of
meetings held
Number of meetings
actual/possible:
Richard Hunting
Dennis Proctor
Peter Rose
Annell Bay
Jay Glick
John Hofmeister
John Nicholas

Board

Nomination
Committee

Audit
Committee

Remuneration
Committee

6/6
6/6
6/6
6/6
6/6
6/6
6/6

2/2
2/2
–
1/1
1/1
2/2
2/2

–
–
–
4/4
4/4
4/4
4/4

–
–
–
5/5
5/5
5/5
5/5

Board Appointments and Nomination Committee
Hunting’s Nomination Committee comprises the Company’s
non-executive Chairman (Committee Chairman), Chief Executive
and the independent non-executive Directors. The terms
of reference of the Nomination Committee can be found
on the Company’s website at www.huntingplc.com.
At 31 December 2015, excluding the Chairman, 67% of the
Committee comprised of independent non-executive Directors.

During 2015, the Nomination Committee met twice, in January
to approve and recommend the appointment of Annell Bay
and Jay Glick and in June to consider and recommend the
reappointments of John Hofmeister and John Nicholas.

All appointments to the Board are in accordance with the
Company’s Articles of Association and the Code. In February 2015
Annell Bay and Jay Glick were appointed to the Board, following a
search process. Ms Bay and Mr Glick are both US residents and
have a strong track record within the energy industry, including the
exploration and manufacturing segments of the sector in which
Hunting operates. Ms Bay and Mr Glick were also reappointed by
shareholders at the Company’s 2015 AGM. Boyden Associates
were engaged by the Company to assist with the recruitment
process. Boyden Associates does not have any connection to
Hunting other than for this search mandate.

Ms Bay and Mr Glick have undertaken a formal induction
process since appointment, which included site visits to facilities
in the US and meeting with senior management across the
Company. The Chairman has also met with the non-executive
Directors throughout the year, to discuss, among other matters,
training and development.

On appointment, each non-executive Director is provided
with a letter of appointment, outlining the time commitments,
responsibilities and fiduciary duties required under Company
Law and, following Company policy, are appointed for a three-
year term. All appointment letters are available for inspection at
the Company’s AGM or at Hunting’s registered office.

In August 2015, John Hofmeister and John Nicholas were each
reappointed for a final three-year term, following a formal appraisal
and evaluation process, led by the Nomination Committee.

As prescribed by the Code, all the Directors submit themselves
for annual re-election at the Company’s AGM and at the 2015
AGM all Directors were re-elected by shareholders.

Hunting PLC
2015 Annual Report and Accounts
51

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCORP OR ATE GOVERNANCE REPORT
C ONTIN UED

Going Concern Assumption and Viability Statement
The Audit Committee and Board review the Going Concern
Assumption twice a year and the Group’s Viability Statement
annually, in parallel to supporting reports from the executive
Directors and Hunting’s central finance function. On
1 March 2016 the Board approved the Going Concern
Assumption and Viability Statement, which is detailed on
page 30.

Risk Management Procedures
The Board acknowledges its responsibility for monitoring the
Group’s principal risks and system of internal control and for
reviewing its effectiveness as required by the Code, with key
authorities being delegated to the Audit Committee.

Hunting’s risk management framework, system of internal control
and principal risks are detailed in the Strategic Report on pages
22 to 30.

Shareholders
The Company uses a number of processes for communicating
with shareholders, including Stock Exchange announcements,
the annual and half-year reports, webcasts, trading statements
and the AGM to which all shareholders are invited. In addition,
the Chief Executive and Finance Director meet on a one-to-one
basis with principal shareholders at least twice a year, following
the Group’s annual and half-year results, or when requested to
update them on Group performance and strategy. The Board is
in turn briefed by the Chief Executive, when appropriate, on
matters raised by shareholders.

During the year, the Chairman and Senior Independent Director
also met with a number of shareholders to discuss strategy,
governance and other matters. Their comments were passed on
to the Board by the Chairman. The non-executive Directors are
also available to meet shareholders.

During the latter part of 2015, the Remuneration Committee
consulted with certain of the Company’s institutional
shareholders to discuss amendments to the operation of the
Group’s Hunting Performance Share Plan (“the Hunting PSP”).

In 2015 the Company also appointed a Head of Investor
Relations to enhance engagement between Hunting and its
shareholders and the investment community.

During the year, management succession was a regular
discussion topic of the Board and Nomination Committee,
with key positions and succession plans being considered.

In 2012, the Company issued its gender diversity policy for new
Director appointments. Hunting’s diversity policy commits the
Group to:

• an embedded culture of equal opportunities for all employees,

regardless of gender;

• require external recruitment consultants to submit their
diversity policies to the Group prior to appointment;

• ensure that external consultants appointed by Hunting provide

candidate shortlists comprising of an appropriate gender
balance for consideration by the Nomination Committee;
• a target of at least one female Director of the Company when

practicable; and

• a periodic review by the Nomination Committee of its progress

in complying with the Davies Report’s recommendations.

The above policies and procedures were adopted and
documented by the Nomination Committee for the appointment
of Ms Bay and Mr Glick. Following the appointment of Annell Bay,
Hunting has met its stated diversity target and is more aligned
with the recommendations of the Davies Report.

Board Evaluation
The Directors undertake an annual evaluation of the Board
and its Committees, which includes completion of a detailed
questionnaire on the operation and governance responsibilities
in relation to the Company’s governance framework. Both the
executive and non-executive Directors are appraised collectively
and individually, with the results of the process reported to the
Board through the Chairman.

In 2015, the Company completed an externally facilitated
evaluation which was managed by IDDAS. IDDAS has no
other connection to the Company other than in facilitating this
process. The process included a review of Board and Committee
materials and individual interviews with each of the Directors and
the Company Secretary. A report on the findings of the evaluation
was presented at the December 2015 meeting of Directors. No
significant issues were highlighted and the evaluation indicated
that the Board is operating well and remains effective.

Further, the Chairman’s performance was evaluated in a separate
exercise by the non-executive Directors in December 2015, led
by John Hofmeister, the Company’s Senior Independent Director.
The non-executive Directors concluded that Mr Hunting had
been an effective and able Chairman of the Company throughout
the year.

Board Accountability
The Board has procedures in place to review all shareholder
communications, including the financial statements and Stock
Exchange announcements issued by the Company. Hunting’s
business model and strategy is detailed on pages 9 to 21.
The Board has delegated the responsibility of assessing whether
the financial statements are fair, balanced and understandable
to the Audit Committee. Further details of the responsibilities of
the Audit Committee, can be found within its report.

Hunting PLC
2015 Annual Report and Accounts
52

The Directors have been authorised to allot and issue Ordinary
shares and to disapply statutory pre-emption rights. These
powers are exercised under authority of resolutions of the
Company passed at its AGM. During the financial year ended
31 December 2015, 372,831 Ordinary shares were issued
pursuant to the Company’s various share plans. Further, the
Company has authority, renewed annually, to purchase up to
14.99% of the issued share capital, equating to 22,255,455
shares. Any shares purchased will either be cancelled, and the
number of Ordinary shares in issue reduced accordingly, or held
in Treasury. During 2015, no Ordinary shares were purchased
by the Company, under this authority.

These powers are effective for 15 months from the date of
shareholder approval, or up to the next general meeting where
new authorities are sought. The Directors will be seeking new
authorities for these powers at the 2016 AGM.

Employee Share Trust
The Group operates an Employee Share Trust (the “Trust”) as a
vehicle to satisfy shares options and awards granted to employees
who participate in the Company’s share-based incentive schemes.
At 31 December 2015, the Trust held 914,225 Ordinary shares in
the Company (2014 – 980,996). The Trust has a policy to
purchase shares in the market or subscribe for new shares to
meet the future requirements of these incentive schemes. During
the year, the Trust did not subscribe for any Ordinary shares.

In accordance with Listing Rule 9.8.4C the Trust has waived all
dividends payable by the Company and voting rights in respect
of the Ordinary shares held by it. Total dividends waived by the
Trust in the financial year to 31 December 2015 were $253,046.

By Order of the Board

R I C H A R D H U N T I N G C . B . E .
C H A I R M A N

3 March 2016

The Company’s major shareholders, as at 31 December 2015,
are listed below:

AXA group of companies
Hunting Investments Limited
European Value Partners
Franklin Templeton group
of companies
Slaley Investments Limited
J Trafford – as trustee
M Pickering – as trustee
David RL Hunting
– as trustee
– other beneficial

Number of
Ordinary
shares
15,482,234
11,073,487
7,340,305

Percentage
of issued
Ordinary
shares
10.4
7.4
4.9

6,095,439
6,411,679
6,025,864
5,722,170
199,910
2,549,117
2,484,583

4.1
4.3
4.0
3.8
0.1
1.7
1.7

Notes

(6)

(1/4/5)

(5)

(2/5)

(5)

(2/5)

(3/5)

Notes:
1.

Included in this holding are 9,437,743 Ordinary shares held by Huntridge
Limited, a wholly owned subsidiary of Hunting Investments Limited. Neither
of these companies is owned by Hunting PLC either directly or indirectly.
2. After elimination of duplicate holdings, the total Hunting family trustee interests

shown above amount to 6,025,864 Ordinary shares.

3. Arise because David RL Hunting and his children are or could become

beneficiaries under the relevant family trusts of which David RL Hunting is
a trustee.

4. Richard H Hunting (Chairman of Hunting PLC) and David RL Hunting are both

directors of Hunting Investments Limited.

5. In 2014, Hunting Investments Limited, Slaley Investments Limited, certain

Hunting family members, including Richard H Hunting and David RL Hunting
and the Hunting family trusts, to which Martin Pickering and James Trafford are
trustees (together known as “the Hunting Family Interests’) entered into a
voting agreement. The voting agreement has the legal effect of transferring all
voting rights of Hunting PLC Ordinary shares held by the Hunting Family
Interests to a voting committee. The beneficial ownership of Hunting PLC
Ordinary shares remains as per the table shown above. At 3 March 2016, the
Hunting Family Interests party to the agreement totalled 25,510,438 Ordinary
shares in the Company, representing 17.14% of the total voting rights.
6. On 17 February 2016, the Company was notified that AXA Investment

Managers S.A. had increased its holding to 16,477,932 Ordinary shares,
representing 11.07% of the issued share capital.

Annual General Meeting
The AGM of the Company will take place on Wednesday,
13 April 2016 at The Royal Automobile Club, 89 Pall Mall, London
SW1Y 5HS, commencing at 10.30 a.m. to which all shareholders
are invited. Shareholder voting procedures follow the provisions
of the Articles of Association and the Code, including a separate
resolution on each material item of business, the availability of
voting via proxy and the offer of a “vote withheld”. At the 2016
AGM, all resolutions will be voted on by way of a poll.

Further details of the resolutions and voting procedures are set
out in the Notice of AGM. Shareholders can vote by completing
the form of proxy sent with the Notice of Meeting, or by
submitting votes electronically via the Registrars’ website
www.sharevote.co.uk or via their online portfolio service,
Shareview, if registered as a member. Alternatively, shares held in
CREST may be voted through the CREST Proxy Voting Service.
To be valid, all votes must be received no later than 48 hours
before the time set for the meeting.

Hunting PLC
2015 Annual Report and Accounts
53

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
DIREC TOR S’ REPORT

The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Group’s and
Company’s transactions and disclose with reasonable accuracy
at any time the financial position of the Group and the Company
and to enable them to ensure that the financial statements and
the Remuneration Committee Report comply with the
Companies Act 2006 and, as regards the Group financial
statements, Article 4 of the IAS Regulation. The Directors are
also responsible for safeguarding the assets of the Group and
the Company and for taking reasonable steps for the prevention
and detection of fraud and other irregularities.

The Directors are also responsible for the maintenance and
integrity of the Group’s website, www.huntingplc.com. Legislation
in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.

Pursuant to the Financial Conduct Authority’s Listing Rules,
Disclosure and Transparency Rules and the UK Corporate
Governance Code, each of the Directors, whose names and
responsibilities are listed on pages 48 and 49, confirm that, to
the best of their knowledge and belief:

• the financial statements, prepared in accordance with IFRSs
as adopted by the EU, give a true and fair view of the assets,
liabilities, financial position and profit/loss of the Group and of
the Company;

• the Strategic Report on pages 2 to 47 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;

• 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.

By Order of the Board

B E N W I L L E Y
CO M PA N Y S E C R E TA RY

3 March 2016

For the purpose of section 415 of the Companies Act 2006, the
Directors present their report and the audited financial statements
of Hunting PLC for the year ended 31 December 2015.

The Strategic Report, incorporating the Chairman’s and
Chief Executive’s Statements, Business Model and Strategy,
Key Performance Indicators, Risk Management, Group
Performance and Development, Outlook and Corporate and
Social Responsibility Report, is located on pages 2 to 47.

As permitted by legislation, the Board has chosen to set out,
within the Strategic Report, some of the matters required to
be disclosed in the Directors’ Report which it considers to be
complementary to communicating Hunting’s performance and
position, as follows:

• changes in the Group and its interests (pages 6 to 8 and 32);
• future developments (page 8);
• risk management, objectives and policies (pages 22 to 30);
• inclusion and diversity (page 45); and
• greenhouse gas emissions (page 47).

Up to the date of this report there were no disclosable post
balance sheet events in respect of the 2015 financial year.

In addition, information relating to the Directors’ indemnity
provisions, substantial shareholder interests and dividend
waivers as required by legislation are disclosed within the
Corporate Governance report on pages 50 to 53 and pages
139 to 141 respectively.

Investor-related information and further disclosures incorporated
into the Directors’ Report, such as information relating to the
AGM, dividends, Directors’ powers and interests, share capital,
political donations, research and development and significant
agreements, can be found within the Shareholders’ Information
section located on pages 139 to 141.

Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report,
the Audit and Remuneration Committee Reports, and the
financial statements in accordance with applicable laws
and regulations.

Company Law requires the Directors to prepare financial
statements for each financial year. Under that law, the Directors
have prepared the Group and parent Company financial
statements in accordance with International Financial Reporting
Standards (“IFRSs”) as adopted by the European Union (“EU”).

Under Company Law, the Directors must not approve the
financial statements unless they are satisfied that they give a true
and fair view of the state of affairs of the Group and the Company
and of the profit or loss of the Group for the year.

In preparing these financial statements, the Directors are
required to:

• select suitable accounting policies and apply

them consistently;

• make judgements and accounting estimates that are

reasonable and prudent;

• state whether applicable IFRSs as adopted by the EU have
been followed, subject to any material departures disclosed
and explained in the financial statements; and

• prepare the financial statements on going concern basis,

unless it is inappropriate to presume that the Company will
continue in business.

Hunting PLC
2015 Annual Report and Accounts
54

AUDIT COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015

“IN 2015, TH E AUDIT CO M M IT T E E CONTINU E D
IT S R E VI E W A ND M ONITO R ING WO R K IN LIN E
WITH TH E B E S T PR AC TI C E R E CO M M E NDATI ON S
PUB LI S H E D BY TH E FINA N CIAL
R E P O RTING COUN CIL .

GIV E N TH E CUR R E NT TR ADING E NVIRONM E NT,
TH E CO M M IT T E E HA S S PE NT CON S ID E R A B LE TI M E
A S S E S S ING TH E I M PAC T O F TH E INDU S TRY
D OWNTUR N ON TH E GROU P ’ S FINA N CIA L S
A ND M O R E S PE CI FI C ALLY IN A S S E S S ING TH E
I M PAIR M E NT S B O O K E D AG AIN S T G O O DWILL
A ND PRO PE RT Y, PL A NT A ND E QUI PM E NT
IN TH E Y E A R .

TH E CO M M IT T E E HA S R E VI E W E D TH E
E NHA N C E D CONTRO L S A ND R E P O RTING
M E A SUR E S D E V E LO PE D BY HUNTING IN TH E Y E A R ,
TO CO M PLY WITH TH E R E VI S E D UK CO R P O R AT E
G OV E R NA N C E CO D E . TH E CO M M IT T E E HA S A L S O
R E VI E W E D TH E GROUP ’ S R I S K M A NAG E M E NT A ND
VIAB ILIT Y S TAT E M E NT DI S CLO SUR E S A ND
R E CO M M E ND E D TH E S E TO TH E B OA R D
F O R A PPROVAL .”

J O H N N I C H O L A S
C H A I R M A N O F T H E AUD I T CO M M I T T EE

Composition and Frequency of Meetings
The Committee currently comprises all of the independent
non-executive Directors of the Company and is chaired by John
Nicholas. Annell Bay and Jay Glick were appointed to the
Committee on their appointment to the Board of Directors on
2 February 2015.

Mr Nicholas has a professional accounting qualification and is
considered to have recent and relevant financial experience;
further details can be found in his biographical summary set out
on page 49.

The Committee met four times during the year and operates
under written terms of reference approved by the Board,
which are published on the Company’s website at
www.huntingplc.com.

The Committee normally meets in March, April, August and
December, and the attendance record of Committee members
during the year is noted on page 51. The Chairman, Chief
Executive, Finance Director, internal and external auditors
are normally invited to attend meetings. During the year, the
Committee reviewed its effectiveness and the Committee
Chairman reported these findings to the Board.

Responsibilities
The principal responsibilities of the Audit Committee are to:

• monitor and review reports from the executive Directors,
including the Group’s financial statements and Stock
Exchange announcements;

• provide to the Board a recommendation about the Annual
Report and Accounts, including whether they are fair,
balanced and understandable;

• review the Company’s Going Concern Assumption and

Viability Statement;

• monitor and review the Group’s systems of internal control;
• assess the effectiveness of the Group’s systems of risk

management and internal control;

• review reports from the Group’s external auditors;
• review reports from the Group’s internal auditors, including

details of the internal audit programme and its scope;

• monitor corporate governance and accounting developments;
• monitor the Group’s Bribery Act compliance procedures;
• consider and recommend to the Board the reappointment

of the external auditors;

• agree the scope and fees of the external audit;
• monitor and approve engagements of the external auditors

to provide non-audit services to the Group; and

• review the external auditors’ independence, effectiveness of
the audit process, and assess the level and quality of service
in relation to fees paid.

Hunting PLC
2015 Annual Report and Accounts
55

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONAUDIT COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

Work Undertaken by Committee During 2015
The Committee discussed, reviewed and made a number of
decisions on key areas throughout 2015 which are set out below:

Mar Apr Aug Dec

Financial Reporting
Annual Report and Full-Year Results announcement
Going Concern Assumption
Viability Statement*
Final Dividend Proposal
Interim Report and Interim Results announcement
Interim Dividend Proposal
Draft Annual Report
Review Accounting Policies
Internal Control and Risk Management
Risk management and internal control report
Key risks and mitigating controls
Effectiveness of internal controls and
internal audit function
Internal Audit Report
Procedures for preventing bribery and corruption
Bribery policy review
Internal audit programme and resourcing
External Auditors
Auditor objectivity, independence and re-appointment
Full-year report to the Audit Committee
Final Management Letter on internal controls
Auditor performance and effectiveness
Proposed year end audit plan including scope,
fees and engagement letter
Interim review report to the Audit Committee
Risk of auditor leaving the market
Other Business
Whistleblowing policy review
Committee effectiveness
Terms of Reference

in February 2016.

Training
During the year, the Committee was briefed by
PricewaterhouseCoopers LLP on the revised UK Corporate
Governance Code, in particular the new requirements to
review and monitor risk management and internal control
procedures and to provide a statement on the longer-term
viability of the Company.

Review of the 2015 Financial Statements
The Committee reviews final drafts of the Group’s Report and
Accounts for both the half and full year. As part of this process, the
performance of the Group’s major divisions is considered, with key
judgements, estimates and accounting policies being approved by
the Committee ahead of a recommendation to the Board.

Significant issues reviewed by the Committee in connection with
the 2015 Annual Report and Accounts were as follows:

Impairment Reviews
During 2015, the Group reported reduced trading due to the
curtailment of drilling activity across the industry following the fall
in the price of crude oil. As a consequence of this, management
completed impairment reviews on the carrying values of assets
held on the Group’s Balance Sheet.

Goodwill
The year end balance sheet includes goodwill of $230.6m (2014
– $440.6m). This represents approximately 20% of the Group’s net
assets (2014 – 31%).

Given the decline in trading, particularly in the second half of 2015,
impairment charges to goodwill were recorded at the half year of
$35.2m, with a further impairment charge recorded in the second
half of the year of $173.0m, to give a full year impairment charge
of $208.2m.

The Committee considered the appropriateness of the
assumptions and challenged the discount rates and the factors
used in the review process. After discussion, it was satisfied that
the assumptions and the disclosures in the year end accounts
were appropriate. Further, the Committee also noted the enhanced
disclosures relating to impairment to be included in the 2015
Annual Report and Accounts.

Intangible Assets
The carrying value of the Group’s intangible assets were also
reviewed and resulted in an impairment charge of $11.2m being
recorded in the full year – this being in addition to the regular
amortisation charge booked in the year.

As with the goodwill impairment charge the Committee considered
the appropriateness of the assumptions, discount rates and
factors used in the review process. The Committee also
considered the disclosures made in the year end accounts in
respect of the impairments.

Property, Plant and Equipment (“PPE”)
The year end balance sheet includes PPE of $460.8m (2014 –
$473.0m). This represents approximately 39% of the Group’s net
assets (2014 – 33%).

A review of the carrying values of the rental equipment held within
the Drilling Tools business unit was completed and, given the
reduction in onshore drilling activity and the short to medium-term
outlook in the recovery of this market segment, an impairment charge
of $26.8m has been recorded against the carrying values of PPE.

The Committee reviewed the PPE impairment charge and
following discussion was satisfied that the assumptions and the
disclosures in the year end accounts were appropriate.

Oil and Gas Exploration and Development Asset Impairment
The Committee reviewed the valuation of estimated reserves held
within the Group’s exploration and production segment and also
considered the appropriateness of the future prices for oil and gas
used to value reserves. After considering the valuation model,
including the impact of recent weakness in oil prices, the
Committee was satisfied that the reported impairment of oil and
gas reserves was calculated appropriately.

Taxation
In view of the international spread of operations the Committee
monitors tax risk, tax audits and provisions held for taxation. The
Finance Director briefed the Committee on developments during
the year.

Exceptional Items Charged to the Consolidated
Income Statement
The Group reports a middle column within the Consolidated
Income Statement which includes amortisation and exceptional
items. The Committee considered the accounting policy
definition of exceptional items and the items included within
this column to ensure consistency of treatment and adherence
to policy. The Committee also reviewed the calculation and
composition of each exceptional item and has satisfied itself
that they are reported appropriately.

Hunting PLC
2015 Annual Report and Accounts
56

In addition to briefings and supporting reports from the central
finance team on principal significant issues, the Committee
engages in discussion with the Group’s external auditors.

Going Concern Assumption and Viability Statement
The Committee reviewed the Going Concern Assumption and
Viability Statement reported by the Group, as required by the revised
UK Corporate Governance Code. Further information on the Going
Concern Assumption can be found on page 30.

In December 2015, the Committee reviewed the Group’s draft
Viability Statement, together with supporting information ahead
of final approval at its meeting on 29 February 2016. The
Committee was satisfied that the Viability Statement, noted on
page 30 of the Strategic Report, presented a reasonable outlook
for the Group for the next three years.

Fair, Balanced and Understandable Assessment
The Committee has reviewed the financial statements together
with the narrative contained within the Strategic Report set out
on pages 2 to 47 and believes that the Annual Report and
Accounts, taken as a whole, is fair, balanced and understandable.

In arriving at this conclusion the Committee undertook the following:

• review of early drafts of the Annual Report and Accounts,
providing relevant feedback to the executive Directors;
• regular review and discussion of the financial results during

the year including briefings by Group finance and operational
management; and

Materiality
The Committee has discussed materiality with the auditors both
as regards accounting errors that will be brought to the Audit
Committee’s attention and as regards amounts that would need
to be adjusted so that the financial statements give a true and fair
view. Overall audit materiality has been set at $5.0m (2014 –
$8.0m). This equates to approximately 5% of the Group’s average
reported profit before tax from continuing operations, adjusted
for the impairment of goodwill and other non-current assets, for
the past three years. This is within the range that audit opinions
are considered to be reliable. Further, the auditors agreed to
draw to the Audit Committee’s attention all identified uncorrected
misstatements greater than $0.3m.

Auditor Effectiveness
The external auditors’ full-year report includes a statement on
their independence, their ability to remain objective and their
ability to undertake an effective audit. The Committee considers
and assesses this independence statement on behalf of the
Board, taking into account the level of fees paid particularly for
non-audit services.

The effectiveness of the audit process is considered throughout
the year with a formal review undertaken at the April meeting of
the Committee. The assessment considers the following matters:

• the auditors’ understanding of the Group’s business and

industry sector;

• the planning and execution of the audit plan approved by

the Committee;

• receipt and review of reports from the external and

• the communication between the Group and audit

internal auditors.

The Committee advised the Board of its conclusion that the
2015 Annual Report and Accounts, taken as a whole, were fair,
balanced and understandable at a Meeting of the Directors on
1 March 2016.

Internal Audit
The Committee receives reports from the Internal Audit department
and reviews the internal audit process and effectiveness as part of
the Group’s internal control and risk assessment programme. An
annual programme of internal audit assignments is reviewed by the
Committee. The Committee met with the head of internal audit
without the presence of the executive Directors on three occasions
during the year.

External Audit
The external auditors present reports at the March, April, August
and December meetings for consideration by the Committee. In
March, a full-year report is considered ahead of publication of the
Group’s Annual Report and Accounts; in April an internal control
report is presented, following the year end audit and in August an
interim report is presented which includes the proposed full-year
audit scope and fee. An update to the full-year plan was
presented at the December meeting. The Committee considers
the reappointment of the auditors annually at its March meeting
and makes a recommendation to the Board. The Committee
normally meets with the external auditors without executive
Directors present at the end of each formal meeting.

Audit Scope
The Audit Committee also considered the audit scope and
materiality threshold. The audit scope was planned to cover
Group-wide risks and local statutory reporting, enhanced by
desk top reviews for smaller, low risk entities. Approximately 92%
of the Group’s reported revenue and 91% of the reported profit
before tax from continuing operations, adjusted for the
impairment of goodwill and other non-current assets, was fully
audited, covering 24 operating units across six countries.

engagement team;

• the auditors’ response to questions from the

Committee, including during private meetings without
management present;

• the independence, objectivity and scepticism of the auditor;
• responses to a formal questionnaire on conduct of the audit

from the senior financial managers of the Group;

• a report from the Finance Director and the Group Financial

Controller; and

• finalisation of the audit work ahead of completion of the

Annual Report and Accounts.

In addition, the Committee reviewed and took account of
the reports from the Financial Reporting Council on
PricewaterhouseCoopers LLP. After considering these matters,
the Committee was satisfied with the effectiveness of the year
end audit.

PricewaterhouseCoopers LLP and its predecessor firms have
been auditors to the Group since the Company’s formation on
7 August 1989 and under the firm’s audit partner rotation rules,
the current Senior Statutory Auditor will rotate off the audit
following completion of the 2018 statutory audit. The Committee
has considered the European Union legislation relating to
external auditors, rotation and intends to complete a tender
process during 2017 in order to ensure a full 12-month period of
independence before appointment of the selected firm as
auditors effective 1 January 2019. The Company has
commenced a process of engaging other firms to undertake
non-audit assignments in order to assess the quality of each firm
and its people as part of the early preparations for the tender
process. This includes Deloitte, KPMG and EY, which have
undertaken non-audit assignments for the Group.

Hunting PLC
2015 Annual Report and Accounts
57

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONAUDIT COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

Whistleblowing
The Company’s Senior Independent Director, John Hofmeister,
is the primary point of contact for staff of the Group to raise, in
confidence, concerns they may have over possible improprieties,
financial or otherwise.

In addition, the Group engages the services of Safecall Limited,
to provide an independent and anonymous whistleblowing
service available to staff across all of Hunting’s operations.

All employees have been notified of these arrangements through
the corporate magazine, Group notice boards and the
Group’s website.

J O H N N I C H O L A S
C H A I R M A N O F T H E AUD I T CO M M I T T EE

3 March 2016

The Committee closely monitors fees paid to the auditors in
respect of non-audit services, which are analysed within note 8.
In 2015, fees for non-audit services totalled $0.3m and comprised
taxation services amounting to $0.3m. The scope and extent of
non-audit work undertaken by the external auditors is monitored
by, and, above certain thresholds, requires prior approval from
the Committee to ensure that the provision of such services does
not impair their independence or objectivity.

The Board received copies of all reports submitted to
the Committee.

In compliance with EU legislation on non-audit services provided
by a Company’s external auditor, the Group appointed Deloitte
LLP from 1 January 2016 to undertake tax-related projects and
review work.

Internal Controls
The Group has an established risk management and internal
control environment, which was in operation throughout the year.
The Committee monitors these arrangements on behalf of the
Board which are detailed in the Risk Management section of the
Strategic Report on pages 22 to 30.

During the year enhancements to the internal control process
were implemented and, following publication of the revised UK
Corporate Governance Code, other control procedures were
monitored to meet the revised Code’s requirements.

Bribery Act Compliance
In compliance with the UK Bribery Act, Hunting has procedures
in place, including the publication of Bribery and Corruption
policies and detailed guidelines on interacting with customers,
suppliers and agents, including specific policies for gifts,
entertainment and hospitality. Senior managers across the Group
are required to report their compliance activities, including an
evaluation of risk areas. The Group has completed a screening
exercise to identify relevant employees who face a heightened
risk of bribery with all relevant personnel completing a formal
training and compliance course, in line with the Group’s
procedures. The Committee reviews the compliance procedures
relating to the Bribery Act at its April and December meetings,
which incorporate risk assessments completed by each business
unit and gifts and entertainment disclosures made during the
reporting period. The Group’s internal audit function reviews local
compliance with the Bribery Act and reports control
improvements and recommendations to the Committee
where appropriate.

Code of Conduct
The Group’s Code of Conduct contains policies and procedures
covering how the Group conducts business and maintains its
relationships with business partners. The Code of Conduct is
available on the Group’s website.

Hunting PLC
2015 Annual Report and Accounts
58

REMUNER ATION COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015

“ TH E R E MUN E R ATI ON O F HUNTING’ S
DIR E C TO R S IN 2015 CONTINU E D TO F O LLOW
TH E FR A M E WO R K A PPROV E D BY S HA R E H O LD E R S
IN 2014, WITH ALL PAYM E NT S IN LIN E WITH TH E
FIXE D A ND VAR IAB LE E M O LUM E NT S WITHIN TH E
DIR E C TO R S’ R E MUN E R ATI ON P O LI C Y.

FRO M A N O PE R ATI ONAL PE R S PE C TIV E , TH E
CO M PA NY FAC E D A M AT E R IAL D E C LIN E WITHIN IT S
CO R E E N E RGY S E RVI C E S M A R K E T S , DU E TO TH E
I M BAL A N C E O F TH E GLO BA L SUPPLY O F C RUD E
O IL , LE ADING TO A S IGNI FI C A NT R E DUC TI ON O R
D E FE R R AL O F C A PITAL E XPE NDITUR E S WITHIN IT S
CU S TO M E R BA S E . THI S HA S R E SULT E D IN A Y E A R
O F D E CLINING R E V E NU E S A ND PRO FIT S F O R TH E
CO M PA NY A S A W H O LE , W HI C H H A S LE D TO
LOW E R LE V E L S O F R E MUN E R ATI ON B E ING PAID TO
TH E E XE CUTIV E DIR E C TO R S DUR ING TH E Y E A R .
BA S E SAL AR I E S W E R E FROZE N F O R TH E M AJ O R IT Y
O F E M PLOY E E S A S TH E CO M PA NY ADJU S T E D
IT S CO S T BA S E TO TH E M AR K E T E NVIRONM E NT
THAT HA S PR E VAILE D TH ROUG H OUT TH E Y E A R .

IN LIGHT O F THI S D E CLIN E IN AC TIVIT Y AC RO S S
TH E E N E RGY IN DU S TRY A ND TH E PE RC E IV E D TI M E
F O R TH E S E C TO R TO R E TUR N TO GROW TH , TH E
CO M M IT T E E CON SULT E D WITH S HA R E H O LD E R S
IN TH E Y E AR ON PRO P O SAL S TO M O DI F Y TH E
PE R F O R M A N C E TA RG E T S O F TH E HUNTING
PE R F O R M A N C E S HAR E PL A N F O R FUTUR E
AWAR D S TO B E T T E R R E FLE C T TH E CUR R E NT
E NVIRONM E NT A ND TO E N SUR E E XE CUTIV E S
R E M AIN FAIR LY R E MUN E R AT E D.”

J O H N H O F M E I S T E R
C H A I R M A N O F T H E R E M UN ER AT I O N CO M M I T T EE

Letter From The Remuneration Committee Chairman

Introduction
The Remuneration Policy Summary and Annual Report on
Remuneration that follow reflect the Remuneration Committee’s
(the “Committee”) reporting requirements under the amended
Companies Act 2006 and the Large and Medium-sized
Companies and Groups (Accounts and Reports) (Amendment)
Regulations 2013.

The Annual Report on Remuneration which follows, including this
letter, details how the Directors’ Remuneration Policy was applied
during 2015 and will be tabled for shareholder approval at the
Annual General Meeting (“AGM”) on 13 April 2016.

Major Decisions and Substantial Changes to Remuneration
Made by the Committee in 2015
• Salary review: the Committee considered the poor market

environment in which the Company operated during the year,
including the reduction in workforce programme completed,
and concluded that it was inappropriate to award base
salary increases to the executive Directors in the year. The
base salaries of Dennis Proctor and Peter Rose are therefore
unchanged from 2014, with any movements reported being a
function of fluctuations in the exchange rates of the currency
in which the executive Director is paid.

• Fee review: while the responsibility of the annual fees of the
non-executive Directors is a Board decision, the Committee
recommended to the Board that no changes be made to the
annual fees paid to the non-executive Directors for 2016.
• Annual Bonus: as noted above, the Committee noted the
reduced trading performance of the Company in the year
which resulted in no bonus awards to the executive Directors.

• Hunting Performance Share Plan: on 28 April 2015 share
awards were made to the executive Directors in line with
the rules of the 2014 Hunting Performance Share Plan (“the
Hunting PSP”). Subject to the achievement of the performance
conditions, these awards will vest on 28 April 2018.

• Modification of performance targets for future awards

under the Hunting PSP: The Committee, in the latter part of
2015, reviewed the performance conditions and applicable
targets to determine whether they were still a viable incentive
to Hunting’s key management, given the prevailing market
environment. Following the review, the Committee agreed
that the performance conditions were still robust but
proposed to reduce the minimum performance targets
required to achieve a threshold vesting from 6% to 4% for
underlying diluted earnings per share (“EPS”) growth and
from 12% to 10% for underlying return on capital employed
(“ROCE”). The maximum vesting targets of 15% and 17%
respectively (averaged over the three-year vesting period)
remain unchanged. The Committee also agreed to amend the
comparator group used to measure total shareholder return
(“TSR”) from 32 companies to 14 to better reflect Hunting’s
peers in the oil equipment manufacturing subsector of the
industry. In Q4 2015 and early 2016, certain key shareholders
were consulted on these amendments to the Hunting PSP,
with feedback being considered by the Committee. These
amendments are designed to keep the Hunting PSP as a
stretching and demanding long-term incentive for Hunting’s
key executives, albeit acknowledging the current and severe
industry decline reported.

At the AGM on 15 April 2015, 98.0% of the votes cast by
shareholders were in favour of the Annual Report on Remuneration
for 2014.

Hunting PLC
2015 Annual Report and Accounts
59

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONREMUNER ATION COMMIT TEE REP ORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

Principal Activities Undertaken by the Remuneration
Committee During 2015
The Committee’s principal activities and matters addressed
during 2015 are as follows:

Mar Apr Aug Dec

Overall Remuneration
Annual Base Salary review
Review senior management emoluments
Items specific to Annual Bonus
Approve Annual Bonus
Review Annual Bonus Plan Rules
Interim review of Annual Bonus calculations
Review personal performance targets and
approve bonus adjustor to be applied
Agree personal performance targets for year ahead
Items specific to Long-Term Incentives
Approve PSP and LTIP vesting
Review outstanding Long Term Incentives
Approve Hunting PSP grants
Review Hunting PSP performance conditions
Interim review of PSP, LTIP and Hunting PSP
Vesting Reports
Review Hunting PSP Grant proposals
Governance and other matters
Approve Annual Report on Remuneration
Review and Approve Remuneration Policy
(as required)
Review governance voting reports
Review AGM proxy votes received for Annual
Statement of Remuneration and Policy (as required)
Review Committee Effectiveness
Review Committee Terms of Reference
Review draft Annual Report on Remuneration
including Letter from Committee Chairman
Review Stock Ownership Schedules

Performance and Context of Remuneration Awarded in 2015
The Group reported underlying profit before tax of $9.4m
(2014 – $212.4m) and return on capital employed of 1.1%
(2014 – 12.7%). As both measures failed to meet the threshold
target of 80% of the Annual Budget as approved by the Board in
March 2015, no bonus awards were payable to the executive
Directors.

Following an interim measurement of the Total Shareholder
Return performance condition on 19 February 2016, a zero
vesting is anticipated for the 2013 performance based awards
under the 2009 Performance Share Plan. A final measurement
will be recorded on 19 March 2016. The Committee anticipates
that no shares will vest for the executive Directors, with this nil
result being recorded in the single figure remuneration table on
page 66. These were the last awards granted under the 2009
Performance Share Plan, it being replaced by the Hunting PSP.

In accordance with the rules under the 2004 Long-Term Incentive
Plan (“LTIP”) and the three-year cycle ending 31 December 2015,
the incentive pool was $nil, resulting in no payments to either of
the executive Directors. There will be no further awards under the
2004 LTIP, it being replaced by the Hunting PSP.

Further details of the emoluments of the executive Directors can
be found within the Annual Report on Remuneration on pages 65
to 72.

J O H N H O F M E I S T E R
C H A I R M A N O F T H E R E M UN ER AT I O N CO M M I T T EE

3 March 2016

Hunting PLC
2015 Annual Report and Accounts
60

DIREC TOR S’ REMUNER ATION
P OLIC Y SUMM ARY

Introduction
Hunting’s Directors’ Remuneration Policy (the “Policy”) was approved by the Company’s shareholders on 16 April 2014 and is valid for
three years from that date. The Policy is located on the Company’s website at www.huntingplc.com. The Directors are planning to
resubmit the Policy for shareholder approval at the 2017 Annual General Meeting.

The following Policy tables note the key elements of the approved Directors’ Remuneration Policy which was applied during 2015,
with details of individual remuneration to the Directors contained in the Annual Report on Remuneration on pages 65 to 72, and in the
Letter from the Chairman of the Remuneration Committee on pages 59 to 60.

Summary Policy
The remuneration of the executive Directors is targeted to provide total emoluments at the market mid-point for the global industry
in which Hunting operates. The remuneration of the Chief Executive is benchmarked to other companies within the global energy
services industry that are comparable in size, profile and profitability to Hunting. The remuneration of the Finance Director is
benchmarked to UK companies that are constituents of the FTSE 250. The remuneration of the executive Directors is divided into
fixed and variable emoluments, with annual bonus and long-term incentives designed to be stretching and only pay out when strong
Company performance has been delivered.

The fees paid to the non-executive Directors are benchmarked to FTSE 250 companies, and are targeted at above the market
median, given the significant time commitment Hunting requires of its non-executive Directors.

Fixed Emoluments
Executives

Maximum
• There is no prescribed maximum
annual increase. The Committee
is guided by the general increase
for the broader employee
population, but on occasions
may need to recognise, for
example, development in role,
change in responsibility and/or
specific retention issues.

• N/A

Remuneration Component – Base Salary
Link to Strategy
• Attract, retain and reward

executives with the necessary
skills to effectively deliver the
Company strategy.

Operation and Award Basis
• Base salaries are set at competitive rates which take
into account the individual’s country of residence and
primary operating location as well as companies in the
same market segment.

• Aimed at the market mid-point.
• Annual increases, where applied, take into account inflation
in the UK, US and increases across the total workforce.

• Relocation and tax equalisation agreements are

also in place for employees working across multiple
geographic jurisdictions.

Remuneration Component – Pension and Benefits
• Provide normal pension and
benefit schemes appropriate
to the country of residence.
• Each executive Director is
provided with healthcare
insurance and a company car
with fuel.

• The Group contributes on behalf of the Chief Executive
(resident in the US) to a US 401K deferred savings plan
and an additional deferred compensation scheme.

• The Group contributes on behalf of the Finance

Director (resident in the UK) to a UK final salary defined
benefit pension scheme.

Hunting PLC
2015 Annual Report and Accounts
61

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONREMUNER ATION COMMIT TEE REP ORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

Fee Detail and Maximum
• The current fee for the Chairman

is $295,784 (£193,500).
• Fees are reviewed annually

in December.

• The basic Board fee is $91,716
(£60,000) with an additional fee
of $15,286 (£10,000) for chairing
the Audit and Remuneration
Committees, and for the role of
Senior Independent Director.
Fees are reviewed annually
in December.

• Aggregate maximum fee for
all non-executive Directors of
$764,300 (£500,000) per annum.

Maximum
• Chief Executive

200% of base salary.

• Finance Director

150% of base salary.

• Chief Executive

550% of base salary.

• Finance Director

450% of base salary.

Non-Executives

Remuneration Component – Chairman’s fees
Link to Strategy
• To attract and retain a high-

Operation
• The Chairman is paid a single fee for all his responsibilities

calibre Chairman by offering a
market-competitive fee level.

including chairing the Nomination Committee.

• Fees are determined by the Board as a whole on

recommendation of the executive Directors following
receipt of external fee information and an assessment
of the time commitment and responsibilities involved.

Remuneration Component – Non-executive Director fees
• To attract and retain

high-calibre non-executive
Directors by offering a market-
competitive fee level.

• The non-executive Directors are paid a basic fee. The
Directors who chair the Board’s committees and the
Senior Independent Director receive an additional fee
to reflect their extra responsibilities.
• Fees are determined by the Board, on

recommendation of the executive Directors, following
receipt of external fee information and an assessment
of the time commitment and responsibilities involved.

• The non-executive Directors do not receive any

other benefits.

Variable Emoluments
Executives

Remuneration Component – Annual Cash Bonus
Link to Strategy
• To incentivise annual delivery of
financial and operational targets.

Operation and Award Basis
• The Annual Cash Bonus is indexed to the Group’s
actual performance against the Annual Budget.

• High reward potential for

exceeding demanding targets.

• Bonus is weighted 70% to Budgeted underlying Profit Before
Tax (“PBT”) and 30% to Budgeted underlying Return on
Capital Employed (“ROCE”).

• Bonuses accrue when 80% of Annual Budget targets are
achieved, increasing on a straight-line basis to a maximum
when 120% of Annual Budget targets are achieved.
• For an “on target” performance a bonus of 100% of

base salary is paid to the Chief Executive and 75% of
base salary to the Finance Director.

• Bonuses can be adjusted for meeting personal

performance targets set by the Remuneration Committee.
• Bonuses can be adjusted for personal performance to
zero or to a maximum of 1.25 times annual bonus – but
not exceeding maximum.

Remuneration Component – Hunting PSP
• Recognition and reward to
executive Directors for the
creation of shareholder value
over the longer term.

• This element provides full
alignment to shareholder
interests.

• Annual grant of shares or nil cost options are subject
to three stretching performance conditions (i) Total
Shareholder Return (“TSR”) against a comparator
group (ii) average ROCE achieved (iii) average diluted
Earnings Per Share (“EPS”) growth achieved.

• Grant value of 450% of base salary for the Chief Executive

and 210% of base salary for the Finance Director.

• Achievement of minimum performance target results in

a 25% vesting of any element of the award.

• The maximum award noted provides the Committee with
flexibility in cases such as recruitment. The Committee
has set the award levels of the current executive Directors
and does not intend to increase these further.

Hunting PLC
2015 Annual Report and Accounts
62

Remuneration Component – 2009 Performance Share Plan
Link to Strategy
• Recognition and reward to
executive Directors for the
creation of shareholder value
over the longer term.

Operation and Award Basis
• Annual grant of shares or nil-cost options.
• Vesting levels determined by TSR measured over

three years against a peer group.

• 40% of shares vest for a median performance

• This element provides strong
alignment with the interests
of shareholders.

increasing on a straight-line basis to 100% for a top
quartile performance.

• Face value of award to Chief Executive and Finance

Director is 100% and 80% of base salary respectively.

Remuneration Component – 2004 Long-Term Incentive Plan
• Recognition and reward to
executive Directors for the
creation of shareholder value
over the longer-term.

• Awards are made based on the accruing of an

incentive pool over a three-year period.

• The incentive pool only accumulates if increases to
average shareholder funds are achieved throughout
the period.

Maximum
• Chief Executive

200% of base salary.

• Finance Director

200% of base salary.

• Chief Executive

350% of base salary.

• Finance Director

175% of base salary.

• If the accruing incentive pool equals zero across the

period, no payments are made.

• Chief Executive and Finance Director receive 35% and
15% of the accumulated incentive pool respectively,
with actual payout limited to a maximum of 350% and
175% of base salary respectively.

Stock Ownership Requirement
The Directors are also required to accumulate shares in the Company over a period of five years from 1 January 2014 or, for new
Directors from the date of their appointment to the Board, to the following values, expressed as a multiple of their base salary or fee:

• Chief Executive – 5 times base salary.
• Finance Director – 2 times base salary.
• Non-executive Directors – 1 times annual fee.

Remuneration Committee Discretion
The Committee has discretion within the Directors’ Policy framework in the following areas:

• annual base salary and fee reviews of the Directors;
• application of the personal performance adjustor to the annual cash bonus;
• application of the annual cash bonus following the exit of a Director;
• composition of the comparator group for the Hunting PSP;
• setting the performance targets for the Hunting PSP; and
• specific recruitment considerations if new Directors are appointed.

Where applied, the Committee will disclose the rationale for the application of discretion.

Recovery of Awards
In 2014, malus and clawback provisions on share awards under the Hunting PSP were introduced. The Committee may require the
satisfaction of malus and/or clawback by way of a reduction in the amount of any existing or future bonus, the vesting of any future
awards, the number of shares under any vested but unexercised option granted under certain share incentive plans, and/or a
requirement to make a cash payment.

There are no malus or clawback provisions contained within the legacy long-term incentives.

The Annual Cash Bonus has been subject to clawback provisions since 2010. The Committee reserves the discretion to adjust the
amount of any Bonus to reflect any fact or circumstances that the Committee considers to be relevant including allowing for the
Bonus to be adjusted to zero.

Hunting PLC
2015 Annual Report and Accounts
63

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONREMUNER ATION COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

Scenarios Charts
The remuneration scenarios of the executive Directors for a fixed, target and maximum performance are presented in the charts
below detailing remuneration under Hunting’s legacy long-term incentive arrangements and the future framework for remuneration
following approval of the Hunting PSP in April 2014. The charts are based on 2015 remuneration data.

Legacy Remuneration

C H I E F E X E C U T I V E

F I N A N C E D I R E C T O R

Maximum

16%

26%

13%

45%

$6,137k

Maximum

24%

28%

15%

33%

$2,404k

Target

29%

22%

11%

38%

$3,584k

Target

38%

23%

12%

27%

$1,481k

Fixed

100%

$1,031k

Fixed

100%

$560k

Fixed

Annual Bonus

PSP

LTIP

Note:
These charts are indicative as share price movement and dividend accruals have been excluded. Assumptions made for each scenario are as follows:
• Fixed: latest known salary, benefits and normal pension contributions.
• Target: fixed remuneration plus half of maximum annual cash bonus opportunity plus 50% vesting of awards under the PSP plus 50% vesting of awards under the LTIP.
• Maximum: fixed remuneration plus maximum annual cash bonus opportunity plus 100% vesting of all long-term incentives.

The Finance Director is paid in Sterling and the equivalent total remuneration scenarios are as follows – fixed £366k; target £969k and
maximum £1,572k.

Future Remuneration

C H I E F E X E C U T I V E

F I N A N C E D I R E C T O R

Maximum

16%

26%

58%

$6,137k

Maximum

25%

31%

44%

$2,199k

Target

29%

22%

49%

$3,584k

Target

40%

25%

35%

Fixed

100%

$1,031k

Fixed

100%

$1,379k

$560k

Fixed

Annual Bonus

Hunting PSP

Note:
These charts are indicative as share price movement and dividend accruals have been excluded. Assumptions made for each scenario are as follows:
• Fixed: latest known salary, benefits and normal pension contributions.
• Target: fixed remuneration plus half of maximum annual cash bonus opportunity plus 50% vesting of awards under the Hunting PSP.
• Maximum: fixed remuneration plus maximum annual cash bonus opportunity plus 100% vesting of all long-term incentives.

The Finance Director is paid in Sterling and the equivalent total remuneration scenarios are as follows – fixed £366k; target £902k and
maximum £1,438k.

J O H N H O F M E I S T E R
C H A I R M A N O F T H E R E M UN ER AT I O N CO M M I T T EE

3 March 2016

Hunting PLC
2015 Annual Report and Accounts
64

ANNUAL REPORT ON REMUNER ATION

Introduction
The principles noted within the summary of the Directors’ Remuneration Policy (the “Policy”) detailed on pages 61 to 64 have
been in operation throughout 2015 and are detailed in the following report. The full Policy can be viewed on the Group’s website
at www.huntingplc.com.

The Remuneration Committee (the “Committee”) will continue to implement these policies throughout 2016.

Role, Membership and Attendance
The Committee is responsible for setting the remuneration of the executive Directors. The Chairman and Chief Executive are
consulted on proposals relating to the remuneration of the Finance Director and designated senior management and, where
appropriate, are invited by the Committee to attend meetings, but are not present when their own remuneration is considered.
Remuneration of the non-executive Directors is agreed by the Board as a whole.

The full scope of the role of the Committee is set out in its terms of reference, which are reviewed annually, and can be found
on the Group’s website at www.huntingplc.com.

The Committee consists entirely of independent non-executive Directors. On 2 February 2015, Annell Bay and Jay Glick were
appointed to the Committee following their appointment to the Board of Directors.

The Committee met five times during the year and attendance details are shown in the table on page 51.

During the year, and to the date of signature of the accounts, the members of the Committee and their unexpired term of office were:

Director
John Hofmeister
Annell Bay
Jay Glick
John Nicholas

Latest appointment date
29 August 2015
2 February 2015
2 February 2015
29 August 2015

Unexpired term as at 3 March 2016
30 months
23 months
23 months
30 months

External Advisers
During the year, New Bridge Street (a trading name of Aon Hewitt Ltd) and Pearl Meyer and Partners, were engaged by the
Committee to provide remuneration consultancy services. Both firms, whose initial appointment was subject to a formal tender
process, are regarded as independent having been appointed by the Committee and acting under direction of the Committee.

The total cost of advice to the Committee over the year to 31 December 2015 was $164,913 (2014 – $264,858) and reflects fees paid
in respect of the review of remuneration, share plans and the remuneration reporting disclosure requirements.

Shareholder Voting at the 2015 Annual General Meeting (“AGM”)
At the AGM of the Company held in April 2015, the resolution to approve the Annual Report on Remuneration received the following
votes from shareholders:

For
Discretion
Against
Votes withheld1
Total votes cast

Number of votes % of votes cast
98.03
108,559,438
0.02
22,433
1.95
2,164,046
–
104,223
100.00
110,850,140

1. A vote withheld is not a vote in law and is not included in the calculation of the % of votes cast.

The Directors’ Remuneration Policy was approved by shareholders at the Company’s 2014 AGM, following the receipt of 91.5% votes
for the resolution.

Shareholder Consultation
During the latter part of 2015 and in early 2016, the Committee consulted with shareholders regarding the modification of the
performance targets for future awards to be made under the Hunting PSP and other proposed minor amendments to executive
Director remuneration.

Following feedback from shareholders, the Committee proposes to amend the threshold vesting performance targets for the 2016
awards under the Hunting PSP and alter the comparator group adopted for the Total Shareholder Return performance condition.
Further, as part of the dialogue with shareholders, the Committee also committed to reviewing the threshold vesting targets, once an
industry wide recovery is confirmed. Further details of the amendments to the Hunting PSP are located in the Annual Statement from
the Chairman on pages 59 and 60 and a full breakdown of the proposed 2016 performance targets can be found on page 72.

Hunting PLC
2015 Annual Report and Accounts
65

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
REMUNER ATION COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

Director Remuneration (audited)

2015
Executives
Dennis Proctor
Peter Rose
Non-executives
Annell Bay11
Jay Glick11
John Hofmeister12
Richard Hunting
John Nicholas12
Total

2014
Executives
Dennis Proctor
Peter Rose
Non-executives
John Hofmeister12
Richard Hunting
John Nicholas12
Andrew Szescila13
Total

Fixed remuneration

Variable remuneration

Base
salary/
fees1
$’000

786
456

84
84
122
296
107
1,935

Benefits2
$’000

Pension3
$’000

Sub total
$’000

Annual
cash
bonus4
$’000

PSP
awards6
$’000

LTIP
awards8
$’000

Sub total
$’000

Other

remuneration10

$’000

Total
remuneration
2015
$’000

71
44

–
–
–
–
–
115

174
60

–
–
–
–
–
234

1,031
560

84
84
122
296
107
2,284

–
–

–
–
–
–
–
–

–
–

–
–
–
–
–
–

–
–

–
–
–
–
–
–

–
–

–
–
–
–
–
–

–
–

–
–
–
–
–
–

1,031
560

84
84
122
296
107
2,284

Fixed remuneration

Variable remuneration

Base
salary/
fees1
$’000

786
491

120
319
115
83
1,914

Benefits2
$’000

Pension3
$’000

Sub total
$’000

56
47

–
–
–
–
103

147
565

–
–
–
–
712

989
1,103

120
319
115
83
2,729

Annual
cash
bonus5
$’000

889
417

–
–
–
–
1,306

PSP
awards7
$’000

LTIP
awards9
$’000

Other

Sub total
$’000

remuneration10

$’000

Total
remuneration
2014
$’000

–
–

–
–
–
–
–

2,750
859

3,639
1,276

–
–
–
–
3,609

–
–
–
–
4,915

180
–

–
–
–
–
180

4,808
2,379

120
319
115
83
7,824

Notes:
1. Executive Directors’ salaries and non-executive Director fees were frozen during 2015. The movement in the £/$ exchange rate in the year has the effect of showing a
year-on-year decrease for the majority of Board members with the exception of Dennis Proctor whose base salary is determined and paid in US dollars. Average $/£
exchange rate in the year was 1.5286:1 (2014 – 1.6479:1).

2. Benefits include the provision of healthcare insurance, a company car and fuel benefits.
3. Dennis Proctor’s single figure pension remuneration represents the total Company contributions paid to his US pension arrangements. Peter Rose is a member of a
defined benefit pension scheme and his 2015 single figure pension remuneration has been calculated in a consistent way in accordance with the regulations and
represents 20 times the increase in his accrued pension over 2014 after allowing for CPI inflation and deducting his own pension contributions.

4. As noted in the Letter from the Chairman of the Remuneration Committee, there were no annual bonus awards made to the executive Directors for 2015.
5. The annual bonus is comprised 70% on an underlying Profit Before Tax (“PBT”) target and 30% on an underlying Return on Capital Employed (“ROCE”) target and is
subject to the application of a personal performance adjustor. In 2014, the PBT and ROCE targets exceeded the Annual Budget by 2.4% and 3.1% respectively,
leading to a bonus allocation equating to 113% of base salary for the Chief Executive and 85% of base salary for the Finance Director. Following a review of the
personal performance objectives set by the Committee in March 2014, a bonus adjustor of 1.0 times was applied to the formula-driven allocation for each executive,
resulting in no adjustment to the formula-driven annual bonus.

6. The 2013 awards under the PSP have a three-year performance period to 20 March 2016. The awards were measured on 19 February 2016 against the performance

conditions specified on page 63, which indicated that the 2013 awards were unlikely to vest. On this basis, no payments will be paid to executive Directors.

7. The 2012 awards under the PSP had a three-year performance period to 16 April 2015. The awards were measured against the performance conditions specified on

page 63, resulting in a zero vesting, with no shares being awarded to the executive Directors.

8. In accordance with the rules under the 2004 Long-Term Incentive Plan (“LTIP”) and the three-year cycle ending 31 December 2015, the incentive pool was $nil,

resulting in no payments to either Dennis Proctor or Peter Rose.

9. In accordance with the rules under the 2004 LTIP and the three-year cycle ending 31 December 2014, the accumulated incentive pool totalled $9.8m, resulting in an
entitlement of $2.8m to Dennis Proctor and an entitlement of $0.9m to Peter Rose. Under the rules of the LTIP, Dennis Proctor is entitled to 35% of the accumulated
incentive pool while Peter Rose is entitled to 15% of the incentive pool. The maximum levels of award to Dennis Proctor and Peter Rose are capped at 350% and
175% of base salary respectively.

10. Other remuneration represents additional UK tax payable under a tax equalisation agreement, where applicable.
11. Annell Bay and Jay Glick were appointed as Directors on 2 February 2015.
12. John Hofmeister receives additional fees as Senior Independent Director and as Chairman of the Remuneration Committee, following his appointment as Chairman

on 16 September 2014. John Nicholas receives an additional fee as Chairman of the Audit Committee.

13. Andrew Szescila retired from the Board on 15 September 2014.

Hunting PLC
2015 Annual Report and Accounts
66

The remuneration of Richard Hunting, Peter Rose and the non-executive Directors is originally denominated in Sterling and is
as follows:

2015
Executives
Peter Rose
Non-executives
Annell Bay1
Jay Glick1
John Hofmeister2
Richard Hunting
John Nicholas2

2014
Executives
Peter Rose
Non-executives
John Hofmeister2
Richard Hunting
John Nicholas2
Andrew Szescila3

Fixed remuneration

Variable remuneration

Base
salary/
fees
£’000

Benefits
£’000

Pension
£’000

Sub total
£’000

Annual
cash
bonus
£’000

PSP
awards
£’000

LTIP
awards
£’000

Sub total
£’000

Total
remuneration
2015
£’000

298

366

55
55
80
194
70

–
–
–
–
–

55
55
80
194
70

–

–
–
–
–
–

–

–
–
–
–
–

–

–
–
–
–
–

–

–
–
–
–
–

366

55
55
80
194
70

Fixed remuneration

Variable remuneration

Base
salary/
fees
£’000

Benefits
£’000

Pension
£’000

Sub total
£’000

Annual
cash
bonus
£’000

PSP
awards
£’000

LTIP
awards
£’000

Sub total
£’000

Total
remuneration
2014
£’000

298

343

669

253

73
194
70
50

–
–
–
–

73
194
70
50

–
–
–
–

–

–
–
–
–

522

775

1,444

–
–
–
–

73
194
70
50

Notes:
1. Annell Bay and Jay Glick were appointed as Directors on 2 February 2015.
2. John Hofmeister receives additional fees as Senior Independent Director and as Chairman of the Remuneration Committee and John Nicholas receives an additional

fee as Chairman of the Audit Committee.

3. Andrew Szescila retired from the Board on 15 September 2014.

Salary and Fees
In December 2014, the executive Directors reviewed the non-executive Directors’ fees, following receipt of benchmarked data from
New Bridge Street. The review resulted in no changes to the fees payable in 2015.

In March 2015, the Committee met to discuss adjustments to the base salaries of the executive Directors. Following discussions
throughout the year, and recognising the prevailing market conditions Hunting operates within, the Committee decided to freeze base
salaries for 2015.

Pensions (audited)
Dennis Proctor is a member of a deferred compensation scheme in the US, which is anticipated to provide a cash lump sum on his
retirement. In practice, this scheme is administered and operated on a money purchase basis. In 2015, the Group contributed
$158,589 (2014 – $131,496) to that arrangement. There are no additional benefits provided on early retirement from this arrangement.
The Group also contributed $15,900 in 2015 (2014 – $15,600) to his US 401K deferred savings plan.

Peter Rose is a member of the defined benefit section of the Hunting pension scheme. His accrued pension as at 31 December 2015
amounted to $177,000 p.a. (2014 – $186,000 p.a.). He is able to retire on 24 October 2018 age 60, his normal retirement age in that
scheme, without any reduction on his main scheme benefits (although there is a small part of his pension that is payable only from
age 62 without reduction). With Company consent, Peter Rose is able to retire without any actuarial reduction for early retirement
applied to his accrued pension.

Hunting PLC
2015 Annual Report and Accounts
67

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONREMUNER ATION COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

Annual Performance-Linked Cash Bonus Plan (audited)
The annual performance-linked cash bonus plan entitles the executive Directors to cash bonus payments when the actual financial
results of the Group achieve pre-set financial targets based on the Group’s Annual Budget. The bonus has the potential to be
adjusted to reflect the delivery of personal performance targets.

The approved Annual Budget reflected a material decline in the revenue and profitability of the Group compared to the actual results
for 2014. The 2015 budgeted underlying PBT and ROCE were $95.0m and 6.6% respectively. Due to the 2015 outturn no annual
bonus was payable to either executive Director.

In January 2015, the Committee set personal performance targets for each executive Director. The targets and outcome, including
the personal performance adjustor applied to the bonus, of each executive Director are summarised below:

Description of Target
• Strategic Planning
• Dynamic Leadership in a Volatile Period
• Succession (Chief Executive only)
• Organisational Effectiveness

(Finance Director only)

Assessment
The Committee reviewed the delivery of the 2015 personal
performance objectives by the executive Directors and
agreed that each Target had been delivered. In particular
the Committee noted the leadership by the executive
Directors during the current subdued trading environment.
However given that the threshold vesting performance
conditions had not been met, no bonuses were paid to
the executive Directors.

Outcome
No adjustments were made
to the annual bonuses for
personal performance, given
that no bonuses were paid
to either executive Director.

The 2014 actual results exceeded Budgeted underlying PBT and ROCE by 2.4% and 3.1% respectively, leading to a cash bonus
allocation of $889,299 for Dennis Proctor and $416,922 (£253,002) for Peter Rose, with no adjustments being made for personal
performance. These amounts reflect 113% and 85% of the base salaries for Dennis Proctor and Peter Rose respectively. 2014
Budgeted underlying PBT and ROCE were $207.4m and 12.7% respectively.

2013 PSP Vesting (audited)
The 2013 awards granted under the PSP with a three-year performance period to 20 March 2016 were measured by New Bridge
Street on 19 February 2016 given that a substantial portion of the performance period had been completed. This measurement
indicated that the awards were unlikely to vest. This result will be confirmed in the 2016 Annual Report on Remuneration, or should
there be a vesting, announced to investors on receipt of the final measurement of the performance conditions.

The 2013 grant under the PSP are the final awards under the 2009 Performance Share Plan.

2012 PSP Vesting (audited)
The 2012 awards granted under the PSP were measured by New Bridge Street on 17 April 2015 and resulted in a zero vesting.
The 2012 share grants to the Chief Executive and Finance Director duly lapsed with no shares vesting for either executive Director.

2013 LTIP Vesting (audited)
On 31 December 2015, the 2013 award under the LTIP for the three-year period commencing 1 January 2013 was measured in
accordance with the plan rules and resulted in an incentive pool of $nil. As a result of this, no payments were made to either
executive Director.

There will be no further awards made to either executive Director under the 2004 Long-Term Incentive Plan.

2012 LTIP Vesting (audited)
On 31 December 2014, the 2012 award under the LTIP for the three-year period commencing 1 January 2012 was measured in accordance
with the plan rules and resulted in an accumulated incentive pool of $9.8m. The executive Directors were awarded the following:

Director
Dennis Proctor
Peter Rose

% of incentive
pool awarded
35%
15%

Value of award
$
2,749,600
859,380

Award as % of
base salary
350
175

Hunting PLC
2015 Annual Report and Accounts
68

2015 Hunting PSP Grant
On 28 April 2015, the Committee approved the allocation of nil-cost share awards to Dennis Proctor and nil-cost options to Peter
Rose under the rules of the Hunting PSP. Awards will vest on 28 April 2018, subject to the achievement of the performance conditions
detailed on page 62 of the Policy. Details of the grant are as follows:

Director
Dennis Proctor
Peter Rose

Award as % of
base salary
450%
210%

Number of
shares awarded
372,534
105,513

Face value of
award at threshold
vesting of 25%
$
883,800
239,150

Face value of
maximum award
vesting at 100%
$
3,535,200
956,598

The targets for each performance condition remain the same as those set for the 2014 award.

The face value of the 2015 award is based on the closing mid-market share price on 28 April 2015 which was 590.5 pence.

Payments to Past Directors and for Loss of Office (audited)
No payments were made in the year to past Directors in the normal course of business or for loss of office.

Directors’ Shareholdings, Ownership Policy and Share Interests (audited)
The beneficial interests of the Directors in the issued Ordinary shares of the Company are as follows:

Director
Non-executive Chairman
Richard Hunting1
– as trustee
– as Director of Hunting Investments Limited
Executives
Dennis Proctor1
Peter Rose1
Non-executives
Annell Bay1
Jay Glick1
John Hofmeister1
John Nicholas1
Andrew Szescila1 (at 15 September 2014)

At
31 December
2015

At
31 December
2014

463,306
979,049
11,073,487

463,306
979,049
10,973,487

1,748,544
86,864

1,576,802
57,410

3,500
13,500
25,000
11,000
–

–
–
10,000
5,000
10,000

1. Beneficial share interests are those Ordinary shares owned by the Director or spouse which the Director is free to dispose of.

There have been no further changes to the Directors’ share interests in the period 31 December 2015 to 3 March 2016.

In 2014, the Group implemented a share ownership policy that requires Directors and certain senior executives within the Group to
build up a holding in shares equal in value to a certain multiple of their base salary or fee. The multiple takes into account the post-tax
value of vested but unexercised share awards or options.

The required shareholding of each Director and the current shareholding as a multiple of base salary as at 31 December 2015
is presented below:

Director
Dennis Proctor
Peter Rose
Annell Bay
Jay Glick
Richard Hunting
John Hofmeister
John Nicholas

Required holding expressed as
a multiple of base salary or fee
5
2
1
1
1
1
1

Value of holding in shares including the post-tax value of vested but unexercised share

awards and options expressed as a multiple of base salary or fee as at 31 December 2015
10.0
0.9
0.2
0.7
7.3
1.0
0.5

Directors have five years from 1 January 2014 (or from the date of appointment to the Board) in which to satisfy the
shareholding requirement.

Hunting PLC
2015 Annual Report and Accounts
69

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONREMUNER ATION COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

The interests of the executive Directors over Ordinary shares of the Group under the ESOP, PSP and Hunting PSP (“HPSP”) are
set out below:

The vesting of options and awards are subject to performance conditions set out within the Policy on pages 61 to 64.

Director
Dennis Proctor

Sub total

Sub total
Total

Peter Rose

Sub total

Sub total
Total

Interests at
1 January
2015
171,742
104,178
64,688
55,449
396,057
52,103
52,516
104,619
255,050

Options/
Options/
awards
awards
exercised in
granted in
year
year
(171,742)
–
–
–
–
–
–
–
(171,742)
–
–
–
–
–
–
–
–
–
–
– 372,534
255,050 372,534
–
755,726 372,534 (171,742)

29,454
18,277
15,000
21,670
84,401
20,953
21,119
42,072
72,238

–
–
–
–
–
–
–
–
–
– 105,513
72,238 105,513

(29,454)
–
–
–
(29,454)
–
–
–
–
–
–
198,711 105,513 (29,454)

Options/
awards
lapsed
in year
–
–
–
–
–
(52,103)
–
(52,103)
–
–
–
(52,103)

–
–
–
–
–
(20,953)
–
(20,953)
–
–
–
(20,953)

Interests at
31 December
2015
–
104,178+
64,688+
55,449+
224,315
–
52,516^
52,516
255,050^
372,534^
627,584
904,415

–
18,277+
15,000+
21,670+
54,947
–
21,119~
21,119
72,238~
105,513~
177,751
253,817

Exercise
price
p

Date from
which
exercisable

Grant date

Expiry date
220.7 09.03.05 09.03.08 08.03.15
383.0 08.03.06 08.03.09 07.03.16
640.0 06.03.07 06.03.10 05.03.17
784.5 04.03.08 04.03.11 03.03.18

nil 17.04.12 17.04.15
nil 20.03.13 20.03.16

nil 01.05.14 01.05.17
nil 28.04.15 28.04.18

–
–

220.7 09.03.05 09.03.08 08.03.15
383.0 08.03.06 08.03.09 07.03.16
640.0 06.03.07 06.03.10 05.03.17
784.5 04.03.08 04.03.11 03.03.18

nil 17.04.12 17.04.15 16.04.22
nil 20.03.13 20.03.16 19.03.23

nil 01.05.14 01.05.17 30.04.24
nil 28.04.15 28.04.18 27.04.25

Scheme
ESOP
ESOP
ESOP
ESOP

PSP
PSP

HPSP
HPSP

ESOP
ESOP
ESOP
ESOP

PSP
PSP

HPSP
HPSP

+ Vested and currently exercisable.
^ Nil-cost share awards which are not yet vested or exercisable and still subject to the performance conditions being measured in accordance with the PSP/Hunting PSP rules.
~ Nil-cost share options which are not yet vested or exercisable and still subject to the performance conditions being measured in accordance with the PSP/Hunting PSP rules.

Executive Director Remuneration and the Wider Workforce
The changes to the remuneration of the Chief Executive in 2015 compared to 2014 and those of the total workforce are as follows:

Base salary
Bonus
Benefits

Chief
Executive
Nil
-100%
+26.8%

Average
employee
-7.0%
-85.7%
+20%

Relative Importance of Spend on Pay
The table below shows the relative importance of spend on employee remuneration in relation to corporate taxation, dividends
and capital investment. The choice of performance metrics represents the material operating costs of the Group and the use of
operating cash flows in delivering long-term shareholder value.

Employee remuneration
Corporate tax paid*
Dividends paid
Capital investment*

* Please refer to the Consolidated Statement of Cash Flows on page 85.

2015
$m
247.5
10.5
39.8
81.1

2014
$m
324.8
26.6
44.1
123.5

% Change
-23.8
-60.5
-9.8
-34.3

Hunting PLC
2015 Annual Report and Accounts
70

Executive Director Remuneration and Shareholder Returns
The following chart compares the TSR of Hunting PLC between 2008 and 2015 to the DJ Stoxx TM Oil Equipment, Services and
Distribution and DJ US Oil Equipment and Services indices.

In the opinion of the Directors, these indices are the most appropriate indices against which the shareholder return of the Company’s
shares should be compared because they comprise other companies in the oil and gas services sector.

T O T A L S H A R E H O L D E R R E T U R N
( R E B A S E D T O 1 0 0 A T 3 1 D E C E M B E R 2 0 0 8 )

350

300

250

200

150

100

350

300

250

200

150

100

31/12/08

31/12/09

31/12/10

31/12/11

31/12/12

31/12/13

31/12/14

31/12/15

Hunting PLC

DJ US Oil Equipment & Services

DJ Stoxx TM Oil Equipment, Services & Distribution

Summary Table of Chief Executive’s Remuneration
The accompanying table details remuneration of the Chief Executive:

2015
2014
2013
2012
2011
2010
2009

Single figure
remuneration1
$’000
1,031
4,808
4,442
5,497
3,261
1,876
2,363

Annual
Cash Bonus
%2
Nil
57
42
75
100
100
17

ESOP/PSP
%
vesting3
Nil
Nil
Nil
66
Nil
100
100

LTIP
% award4
Nil
100
100
100
31
5
62

1. Single figure remuneration reflects the aggregate remuneration paid to the Chief Executive as defined within the Directors’ Remuneration Policy located at

www.huntingplc.com.

2. Annual cash bonus percentages reflect the bonus received by the Chief Executive each year expressed as a percentage of maximum bonus opportunity.
3. Percentage vesting reflects the % of the ESOP that vested in the financial year and the % of the PSP where a substantial portion of the performance period was

completed at the financial year end.

4. LTIP award percentage reflects the award value expressed as a percentage of maximum award opportunity received each year measured at 31 December.

Hunting PLC
2015 Annual Report and Accounts
71

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONREMUNER ATION COMMIT TEE REPORT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015
C ONTIN UED

Implementation of Policies in 2016
The remuneration policies for 2016 will be applied in line with those detailed on pages 61 to 64. For full details of the Policy refer to the
Company’s website www.huntingplc.com.

In December 2015, the Board concluded that in the current trading environment there would be no changes made to fees payable to
the non-executive Directors for 2016. Further, the Committee noted the cost reduction initiatives underway across the Group and
following Board discussion agreed to reduce the annual fee of the Chairman from £193,500 to £100,000 with effect from 1 April 2016.

In February 2016, the Committee met to discuss base salary changes for the executive Directors, and concluded that due to the poor
market environment in which the Company operated in during the year, including the reduction in workforce programmes that there
would be no change to the base salaries payable to the executive Directors for 2016.

The annual performance-linked cash bonus for 2016 will be operated in line with the Policy detailed on page 62. The Committee will
disclose details of the retrospective performance against the pre-set financial and personal performance targets.

The Committee plans to grant nil-cost share awards or options to the Chief Executive and Finance Director under the Hunting PSP
in March 2016. The awards will be in line with the rules of the Hunting PSP and subject to the following performance conditions:

Proportion of awards
33.33%

Performance conditions Minimum performance target
TSR

33.33%

Underlying EPS

25% vests if median performance against a
comparator group of companies is achieved.
25% vests if absolute EPS growth across the
three-year vesting period averages 4%.

33.33%

Underlying ROCE 25% vests if average ROCE across the three-

year vesting period averages 10%.

Maximum performance target
100% vests if an upper quartile performance against
a comparator group of companies is achieved.
100% vests if absolute EPS growth across the
three-year vesting period averages 15%.
100% vests if average ROCE across the three-
year vesting period averages 17%.

Following consultation with shareholders, the Committee has adjusted the threshold vesting targets for the EPS and ROCE
performance conditions for the 2016 awards under the Hunting PSP to the executive Directors, compared to the performance targets
set in 2015. The reasons for these modifications are wholly due to the depth and severity of the downturn in the global oil and gas
market. The Committee believes that the oil and gas industry will remain subdued for the short term, as the crude oil supply/demand
imbalance slowly recedes and the industry cautiously recommences investment. The Committee has responded to this market
environment by amending the targets for the 2016 grant to ensure that the Hunting PSP continues to remain a strong incentive to
management whilst remaining a credible, stretching and demanding long-term incentive. Further the Committee has reduced the
comparator group, for the TSR performance condition, from 32 to 14 companies to better reflect the Group’s peers within the
manufacturing subsector of the global oil and gas industry.

Further, the Committee is also committed to monitoring the market and restoring the original threshold EPS and ROCE performance
targets, when a recovery across the oil and gas industry is confirmed.

J O H N H O F M E I S T E R
C H A I R M A N O F T H E R E M UN ER AT I O N CO M M I T T EE

3 March 2016

Hunting PLC
2015 Annual Report and Accounts
72

S
T
R
A
T
E
G

R
E
P
O
R
T

C
O
R
P
O
R
A
T
E

G
O
V
E
R
N
A
N
C
E

F
I

N
A
N
C

A
L

S
T
A
T
E
M
E
N
T
S

O
T
H
E
R

N
F
O
R
M
A
T
I

O
N

H U N T I N G S U B S E A
M A N U FAC T U R E S CO U P LI N G ,
VA LV E S A N D OT H E R P R O D U C T S
F O R D E E P S E A A P P LI C AT I O N

Hunting PLC
2015 Annual Report and Accounts
73

INDEPENDENT AUDITOR S’ REPORT
TO THE MEMBER S OF HUNTING PLC

Report on the financial statements
Our opinion
In our opinion:

• Hunting PLC’s Group financial statements and Company financial statements (the “financial statements”) give a true and fair view

of the state of the Group’s and of the Company’s affairs as at 31 December 2015, and of the Group’s loss and the Group’s and the
Company’s cash flows for the year then ended;

• the Group financial statements have been properly prepared in accordance with International Financial Reporting Standards

(“IFRSs”) as adopted by the European Union;

• the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union and

as applied in accordance with the provisions of the Companies Act 2006; and

• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the

Group financial statements, Article 4 of the IAS Regulation.

What we have audited
The financial statements, included within the Annual Report and Accounts (the “Annual Report”), comprise:

• the Consolidated and Company Balance Sheets as at 31 December 2015;
• the Consolidated Income Statement and the Consolidated Statement of Comprehensive Income for the year then ended;
• the Consolidated and Company Statements of Cash Flows for the year then ended;
• the Consolidated and Company Statements of Changes in Equity for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is applicable law and IFRSs as
adopted by the European Union and, as regards the Company financial statements, as applied in accordance with the provisions of
the Companies Act 2006.

Our audit approach
Overview

Materiality

• Overall Group materiality was set at $5.0m which represents approximately 5% of three-year average profit
before tax from continuing operations adjusted for the impairment of goodwill and other non-current assets.

Audit scope

• We conducted audit work in six countries covering 24 operating units and visited a number of audit

locations, including the one significant component, Hunting Titan.

• Our audit scope accounted for over 92% of Group revenues and 91% of Group absolute profit before tax

from continuing operations adjusted for the impairment of goodwill and other non-current assets.

Areas of focus

• Goodwill and non-current asset impairment assessment.
• Impairment of oil and gas properties.
• Direct tax exposures.

The scope of our audit and our areas of focus
Our Group audit work was conducted in accordance with International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”).

We designed our audit by determining materiality and assessing the risks of material misstatement in the financial statements. In
particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain. As in all of our audits we also
addressed the risk of management override of internal controls, including evaluating whether there was evidence of bias by the
Directors that represented a risk of material misstatement due to fraud.

The risks of material misstatement that had the greatest effect on our audit, including the allocation of our resources and effort, are
identified as “areas of focus” in the table below. We have also set out how we tailored our audit to address these specific areas in
order to provide an opinion on the financial statements as a whole, and any comments we make on the results of our procedures
should be read in this context. This is not a complete list of all risks identified by our audit.

Hunting PLC
2015 Annual Report and Accounts
74

Area of focus
Goodwill and non-current asset impairment
assessment
Refer to pages 55 to 58 (Audit Committee report),
page 87 (critical accounting estimates and
judgements), pages 120 to 123 (principal accounting
policies) and notes 14, 15 and 16 (property, plant and
equipment, goodwill and other intangible assets).

The Group holds $230.6m of goodwill on the balance
sheet, which is net of a $208.2m impairment
recognised during the year. Additional intangible assets
held by the Group, including customer relationships,
unpatented technology and patents & trademarks, total
$180.4m, which is net of an $11.2m impairment
recognised during the year.

Goodwill and intangible asset valuation is a
judgemental and complex area as it depends on the
future financial performance of the cash generating
unit (“CGU”) and future market performance. In
particular there is significant uncertainty in the oil and
gas market as a result of the impact of the continued
decline in oil prices. As such the key area of focus is
the carrying value of assets, with our focus on
judgemental areas being the forecast revenue and
profit, terminal growth rates and the discount rates.

During the year the Group recognised a $208.2m
impairment against goodwill, of which $35.2m was
recognised during the interim period to 30 June 2015.
The charge was taken predominantly against the
Hunting Titan, Electronics and Stafford CGUs of
$107.6m, $28.7m and $17.8m respectively, with the
remaining charge taken against goodwill across
various US and UK based CGUs.

In addition, impairment charges of $11.2m have been
recognised against customer relationship intangible
assets, where the recoverable amount of the asset is
no longer supported by the estimated future revenue
and gross margin applicable to the associated customer.

Other non-current assets held by the Group totalling
$460.8m, net of current year impairment of $33.2m
include land and buildings, plant, machinery and motor
vehicles, rental tools, and oil and gas exploration and
development (see area of focus on impairment of oil
and gas properties below). Following a review of the
carrying value of these non-current assets undertaken
at 30 June 2015, impairment charges totalling $26.8m
were taken against the assets of the Drilling Tools
CGU, comprising of $26.2m against rental tools, $0.5m
against land and buildings and $0.1m for other plant,
machinery and motor vehicles.

These impairments reflect the respective CGUs’
subdued financial performance in the year, as a result
of increased competition, the impact of the continuing
decline in oil prices on forecast revenue and the
prolonged customer unwinding of inventory.

How our audit addressed the area of focus
We tested management’s identification of the CGUs, considering business
changes that would prompt a change to the classification of CGUs.

In order to test the impairment models, we challenged whether the future cash
flow forecasts and the timing of recovery of these forecasts for the identified
CGUs were appropriate.

More specifically, we challenged the key assumptions as follows:

• Forecast revenue and profit assumptions and how management has

incorporated the impact of the decline in oil prices, by comparing them to
historical results, comparing the growth rates to independent specialist
third party published reports and considering the impact already
observed within the market;

• Terminal growth rates, by comparing them to economic and industry

forecasts; and

• Discount rates, by assessing the cost of capital assumption for each CGU

and comparable organisations.

We found the above assumptions to be consistent and in line with our
expectations and that management has followed a clear process for drawing
up the future cash flow forecasts, which was subject to oversight and challenge
by the Directors and which was consistent with Board approved budgets.

In addition to evaluating management’s assessments, we requested a “sum of
the parts” valuation exercise be undertaken to determine the amount of the
implied premium between the Group’s net book value compared to the
Group’s market capitalisation. We compared the implied premium with
observable implied premiums for similar groups within the industry, noting that
the Group’s implied premium was within that range.

In respect of CGUs where impairments have been recognised, we sensitised
each key driver of the cash flow forecasts, including the underlying
assumptions listed above, by determining what we considered to be a
reasonably possible change in the assumptions, based on current market
data and historical and current business performance. Through this we
determined an appropriate range for the fair value less cost of disposal for
each CGU.

For all other CGUs, in particular those with lower relative headroom, we
calculated the degree to which the key assumptions would need to change
before an impairment was triggered. We assessed the likelihood of such a
movement by comparison to sensitised forecasts and possible changes in
discount rates and concluded that it was unlikely.

We concluded that the total goodwill impairment charge of $208.2m
recognised is supported by our testing of key assumptions.

The impairment of $11.2m recognised against customer relationship intangible
assets was taken against specific relationships which were recognised on
acquisition of the associated CGU. We considered the decline in revenue and
gross margin derived by the customers to which the relationships relate and
consider the impairment recognised by management to be reasonable. We
note the remaining balance of $118.5m is supported by the carrying value of
the CGUs to which it relates.

The impairment recognised against property plant and equipment was
taken in relation to specific assets which had been identified as surplus to
requirements within the Drilling Tools CGU. We found the remaining non-
current assets within the CGU are supported by the recoverable amount
calculated through the impairment assessment management has performed.

Hunting PLC
2015 Annual Report and Accounts
75

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONINDEPENDENT AUDITOR S’ REPORT
TO THE MEMBER S OF HUNTING PLC
C ONTIN UED

Area of focus
Impairment of oil and gas properties
Refer to pages 55 to 58 (Audit Committee Report),
page 87 (critical accounting estimates and judgements),
pages 120 to 123 (principal accounting policies) and
note 14.

The Group holds $4.8m of oil and gas exploration and
development assets on the balance sheet, which is net
of a $6.5m impairment recognised during the year.
Management’s impairment model for the estimated
recoverable amount of oil and gas exploration and
development assets is judgemental, as it depends on
the future financial performance of the assets and
future market performance. In particular it is dependent
on estimated oil reserves and forecast oil prices, which
can fluctuate significantly from one year to the next.

The impairment of $6.4m recognised in the year
reflects the decrease in forecast oil prices and a
decrease in estimated oil reserves.

Direct tax exposures
Refer to pages 55 to 58 (Audit Committee Report),
page 87 (critical accounting estimates and
judgements), pages 120 to 123 (accounting policies)
and note 19.

The Group operates in a number of different countries
and is therefore subject to many tax regimes around
the world. Provisions are estimated for uncertain direct
tax positions and disputes with tax authorities,
including transactions between Group companies.
These are measured in accordance with relevant
accounting standards. We considered this an area of
focus because of the judgement required by
management to assess matters across multiple
jurisdictions.

How our audit addressed the area of focus
In order to test management’s impairment model, we challenged and
evaluated the future cash flow forecasts and the process by which they were
drawn up and tested the underlying calculations. In particular, for each of the
following significant assumptions, we challenged:

• Forecast oil prices, by agreeing them to published forecast future oil

prices;

• Estimated oil reserves, by agreeing them to independent third party
reserves engineer reports and agreeing that the reserves engineer is
independent, objective and appropriately accredited; and

• Discount rate, by assessing the cost of capital assumption against

comparable organisations.

We found the assumptions to be appropriate and in line with our expectations.

We sensitised each key driver of the cash flow forecasts, including the
underlying assumptions listed above, by determining what we considered to be
a reasonably possible change in assumption, based on current market data and
historical and current business performance. Through this we determined an
appropriate range of value in use for oil and gas exploration and development
assets. We concluded that the impairment of $6.4m recognised is within our
independently determined range for the recoverable amount.
We discussed potential direct tax exposures with senior Group management,
and the basis for their positions with the Group’s in-house tax specialists.

We evaluated the calculations of the provisions, and considered:

• The accuracy of the calculations and ensured that appropriate tax rates

have been used; and

• Key judgements made by management in determining the probability of

potential outcomes.

Our evaluation of these judgements included using our tax specialists, in the UK
and overseas, and with experience in the oil and gas and oilfield services
industry, as well as our experience of similar challenges elsewhere.

Through these procedures we evaluated the level of provisions recognised and
the disclosures made in the financial statements, which we consider to be in line
with the Group’s policies and methodology, and relevant account standards.

Hunting PLC
2015 Annual Report and Accounts
76

How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the geographic structure of the Group, the accounting processes and controls, and the industry in which the
Group operates.

The Group financial statements are a consolidation of entities covering non-trading legal entities, centralised functions and 31
operating units.

In establishing the overall approach to the Group audit, we considered the type of work that needed to be performed at the operating units
by us, as the Group engagement team, or component auditors within PwC UK and from other PwC network firms operating under our
instruction. Where the work was performed by component auditors, we determined the extent of audit work needed at those operating
units to be able to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the Group
financial statements as a whole.

The Group’s operating units vary significantly in size and we identified 12 operating units that, in our view, required an audit of their complete
financial information, due to their size or risk characteristics. Specific audit procedures over certain balances and transactions were
performed at a further 12 operating units, to give appropriate coverage of all material balances at the Group level. In doing so we conducted
work in six countries and the Group audit team visited multiple reporting locations in the US, which included visiting Hunting Titan, the one
significant component, and the UK. Together, the operating units subject to audit procedures accounted for over 92% of Group revenues
and 91% of absolute Group profit before tax from continuing operations, adjusted for the impairment of goodwill and other non-current
assets. Further, specific audit procedures over central functions and areas of significant judgement, including taxation, treasury, pensions
and impairment, were performed by the Group audit team centrally.

Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together
with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on
the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the
financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:

Overall Group materiality
How we determined it

$5.0m (2014: $8.0m).
Approximately 5% of three-year average profit before tax from continuing operations adjusted for the
impairment of goodwill and other non-current assets.

Rationale for benchmark applied We applied this benchmark because, in our view, this is an appropriate metric against which the

Component materiality

performance of the Group is measured and of the recurring Group performance. This represents a
change from the prior year where we used the current year profit before tax from continuing
operations adjusted for the non-recurring impairment of goodwill and oil and gas exploration and
development assets, to reflect the fact that Hunting’s 2015 result is significantly lower than more
normalised levels due to the current volatility in the market.
For each component in our audit scope, we allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components subject to a full scope audit was
between $0.4m and $4.0m.

We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $0.3m (2014:
$0.4m) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.

Hunting PLC
2015 Annual Report and Accounts
77

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONINDEPENDENT AUDITOR S’ REPORT
TO THE MEMBER S OF HUNTING PLC
C ONTIN UED

Going concern
Under the Listing Rules we are required to review the Directors’ statement, set out on page 30, in relation to going concern. We have
nothing to report having performed our review.

Under ISAs (UK & Ireland) we are also required to report to you if we have anything material to add or to draw attention to in relation to
the Directors’ statement about whether they considered it appropriate to adopt the going concern basis in preparing the financial
statements. We have nothing material to add or to draw attention to.

As noted in the Directors’ statement, set out on page 30, the Directors have concluded that it is appropriate to adopt the going
concern basis in preparing the financial statements. The going concern basis presumes that the Group has adequate resources to
remain in operation, and that the Directors intend it to do so, for at least one year from the date the financial statements were signed.
As part of our audit we have concluded that the Directors’ use of the going concern basis is appropriate.

However, because not all future events or conditions can be predicted, these statements are not a guarantee as to the Group’s ability
to continue as a going concern.

Other required reporting
Consistency of other information
Companies Act 2006 opinions
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial
statements are prepared is consistent with the financial statements.

ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:

• Information in the Annual Report is:

• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the

Group and Company acquired in the course of performing our audit; or

• otherwise misleading.

• the statement given by the Directors on page 54, in accordance with provision C.1.1 of the UK

Corporate Governance Code (the “Code”), that they consider the Annual Report taken as a whole to
be fair, balanced and understandable and provides the information necessary for members to assess
the Group’s and Company’s position of performance, business model and strategy is materially
inconsistent with our knowledge of the Group and Company acquired in the course of performing
our audit.

• the section of the Annual Report on pages 55 to 58, as required by provision C.3.8 of the Code,

describing the work of the Audit Committee does not appropriately address matters communicated
by us to the Audit Committee.

We have no exceptions
to report.

Hunting PLC
2015 Annual Report and Accounts
78

The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of
the Group
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to:

• the Directors’ confirmation in the Annual Report, in accordance with provision C.2.1 of the Code, that
they have carried out a robust assessment of the principal risks facing the Group, including those that
would threaten its business model, future performance, solvency or liquidity.

• the disclosures in the Annual Report that describe those risks and explain how they are being

managed or mitigated.

• the Directors’ explanation in the Annual Report, in accordance with provision C.2.2 of the Code, as

to how they have assessed the prospects of the Group, over what period they have done so and why
they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall
due over the period of their assessment, including any related disclosures drawing attention to any
necessary qualifications or assumptions.

We have nothing
material to add or to
draw attention to.
We have nothing
material to add or to
draw attention to.
We have nothing
material to add or to
draw attention to.

Under the Listing Rules we are required to review the Directors’ statement that they have carried out a robust assessment of the principal
risks facing the Group and the Directors’ statement in relation to the longer-term viability of the Group, set out on page 30. Our review
was substantially less in scope than an audit and only consisted of making enquiries and considering the Directors’ process supporting
their statements; checking that the statements are in alignment with the relevant provisions of the Code; and considering whether the
statements are consistent with the knowledge acquired by us in the course of performing our audit. We have nothing to report having
performed our review.

Adequacy of accounting records and information and explanations received
Under the Companies Act 2006, we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the Company, or returns adequate for our audit have not been received from

branches not visited by us; or

• the Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with the

accounting records and returns.

We have no exceptions to report arising from this responsibility.

Directors’ remuneration
Directors’ remuneration report – Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the
Companies Act 2006.

Other Companies Act 2006 reporting
Under the Companies Act 2006, we are required to report to you if, in our opinion, certain disclosures of Directors’ remuneration
specified by law are not made. We have no exceptions to report arising from this responsibility.

Corporate governance statement
Under the Listing Rules, we are required to review the part of the Corporate Governance Statement relating to ten further provisions
of the UK Corporate Governance Code. We have nothing to report having performed our review.

Hunting PLC
2015 Annual Report and Accounts
79

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONINDEPENDENT AUDITOR S’ REPORT
TO THE MEMBER S OF HUNTING PLC
C ONTIN UED

Responsibilities for the financial statements and the audit
Our responsibilities and those of the directors
As explained more fully in the Statement of Directors’ Responsibilities set out on page 54, the Directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and ISAs (UK &
Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for, and only for, the Company’s members as a body in accordance with
Chapter 3 of Part 16 of the Companies Act 2006, and for no other purpose. We do not, in giving these opinions, accept or assume
responsibility for any other purpose, or to any other person to whom this report is shown or into whose hands it may come, save
where expressly agreed by our prior consent in writing.

What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of:

• whether the accounting policies are appropriate to the Group’s and the Company’s circumstances and have been consistently

applied and adequately disclosed;

• the reasonableness of significant accounting estimates made by the Directors; and
• the overall presentation of the financial statements.

We primarily focus our work in these areas by assessing the Directors’ judgements against available evidence, forming our own
judgements, and evaluating the disclosures in the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a
reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive
procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the
audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent
with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material
misstatements or inconsistencies we consider the implications for our report.

N I C H O L A S C A M P B E L L - L A M B E R T
(S EN I O R S TAT U TO RY AUD I TO R )
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
3 March 2016

Hunting PLC
2015 Annual Report and Accounts
80

CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015

Revenue
Cost of sales
Gross profit
Other operating income
Operating expenses
Profit (loss) from continuing operations
Finance income
Finance expense
Share of associates’ post-tax losses
Profit (loss) before tax from continuing
operations
Taxation
Profit (loss) for the year:
From continuing operations
From discontinued operations
Profit (loss) for the year

Profit (loss) attributable to:
Owners of the parent
Non-controlling interests

Earnings (loss) per share
Basic

– from continuing operations
– from discontinued operations

Group total

Diluted – from continuing operations

– from discontinued operations

Group total

Before
amortisationi
and
exceptional
items
$m
810.5
(615.3)
195.2
3.8
(182.6)
16.4
3.3
(10.1)
(0.2)

2015
Amortisationi
and
exceptional
items
(note 7)
$m
–
(37.9)
(37.9)
–
(260.7)
(298.6)
–
–
–

(298.6)
63.2

(235.4)
4.2
(231.2)

(231.2)
–
(231.2)

9.4
(5.4)

4.0
–
4.0

4.6
(0.6)
4.0

cents
3.1
–
3.1

3.1
–
3.1

Notes
4

5
6
8
10
10

13
13

Before
amortisationi
and
exceptional
items
$m
1,386.5
(942.6)
443.9
9.5
(235.6)
217.8
7.5
(12.4)
(0.5)

2014
Amortisationi
and
exceptional
items
(note 7)
$m
–
(11.3)
(11.3)
–
(92.6)
(103.9)
–
–
–

(103.9)
20.5

(83.4)
1.1
(82.3)

(82.3)
–
(82.3)

212.4
(57.2)

155.2
0.3
155.5

151.5
4.0
155.5

cents
102.6
0.2
102.8

100.0
0.2
100.2

Total
$m
810.5
(653.2)
157.3
3.8
(443.3)
(282.2)
3.3
(10.1)
(0.2)

(289.2)
57.8

(231.4)
4.2
(227.2)

(226.6)
(0.6)
(227.2)

cents
(156.1)
2.8
(153.3)

(156.1)
2.8
(153.3)

Total
$m
1,386.5
(953.9)
432.6
9.5
(328.2)
113.9
7.5
(12.4)
(0.5)

108.5
(36.7)

71.8
1.4
73.2

69.2
4.0
73.2

cents
45.9
1.0
46.9

44.8
1.0
45.8

i. Relates to amortisation of intangible assets that arise on the acquisition of businesses (referred to hereafter as amortisation of acquired intangible assets).

Hunting PLC
2015 Annual Report and Accounts
81

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015

Comprehensive income
(Loss) profit for the year

Components of other comprehensive income after tax
Items that have been reclassified to profit or loss:
Fair value gains and losses:
– gains transferred to income statement on disposal of cash flow hedges
– gain transferred to income statement on redemption of available for sale investment
Release of foreign exchange losses

Items that may be reclassified subsequently to profit or loss:
Exchange adjustments
Fair value gains and losses:
Losses originating on cash flow hedges arising during the year

Items that will not be reclassified to profit or loss:
Remeasurement of defined benefit pension schemes

Other comprehensive expense after tax

Total comprehensive (expense) income for the year

Total comprehensive (expense) income attributable to:
Owners of the parent
Non-controlling interests

Total comprehensive (expense) income attributable to owners of the parent arises from:
Continuing operations
Discontinued operations

Notes

2015
$m

(227.2)

30
30
30

–
–
0.6
0.6

(17.1)

–
(17.1)

9.2

2014
$m

73.2

(1.3)
(0.2)
3.8
2.3

(17.9)

(0.1)
(18.0)

1.5

(7.3)

(14.2)

(234.5)

59.0

(231.9)
(2.6)
(234.5)

(236.5)
4.6
(231.9)

57.2
1.8
59.0

56.0
1.2
57.2

Hunting PLC
2015 Annual Report and Accounts
82

CONSOLIDATED
BAL ANCE SHEE T
AT 3 1 DEC EM BER 2015

ASSETS
Non-current assets
Property, plant and equipment
Goodwill
Other intangible assets
Investments in associates
Investments
Retirement benefit assets
Trade and other receivables
Deferred tax assets

Current assets
Inventories
Trade and other receivables
Current tax assets
Investments
Cash and cash equivalents
Assets classified as held for sale

LIABILITIES
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Provisions
Liabilities classified as held for sale

Net current assets

Non-current liabilities
Borrowings
Deferred tax liabilities
Provisions
Trade and other payables

Net assets

Equity attributable to owners of the parent
Share capital
Share premium
Other components of equity
Retained earnings

Non-controlling interests
Total equity

Notes

2015
$m

2014
$m

14
15
16

17
28
18
19

20
18

22
23

22
19
23
21

29
29
30
31

460.8
230.6
180.4
3.7
9.1
41.4
4.0
2.0
932.0

331.2
140.2
33.5
4.6
54.4
–
563.9

104.2
14.6
52.3
5.4
–
176.5
387.4

117.2
10.2
12.6
11.3
151.3
1,168.1

61.7
153.0
15.7
911.5
1,141.9
26.2
1,168.1

473.0
440.6
224.8
4.4
8.9
30.9
3.3
1.2
1,187.1

381.8
285.6
1.6
3.8
88.5
20.3
781.6

197.7
20.9
65.4
10.6
15.5
310.1
471.5

157.9
37.1
14.1
11.2
220.3
1,438.3

61.6
151.9
30.7
1,163.9
1,408.1
30.2
1,438.3

The notes on pages 86 to 123 are an integral part of these consolidated financial statements. The financial statements on pages 81 to
85 were approved by the Board of Directors on 3 March 2016 and were signed on its behalf by:

D E N N I S P R O C T O R
D I R E C TO R

P E T E R R O S E
D I R E C TO R

Registered number: 974568

Hunting PLC
2015 Annual Report and Accounts
83

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

CONSOLIDATED STATEMENT
OF CHANGES IN EQUIT Y

At 1 January

Loss for the year
Other comprehensive (expense) income
Total comprehensive expense

Dividends
Shares issued
– share option schemes and awards
Treasury shares
– purchase of Treasury shares
Share options and awards
– value of employee services
– discharge
– taxation
Investment by non-controlling interest
Total transactions with owners

Notes

Share
capital
$m
61.6

Share
premium
$m
151.9

–
–
–

–

0.1

–

–
–
–
–
0.1

–
–
–

–

1.1

–

–
–
–
–
1.1

Year ended 31 December 2015
Other
components
of equity
$m
30.7

Retained
earnings
$m
1,163.9

Total
$m
1,408.1

Non-
controlling
interests
$m
30.2

–
(14.5)
(14.5)

(226.6)
9.2
(217.4)

(226.6)
(5.3)
(231.9)

(0.6)
(2.0)
(2.6)

Total
equity
$m
1,438.3

(227.2)
(7.3)
(234.5)

–

6.2
(6.7)
–
–
(0.5)

(39.8)

(2.0)

(41.8)

–

(1.4)

–
6.5
(0.3)
–
(35.0)

1.2

(1.4)

6.2
(0.2)
(0.3)
–
(34.3)

–

–
–
–
0.6
(1.4)

1.2

(1.4)

6.2
(0.2)
(0.3)
0.6
(35.7)

At 31 December

61.7

153.0

15.7

911.5

1,141.9

26.2

1,168.1

Notes

Share
capital
$m
61.3

Share
premium
$m
150.6

Year ended 31 December 2014
Other
components
of equity
$m
41.6

Retained
earnings
$m
1,130.4

Total
$m
1,383.9

At 1 January

Profit for the year
Other comprehensive (expense) income
Total comprehensive (expense) income

–
–
–

–

0.3

–

–
–
–
0.3

–
–
–

–

1.3

–

–
–
–
1.3

–
(13.5)
(13.5)

–

7.2
(4.6)
–
2.6

69.2
1.5
70.7

69.2
(12.0)
57.2

(44.1)

–

(7.5)

–
11.3
3.1
(37.2)

1.6

(7.5)

7.2
6.7
3.1
(33.0)

Non-
controlling
interests
$m
30.9

Total
equity
$m
1,414.8

4.0
(2.2)
1.8

(2.5)

–

–
–
–
(2.5)

73.2
(14.2)
59.0

(46.6)

1.6

(7.5)

7.2
6.7
3.1
(35.5)

At 31 December

61.6

151.9

30.7

1,163.9

1,408.1

30.2

1,438.3

Hunting PLC
2015 Annual Report and Accounts
84

CONSOLIDATED STATEMENT
OF C A SH FLOWS
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015

Operating activities
(Loss) profit from operations
Acquisition amortisation and exceptional items
Depreciation and non-acquisition amortisation
Underlying EBITDA
Loss on disposal of property, plant and equipment
Decrease (increase) in inventories
Decrease (increase) in receivables
(Decrease) increase in payables
Decrease in provisions
Restructuring costs
Taxation paid
Proceeds from disposal of property, plant and equipment held for rental
Purchase of property, plant and equipment held for rental
Other non-cash flow items
Discontinued operations
Net cash inflow from operating activities
Investing activities
Interest received
Dividends received from associates
Purchase of subsidiaries
Proceeds from disposal of associates
Net movement on loans to and from associates
Proceeds from disposal of property, plant and equipment
Purchase of property, plant and equipment
Purchase of intangible assets
Increase in bank deposit investments
Net proceeds from disposal of subsidiaries
Net cash in subsidiaries sold
Indemnity receipts in respect of disposed subsidiaries
Net cash outflow from investing activities
Financing activities
Interest and bank fees paid
Equity dividends paid
Non-controlling interest dividend paid
Investment by non-controlling interest
Share capital issued
Purchase of Treasury shares
Proceeds from new borrowings
Repayment of borrowings
Net cash outflow from financing activities

Net cash outflow in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rates
Reclassified from (to) held for sale
Cash and cash equivalents at the end of the year

Cash and cash equivalents at the end of the year comprise:
Cash at bank and in hand
Bank overdrafts included in borrowings

Notes

7
8

2015
$m

(282.2)
298.6
45.5
61.9
1.8
39.4
143.5
(86.9)
(6.7)
(5.9)
(10.5)
2.9
(9.0)
10.8
1.0
142.3

1.1
0.1
–
–
(0.2)
1.3
(72.1)
(8.0)
(1.1)
0.7
(3.9)
0.4
(81.7)

(8.5)
(39.8)
(2.0)
0.6
1.2
(1.4)
7.6
(36.3)
(78.6)

(18.0)
38.0
(1.9)
3.8
21.9

54.4
(32.5)
21.9

2014
$m

113.9
103.9
52.0
269.8
6.0
(3.1)
(34.7)
41.6
(3.4)
–
(26.6)
7.0
(28.9)
2.5
(0.9)
229.3

2.0
4.5
(3.0)
0.2
0.6
0.6
(94.6)
(5.0)
(2.0)
3.9
–
0.2
(92.6)

(7.6)
(44.1)
(2.5)
–
1.6
(7.5)
70.2
(155.9)
(145.8)

(9.1)
52.4
(1.5)
(3.8)
38.0

88.5
(50.5)
38.0

* The 2014 Statement of Cash Flows has been represented to ensure a clearer relationship with management’s summarised cash flow statement on page 41 of the

Strategic Report.

Hunting PLC
2015 Annual Report and Accounts
85

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE CONSOLIDATED
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 IFRS Interpretations Committee (“IFRS IC”) 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, the defined benefit pension asset and those financial assets and financial liabilities held at fair
value through profit or loss. The Board’s consideration of the applicability of the going concern basis is detailed further in the Strategic
Report on page 30.

The principal accounting policies applied in the preparation of these financial statements are set out in note 37. These policies have
been consistently applied to all the years presented.

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 2015:

• Annual Improvements to IFRSs 2011–2013 Cycle

Although the adoption of these amendments represents a change in accounting policy, comparative figures for 2014 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*
• IFRS 16 Leases*
• 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
• Amendments to IAS 12: Recognition of Deferred Tax Assets for Unrealised Losses*
• Amendments to IAS 7: Disclosure Initiative*
• Annual Improvements to IFRSs 2010–2012 Cycle
• Annual Improvements to IFRSs 2012–2014 Cycle

* Not yet endorsed by the European Union.

Hunting PLC
2015 Annual Report and Accounts
86

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:

Asset/liability
Goodwill

Carrying value at
31 December 2015
$230.6m (2014 – $440.6m)

Property, plant and equipment
and other intangible assets

Combined carrying value at
31 December 2015
$641.2m (2014 – $697.8m)

Taxation

Carrying value of the
net tax asset at
31 December 2015
$10.7m (2014 – $55.2m
net liability)

Oil and gas exploration
and development assets

Carrying value at
31 December 2015
$4.8m (2014 – $12.5m)

Nature of estimates
• The Group comprises a number of cash generating units (“CGUs”) with each one having
independent business profiles and cash flows. When goodwill is initially recognised upon
a business combination, it is allocated to the CGUs that are expected to benefit from the
combination.

• The goodwill of each CGU is subsequently reviewed for impairment at least annually by

comparing its carrying value with the recoverable amount based on the estimated future gross
cash flows that are expected to be generated by the CGU.

• The estimated future gross cash flows are based on the Directors’ view of their future trading

prospects and are discounted at a rate that is determined for each CGU in isolation by
consideration of their business risk profiles.

• Any shortfall in the recoverable amount is charged to the income statement immediately.
• During the year, the estimated future gross cash flows expected from a number of CGUs were

revised downwards to reflect the severity of the downturn in the oil and gas sector and its impact
on business activity levels. Consequently, goodwill was impaired by $208.2m during the year to
reflect these revised estimates.

• Further details of goodwill are disclosed in note 15.
• The Group’s property, plant and equipment and intangible assets (except goodwill) are

depreciated/amortised at rates that are intended to spread the irrecoverable cost of the assets
over their useful lives. The Directors must therefore estimate the useful lives of the assets, their
residual values and the pattern of consumption of their carrying values. Each asset is also
regularly reviewed to ensure it remains consistent with the Directors’ assumptions and, when
required, adjustments are made prospectively.

• In addition, the carrying value of each asset must not be less than the minimum future benefits
that are expected to be generated by that asset. As part of the impairment exercise referred to
above, a number of property, plant and equipment assets in the Drilling Tools business have
been impaired during the year to reflect a reduction in the estimated future cash flows arising
from the sustained current downturn in the oil and gas sector.

• The depreciation rates currently in use are disclosed in note 37. Further details of the Group’s

property, plant and equipment and the other intangible assets are disclosed in notes 14 and 16
respectively.

• In determining current tax estimates, management has to consider the likelihood of tax authority
challenges and estimates tax payable accordingly. Management base their estimates in relation
to current taxes by considering the enacted and substantively enacted tax laws and rates
at the balance sheet date. This incorporates territories in which the Group operates and any
uncertainty in interpretation of those laws and their assessment of the tax risks and exposures
and judgement of likely outcome, taking into account their past experience of enquiries from tax
authorities and other relevant information.

• The deferred tax balances at 31 December 2015 represent an estimate of the amounts that
are expected to be paid or recovered from the tax authorities in future periods if assets and
liabilities in the balance sheet were recovered at their carrying values based on tax laws and
rates that have been substantively enacted by the balance sheet date. Measurement of deferred
tax balances therefore requires management to assess the substantively enacted tax laws and
rates, the timing of the reversal of existing taxable and deductible temporary differences and the
nature, timing and amount of taxable income which would potentially be available to support the
recognition of deferred tax assets (note 19). Management base their estimates of recoverability
of deferred tax assets using these criteria for each separate significant category of deductible
temporary difference and losses carried forward.

• The carrying value of the Group’s oil and gas exploration and development assets is subject to

the value in use of the Group’s oil and gas reserves.

• The value in use is determined by applying a present value to the estimated future producible

reserves at a given forecast market price.

• The estimate of producible reserves is principally extracted using a combination of geological

data and production performance records.

• The estimate of market prices is based on the medium-term futures prices (four to six years)

issued by NYMEX.

• The discount rate is based on the activity’s cost of capital and specific risk premium, which is

estimated to be 12% pre-tax.

• Details of the Group’s oil and gas exploration and development expenditure are disclosed in

note 14.

Hunting PLC
2015 Annual Report and Accounts
87

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

3. Segmental Reporting
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 by the Hunting PLC Board, the Group’s Chief Operating Decision Maker (“CODM”). The
Group’s continuing operating 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 acquired 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.

(a) 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. No exploration and evaluation activities have occurred during the year. 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.

(b) Discontinued Operations
The discontinued operations comprise Gibson Shipbrokers, which was sold on 31 March 2015, 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 CODM.

Year ended 31 December 2015
Profit from
operations
before
amortisationi
and
exceptional
items
$m

Total
revenue
$m

Amortisationi
and
exceptional
items
$m

Total gross
revenue
$m

Inter-
segmental
revenue
$m

216.6
495.0
107.6
819.2

4.2
823.4

(5.2)
(6.4)
(1.3)
(12.9)

–
(12.9)

211.4
488.6
106.3
806.3

4.2
810.5

11.6
–
11.6

–
–
–

11.6
–
11.6

1.9
14.2
4.6
20.7

(4.3)
16.4

(6.8)
(0.2)
9.4

–
–
–

0.1
(0.1)
–

(113.8)
(146.8)
(31.6)
(292.2)

(6.4)
(298.6)

–
–
(298.6)

4.9
0.4
5.3

–
(1.1)
4.2

Total
$m

(111.9)
(132.6)
(27.0)
(271.5)

(10.7)
(282.2)

(6.8)
(0.2)
(289.2)

4.9
0.4
5.3

0.1
(1.2)
4.2

Continuing operations:
Hunting Energy Services
Well Construction
Well Completion
Well Intervention

Other Activities
Exploration and Production
Total from continuing operations

Net finance expense
Share of associates’ post-tax losses
Profit (loss) before tax from continuing operations

Discontinued operations:
Gibson Shipbrokers
Gibson Energy
Total from discontinued operations

Net finance income
Taxation
Profit from discontinued operations

i. Relates to amortisation of acquired intangible assets.

Hunting PLC
2015 Annual Report and Accounts
88

3. Segmental Reporting continued

Continuing operations:
Hunting Energy Services
Well Construction
Well Completion
Well Intervention

Other Activities
Exploration and Production
Total from continuing operations

Net finance expense
Share of associates’ post-tax losses
Profit before tax from continuing operations

Discontinued operations:
Gibson Shipbrokers
Gibson Energy
Field Aviation
Total from discontinued operations

Net finance income
Taxation
Profit from discontinued operations

i. Relates to amortisation of acquired intangible assets.

(d) Other Segment Items

Continuing operations:
Hunting Energy Services
Well Construction
Well Completion
Well Intervention

Other Activities
Exploration and Production
Total – continuing operations

Discontinued operations:
Gibson Shipbrokers

Year ended 31 December 2014
Profit from
operations
before
amortisationi
and
exceptional
items
$m

Total
revenue
$m

Amortisationi
and
exceptional
items
$m

Total gross
revenue
$m

Inter-
segmental
revenue
$m

384.3
877.6
135.8
1,397.7

10.1
1,407.8

(6.0)
(15.0)
(0.3)
(21.3)

–
(21.3)

378.3
862.6
135.5
1,376.4

10.1
1,386.5

47.4
–
–
47.4

–
–
–
–

47.4
–
–
47.4

53.0
140.8
23.8
217.6

0.2
217.8

(4.9)
(0.5)
212.4

0.5
–
–
0.5

0.2
(0.4)
0.3

(57.1)
(34.7)
(0.8)
(92.6)

(11.3)
(103.9)

–
–
(103.9)

–
0.2
0.9
1.1

–
–
1.1

Total
$m

(4.1)
106.1
23.0
125.0

(11.1)
113.9

(4.9)
(0.5)
108.5

0.5
0.2
0.9
1.6

0.2
(0.4)
1.4

2015
Amortisation
of intangible
assets
$m

Depreciation
$m

Impairment
$m

Depreciation
$m

2014
Amortisation
of intangible
assets
$m

Impairment
$m

14.1
18.4
7.3
39.8

3.8
43.6

7.7
32.4
0.7
40.8

–
40.8

106.8
118.7
30.0
255.5

6.4
261.9

21.7
19.2
6.3
47.2

4.8
52.0

7.5
34.5
0.8
42.8

–
42.8

49.6
–
–
49.6

11.3
60.9

–

0.3

–

Hunting PLC
2015 Annual Report and Accounts
89

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

3. Segmental Reporting continued
(e) 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.

External revenue

2015
$m

2014
$m

Profit from operations
before amortisationi and
exceptional items

2015
$m

2014
$m

Non-current assets

2015
$m

2014
$m

Continuing operations:
Hunting Energy Services
US
Canada
North America

UK
Rest of Europe
Europe

Singapore
Rest of Asia
Asia Pacific

Middle East, Africa and Other

Other activities
US

Discontinued operations:
UK
Other

Unallocated assets:
Deferred tax assets
Retirement benefit assets
Total non-current assets

507.0
56.1
563.1

119.4
15.2
134.6

67.2
22.9
90.1

18.5
806.3

4.2
810.5

9.9
1.7
11.6

867.3
95.5

962.8

163.5
30.7

194.2

149.0
50.5
199.5

19.9

1,376.4

10.1
1,386.5

40.4
7.0
47.4

31.7
(3.6)
28.1

(2.7)
(1.5)
(4.2)

1.6
(1.9)
(0.3)

(2.9)
20.7

(4.3)
16.4

(0.2)
0.2
–

170.0
3.8

173.8

8.4
2.5
10.9

27.4
3.6
31.0

1.9

217.6

0.2
217.8

(1.4)
1.9
0.5

748.4
9.1
757.5

66.3
4.7
71.0

10.8
17.3
28.1

25.6
882.2

6.4
888.6

–
–
888.6

2.0
41.4
932.0

985.6
25.6
1,011.2

75.0
4.4
79.4

11.8
22.4
34.2

14.6
1,139.4

15.6
1,155.0

–
–
1,155.0

1.2
30.9
1,187.1

i. Relates to amortisation of acquired intangible assets.

(f) Major Customer Information
The Group received $86.3m (2014 – $155.5m) of revenue from the Halliburton Company Group, which is 11% (2014 – 11%) of the
Group’s revenue from external customers. The revenue is included within the Well Construction, Well Completion and Well
Intervention segments.

4. Revenue

Sale of goods
Revenue from services
Rental revenue
Continuing operations

5. Other Operating Income

Operating lease rental income
Gain on disposal of property, plant and equipment
Foreign exchange gains
Other income
Continuing operations

Hunting PLC
2015 Annual Report and Accounts
90

2015
$m
687.0
72.3
51.2
810.5

2014
$m
1,154.5
110.3
121.7
1,386.5

2015
$m
0.7
1.3
1.1
0.7
3.8

2014
$m
1.2
4.2
2.8
1.3
9.5

6. Operating Expenses

Administration expensesii before amortisationi and exceptional items
Distribution and selling costs
Loss on disposal of property, plant and equipment
Operating expenses before amortisationi and exceptional items
Amortisationi and exceptional items (note 7)
Continuing operations

i. Relates to amortisation of acquired intangible assets.
ii.

Includes foreign exchange losses of $1.6m (2014 – $1.8m).

7. Amortisation and Exceptional Items

Impairment of property, plant and equipment (note 14)
Dry hole costs (note 14)
Restructuring costs
Charged to cost of sales
Amortisation of acquired intangible assets (note 8)
Impairment of goodwill (note 15)
Impairment of other intangible assets (note 16)
Restructuring costs
Release of foreign exchange on liquidation of subsidiaries
Excess property provision release
Charged to operating expenses
Amortisation and exceptional items
Taxation on amortisation and exceptional items (note 11)
Continuing operations

2015
$m
111.1
68.4
3.1
182.6
260.7
443.3

2015
$m
33.2
–
4.7
37.9
38.9
208.2
11.2
2.4
–
–
260.7
298.6
(63.2)
235.4

2014
$m
133.9
91.5
10.2
235.6
92.6
328.2

2014
$m
9.6
1.7
–
11.3
42.8
49.6
–
–
4.8
(4.6)
92.6
103.9
(20.5)
83.4

Plant and equipment impairment of $26.8m (2014 – $nil) was recognised in the Drilling Tools business following a review of the
carrying value given current trading conditions and future expectations and an impairment charge of $6.4m (2014 – $11.3m) for oil and
gas exploration and development expenditure was recorded. Dry hole costs of $1.7m were incurred and paid during 2014 from
Exploration and Production activities. Further details can be found in note 14.

A goodwill impairment charge of $208.2m (2014 – $49.6m) has been recognised. Further details can be found in note 15.

Restructuring costs of $7.1m (2014 – $nil) have been recognised in the year, reflecting the reduction in the Group’s workforce and the
closure of the Canada Drilling Tools business. Restructuring costs gave rise to cash outflows of $5.9m (2014 – $nil) in the year.

Foreign exchange losses of $4.8m relating to cumulative foreign exchange differences previously recognised in the currency
translation reserve were transferred to the income statement following the voluntary liquidation of central non-operating companies
in 2014.

Property provisions of $4.6m were released in 2014 as they were no longer required following the signing of a lease termination
agreement with the owner of a leasehold property. During the year, payments of $4.6m were made.

Hunting PLC
2015 Annual Report and Accounts
91

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

8. Profit (loss) from Continuing Operations
The following items have been charged in arriving at profit (loss) from continuing operations:

Staff costs (note 9)
Depreciation of property, plant and equipment (note 14)
Amortisation of acquired intangible assets (included in operating expenses) (note 16)
Amortisation of other intangible assets (included in operating expenses) (note 16)
Impairment of other intangible assets (included in operating expenses) (note 16)
Impairment of goodwill (included in operating expenses) (note 15)
Impairment of property, plant and equipment (included in cost of sales) (note 14)
Impairment of trade and other receivables (included in operating expense) (note 18)
Cost of inventories recognised as expense (included in cost of sales)
Write down in inventories (included in cost of sales)
Net loss on disposal of property, plant and equipment
Operating lease payments (note 34)
Research and development expenditure

Fees payable to the Group’s auditors PricewaterhouseCoopers LLP and its associates for:

The audit of these accounts
The audit of the accounts of the Company’s subsidiaries
Total audit
Audit-related assurance services
Total audit and audit-related services

Taxation compliance services
Taxation advisory services
Total services relating to taxation

Other services
Total other non-audit services

Total fees

9. Employees

2015
$m
208.4
43.6
38.9
1.9
11.2
208.2
33.2
0.2
559.5
9.3
1.8
14.2
0.6

2015
$m
1.9
0.4
2.3
0.1
2.4

0.2
0.1
0.3

–
–

2.7

Wages and salaries
Social security costs
Share-based payments (note 33)
Pension costs
– defined contribution schemes (note 28)
– defined benefit scheme (note 28)
Staff costs included in underlying profit from operations
Defined benefit credit included in exceptional items

Pension costs – net interest included in net finance
expense (note 28)
Staff costs for the year

Continuing
operations
$m
177.7
12.8
6.2

2015
Discontinued
operations
$m
7.7
0.9
–

8.0
3.7
208.4
–
208.4

(0.8)
207.6

0.3
0.5
9.4
(5.5)
3.9

–
3.9

Continuing
operations
$m
247.9
17.2
7.4

2014
Discontinued
operations
$m
31.7
3.6
0.3

9.8
3.7
286.0
–
286.0

(1.2)
284.8

1.0
2.3
38.9
–
38.9

–
38.9

Total
$m
185.4
13.7
6.2

8.3
4.2
217.8
(5.5)
212.3

(0.8)
211.5

2014
$m
286.0
52.0
42.8
–
–
49.6
11.3
0.5
839.2
2.4
6.0
16.2
0.8

2014
$m
1.9
0.3
2.2
0.1
2.3

0.2
0.2
0.4

0.1
0.1

2.8

Total
$m
279.6
20.8
7.7

10.8
6.0
324.9
–
324.9

(1.2)
323.7

Hunting PLC
2015 Annual Report and Accounts
92

9. Employees continued
The average monthly number of employees by geographical area (including executive Directors) during the year was:

UK
Rest of Europe
Canada
USA
Singapore
Rest of Asia Pacific
Middle East, Africa & Other

Continuing
operations
386
82
180
2,032
221
344
66
3,311

2015
Discontinued
operationsi
39
–
–
–
4
1
–
44

Continuing
operations
409
78
267
2,359
218
498
41
3,870

2014
Discontinued
operations
154
–
–
1
15
4
–
174

Total
425
82
180
2,032
225
345
66
3,355

The average monthly number of employees by operating segment (including executive Directors) during the year was:

Well Construction
Well Completion
Well Intervention
Exploration and Production
Gibson Shipbrokers
Central

Continuing
operations
866
1,877
499
4
–
65
3,311

2015
Discontinued
operationsi
–
–
–
–
44
–
44

Continuing
operations
1,081
2,237
483
4
–
65
3,870

2014
Discontinued
operations
–
–
–
–
174
–
174

Total
866
1,877
499
4
44
65
3,355

Total
563
78
267
2,360
233
502
41
4,044

Total
1,081
2,237
483
4
174
65
4,044

i. The average monthly number of employees for discontinued operations was 178 for the three months during which the discontinued operations were part of the

Group. In presenting the Group’s average numbers for the year, the discontinued average has been calculated across 12 months.

The actual number of employees at the year end was:

Male
Female

Continuing
operations
2,227
557
2,784

2015
Discontinued
operations
–
–
–

Continuing
operations
3,271
732
4,003

2014
Discontinued
operations
149
30
179

Total
2,227
557
2,784

Key management comprises the executive and non-executive Directors only. Their compensation in the year was:

Salaries and short-term employee benefits
Social security costs
Post-employment benefits
Share-based payments

2015
$m
2.1
0.4
0.2
–
2.7

Total
3,420
762
4,182

2014
$m
3.9
0.4
0.5
1.5
6.3

Salaries and short-term benefits are included within the Directors Remuneration table on page 66 of the Annual Report on
Remuneration. Post-employment benefits comprise employer pension contributions. Share-based payments comprise the charge
to the income statement. Details of share options and awards are disclosed on page 70 of the Annual Report on Remuneration.

Hunting PLC
2015 Annual Report and Accounts
93

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

10. Net Finance Expense

Finance income:
Bank balances and deposits
Pension interest income
Foreign exchange gains
Other finance income

Finance expense:
Bank overdrafts
Bank borrowings
Bank fees and commissions
Foreign exchange losses
Other finance expense

Net finance expense – continuing operations

11. Taxation

Current tax
– current year (credit) expense
– adjustments in respect of prior years

Deferred tax
– origination and reversal of temporary differences
– change in tax rate
– adjustments in respect of prior years

Taxation charge (credit) – continuing operations

i. Relates to amortisation of acquired intangible assets.

2015
$m

0.9
1.1
0.8
0.5
3.3

(0.8)
(2.6)
(5.1)
(0.4)
(1.2)
(10.1)
(6.8)

2015

Before
amortisationi
and
exceptional
items
$m

Amortisationi
and
exceptional
items
$m

(0.7)
(0.4)
(1.1)

6.1
0.1
0.3
6.5
5.4

(26.8)
–
(26.8)

(36.4)
–
–
(36.4)
(63.2)

Before
amortisationi
and
exceptional
items
$m

2014

Amortisationi
and
exceptional
items
$m

58.4
(6.5)
51.9

2.6
–
2.7
5.3
57.2

(19.1)
–
(19.1)

(1.4)
–
–
(1.4)
(20.5)

Total
$m

(27.5)
(0.4)
(27.9)

(30.3)
0.1
0.3
(29.9)
(57.8)

2014
$m

1.7
1.5
3.3
1.0
7.5

(1.4)
(3.5)
(4.1)
(2.4)
(1.0)
(12.4)
(4.9)

Total
$m

39.3
(6.5)
32.8

1.2
–
2.7
3.9
36.7

The weighted average applicable tax rate for continuing operations before amortisation and exceptional items is 57% (2014 – 27%).

The tax credit in the income statement of $63.2m (2014 – $20.5m) for amortisation and exceptional items comprises credits of $15.1m
(2014 – $16.4m) on the amortisation of acquired intangible assets, $9.2m (2014 – $nil) on the impairment of plant, machinery and
motor vehicles, $2.6m (2014 – $3.7m) on the impairment of oil and gas development expenditure, $3.1m (2014 – $nil) on the
impairment of other intangible assets, $31.9m (2014 – $nil) on the impairment of goodwill, $1.3m (2014 – $nil) relating to restructuring
costs, $nil (2014 – $0.7m) for dry hole costs, $nil (2014 – $0.7m) on the release of foreign exchange on liquidation of subsidiaries, and
a charge of $nil (2014 – $1.0m) on the excess property provision release.

The total tax credit for the year is lower (2014 – the total tax charge was higher) than the standard rate of UK corporation tax of 20.25%
(2014 – 21.5%) for the following reasons:

(Loss) profit before tax from continuing operations
Tax at 20.25% (2014 – 21.5%)
Permanent differences including tax credits
Recognition of previously unrecognised deferred taxes
Non-tax deductible (untaxed) exceptional items
Higher rate of tax on overseas profits
Current year losses not recognised
Change in tax rates
Adjustments in respect of prior years
Taxation – continuing operations

2015
$m
(289.2)
(58.6)
2.1
–
41.4
(45.8)
3.1
0.1
(0.1)
(57.8)

2014
$m
108.5
23.3
(4.0)
(0.1)
11.1
10.2
–
–
(3.8)
36.7

Hunting PLC
2015 Annual Report and Accounts
94

11. Taxation continued
Tax effects relating to each component of other comprehensive income were as follows:

Exchange adjustments
Release of foreign exchange losses
Fair value gains and losses:
– gain transferred to income statement on redemption of

available for sale investment

– losses originating on cash flow hedges arising during

the year

– gains transferred to income statement on disposal of

cash flow hedges

Remeasurement of defined benefit pension schemes

2015
Tax (charged)
credited
$m
0.1
–

Before tax
$m
(17.2)
0.6

After tax
$m
(17.1)
0.6

Before tax
$m
(19.4)
4.8

2014
Tax (charged)
credited
$m
1.5
(1.0)

–

–
10.9
(5.7)

–

–
(1.7)
(1.6)

–

–
9.2
(7.3)

(0.2)

(0.1)

(1.7)
1.7
(14.9)

–

0.4
(0.2)
0.7

After tax
$m
(17.9)
3.8

(0.2)

(0.1)

(1.3)
1.5
(14.2)

In respect of the tax on the remeasurement of defined benefit pension schemes, a $2.0m charge (2014 – $0.2m) arises on the current
year’s movement and a credit of $0.3m (2014 – $nil) is due to a change in tax rates. The $1.7m charge comprises $1.5m deferred tax
and $0.2m current tax.

In July 2013, the UK Government enacted a change in the UK corporation tax rate from 21% to 20% effective from 1 April 2015. The
impact of the change in rate to 20% has been recognised in calculating the effective tax rate for the year ended 31 December 2015.

A number of changes to the UK corporation tax system were announced in the summer 2015 Budget Statement, whereby from
1 April 2017 the main rate of corporation tax will reduce from 20% to 19%, with a further reduction from 19% to 18% on 1 April 2020.
The Finance Bill which included these changes received Royal Assent on 18 November 2015. The changes have not had a material
impact on the Group’s UK deferred tax balances.

12. Discontinued Operations
The results from discontinued operations were as follows:

Trading results:
Revenue
Gross profit
Other operating income
Other operating expenses
Profit from operations
Finance income
Profit before tax
Taxation
Profit for the year

Gain on disposal:
Gain on sale before tax
Taxation
Gain on sale after tax

Total profit from discontinued operations

Gibson
Shipbrokers
$m

2015

Gibson
Energy
$m

11.6
11.6
0.1
(11.7)
–
0.1
0.1
(0.1)
–

4.9
(1.1)
3.8

3.8

–
–
–
–
–
–
–
–
–

0.4
–
0.4

0.4

Gibson
Shipbrokers
$m

2014

Field
Aviation
$m

Gibson
Energy
$m

47.4
47.4
0.4
(47.3)
0.5
0.2
0.7
(0.4)
0.3

–
–
–

0.3

–
–
–
–
–
–
–
–
–

0.9
–
0.9

0.9

–
–
–
–
–
–
–
–
–

0.2
–
0.2

0.2

Total
$m

11.6
11.6
0.1
(11.7)
–
0.1
0.1
(0.1)
–

5.3
(1.1)
4.2

4.2

Total
$m

47.4
47.4
0.4
(47.3)
0.5
0.2
0.7
(0.4)
0.3

1.1
–
1.1

1.4

Gibson Shipbrokers
On 31 March 2015, the Group sold E.A. Gibson Shipbrokers Limited and its subsidiaries (together referred to as “Gibson
Shipbrokers”) to an employee-owned trust formed by Gibson Shipbrokers’ employees. The selling price was $3.7m, with $3.0m
deferred in the form of an interest-bearing loan note and the remainder paid in cash. A curtailment gain on the Group’s pension
obligations of $5.5m was also recognised upon the sale.

Field Aviation
On 27 April 2012, the Group sold its aviation engineering services business, Hunting Canadian Airport Holdings Ltd and its
subsidiaries, including Field Aviation Company Inc (together referred to as “Field Aviation”). Under the terms of the sale, Hunting PLC
and the purchaser established an environmental escrow account to address ongoing site condition costs relating to Field Aviation’s
hangar facilities in Calgary. Additionally, part of the consideration was deferred in the form of an interest-bearing promissory note
issued to Hunting PLC, repayable by the purchaser on or before 31 December 2018. On 30 September 2014, the promissory note
was repaid in full and the environmental escrow account was wound up, with remaining funds distributed between Hunting PLC and
the purchaser. This resulted in a gain of $0.9m included within discontinued items in 2014.

Hunting PLC
2015 Annual Report and Accounts
95

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

12. Discontinued Operations continued
Gibson Energy
The sale of Gibson Energy Inc, Hunting’s Canadian midstream services operation, was completed on 12 December 2008.
Subsequent gains reported relate to the settlement of tax items.

13. Earnings per Share
Basic earnings per share (“EPS”) is calculated by dividing the earnings attributable to Ordinary shareholders by the weighted average
number of Ordinary shares outstanding during the year.

For diluted earnings per share, the weighted average number of outstanding Ordinary shares is adjusted to assume conversion of all
dilutive potential Ordinary shares. The dilution in respect of share options applies where the exercise price is less than the average
market price of the Company’s Ordinary shares during the year and the possible issue of shares under the Group’s long-term
incentive plans.

Reconciliations of the earnings and weighted average number of Ordinary shares used in the calculations are set out below:

Basic and diluted (loss) earnings attributable to Ordinary shareholders
From continuing operations
From discontinued operations
Total

Basic and diluted (loss) earnings attributable to Ordinary shareholders before amortisationi
and exceptional items
From continuing operations
Add: amortisationi and exceptional items after taxation (note 7)
Total

From discontinued operations
Less: exceptional items after taxation
Total

Basic weighted average number of Ordinary shares
Dilutive outstanding share options
Long-term incentive plans
Adjusted weighted average number of Ordinary shares

(a) Reported (Loss) Earnings per Share

Basic EPS
From continuing operations
From discontinued operations

Diluted EPSii
From continuing operations
From discontinued operations

(b) Underlying Earnings per Share

Basic EPS
From continuing operations
From discontinued operations

Diluted EPSii
From continuing operations
From discontinued operations

2015
$m

(230.8)
4.2
(226.6)

(230.8)
235.4
4.6

4.2
(4.2)
–

millions
147.8
0.1
2.0
149.9

2014
$m

67.8
1.4
69.2

67.8
83.4
151.2

1.4
(1.1)
0.3

millions
147.3
0.6
3.2
151.1

cents

(156.1)
2.8
(153.3)

3.1
–
3.1

45.9
1.0
46.9

44.8
1.0
45.8

102.6
0.2
102.8

100.0
0.2
100.2

i. Relates to amortisation of acquired intangible assets.
ii. For the year ended 31 December 2015, the effect of dilutive share options and long-term incentive plans was anti-dilutive and, therefore, they have not been used to

calculate diluted earnings per share.

Hunting PLC
2015 Annual Report and Accounts
96

14. Property, Plant and Equipment

Cost:
At 1 January
Exchange adjustments
Additions
Disposals
Classified as held for sale
Reclassification to inventory
At 31 December

Accumulated depreciation and impairment:
At 1 January
Exchange adjustments
Charge for the year
Impairment of assets
Disposals
Classified as held for sale
Reclassification
At 31 December

Land and
buildings
$m

243.6
(3.3)
28.5
(1.9)
–
–
266.9

24.8
(0.9)
4.9
0.5
(1.2)
–
–
28.1

Year ended 31 December 2015
Plant,
machinery
and motor
vehicles
$m

Oil and gas
exploration
and
development
$m

Rental
tools
$m

304.2
(8.9)
36.5
(5.7)
–
–
326.1

152.2
(5.8)
28.1
0.1
(5.2)
–
0.7
170.1

139.4
(2.0)
9.6
(7.7)
(35.9)
(0.2)
103.2

49.7
(1.1)
6.8
26.2
(3.0)
(35.9)
(0.7)
42.0

178.4
–
2.5
–
–
–
180.9

165.9
–
3.8
6.4
–
–
–
176.1

Total
$m

865.6
(14.2)
77.1
(15.3)
(35.9)
(0.2)
877.1

392.6
(7.8)
43.6
33.2
(9.4)
(35.9)
–
416.3

Net book amount

238.8

156.0

61.2

4.8

460.8

The Drilling Tools business experienced a decline in revenue of over 68% and a reduction in workforce of 63% in 2015, with a major
restructuring programme completed at the business unit in the year to align with lower activity levels. Following a review of the
carrying value of property, plant and equipment, given current trading conditions and future expectations, completed mid-year, an
impairment of $26.8m (2014 – $nil) was recognised in the Drilling Tools business relating to rental tools of $26.2m (2014 – $nil), land
and buildings of $0.5m (2014 – $nil) and plant, machinery and motor vehicles of $0.1m (2014 – $nil). Although remaining property,
plant and equipment at Drilling Tools is being utilised in the business, at the year end their carrying value remains sensitive to further
decline in projected business performance. In the review of carrying value at the year end, a fair value less costs to sell model was
used with cash flows discounted using a nominal pre-tax rate of 13% and long-term growth of 2%, with revenue expected to recover
to approximately 55% of revenue reported in 2014 by the end of the five year projection period in 2020. If the discount rate was
increased by 25 basis points and revenue only recovered to 50% of the 2014 level by 2020, a further impairment charge of $11.4m
would be required.

Productive assets are tested for impairment, at least annually. Following a valuation of oil and gas reserves at 31 December 2015,
performed for impairment purposes, an impairment charge of $6.4m (2014 – $11.3m) for property, plant and equipment was incurred
in the year reflecting a decline in the oil price and a reduction in reserve estimates compared to those at 31 December 2014. The
recoverable amount of oil and gas development expenditure is based on value in use. These calculations use discounted cash flow
projections based on estimated oil and gas reserves, future production and the income and costs in generating this production. Cash
flows are based on productive lives between one and fifteen years and are discounted using a nominal pre-tax rate of 12% (2014 – 13%).

Included in the net book amount is expenditure relating to assets in the course of construction of $50.2m (2014 – $60.1m) for land and
buildings, $nil (2014 – $0.7m) for oil and gas exploration and development, $26.3m (2014 – $20.2m) for plant and machinery and
$2.5m (2014 – $0.8m) for rental tools.

Group capital expenditure committed for the purchase of property, plant and equipment, but not provided for in these financial
statements, amounted to $4.8m (2014 – $23.3m).

The net book amount of land and buildings of $238.8m (2014 – $218.8m) comprises freehold land and buildings of $234.1m (2014
– $215.4m) and short leasehold land and buildings of $4.7m (2014 – $3.0m).

Hunting PLC
2015 Annual Report and Accounts
97

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

14. Property, Plant and Equipment continued

Cost:
At 1 January
Exchange adjustments
Additions
Disposals
Classified as held for sale
Reclassification
At 31 December

Accumulated depreciation and impairment:
At 1 January
Exchange adjustments
Charge for the year*
Impairment of assets
Disposals
Classified as held for sale
Reclassification
At 31 December

Land and
buildings
$m

192.1
(3.7)
56.0
(0.1)
(2.0)
1.3
243.6

22.7
(0.8)
4.4
–
(0.1)
(1.6)
0.2
24.8

Year ended 31 December 2014
Plant,
machinery
and motor
vehicles
$m

Rental
tools
$m

Oil and gas
exploration
and
development
$m

281.5
(6.6)
36.3
(4.6)
(1.3)
(1.1)
304.2

133.3
(4.1)
28.6
–
(4.2)
(1.2)
(0.2)
152.2

171.3
–
7.1
–
–
–
178.4

149.8
–
4.8
11.3
–
–
–
165.9

135.2
(1.6)
25.7
(19.7)
–
(0.2)
139.4

42.5
(0.9)
14.5
–
(6.4)
–
–
49.7

89.7

Total
$m

780.1
(11.9)
125.1
(24.4)
(3.3)
–
865.6

348.3
(5.8)
52.3
11.3
(10.7)
(2.8)
–
392.6

Net book amount

218.8

152.0

Included in the charge for the year is $0.3m for discontinued operations.

15. Goodwill

Cost:
At 1 January
Exchange adjustments
Classified as held for sale
At 31 December

Accumulated impairment:
At 1 January
Exchange adjustments
Charge for the year
Classified as held for sale
At 31 December

Net book amount

The net book amount of goodwill at 1 January 2014 was $495.2m.

(a) Impairment Tests for Goodwill
Goodwill is allocated to the Group’s cash-generating units (“CGUs”) as follows:

CGU
Titan
Hunting Stafford “Subsea” (formally National Coupling Company)
Electronics
Dearborn
Welltonic
Drilling Tools
Hunting Specialty
US Manufacturing
US Pipe
Canada Pipe
PT Hunting Energy Asia
At 31 December

Hunting PLC
2015 Annual Report and Accounts
98

12.5

473.0

2015
$m

522.5
(5.4)
–
517.1

81.9
(3.6)
208.2
–
286.5

2014
$m

529.2
(3.7)
(3.0)
522.5

34.0
(0.5)
49.6
(1.2)
81.9

230.6

440.6

2015
$m
180.4
15.0
–
12.5
5.2
–
5.0
12.5
–
–
–
230.6

2014
$m
288.4
32.7
28.7
25.5
18.0
4.4
17.0
12.5
2.3
8.9
2.2
440.6

15. Goodwill continued
The downturn of the oil and gas sector continued to worsen during 2015. Likewise, the general view on the outlook for commodity
prices remains progressively “lower for longer”. Hence, in addition to the $35.2m charge reflected in the half-year report, a further
$173.0m impairment charge has been recognised at the year end, bringing the total charge for the year to $208.2m.

The recoverable amount for each CGU has been determined based on a fair value less costs to sell approach, thereby including
currently approved capital projects which are in progress and deducting appropriate selling costs. The recoverable amount
calculations use discounted pre-tax nominal cash flow projections. The key assumptions for the recoverable amount calculations are
revenue growth rates, taking into account the impact these have on margins, terminal growth rates and the discount rates applied.

For 2016 and 2017, projections are based on management’s latest forecasts. For 2018 to 2020 management has made revenue
projections using Spears and Associates “Drilling and Production Outlook” reports as a basis, selecting the most appropriate
geographic market and driver (rig count, footage drilled or E&P spend) for each CGU. Management has then applied judgemental
decreases to reflect the worsening of expectations and has then modelled the expected impact on margin and cash flow from the
resulting revenue projections.

Market conditions remain volatile, difficult to predict and will impact CGUs differently. The compound annual growth rates (“CAGR”)
for revenue for the CGUs between 2015 and 2020 vary between minus 7% and positive 12%. After 2020 a terminal value has been
calculated assuming growth above inflation between 35 and 50 basis points, giving nominal growth rates between 2% and 6%.

Cash flows have been discounted using nominal pre-tax rates between 8% and 14%. The discount rates reflect current market
assessments of the time value of money, the risks associated with the cash flows, the likely external borrowing rate of the CGU and
expected levels of leverage. Consideration has also been given to other factors such as currency risk, operational risk and
country risk.

(b) Impairment of Goodwill and Sensitivities
Titan – An impairment charge of $107.6m (2014 – $nil) has been recognised reflecting the downturn in the sector and, in particular,
relates to the impact for onshore US shale which is Titan’s primary market. Titan represents 78% of the goodwill balance at
31 December 2015 (2014 – 65%) and has a carrying value, including amounts recognised on consolidation such as goodwill, of
$503.0m (2014 – $654.0m). Projected annual growth rates vary between minus 13% and positive 11%. Cash flows have been
discounted at a nominal pre-tax rate of 10%. If the expected upturn is delayed from 2017 to 2018 and if discount rates increase by a
further 25 basis points, then a further $13.8m of impairment would be incurred.

Hunting Stafford (“Subsea”) – An impairment charge of $17.7m (2014 – $nil) has been recognised reflecting the downturn in the sector.
Cash flows have been discounted at a nominal pre-tax rate of 12%. If the expected upturn is delayed from 2017 to 2018 and if
discount rates increase by a further 25 basis points, then a further $10.5m of impairment would be incurred.

Hunting Dearborn – An impairment charge of $13.0m (2014 – $nil) has been recognised reflecting the downturn in the sector. Cash
flows have been discounted at a nominal pre-tax rate of 9%. If the expected upturn is delayed from 2017 to 2018 and if discount rates
increase by a further 25 basis points, then a further $8.6m of impairment would be incurred.

Welltonic – An impairment charge of $12.2m (2014 – $nil) has been recognised reflecting the downturn in the sector. Cash flows have
been discounted at a nominal pre-tax rate of 9%. If the expected upturn is delayed from 2017 to 2018 and if discount rates increase
by a further 25 basis points, then a further $2.2m of impairment would be incurred.

Hunting Specialty – An impairment charge of $12.0m (2014 – $nil) has been recognised reflecting the downturn in the sector. Cash
flows have been discounted at a nominal pre-tax rate of 8%. If the expected upturn is delayed from 2017 to 2018 and if discount rates
increase by a further 25 basis points, then a further $1.3m of impairment would be incurred.

Canada Pipe – An impairment charge of $8.1m (2014 – $nil) has been recognised reflecting the downturn in the sector, which reduced
the balance on goodwill to $nil (2014 – $9.0m). Cash flows have been discounted at a nominal pre-tax rate of 9%.

US Pipe – An impairment charge of $2.3m (2014 – $nil) has been recognised reflecting the downturn in the sector, which reduced the
balance on goodwill to $nil (2014 – $2.3m). Cash flows have been discounted at a nominal pre-tax rate of 11%.

Electronics – An impairment charge of $28.7m was incurred in the first half of 2015 following a prolonged period of customer
de-stocking, increased competition, in particular from the Far East, and as a result of the sector downturn. Cash flows have been
discounted at a nominal pre-tax rate of 10%. This fully impaired the goodwill, leaving the balance at $nil (2014 – $28.7m).

Hunting PLC
2015 Annual Report and Accounts
99

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

15. Goodwill continued
Drilling Tools – An impairment charge of $4.3m was incurred in the first half of 2015 as a result of increased competition, higher
maintenance costs, and the significant impact of the downturn on the US shale and Canadian markets in which this CGU operated.
Cash flows have been discounted at a nominal pre-tax rate of 13%. This fully impaired the goodwill leaving the balance at $nil (2014
– $4.4m). The Canadian Drilling Tools business has been closed in the year.

PT Hunting Energy Asia – An impairment charge of $2.2m was incurred in the first half of 2015 as a result of the sector downturn.
This fully impaired the goodwill leaving the balance at $nil (2014 – $2.2m).

US Manufacturing – No impairment charge has been incurred as a result of the downturn (2014 – $nil). Cash flows have been
discounted at a nominal pre-tax rate of 11%. If the expected upturn is delayed from 2017 to 2018, and if discount rates increase by a
further 25 basis points, no impairment is required.

16. Other Intangible Assets

Cost:
At 1 January
Exchange adjustments
Additions
Disposals
At 31 December

Accumulated amortisation and impairment:
At 1 January
Exchange adjustments
Charge for the year
Impairment of assets
Disposals
At 31 December

Net book amount

Cost:
At 1 January
Exchange adjustments
Additions
Classified as held for sale
Reclassification
At 31 December

Accumulated amortisation:
At 1 January
Exchange adjustments
Charge for the year
Classified as held for sale
At 31 December

Net book amount

Customer
relationships
$m

Unpatented
technology
$m

Patents &
Trademarks
$m

2015

247.6
(0.2)
–
–
247.4

92.1
(0.2)
25.8
11.2
–
128.9

118.5

60.2
(0.2)
4.4
–
64.4

17.5
0.1
5.9
–
–
23.5

40.9

50.7
–
3.2
–
53.9

28.6
–
7.6
–
–
36.2

17.7

Customer
relationships
$m

Unpatented
technology
$m

2014
Patents &
Trademarks
$m

247.8
(0.2)
–
–
–
247.6

66.3
(0.2)
26.0
–
92.1

155.5

53.4
(0.1)
3.9
–
3.0
60.2

12.2
–
5.3
–
17.5

42.7

53.2
–
0.2
–
(2.7)
50.7

21.1
–
7.5
–
28.6

22.1

Other
$m

22.6
(0.3)
0.4
(0.3)
22.4

18.1
(0.2)
1.5
–
(0.3)
19.1

Total
$m

381.1
(0.7)
8.0
(0.3)
388.1

156.3
(0.3)
40.8
11.2
(0.3)
207.7

3.3

180.4

Other
$m

22.7
(0.4)
0.9
(0.3)
(0.3)
22.6

14.5
(0.1)
4.0
(0.3)
18.1

Total
$m

377.1
(0.7)
5.0
(0.3)
–
381.1

114.1
(0.3)
42.8
(0.3)
156.3

4.5

224.8

The net book amount of other intangible assets at 1 January 2014 was $263.0m.

A review of the carrying value of other intangible assets was undertaken, which led to the impairment of customer relationships arising
on the acquisition of the Electronics and Doffing businesses of $11.2m (2014 – $nil).

Other intangible assets include software of $2.7m (2014 – $3.7m).

Internally generated intangible assets have been included within unpatented technology. Additions during the year amounted to
$1.1m (2014 – $3.2m). The carrying value at the beginning of the year was $5.9m (2014 – $2.7m) and at the end of the year was
$6.4m (2014 – $5.9m).

Hunting PLC
2015 Annual Report and Accounts
100

16. Other Intangible Assets continued
All intangible assets are regarded as having a finite life and are amortised accordingly. All amortisation charges relating to intangible
assets have been charged to operating expenses.

Individual Material Intangible Assets
Included in the table above are the following individual material intangible assets:

Cost:
At 1 January and 31 December

Accumulated amortisation:
At 1 January
Charge for the year
At 31 December

Net book amount
Remaining amortisation period at 31 December – years

17. Investments

Non-current:
Listed equity investments and mutual funds

Current:
Bank deposits maturing after more than three months

18. Trade and Other Receivables

Non-current:
Loan note
Prepayments
Other receivables

Current:
Trade receivables
Less: provision for impairment of receivables
Net trade receivables
Prepayments
Accrued revenue
Loan note
Other receivables

2015

Customer
relationships
– Dearborn
$m

Customer
relationships
– Titan
$m

14.7

190.2

6.2
1.9
8.1

6.6
3.5

2015
$m

9.1

62.6
19.0
81.6

108.6
5.8

2014
$m

8.9

4.6

3.8

2015
$m

2.2
1.6
0.2
4.0

119.1
(2.7)
116.4
13.1
3.8
0.7
6.2
140.2

2014
$m

–
3.1
0.2
3.3

255.6
(2.5)
253.1
15.3
9.9
–
7.3
285.6

Payments on account to suppliers of $2.9m in 2014 have been reclassified from other receivables to prepayments.

Trade receivables that are not overdue and not impaired are expected to be fully recovered as there is no recent history of default
or any indications that the customers will not meet their payment obligations. At the year end there are no trade receivables
(2014 – none) whose terms have been renegotiated and would otherwise be past due or impaired.

Hunting PLC
2015 Annual Report and Accounts
101

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

18. Trade and Other Receivables continued
At 31 December 2015, trade receivables of $56.5m (2014 – $112.0m) were overdue but not impaired. The ageing of these receivables
at the year end is as follows:

Number of days overdue:
1-30 days
31-60 days
61-90 days
91-120 days
more than 120 days
Receivables overdue not impaired
Receivables not overdue
Receivables not overdue and impaired
Receivables overdue and impaired
Impairment
Net trade receivables

2015
$m

26.6
11.5
6.9
5.5
6.0
56.5
59.8
0.1
2.7
(2.7)
116.4

2014
$m

54.3
24.8
23.1
6.9
2.9
112.0
141.1
–
2.5
(2.5)
253.1

Receivables that are overdue but not impaired relate to customers for whom there is no recent history of default.

Receivables that have been impaired mainly relate to debtors in financial difficulty where defaults in payments have occurred or
concerns have been raised about the customer’s liquidity. Trade receivables are impaired when there is evidence that the Group will
not be able to collect all amounts due according to the original terms of sale.

During the year, a provision of $0.7m (2014 – $1.3m) for the impairment of receivables was recognised, $nil (2014 – $0.7m) receivables
were written off, $0.5m (2014 – $0.7m) unused provisions were released, and $nil (2014 – $1.3m) was classified as held for sale.
The provision for the impairment of trade receivables at the year end was $2.7m (2014 – $2.5m).

The other classes of financial assets within trade and other receivables do not contain impaired assets.

Concentrations of credit risk with respect to trade receivables are limited due to the Group’s wide and unrelated customer base.
The maximum exposure to credit risk is the fair value of each class of receivable. The carrying value of each class of receivable
approximates their fair value as described in note 25.

The Group does not hold any collateral as security and no assets have been acquired through the exercise of any collateral
previously held.

19. Deferred Tax
Deferred income tax assets and liabilities are only offset when there is a legally enforceable right to offset and when the deferred
income taxes relate to the same fiscal authority and there is an intention to settle the balance net. The offset amounts are as follows:

Deferred tax assets
Deferred tax liabilities

The movement in the net deferred tax liability is as follows:

At 1 January
Exchange adjustments
Credit (charge) to the income statement*
Change in tax rates
Taken direct to equity
Classified as held for sale
At 31 December

2015
$m
2.0
(10.2)
(8.2)

2015
$m
(35.9)
0.7
28.9
(0.1)
(1.8)
–
(8.2)

2014
$m
1.2
(37.1)
(35.9)

2014
$m
(31.6)
0.6
(3.9)
–
(0.8)
(0.2)
(35.9)

* The credit to the income statement (2014 – charge) includes a charge of $1.1m relating to discontinued operations (2014 – $nil).

Deferred tax assets of $32.6m (2014 – $1.4m) have not been recognised as realisation of the tax benefit is not probable. This includes
$3.8m in respect of tax losses (2014 – $1.4m). The tax losses do not have an expiry date.

Hunting PLC
2015 Annual Report and Accounts
102

19. Deferred Tax continued
Deferred tax assets of $2.0m (2014 – $1.2m) are expected to be recovered after more than 12 months. Deferred tax liabilities of
$10.2m (2014 – $37.1m) are expected to be released after more than 12 months.

The movements in deferred tax assets and liabilities, without taking into consideration the offsetting of balances within the same tax
jurisdictions, are shown below:

Tax losses
Inventory
Goodwill and intangibles
Post-retirement benefits
Asset decommissioning provision
Accumulated tax depreciation
Share-based payments
Unremitted earnings
Other

20. Inventories

Raw materials
Work in progress
Finished goods
Less: provisions for losses

At
1 January
2015
$m
1.0
7.2
(20.2)
(3.7)
2.2
(28.4)
6.0
(0.2)
0.2
(35.9)

Exchange
adjustments
$m
–
–
–
0.3
–
0.4
–
–
–
0.7

At
1 January
2014
$m
0.8
5.4
(16.9)
(3.8)
2.1
(33.7)
7.8
(0.2)
6.9
(31.6)

Exchange
adjustments
$m
–
–
0.1
0.4
–
0.2
(0.1)
–
–
0.6

(Charge)
credit to
income
statement
$m
(0.6)
1.2
35.5
(0.3)
0.4
0.5
(4.7)
0.2
(3.3)
28.9

(Charge)
credit to
income
statement
$m
0.2
1.3
(3.0)
(0.1)
0.1
4.7
(1.4)
–
(5.7)
(3.9)

Change in
tax rates
$m
–
–
(0.1)
–
–
–
–
–
–
(0.1)

Taken
direct to
equity
$m
–
–
–
(1.5)
–
–
(0.3)
–
–
(1.8)

Other
movements
$m
–
(0.6)
0.5
–
(0.4)
–
(0.7)
–
1.2
–

At
31 December
2015
$m
0.4
7.8
15.7
(5.2)
2.2
(27.5)
0.3
–
(1.9)
(8.2)

Net
deferred
tax assets
$m
0.4
0.6
0.9
–
–
0.3
–
–
(0.2)
2.0

Taken
direct to
equity
$m
–
–
–
(0.2)
–
–
(1.0)
–
0.4
(0.8)

Other
movements
$m
–
0.5
(0.4)
–
–
0.6
0.7
–
(1.4)
–

Classified
as held for
sale
$m
–
–
–
–
–
(0.2)
–
–
–
(0.2)

At
31 December
2014
$m
1.0
7.2
(20.2)
(3.7)
2.2
(28.4)
6.0
(0.2)
0.2
(35.9)

Net
deferred
tax assets
$m
0.5
–
–
–
–
0.7
1.0
–
(1.0)
1.2

2015
$m
94.1
43.9
213.1
(19.9)
331.2

Net
deferred
tax
liabilities
$m
–
7.2
14.8
(5.2)
2.2
(27.8)
0.3
–
(1.7)
(10.2)

Net
deferred
tax
liabilities
$m
0.5
7.2
(20.2)
(3.7)
2.2
(29.1)
5.0
(0.2)
1.2
(37.1)

2014
$m
110.7
63.7
219.3
(11.9)
381.8

The carrying amount of inventories stated at net realisable value is $28.0m (2014 – $22.8m).

The Group reversed $2.1m (2014 – $2.1m) of a previous inventory impairment as the goods were sold during the year for an amount
greater than their carrying value. The amount reversed has been included in cost of sales in the income statement.

Hunting PLC
2015 Annual Report and Accounts
103

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

21. Trade and Other Payables

Non-current:
Trade payables
Accruals
Social security and other taxes
Other payables

Current:
Trade payables
Social security and other taxes
Accruals
Other payables

22. Borrowings

Non-current:
Unsecured bank loans
Other unsecured loans

Current:
Bank overdrafts
Unsecured bank loans

Total borrowings

Analysis of Borrowings by Currency
The carrying amount of the Group’s borrowings is denominated in the following currencies:

Unsecured bank loans
Other unsecured loans
Bank overdrafts
At 31 December 2015

Unsecured bank loans
Other unsecured loans
Bank overdrafts
At 31 December 2014

23. Provisions

At 1 January 2015
Exchange adjustments
Charged to the income statement
Adjustments to property, plant and equipment
Provisions utilised
Unutilised amounts reversed
Unwinding of discount
At 31 December 2015

Canadian
dollars
$m
29.8
–
–
29.8

Canadian
dollars
$m
34.0
–
–
34.0

Sterling
$m
24.9
–
13.1
38.0

US dollars
$m
75.6
3.9
19.4
98.9

Sterling
$m
29.9
–
24.0
53.9

US dollars
$m
105.0
3.9
26.5
135.4

Euro
$m
2.3
–
–
2.3

Euro
$m
–
–
–
–

Onerous
contracts
$m
13.4
(0.6)
0.9
–
(6.1)
–
0.1
7.7

Hunting PLC
2015 Annual Report and Accounts
104

2015
$m

0.4
1.7
0.1
9.1
11.3

57.1
7.3
36.0
3.8
104.2

2015
$m

113.3
3.9
117.2

32.5
19.8
52.3

2014
$m

–
1.5
0.8
8.9
11.2

92.7
12.5
86.7
5.8
197.7

2014
$m

154.0
3.9
157.9

50.5
14.9
65.4

169.5

223.3

Other
$m
0.5
–
–
0.5

Other
$m
–
–
–
–

Other
$m
11.3
(0.2)
1.0
(0.5)
(0.9)
(0.5)
0.1
10.3

Total
$m
133.1
3.9
32.5
169.5

Total
$m
168.9
3.9
50.5
223.3

Total
$m
24.7
(0.8)
1.9
(0.5)
(7.0)
(0.5)
0.2
18.0

23. Provisions continued
Provisions are due as follows:

Current
Non-current

2015
$m
5.4
12.6
18.0

2014
$m
10.6
14.1
24.7

The Group has commitments in respect of leasehold properties, some of which are not used for Group trading purposes and are
vacant or sub-let to third parties. The provision for onerous contracts reflects the uncertainty of future conditions in the sub-letting
market. It is expected that $1.6m of the provision will be utilised in 2016, $1.9m in 2017 and the remaining balance of $4.2m utilised
from 2018 to 2023. Provision is made on a discounted basis, at a risk-free rate of between 0.36% and 1.6% p.a., for the net rental
deficit on these properties to the end of the lease term.

Other provisions include warranties and tax indemnities of $1.3m (2014 – $1.9m) and asset decommissioning and remediation
obligations of $5.8m (2014 – $6.3m) relating to the Group’s obligation to dismantle, remove and restore items of property, plant and
equipment. The asset decommissioning provision reflects uncertainty in the timing and amounts of the costs expected to arise in
meeting this obligation. Provision is made on a discounted basis, the majority of which is estimated to be utilised over a period of
ten years.

24. Derivatives and Hedging
(a) Currency Derivatives
The Group has used spot and forward foreign exchange contracts to hedge its exposure to exchange rate movements during
the year.

At 31 December 2015, the total notional amount of the Group’s outstanding forward foreign exchange contracts was $3.1m
(2014 – $4.0m).

Gains and losses on contracts that are not designated in a hedge relationship are taken directly to the income statement. Changes in
the fair value of currency derivatives not designated in a hedge relationship amounting to a $0.2m loss (2014 – $0.1m) have been
recognised in the income statement during the year for continuing operations.

Certain highly probable forecast transactions have been designated in a cash flow hedge relationship and hedged using forward
foreign exchange contracts during the year. These forecast transactions are expected to occur during the first six months of 2016. No
gains or losses were recognised in the hedging reserve nor were any gains or losses transferred out of the hedging reserve during the
year. During 2014, losses of $0.1m were recognised in the hedging reserve (note 30) and gains of $1.7m were reclassified from equity
and included in revenue in the income statement. There was no ineffectiveness (2014 – $nil) on the cash flow hedges during the year.

Fair values of derivative financial instruments:

Forward foreign exchange contracts – not in a hedge

2015

Total
assets
$m
–

Total
liabilities
$m
(0.1)

2014

Total
assets
$m
0.1

Total
liabilities
$m
–

(b) Hedge of Net Investments in Foreign Operations
The Group has both Canadian dollar and Sterling denominated borrowings, which it has designated as a hedge of the net investment
in its Canadian and UK subsidiaries respectively. At 31 December 2015, the carrying amount of net Canadian dollar borrowings was
$21.1m (2014 – $17.4m) and the carrying amount of net Sterling borrowings was $22.1m (2014 – $26.0m). During 2015, foreign
exchange gains of $5.1m (2014 – $4.0m) on translation of the borrowings into US dollars were recognised in the currency
translation reserve.

25. Financial Instruments: Fair Values
The carrying value of investments, non-current trade and other receivables, net trade receivables, accrued revenue, other receivables,
deposits maturing after three months, cash and cash equivalents, assets classified as held for sale, trade payables, accruals, other
payables, provisions, liabilities classified as held for sale, bank overdrafts, unsecured bank loans and other unsecured loans
approximates their fair value. Drawdowns under the multi-currency loan facility are typically for periods of one month or less and, as
a result, the carrying value and the fair value are considered to be the same.

The following tables present the Group’s other financial assets and liabilities that are measured at fair value at the year end and show
the level in the fair value hierarchy in which the fair value measurements are categorised. There were no transfers between Level 1
and Level 2 during the year.

Hunting PLC
2015 Annual Report and Accounts
105

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

25. Financial Instruments: Fair Values continued

Non-current investments
Listed equity investments and mutual funds
Derivatives held for trading
Derivative financial liabilities

Non-current investments
Listed equity investments and mutual funds
Derivatives held for trading
Derivative financial assets

Fair value at
31 December
2015
$m

9.1

(0.1)
9.0

Fair value at
31 December
2014
$m

Level 1
$m

Level 2
$m

9.1

–
9.1

–

(0.1)
(0.1)

Level 1
$m

Level 2
$m

8.9

0.1
9.0

8.9

–
8.9

–

0.1
0.1

The fair value hierarchy has the following levels:
Level 1 – inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 – inputs other than quoted prices included within Level 1 that are observable for the asset or liability.

The fair value of forward foreign exchange contracts is determined by comparing the cash flows generated by the contract with the
coterminous cash flows potentially available in the forward exchange market on the balance sheet date. The fair value of listed
equities and mutual funds is based on their current bid prices in an active market, which is considered to be the most representative
of fair value, at the balance sheet date. The fair values of non-US dollar denominated financial instruments are translated into
US dollars using the year end exchange rate.

The inputs used to determine the fair value of derivative financial instruments are inputs other than quoted prices that are observable
and so the fair value measurement can be categorised in Level 2 of the fair value hierarchy. The fair value of listed equity investments
and mutual funds is based on quoted market prices and so the fair value measurement can be categorised in Level 1 of the fair
value hierarchy.

26. Financial Risk Management
The Group’s activities expose it to certain financial risks, namely market risk (including currency risk, fair value interest risk and
cas-ow interest risk), credit risk and liquidity risk. The Group’s risk management strategy seeks to mitigate potential adverse effects
on its financial performance. As part of its strategy, both primary and derivative financial instruments are used to hedge certain
risk exposures.

There are clearly defined objectives and principles for managing financial risk established by the Board of Directors, with policies,
parameters and procedures covering the specific areas of funding, banking relationships, foreign currency and interest rate exposures
and cash management.

The Group’s treasury function is responsible for implementing the policies and providing a centralised service to the Group for
funding, foreign exchange and interest rate management and counterparty risk management. It is also responsible for identifying,
evaluating and hedging financial risks in close co-operation with the Group’s operating companies.

(a) Foreign Exchange Risk
The Group’s international base is exposed to foreign exchange risk from its investing, financing and operating activities, particularly in
respect of Sterling and Canadian dollars. Foreign exchange risks arise from future transactions and cash flows, and from recognised
monetary assets and liabilities that are not denominated in the functional currency of the Group’s local operations.

The Group’s material foreign exchange rates are:

Average exchange rate to US dollars
Year end exchange rate to US dollars

Sterling

2015
0.65
0.68

2014
0.61
0.64

Canadian dollar
2015
1.28
1.39

2014
1.10
1.16

Hunting PLC
2015 Annual Report and Accounts
106

26. Financial Risk Management continued
(i) Transactional Risk
The exposure to exchange rate movements in significant future transactions and cash flows is hedged by using forward foreign
exchange contracts or currency options. Certain forward foreign exchange contracts have been designated as hedging instruments
of highly probable forecast transactions. Operating companies prepare quarterly rolling 12-month cash flow forecasts to enable
working capital currency exposures to be identified. Currency exposures arise where the cash flows are not in the functional currency
of the entity. Exposures arising from committed long-term projects beyond a 12-month period are also identified. The currency flows
to be hedged are committed foreign currency transactions greater than $400,000 equivalent per month and/or currency flows that in
aggregate exceed $400,000 equivalent per annum.

No speculative positions are entered into by the Group.

The table below shows the carrying values of the Group’s financial instruments at 31 December, including derivative financial
instruments, on which exchange differences would potentially be recognised in the income statement in the following year. The table
excludes derivatives designated in a cash flow hedge and loans to subsidiaries that are considered to be part of the net investment in
a foreign operation, as exchange differences arising on these are recognised in other comprehensive income.

At 31 December 2015
Functional currency of Group’s entities:
Sterling
US dollars
Canadian dollars
Singapore dollars
Euro
Chinese CNY

Sterling
$m

US dollars
$m

Currency of denomination
Singapore
dollars
$m

Canadian
dollars
$m

–
(2.7)
–
–
(0.4)
(0.1)
(3.2)

0.4
–
0.8
2.5
0.6
(2.6)
1.7

–
(0.6)
–
–
–
–
(0.6)

–
0.4
–
–
–
–
0.4

Euro
$m

(0.6)
–
–
–
–
–
(0.6)

Chinese
CNY
$m

Other
currencies
$m

–
0.9
–
–
–
–
0.9

(0.1)
(0.2)
–
–
–
–
(0.3)

Total
$m

(0.3)
(2.2)
0.8
2.5
0.2
(2.7)
(1.7)

The Sterling and US dollar denominated financial instruments consist of cash balances, trade receivables, accrued revenue, trade
payables, accrued expenses, bank borrowings and intra-group loans.

At 31 December 2014
Functional currency of Group’s entities:
Sterling
US dollars
Canadian dollars
Singapore dollars
Euro
Chinese CNY
Other currencies

Sterling
$m

US dollars
$m

Currency of denomination

Canadian
dollars
$m

Singapore
dollars
$m

–
(11.0)
–
–
(0.7)
–
–
(11.7)

6.9
–
2.4
3.6
2.1
(0.7)
(0.1)
14.2

0.2
(7.8)
–
–
–
–
–
(7.6)

–
(0.3)
–
–
–
–
–
(0.3)

Euro
$m

(2.0)
2.1
–
–
–
–
–
0.1

Chinese
CNY
$m

Other
currencies
$m

–
2.7
–
–
–
–
–
2.7

–
0.2
–
–
–
–
–
0.2

Total
$m

5.1
(14.1)
2.4
3.6
1.4
(0.7)
(0.1)
(2.4)

The Sterling and US dollar denominated financial instruments consist of cash balances, trade receivables, accrued revenue,
trade payables, accrued expenses and intra-group loans. The Canadian dollar denominated financial instruments consist of
intra-group loans.

(ii) Translational Risk
Foreign exchange risk also arises from the Group’s investments in foreign operations.

The foreign exposure to net investments in foreign operations is managed using borrowings denominated in the same functional
currency as that of the assets. The borrowings are designated as a hedge of the net investment in foreign operations. The foreign
exchange exposure primarily arises from Sterling and Canadian dollar denominated net investments.

(b) Interest Rate Risk
Variable interest rates on cash at bank, deposits, overdrafts and borrowings expose the Group to cash flow interest risk and fixed
interest rates on loans and deposits expose the Group to fair value interest rate risk. The treasury function manages the Group’s
exposure to interest rate risk and uses interest rate swaps and caps, when considered appropriate.

Hunting PLC
2015 Annual Report and Accounts
107

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

26. Financial Risk Management continued
(c) Credit Risk
The Group’s credit risk arises from its pension assets, cash and cash equivalents, investments, derivative financial instruments, loan
note and outstanding receivables.

At the year end, the Group had credit risk exposures to a wide range of counterparties. Credit risk exposure is continually monitored
and no individual exposure is considered to be significant in the context of the ordinary course of the Group’s activities.

Exposure limits are set for each approved counterparty, as well as the types of transactions that may be entered into. Approved
institutions that the treasury function can invest surplus cash with all must have a minimum of an A1, P1 or F1 short-term rating from
Standard and Poor’s, Moody’s or Fitch rating agencies respectively and AAA rating for Money Market Funds.

At the year end, cash and cash equivalents totalled $54.4m (2014 – $88.5m) and current investments $4.6m (2014 – $3.8m). 90% of
cash and cash equivalents were deposited with banks with Fitch short-term ratings of F1 to F1+. Of the remaining 10%, the vast
majority was held on deposit with a mainland Chinese financial institution which, given the Group’s operations in this jurisdiction, were
deemed necessary. Despite not having a formal credit rating, an internal vetting procedure determined that the bank’s credit profile
was appropriate for this level of deposit.

The credit risk of foreign exchange contracts is calculated before the contract is acquired and compared to the credit risk limit set for
each counterparty. Credit risk is calculated as a fixed percentage of the nominal value of the instrument.

Trade and other receivables are continuously monitored. Credit account limits are primarily based on the credit quality of the
customer and past experience through trading relationships. To reduce credit risk exposure from outstanding receivables, the Group
has taken out credit insurance with an external insurer, subject to certain conditions.

The Group operates a pension scheme in the UK, which includes a funded defined benefit section with pension plan net assets of
$41.4m (2014 – $30.9m). The majority of the Scheme’s defined benefits are now covered by insurance company annuity policies,
meaning the pensions-related risks have largely been eliminated. The pension buy-in has been effected by using a number of
insurers, so as to spread its credit risk. The credit rating of these insurers is monitored.

The Group also operates a defined benefit pension scheme in the US, which is unfunded. Contributions are paid into a separate
investment vehicle and invested in a wide portfolio of US mutual funds that are recognised as non-current investments. Investments
at the year end amounted to $9.1m (2014 – $8.9m) and are expected to be fully recovered.

(d) Liquidity Risk
The Group needs to ensure that it has sufficient liquid funds available to support its working capital and capital expenditure
requirements. All subsidiaries submit weekly and bi-monthly cash forecasts to the treasury function to enable them to monitor the
Group’s requirements.

The Group has sufficient credit facilities to meet both its long and short-term requirements.

The Group’s credit facilities are provided by a variety of funding sources and total $414.6m (2014 – $649.8m) at the year end. The
facilities comprise $350.0m (2014 – $584.7m) of committed facilities and $64.6m (2014 – $65.1m) of unsecured uncommitted facilities.

A new bank facility agreement was signed on 26 October 2015. The five-year, multi-currency revolving facility from a syndicate of five
banks of $350.0m replaces the Sterling denominated £375.0m facility. This facility expires on 26 October 2020 and is unsecured.
A commitment fee is payable on the undrawn amount.

The Group’s treasury function ensures flexibility in funding by maintaining availability under committed credit facilities. The Group had
undrawn committed borrowing facilities available at the year end totalling $233.9m (2014 – $428.0m), which expire between two and
five years.

The following tables analyse the Group’s non-derivative financial liabilities into relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual maturity date of the financial liabilities. The amounts are the contractual,
undiscounted cash flows. The carrying amounts in the balance sheet are the discounted amounts. Balances due within one year
have been included in the maturity analysis at their carrying amounts, as the impact of discounting is not significant.

Hunting PLC
2015 Annual Report and Accounts
108

26. Financial Risk Management continued

Non-derivative financial liabilities:
Trade payables
Accruals
Other payables
Onerous lease contracts
Unsecured bank loans
Other unsecured loans
Bank overdrafts
Total

2015

On demand
or within
one year
$m

Between
two and
five years
$m

After
five years
$m

57.1
36.0
2.3
1.6
22.0
–
32.5
151.5

0.4
0.6
–
4.3
124.4
–
–
129.7

–
1.1
9.1
2.0
–
3.9
–
16.1

On demand
or within
one year
$m

2014

Between
two and
five years
$m

After
five years
$m

92.7
86.7
3.1
6.2
19.6
–
50.5
258.8

–
1.5
–
4.4
159.6
–
–
165.5

–
–
8.9
3.0
–
3.9
–
15.8

Total
$m

57.5
37.7
11.4
7.9
146.4
3.9
32.5
297.3

Total
$m

92.7
88.2
12.0
13.6
179.2
3.9
50.5
440.1

The Group had no net settled financial liabilities at the year end (2014 – none).

The table below analyses the Group’s derivative financial instruments, which will be settled on a gross basis, into maturity groupings
based on the period remaining from the balance sheet date to the contractual maturity date. The amounts disclosed in the table are
the contractual, undiscounted cash flows.

Currency derivatives – held for trading
– inflows
– outflows

On demand or within one year
2014
$m

2015
$m

11.2
(11.3)

17.8
(17.8)

(e) Capital Risk Management
The Group’s objectives, policies and processes for managing capital are outlined in the Strategic Report within the Financial Capital
Management section on page 42. Within this section, the Group provides a definition of capital, provides details of the external
financial covenants imposed, key measures for managing capital and the objectives for managing capital. Quantitative disclosures
have been made together with the parameters for meeting external financial covenants.

27. Financial Instruments: Sensitivity Analysis
The following sensitivity analysis is intended to illustrate the sensitivity to changes in market variables on the Group’s financial
instruments and show the impact on profit or loss and shareholders’ equity. Financial instruments affected by market risk include
cash and cash equivalents, borrowings, deposits and derivative financial instruments. The sensitivity analysis relates to the position as
at 31 December 2015.

The analysis excludes the impact of movements in market variables on the carrying value of pension and other post-retirement
obligations, provisions and on the non-financial assets and liabilities of foreign operations.

The following assumptions have been made in calculating the sensitivity analysis:

• Foreign exchange rate and interest rate sensitivities have an asymmetric impact on the Group’s results, that is, an increase in rates

does not result in the same amount of movement as a decrease in rates.

• For floating rate assets and liabilities, the amount of asset or liability outstanding at the balance sheet date is assumed to be

outstanding for the whole year.

• Fixed-rate financial instruments that are carried at amortised cost are not subject to interest rate risk for the purpose of this analysis.
• The carrying values of financial assets and liabilities carried at amortised cost do not change as interest rates change.

Positive figures represent an increase in profit or equity.

Hunting PLC
2015 Annual Report and Accounts
109

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

27. Financial Instruments: Sensitivity Analysis continued
(a) Interest Rate Sensitivity
The sensitivity rate of 0.5% (2014 – 0.25%) for US interest rates represents management’s assessment of a reasonably possible
change, based on historical volatility and a review of analysts’ research and banks’ expectations of future interest rates.

The post-tax impact on the income statement, with all other variables held constant, at 31 December, for an increase of 0.5% (2014
– 0.25%) in US interest rates, is to reduce profits by $0.3m (2014 – $0.2m). If US interest rates were to decrease by 0.5% (2014 –
0.25%), then the post-tax impact on the income statement would be to increase profits by $0.3m (2014 – $0.2m). The movements
arise on US dollar denominated borrowings. There is no impact on other comprehensive income (“OCI”) for a change in interest rates.

(b) Foreign Exchange Rate Sensitivity
The sensitivity rate of 10% (2014 – 10%) for Sterling and Canadian dollar exchange rates represents management’s assessment of a
reasonably possible change, based on historical volatility and a review of analysts’ research and banks’ expectations of future foreign
exchange rates.

The table below shows the post-tax impact for the year of a reasonably possible change in foreign exchange rates, with all other
variables held constant, at 31 December.

Sterling exchange rate +10% (2014: +10%)
Sterling exchange rate -10% (2014: -10%)
Canadian dollar exchange rates +10% (2014: +10%)
Canadian dollar exchange rates -10% (2014: -10%)
Singapore dollar exchange rates +10% (2014: +10%)
Singapore dollar exchange rates -10% (2014: -10%)

2015

2014

Income
statement
$m
(0.8)
0.9
(0.1)
0.1
0.3
(0.4)

OCI
$m
–
–
–
–
–
–

Income
statement
$m
(2.1)
2.5
0.3
(0.4)
(0.3)
0.3

OCI
$m
(0.2)
0.2
(0.1)
0.1
–
–

The movements in the income statement mainly arise from cash, bank overdrafts, intra-group balances, trade receivables and
payables and accrued expenses, where the functional currency of the entity is different from the currency that the monetary items
are denominated in.

The movements in OCI arise from net Sterling and Canadian dollar borrowings designated in a hedge of net investments in foreign
subsidiaries and from US and Canadian dollar denominated loans that have been recognised as part of the Group’s net investment
in foreign subsidiaries.

28. Post-Employment Benefits
(a) UK Pensions
Within the UK, the Group operates a funded pension scheme, which includes a defined benefit section with benefits linked to final
salary and a defined contribution section with benefits dependent on future investment returns. The defined benefit section is closed
to new UK employees who are offered membership of the defined contribution section. The majority of UK employees are members
of one of these arrangements.

The UK scheme is registered with HMRC for tax purposes, is operated separately from the Group and managed by a Board of
trustees. The trustees are responsible for the payment of benefits and the management of the scheme’s assets.

The UK scheme is subject to UK regulations, which require the Group and the trustees to agree a funding strategy and contributions
schedule for the defined benefit section of the UK scheme. Contributions to the defined contribution section of the UK scheme and
other Group defined contribution arrangements are payable in addition and are charged directly to profit and loss.

The Company has consulted with active members of the defined benefit section of the scheme over a proposal to close that section
to future accrual of further benefits with effect from 30 June 2016. If closure is the final decision, then active members will be offered
membership of the defined contribution section of the scheme from 1 July 2016. The effect of this change, if agreed, will be
recognised in the Group’s 2016 financial statements.

Risk exposures and investment strategy
The weighted average duration to payment of the projected future cash flows from the defined benefit section of the UK scheme is about
17 years. The scheme is managed so that it is well funded and represents a low risk to the Group. In particular, the scheme’s assets are
invested in a range of deferred annuity and immediate annuity policies with a number of insurers, which largely match the benefits to be
paid to members of the scheme. This strategy significantly reduces the Group’s investment, inflation and demographic risks in relation to
the scheme’s liabilities. This is demonstrated by the relative stability of the Group’s pension asset from year-to-year. The position would
change materially if one of the insurers was no longer able to meet its obligations as the pension obligation ultimately rests with the Group.

The increase in the Group’s pension asset during 2015 principally reflects the gain arising from the trustees’ decision to surrender part of
one of their insurance annuity policies and the impact of the sale of Gibson Shipbrokers.

Hunting PLC
2015 Annual Report and Accounts
110

28. Post-Employment Benefits continued
Funding strategy
The trustees and the Group together agree a funding strategy for the scheme every three years. The trustees and the Group have
agreed that the contributions ordinarily from the Group under this agreement in the next reporting period will be funded from the
surplus in the scheme. As such, the Group expects to contribute approximately $nil to the defined benefit section of the UK scheme
in the next reporting period.

The net assets for the UK post-employment benefit scheme are:

Present value of obligations
Total fair value of plan assets
Net asset

Changes in the net asset recognised in the balance sheet

Opening balance sheet net asset
Exchange adjustments
Expense charged to the income statement – continuing operations
Past service cost credited to the income statement – discontinued operations
Amount recognised in other comprehensive income
Transfer to defined contribution scheme
Employers contributions paid
Closing balance sheet net asset

2015
$m
(387.1)
428.5
41.4

2014
$m
(438.3)
469.2
30.9

2015
$m
30.9
(2.1)
(2.9)
5.5
10.6
(1.8)
1.2
41.4

2014
$m
29.6
(1.8)
(4.3)
–
2.1
–
5.3
30.9

The Group has concluded that it can recognise the full amount of this surplus on the grounds that it could gain sufficient economic
benefit from a future reduction of its contributions to the scheme. Amendments to the current rules on recognising a surplus are
currently being considered. The Group has concluded that the above accounting treatment will not be affected by the current
proposed changes to these rules.

Movements in the present value of the defined benefit obligation for the defined benefit section of the UK scheme

Opening defined benefit obligation
Exchange adjustments
Current service cost (employer)
Contributions by plan participants
Interest on benefit obligations
Remeasurements due to:
Changes in financial assumptions
Changes in demographic assumptions
Experience on benefit obligations
Past service cost
Benefits and expenses paid
Present value of the obligation at the end of the year

Movements in the fair value of the assets for the defined benefit section of the UK scheme

Opening fair value of plan assets
Exchange adjustments
Interest on plan assets
Actual returns over interest on plan assets
Transfer to defined contribution scheme
Contributions by employer
Contributions by plan participants
Benefits and expenses paid
Closing fair value of plan assets

2015
$m
438.3
(23.0)
4.0
0.3
15.1

(7.5)
(4.5)
(11.3)
(5.5)
(18.8)
387.1

2015
$m
469.2
(25.1)
16.2
(12.7)
(1.8)
1.2
0.3
(18.8)
428.5

2014
$m
428.2
(27.2)
5.8
0.5
18.3

31.6
–
(0.3)
–
(18.6)
438.3

2014
$m
457.8
(29.0)
19.8
33.4
–
5.3
0.5
(18.6)
469.2

The “Actual returns over interest on plan assets” shown in the table above principally includes the impact of both a gain arising from
the surrender of some of the annuity policies and a loss following changes in financial assumptions on the value of the insurance
annuity policies. The loss due to the changes in the assumptions broadly offsets the corresponding gain on the remeasurement of the
defined benefit obligation, demonstrating that the pensions related risks have been mitigated by the scheme’s investment strategy.

Hunting PLC
2015 Annual Report and Accounts
111

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

28. Post-Employment Benefits continued
Major asset categories for the defined benefit section of the UK scheme

Insurance annuity policies
Multi-asset fund
Bonds
Cash/other
Fair value of plan assets

2015
$m
395.3
18.0
10.6
4.6
428.5

2014
$m
459.8
7.8
–
1.6
469.2

The scheme does not invest in property occupied by the Group or in financial securities issued by the Group.

Amounts recognised in the income statement in respect of the UK scheme

Current service cost – operating expenses
Past service cost – gain on curtailment (note 12)
Total expense (credit) included within profit (loss) from operations
Net interest on the defined benefit asset – finance income (note 10)
Total expense (credit) included within staff costs (note 9)

Current service cost – operating expenses
Net interest on the defined benefit asset – finance income (note 10)
Total expense included within staff costs (note 9)

The current service cost includes $1.2m (2014 – $1.5m) of administration costs.

Continuing
operations
$m
3.5
–
3.5
(1.1)
2.4

Continuing
operations
$m
3.5
(1.5)
2.0

2015
Discontinued
operations
$m
0.5
(5.5)
(5.0)
–
(5.0)

2014
Discontinued
operations
$m
2.3
–
2.3

Total
$m
4.0
(5.5)
(1.5)
(1.1)
(2.6)

Total
$m
5.8
(1.5)
4.3

In addition, employer contributions of $8.3m (2014 – $10.8m) for various Group defined contribution arrangements (including the
defined contribution section of the UK scheme) are recognised in the income statement.

Special events
The following special events occurred during the year:

• The trustees surrendered some of the annuity policies during the year. The effect of this has been recognised through other

comprehensive income.

• The sale of Gibson Shipbrokers was completed during the year. The effect of this has been recognised in the income statement within

discontinued operations.

Both of these events have had the effect of increasing the value of the Group’s pension asset.

The principal assumptions used for accounting purposes reflect prevailing market conditions are:

Discount rate
Future pension increase
Future salary increase

Mortality assumption – life expectancy

Male aged 65 at the accounting date
Female aged 65 at the accounting date
Male aged 65 in 20 years
Female aged 65 in 20 years

2015
3.8% p.a.
3.3% p.a.
5.3% p.a.

2014
3.6% p.a.
3.2% p.a.
5.2% p.a.

2015
Years
25.0
27.7
26.9
29.1

2014
Years
24.9
27.1
27.6
29.5

The assumptions used to determine the end-of-year benefit obligations are also used to calculate the following year’s cost.

Hunting PLC
2015 Annual Report and Accounts
112

28. Post-Employment Benefits continued
Sensitivity analysis
Apart from the assumption for salary increases, the change in the obligation arising as a result of changes in the above assumptions
is broadly matched by a corresponding change in the value of the insurance policies, so that the impact on the net balance sheet
asset is significantly dampened.

A 0.25% p.a. increase in the salary increase assumption would increase the defined benefit obligation by about $1.0m (2014 – $2.7m)
without having any impact on the value of the scheme’s assets. The net balance sheet is also now more sensitive to changes in the
market value of the invested assets following the surrender of part of the insured annuity policies. A 5% fall in the value of those
assets would reduce the net balance sheet by $1.1m (2014 – $0.3m).

(b) Other Pensions
The Group also operates a cash balance arrangement in the US for certain executives. Members build up benefits in this
arrangement by way of notional contributions and notional investment returns. Actual contributions are paid into an entirely separate
investment vehicle held by the Company, which is used to pay benefits due from the cash balance arrangement when the
member retires.

Under IAS 19, the cash balance arrangement is accounted for as an unfunded defined benefit scheme.

The amounts recognised in the income statement during the year were $0.2m (2014 – $0.2m) for the employer’s current service cost
(recognised in operating expenses) and $0.3m (2014 – $0.3m) interest cost (recognised in finance expense).

Movements in the present value of the obligation for the defined US deferred compensation plan

Present value of the obligation at the start of the year
Current service cost (equal to the notional contributions)
Interest on benefit obligations
Remeasurement – excess of notional investment returns over interest cost
Present value of the obligation at the end of the year

29. Share Capital and Share Premium

At 1 January
Shares issued – share option schemes and awards
At 31 December

2015
$m
8.9
0.2
0.3
(0.3)
9.1

2014
$m
8.0
0.2
0.3
0.4
8.9

Ordinary
shares of
25p each
Number
148,468,677
372,831
148,841,508

Ordinary
shares of
25p each
Number
147,742,760
725,917
148,468,677

2015

Ordinary
shares of
25p each
$m
61.6
0.1
61.7

2014

Ordinary
shares of
25p each
$m
61.3
0.3
61.6

Share
premium
$m
151.9
1.1
153.0

Share
premium
$m
150.6
1.3
151.9

There are no restrictions attached to any of the Ordinary shares in issue and all Ordinary shares carry equal voting rights. The rights
attached to the Company’s Ordinary shares are summarised on page 140. All of the Ordinary shares in issue are fully paid.

At 31 December 2015, 914,225 (2014 – 980,996) Ordinary shares were held by an Employee Benefit Trust. Details of the carrying
amount are set out in note 31.

Hunting PLC
2015 Annual Report and Accounts
113

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

30. Other Components of Equity

Year ended 31 December 2015
At 1 January
Exchange adjustments
Release of foreign exchange losses net of tax
Share options and awards
– value of employee services
– discharge
At 31 December

Year ended 31 December 2014
At 1 January
Exchange adjustments net of tax
Release of foreign exchange losses net of tax
Fair value gains and losses:
– gain transferred to income statement on redemption of available for sale investment
– losses originating on cash flow hedges arising during the year net of tax
– gains transferred to income statement on disposal of cash flow hedges net of tax
Share options and awards
– value of employee services
– discharge
At 31 December

31. Retained Earnings

At 1 January
(Loss) profit for the year
Remeasurement of defined benefit pension schemes net of tax
Dividends paid
Treasury shares
– purchase of Treasury shares
Share options and awards
– discharge
– taxation
At 31 December

Other
reserves
$m
15.1
–
–

6.2
(6.7)
14.6

Cash flow
hedge
reserve
$m
1.4
–
–

–
(0.1)
(1.3)

–
–
–

Currency
translation
reserve
$m
15.6
(15.1)
0.6

–
–
1.1

Currency
translation
reserve
$m
27.5
(15.7)
3.8

–
–
–

–
–
15.6

Total
$m
30.7
(15.1)
0.6

6.2
(6.7)
15.7

Total
$m
41.6
(15.7)
3.8

(0.2)
(0.1)
(1.3)

7.2
(4.6)
30.7

Other
reserves
$m
12.7
–
–

(0.2)
–
–

7.2
(4.6)
15.1

2015
$m
1,163.9
(226.6)
9.2
(39.8)

2014
$m
1,130.4
69.2
1.5
(44.1)

(1.4)

(7.5)

6.5
(0.3)
911.5

11.3
3.1
1,163.9

The share options and awards taxation charge taken directly to equity of $0.3m (2014 – $3.1m credit) comprises a current tax credit
of $nil (2014 – $4.1m) and a deferred tax charge of $0.3m (2014 – $1.0m).

Retained earnings include the following amounts in respect of the carrying amount of Treasury shares:

Cost:
At 1 January
Purchase of Treasury shares
Disposal of Treasury shares
At 31 December

2015
$m

(14.8)
(1.4)
4.4
(11.8)

2014
$m

(13.8)
(7.5)
6.5
(14.8)

The loss on disposal of Treasury shares during the year, which is recognised in retained earnings, was $4.4m (2014 – $6.5m).

Hunting PLC
2015 Annual Report and Accounts
114

32. Dividends Paid

Ordinary dividends:
2015 interim paid
2014 final paid
2014 interim paid
2013 final paid

2015

Cents per
share

4.0
22.9
–
–
26.9

5.9
33.9
–
–
39.8

2014

Cents per
share

–
–
8.1
21.8
29.9

–
–
12.0
32.1
44.1

A final dividend of 4.0 cents per share has been proposed by the Board, amounting to an estimated distribution of $5.9m. The
dividend will be paid in Sterling on 6 July 2016, to shareholders on the register on 10 June 2016, and the Sterling value of the dividend
payable per share will be fixed and announced approximately two weeks prior to the payment date based on the average spot
exchange rate over the three business days preceding the announcement date. The proposed final dividend is subject to approval by
the shareholders at the Annual General Meeting to be held on 13 April 2016 and has not been provided for in these
financial statements.

33. Share-Based Payments
(a) 2001 Executive Share Option Plan
The Company operated an executive share option plan between 2001 and 2008 which granted options to eligible employees. Under
this scheme, the final granting of options occurred on 4 March 2008 and the final vesting of options occurred on 4 March 2011. There
is no longer a charge to the income statement attributable to this scheme. Following successful vesting of the options, the employee,
subject to continued employment, has seven years in which to exercise the option. Details of movements in the outstanding share
options are set out below.

(i) Share Option Movements During the Year

Outstanding at the beginning of the year
Exercised during the year
Lapsed during the year
Outstanding and exercisable at the year end

2015

2014

Weighted
average
exercise
price
p
454
221
–
571

Number
of options
1,658,147
(563,834)
–
1,094,313

Weighted
average
exercise
price
p
354
160
–
454

Number
of options
1,094,313
(372,831)
(20,782)
700,700

Options were granted with an exercise price equal to the average closing mid-market price of the Company’s share price for the three
trading days prior to the date of grant.

The weighted average share price at the date of exercise during 2015 was 491.1p (2014 – 873.5p).

(ii) Share Options Outstanding at the Year End

Executive Share Options 2005 – vested
Executive Share Options 2006 – vested
Executive Share Options 2007 – vested
Executive Share Options 2008 – vested

2015
Number
of options
–
298,471
205,440
196,789
700,700

2014
Number
of options
372,831
298,471
216,534
206,477
1,094,313

Exercise
price range
p
220.7
383.0
640.0
784.5

Exercise period
09.03.08 – 08.03.15
08.03.09 – 07.03.16
06.03.10 – 05.03.17
04.03.11 – 03.03.18

(b) 2009 Performance Share Plan (“PSP”)
(i) Performance Based Awards and Options
The Company granted performance-based share awards and options under the PSP between 2009 and 2013. Under the PSP annual
conditional awards of shares and options were made to executive Directors and senior employees. Awards and options are subject to
performance conditions during the vesting period. The PSP was replaced by the 2014 Hunting Performance Share Plan (“Hunting
PSP”) following shareholder approval of the Hunting PSP at the Annual General Meeting (“AGM”) of the Company on 16 April 2014.
The final grant under the PSP occurred in 2013 and will vest in 2016, subject to performance conditions and continued service.
Awards and options were granted at nil cost under the PSP.

The performance-based awards and options will vest subject to a median or above total shareholder return (“TSR”) performance over
a three-year period from the date of grant, relative to comparator companies from the DJ US Oil Equipment and Services sector index
and the DJ STOXX TM Oil Equipment and Services sector index.

Hunting PLC
2015 Annual Report and Accounts
115

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

33. Share-Based Payments continued
Details of the performance based PSP awards and options movements during the year are set out below:

Outstanding at the beginning of the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year

Details of the performance-based PSP awards and options outstanding at 31 December 2015 are as follows:

2015
Number
of awards
383,683
(231,085)
152,598
–

2014
Number
of awards
568,664
(184,981)
383,683
–

Date of grant:
17 April 2012
20 March 2013
Outstanding at the end of the year

2015
Number
of shares

2014
Number
of shares

–
152,598
152,598

218,963
164,720
383,683

Normal
vesting date

17.04.15
20.03.16

There were no exercises of the performance based PSP awards and options during 2014 and 2015.

The fair value charge to the income statement attributable to the performance based PSP is $0.6m (2014 – $1.3m), which is
recognised in operating expenses.

(ii) Time-Based Awards and Options
The Company granted time-based share awards and options under the PSP between 2009 and 2013. Annual awards of shares and
options were made to employees, subject to continued employment, during the vesting period. There were no performance
conditions attached. Time-based awards will continue to be granted under the Hunting PSP. The final grant under the PSP occurred
in 2013 and will vest in 2016. Awards and options were granted at nil cost under the PSP.

Details of the time-based PSP awards and options movements during the year are as follows:

Outstanding at the beginning of the year
Vested and exercised during the year
Lapsed during the year
Outstanding at the end of the year
Exercisable at the end of the year

The weighted average share price at the date of exercise during 2015 was 589.0p (2014 – 864.0p).

Details of the time-based PSP awards and options outstanding at 31 December 2015 are as follows:

2015
Number
of awards
553,497
(207,156)
(30,881)
315,460
15,896

2014
Number
of awards
747,166
(158,665)
(35,004)
553,497
1,969

Date of grant:
25 February 2011
17 April 2012
20 March 2013
Outstanding at the end of the year

2015
Number
of shares

2014
Number
of shares

Normal
vesting date

875
15,021
299,564
315,460

1,969
204,266
347,262
553,497

25.02.14
17.04.15
20.03.16

The fair value charge to the income statement attributable to the time-based PSP is $1.5m (2014 – $2.5m), which is recognised in
operating expenses.

(c) 2004 Long-Term Incentive Plan (“LTIP”)
Between 2004 and 2013, the Company had granted awards to key executives under the LTIP, which expired in 2015 in line with Plan
rules, following 10 years of operation. The final year of vesting of awards under the LTIP rules is due in 2016, however nil awards will
vest. Details of awards made under this plan are contained within the Remuneration Committee Report on page 68.

The fair value charge to the income statement attributable to the LTIP is $nil (2014 – $0.5m) and the liability in relation to the LTIP at
the year end is $nil (2014 – $6.8m).

Hunting PLC
2015 Annual Report and Accounts
116

33. Share-Based Payments continued
(d) 2014 Hunting Performance Share Plan (“Hunting PSP”)
(i) Performance-Based Awards
The Company now grants performance-based share awards annually to executive Directors and senior employees under the Hunting PSP,
which has replaced both the LTIP, which expired in 2015, and the PSP, which is no longer used. Awards are granted at nil cost under the
Hunting PSP.

The performance-based Hunting PSP awards to the executive Directors are divided equally into three tranches. Each tranche is
subject to a three-year vesting period, and is also subject to performance conditions. The three conditions are Company performance
over a three-year period against (i) the TSR of a bespoke peer group, (ii) underlying diluted earnings per share (“EPS”) growth, and (iii)
average underlying Return on Capital Employed (“ROCE”). The performance period for 2015 awards granted under the Hunting PSP
is 1 January 2015 to 31 December 2017.

Details of the performance-based Hunting PSP awards movements during the year are set out below:

Outstanding at the beginning of the year
Granted during the year
Lapsed during the year
Outstanding at the end of the year

Details of the performance based Hunting PSP awards outstanding at 31 December 2015 are as follows:

2015
Number
of shares
692,750
1,107,587
(108,807)
1,691,530

2014
Number
of shares
–
707,376
(14,626)
692,750

Date of grant:
1 May 2014
28 April 2015
Outstanding at the end of the year

2015
Number
of shares

2014
Number
of shares

644,772
1,046,758
1,691,530

692,750
–
692,750

Normal
vesting date

01.05.17
28.04.18

(ii) Time-Based Awards
The Company also grants time-based share awards annually under the Hunting PSP. Annual awards of shares may be made to
employees subject to continued employment during the vesting period. There are no performance conditions attached. Awards are
granted at nil cost under the Hunting PSP.

Details of time based Hunting PSP awards movements during the year are set out below:

Outstanding at the beginning of the year
Granted during the year
Vested and exercised during the year
Lapsed during the year
Outstanding at the year end

The weighted average share price at the date of exercise during 2015 was 426.4p (2014 – 649.0p).

Details of the time-based Hunting PSP awards outstanding at 31 December 2015 are as follows:

2015
Number
of shares
654,842
1,040,708
(16,250)
(182,369)
1,496,931

2014
Number
of shares
–
681,850
(429)
(26,579)
654,842

Date of grant:
1 May 2014
28 April 2015
Outstanding at the end of the year

2015
Number
of shares

2014
Number
of shares

557,959
938,972
1,496,931

654,842
–
654,842

Normal
vesting date

01.05.17
28.04.18

Hunting PLC
2015 Annual Report and Accounts
117

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

33. Share-Based Payments continued
(iii) Fair Value of Hunting PSP Awards
The fair value of awards granted under the Hunting PSP is calculated using two separate models:

(1) The fair value of awards subject to a market-related performance condition, specifically Company performance against the TSR of

a bespoke peer group, has been calculated using the Stochastic pricing model (also known as the “Monte Carlo” model).

The assumptions used in this model were as follows:

Date of grant/valuation date
Weighted average share price at grant
Exercise price
Expected dividend yield
Expected volatility
Risk-free rate
Expected life
Fair value

2015
28 April 2015
590.5p
nil
nil
36.5%
0.73%
3 years
300.5p

2014
1 May 2014
839.5p
nil
nil
32.3%
1.08%
3 years
463.9p

(2) The fair value of performance-based awards not subject to a market-related performance condition, specifically Company

performance against EPS and ROCE targets, and the time-based Hunting PSP awards has been calculated using the Black-
Scholes pricing model.

The assumptions used in this model were as follows:

Date of grant/valuation date
Weighted average share price at grant
Exercise price
Expected dividend yield
Expected volatility
Risk-free rate
Expected life
Fair value

2015
28 April 2015
590.5p
nil
nil
36.5%
0.73%
3 years
590.5p

2014
1 May 2014
839.5p
nil
nil
32.3%
1.08%
3 years
839.5p

The methods to calculate the assumptions for both models are:

• The expected volatility was calculated using historic weekly volatility, equal in length to the remaining portion of the performance

period at the date of grant.

• The expected life of the award has been calculated commensurate with the vesting period. The risk-free rate is based on the UK

gilt rate commensurate with the vesting period prevailing at the date of grant.

• Participants are entitled to a dividend equivalent over the number of shares that make up their award. It is accumulated over
the vesting period and released subject to the achievement of the performance conditions. This is factored into the fair value
calculation and as a result the dividend yield assumption is set to zero.

• The initial accounting charge of the performance-based Hunting PSP awards granted under the Hunting PSP incorporates an
estimate of the number of shares that are expected to lapse for those participants who cease employment during the vesting
period. The estimate of the expected forfeiture rate is 2.5% per annum. The subsequent accounting charge for 2015 includes an
adjustment to the initial accounting charge to allow for actual lapses rather than estimated lapses.

The amount recognised in the income statement attributable to the performance-based Hunting PSP awards is a credit of $0.2m
(2014 – $1.4m charge) and the charge to the income statement in respect of time-based Hunting PSP awards is $4.3m (2014 –
$2.0m). These are recognised in operating expenses.

34. Operating Leases
(a) The Group as Lessee
Operating lease payments from continuing operations mainly represent rentals payable by the Group for properties:

Operating lease payments in the income statement:
Lease and rental payments

Property
$m

2015

Others
$m

13.1

1.1

Total
$m

14.2

Property
$m

2014

Others
$m

Total
$m

13.7

2.5

16.2

The Group has provisions of $7.7m (2014 – $13.4m) for onerous contracts in respect of some leasehold properties, some of which are
not used for Group trading purposes and are either vacant or sub-let to third parties (note 23).

Hunting PLC
2015 Annual Report and Accounts
118

34. Operating Leases continued
Total future aggregate minimum lease payments under non-cancellable operating leases expiring:

Within one year
Between two and five years
After five years
Total lease payments

Property
$m
14.6
38.1
37.8
90.5

2015

Others
$m
0.5
0.8
–
1.3

Total
$m
15.1
38.9
37.8
91.8

Property
$m
13.1
32.6
27.2
72.9

2014

Others
$m
0.8
1.1
–
1.9

Total
$m
13.9
33.7
27.2
74.8

(b) The Group as Lessor
Property rental earned during the year was $0.7m (2014 – $1.2m). A number of the Group’s leasehold properties are sub-let under
existing lease agreements.

Total future minimum sublease income receivable under non-cancellable operating leases expiring:

Within one year
Between two and five years
After five years
Total lease income receivable

2015
Property
$m
0.7
2.8
1.3
4.8

2014
Property
$m
0.6
2.8
2.1
5.5

35. Related-Party Transactions
The following related-party transactions took place between wholly owned subsidiaries of the Group and associates during the year:

Transactions:
Sales of goods and services
Purchase of goods and services
Royalties receivable
Dividends received from associates
Movement on loans to and from associates:
Loans to associates
Loans to associates repaid
Year end balances:
Receivables from associates
Payables from associates

2015
$m

–
(0.1)
0.3
0.1

(0.2)
–

0.4
(0.1)

2014
$m

0.1
(0.1)
0.2
4.5

–
0.6

0.1
(0.1)

The outstanding balances at the year end are unsecured and have no fixed date for repayment. No expense has been recognised in
the year for bad or doubtful debts in respect of amounts owed by associates.

All ownership interests in associates are in the equity shares of those companies. The ownership interests in subsidiaries and
associates are set out in note C17 to the Company financial statements.

The key management of the Company comprises the executive and non-executive Directors only. The details of the Directors’
compensation are disclosed in note 9. The Directors of the Company had no material transactions other than as a result of their
service agreements.

Hunting PLC
2015 Annual Report and Accounts
119

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

36. Business Disposals
On 31 March 2015, the Group sold E.A. Gibson Shipbrokers Limited and its subsidiaries (together referred to as “Gibson
Shipbrokers”) to an employee-owned trust. The selling price was $3.7m, with $3.0m deferred in the form of an interest-bearing loan
note and the remainder paid in cash. A curtailment gain on the Group’s pension obligations of $5.5m was also recognised upon
the sale.

Details of the net assets disposed and consideration are set out below:

Property, plant and equipment
Goodwill
Investments
Deferred tax assets
Trade and other receivables
Cash and cash equivalents*
Trade and other payables
Current tax liabilities
Net assets disposed
Gain on curtailment of pension obligations
Release of foreign exchange adjustments
Gain on disposal (note 12)
Consideration

The consideration comprised the following:
Net cash proceeds
Deferred consideration

$m
0.5
1.8
0.7
0.1
10.4
3.9
(13.2)
(0.5)
3.7
(5.5)
0.6
4.9
3.7

0.7
3.0
3.7

* Cash and cash equivalents of $3.8m were classified as held for sale at 31 December 2014.

As part of the consideration, the Group subscribed to a loan note, which is carried as a receivable at amortised cost. The note is
repayable by 31 March 2019 and is unsecured.

37. Principal Accounting Policies
The Group’s principal accounting policies are described below:

(a) Consolidation
• The Group accounts include the results of the Company and its subsidiaries, together with its share of associates.
• Subsidiaries are consolidated from the date on which control is transferred to the Group and are de-consolidated from the date

control ceases.

• The Group uses the acquisition method of accounting for business combinations. Consequently, the consideration is determined
as the fair value of the net assets transferred to the vendor and includes an estimate of any contingent consideration. The net
assets acquired are also measured at their respective fair values for initial recognition purposes on the acquisition date.

• Acquisition-related costs are expensed to the income statement as incurred.

(b) Discontinued Operations
• A discontinued operation is a component of the Group that has either been disposed of or that is classified as held for sale, which
represents a separate major line of business or geographical area of operations and is part of a single coordinated plan to dispose
of a separate major line of business or geographical area of operations.

• The results of discontinued operations are presented separately in the income statement and are shown net of tax.
• The assets and liabilities of discontinued operations, that have not been disposed of prior to the balance sheet date, are presented

separately in the balance sheet as assets and liabilities classified as held for sale.

(c) Revenue
• Revenue is measured as the fair value of the consideration received or receivable for the provision of goods, services and rental
supplies in the ordinary course of business, taking into account trade discounts and volume rebates, and is stated net of sales
taxes.

• Revenue from the sale of goods is recognised when the significant risks and rewards of ownership have been transferred to the
customer, which is normally on delivery of the products. Products include manufactured goods and OCTG supplies, including
tubulars acquired by Hunting as plain-end pipe on which lathing work has been applied and which is resold as threaded pipe.

• Revenue from the sale of services is recognised when the services are rendered. The Group’s service activities principally

comprise lathing work to apply a thread on to customer-owned plain-end pipe.

• Revenue from the rental of plant and equipment is recognised as the income is earned.

Hunting PLC
2015 Annual Report and Accounts
120

37. Principal Accounting Policies continued
(d) Amortisation and Exceptional Items
Exceptional items are items of income or expense which the Directors believe should be separately disclosed by virtue of their
significant size or nature to enable a better understanding of the Group’s financial performance. The Group discloses such items in
the “middle column” of the income statement. In applying this policy, the following items have been treated as exceptional:

• Impairment charges of goodwill, other intangible assets and of property, plant and equipment have been recognised to reflect the

protracted decline in the oil and gas sector, a prolonged period of customer de-stocking and increased competition.

• Impairments of property, plant and equipment specifically held by the Exploration and Production division. As the valuations are
subject to the frequent changes in long-term oil and gas prices, such impairments can lead to volatility in the income statement
that is unrelated to the underlying performance of the business.

• Dry hole costs in respect of unsuccessful exploration for commercially viable oil and gas reserves.
• Costs of restructuring the Group’s operations, including the cost of redundancies, in response to the decline in the oil and gas

sector.

• Foreign exchange losses relating to cumulative exchange differences previously recognised in the currency translation reserve
which have been transferred to the income statement in relation to central non-operating companies which have entered into
voluntary liquidation.

• The release of excess property provisions no longer required following the termination of a lease agreement.
• The tax effect of any transaction considered to be exceptional is also treated as exceptional.

Amortisation expenses for acquired intangible assets are also shown in the “middle column” due to the significance of these amounts
and to clearly identify the effect on profits, which will arise as current balances become fully written-off, or as new acquisitions give
rise to new expenses.

(e) Interest
• Interest income and expense is recognised in the income statement using the effective interest method.

(f) Foreign Currencies
(i) Individual Subsidiaries’ and Associates’ Accounts
• The financial statements for each of the Group’s subsidiaries and associates are prepared using their functional currency.
• The functional currency is the currency of the primary economic environment in which the entity operates.
• Transactions denoted in currencies other than the functional currency are translated into the functional currency at the exchange

rate ruling at the date of the transaction.

• Monetary assets and liabilities, except borrowings designated as a hedging instrument in a net investment hedge, denoted in non-
functional currencies are retranslated at the exchange rate ruling at the balance sheet date and exchange differences are taken to
the income statement.

• Borrowings designated as a hedging instrument in a net investment hedge are retranslated at the exchange rate ruling at the

balance sheet date and exchange differences are taken direct to equity.

(ii) Group Consolidated Accounts
• The presentation currency of the Group is US dollars.
• The net assets of non-US dollar denominated subsidiaries and associates are translated into US dollars at the exchange rates

ruling at the balance sheet date.

• The income statements of subsidiaries and associates are translated into US dollars at the average rates of exchange for the year.
• Exchange differences are recognised directly in equity in the currency translation reserve (“CTR”), together with exchange

differences arising on foreign currency loans used to finance foreign currency net investments.

• Upon adoption of IFRS on 1 January 2004, accumulated exchange differences arising on consolidation prior to 31 December

2003 were reset to zero and the CTR recommenced under IFRS on 1 January 2004.

• The balance on the CTR represents the exchange differences arising on the retranslation of non-US dollar amounts into US dollars

since 1 January 2004.

• On the disposal of a business, the cumulative exchange differences previously recognised in the CTR relating to that business are

transferred to the income statement as part of the gain or loss on disposal.

(g) Taxation
• The taxation recognised in the income statement comprises current tax and deferred tax arising on the current year’s result before

tax and adjustments to tax arising on prior years’ results.

• Current tax is the expected tax payable or receivable arising in the current year on the current year’s result before tax, using tax
rates enacted or substantively enacted at the balance sheet date, plus adjustments to tax in respect of prior years’ results.
• Deferred tax is the tax that is expected to arise when the assets and liabilities recognised in the associated balance sheet are

realised, using tax rates enacted or substantively enacted at the balance sheet date that are expected to apply when the asset is
realised or the liability is settled.

• Full provision is made for deferred taxation, using the liability method, on all taxable temporary differences. Deferred tax assets and

liabilities are recognised separately on the balance sheet and are reported as non-current assets and liabilities.

• Deferred tax assets are recognised only to the extent that they are expected to be recoverable. Deferred taxation on unremitted

overseas earnings is provided for to the extent a tax charge is foreseeable.

• When items of income and expense are recognised in other comprehensive income, the current and deferred tax relating to those

items is also recognised in other comprehensive income.

• Tax arising on the discharge of share options and awards is recognised directly in equity.

Hunting PLC
2015 Annual Report and Accounts
121

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
C ONTIN UED

37. Principal Accounting Policies continued
(h) Segmental Reporting
• Financial information on operating segments that corresponds with information regularly reviewed by the Chief Operating Decision

Maker is disclosed in the accounts.

• Operating segments are components of the Group that are engaged in providing related products.
• Geographical information is based on the location of where the sale originated and where the non-current assets are located.

(i) Property, Plant and Equipment
(i) General
• Property, plant and equipment is stated at cost less accumulated depreciation and any impairment in value. Cost includes

expenditure that is directly attributable to the acquisition and installation of the asset.

• Land, pre-production oil and gas exploration costs and assets under construction are not depreciated.
• With the exception of drilling tools, which are depreciated using the units of production method, and oil and gas exploration and

production equipment (see (i)(ii) below), assets are depreciated using the straight-line method at the following rates:

Freehold buildings
Leasehold buildings
Plant, machinery and motor vehicles

– 2% to 10%
– life of lease
– 6% to 331/3%

• The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at the end of each reporting period.

(ii) Exploration Expenditure
• Oil and gas exploration and appraisal costs are initially capitalised pending determination of the existence of commercial reserves

and are included in the asset category oil and gas exploration and development.

• Upon determination that commercially viable quantities of hydrocarbons are not found, the costs are charged immediately to the

income statement.

• Depreciation of oil and gas expenditure commences when production commences. The costs are depreciated using the unit of

production method.

(j) Goodwill
• Goodwill arises when the fair value of the consideration paid for a business exceeds the fair value of the Group’s share of the net

assets acquired.

• Goodwill is recognised as an asset and is carried at cost less accumulated impairment losses.
• Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to the cash-generating
units or groups of cash-generating units that are expected to benefit from the business combination in which the goodwill arose.

• On the disposal of a business, goodwill relating to that business that remains on the balance sheet at the date of disposal is

included in the determination of the profit or loss on disposal.

(k) Other Intangible Assets
• Other intangible assets are stated at cost less accumulated amortisation and impairment losses where applicable.
• These assets have a finite life and are amortised in accordance with the pattern of expected future economic benefits, or when this

cannot be reliably estimated, by using the straight-line method.

• Intangible assets are amortised over the following periods:

Customer relationships
Patents
Unpatented technology
Trademarks and domain names

– eight to ten years
– eight to ten years
– eight to ten years
– one to five years

(l) Impairments
• The Group performs goodwill impairment reviews at least annually.
• The Group also assesses at least annually whether there have been any events or changes in circumstances that indicate that
property, plant and equipment and intangible assets other than goodwill may be impaired. An impairment review is carried out
whenever the assessment indicates that the carrying amount may not be fully recoverable.

• For the purposes of impairment testing, assets are grouped at the lowest levels for which there are separately identifiable cash flows.
• Where impairment exists, the asset is written down to the higher of (a) its fair value minus costs to sell; and (b) its value in use.

Impairments are recognised immediately in the income statement.

• An impairment to goodwill is never reversed. When applicable, an impairment of any other asset is reversed, but only to the extent
that the consequent carrying value does not exceed what would have been the carrying value had the impairment not originally
been made.

(m) Inventories
• Inventories are stated at the lower of cost and net realisable value.
• Cost is determined using the first-in-first-out method and net realisable value is the estimated selling price less costs of disposal in

the ordinary course of business. The cost of inventories includes direct costs plus production overheads.

Hunting PLC
2015 Annual Report and Accounts
122

37. Principal Accounting Policies continued
(n) Cash and Cash Equivalents
• Cash and cash equivalents comprise cash at bank and in hand and short-term deposits with a maturity of less than three months

from the date of deposit that are readily convertible to a known amount of cash.

• For cash flow statement purposes, cash and cash equivalents include bank overdrafts and short-term deposits with a maturity

of less than three months from the date of deposit. In the balance sheet, bank overdrafts are shown within borrowings in current
liabilities.

(o) Loans and Receivables
• Loans and receivables are initially recognised at fair value at the trade date which is normally the consideration paid plus

transaction costs.

• Loans and receivables are carried at amortised cost using the effective interest method. If collection is expected in one year or less

they are classified as current assets, otherwise they are presented as non-current assets.

• The Group assesses at each balance sheet date whether a loan or receivable is impaired and, if necessary, the carrying amount is

reduced to the appropriate value. The loss is recognised immediately in the income statement.

• Loans and receivables cease to be recognised when the right to receive cash flows has expired or the Group has transferred

substantially all the risks and rewards of ownership.

(p) Financial Liabilities
• Financial liabilities are initially recognised at fair value at the trade date which is normally the consideration received less, in the
case of financial liabilities that are not measured at fair value through profit or loss, transaction costs. The Group subsequently
remeasures all of its non-derivative financial liabilities, including trade payables, at amortised cost.

• Payables are classified as current liabilities if payment is due within one year, otherwise they are presented as non-current liabilities.

(q) Provisions
• Provisions are liabilities for which the amount or timing of future expenditure is uncertain.
• Provisions are recognised when the Group has a present obligation as a result of a past event and it is probable that an outflow of

resources will be required to settle the obligation.

• Whenever the time value of money is material, provisions are discounted to their present value.

(r) Post-Employment Benefits
(i) Defined Contribution Retirement Schemes
• Payments to defined contribution retirement schemes are charged to the income statement when they fall due.

(ii) Defined Benefit Retirement Schemes
• Payments to defined benefit retirement schemes are recognised as increments to the assets of the schemes.
• The amount charged to the income statement with respect to these schemes, within profit from operations, is the increase in

the retirement benefit obligation resulting from the additional service provided by the participating employees during the current
year, which for the funded scheme is measured using the Projected Unit method and for the unfunded scheme is equal to the
contributions paid.

• Net interest arising on the net assets of the schemes is also recognised in the income statement within net finance costs.
• Curtailment gains and losses are recognised fully and immediately in the income statement.
• Remeasurement gains and losses are recognised fully and immediately in the statement of comprehensive income.
• The assets of the funded scheme, which are invested in insurance policies, have been valued using the same methodology and

assumptions used to calculate the defined benefit obligation so that, where the assets match the liabilities, the value of the assets
is equal to the value of the corresponding obligation.

(s) Share-Based Payments
• Between 2004 and 2013, the Group issued three-year performance LTIP awards that were share-based payments, as they could
be settled in either cash or equity, to certain employees as consideration for services received from the employees. The LTIP
consequently expired in 2015. A liability is recognised equal to the current fair value of the services received, determined at each
balance sheet date. The fair value of the liability is remeasured at each subsequent reporting date and at the date of settlement,
with any changes in fair value recognised in the income statement.

• The Group also issues equity-settled, share-based payments (Hunting PSP awards) to certain employees as consideration for
services received from the employees. The fair value of the employees’ services is recognised as an expense in the income
statement on a straight-line basis over the vesting period based on the Group’s estimate of awards that will ultimately vest.
The obligation to settle these awards is recognised within other components of equity.

(t) Share Capital
• The Company’s share capital comprises a single class of Ordinary shares, which are classified as equity.
• Incremental costs directly attributable to the issue of new shares are charged to equity as a deduction from the proceeds, net

of tax.

(u) Dividends
• Dividends to the Group’s shareholders are recognised as liabilities in the Group’s financial statements in the period in which the

dividends are approved by shareholders. Interim dividends are recognised when paid. All dividends are dealt with in the statement
of changes in equity.

Hunting PLC
2015 Annual Report and Accounts
123

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

COMPANY
BAL ANCE SHEE T
AT 3 1 DEC EM BER 2015

ASSETS
Non-current assets
Investments in subsidiaries
Other receivables

Current assets
Other receivables
Current tax asset
Cash and cash equivalents

LIABILITIES
Current liabilities
Other payables
Borrowings
Provisions

Net current (liabilities) assets

Non-current liabilities
Deferred tax liabilities
Provisions

Net assets

Equity attributable to owners of the parent
Share capital
Share premium
Other components of equity
Retained earnings
Total equity

Notes

2015
$m

2014
$m

C4
C5

C11
C11
C12
C13

436.8
171.3
608.1

0.3
–
0.1
0.4

3.3
15.1
0.3
18.7
(18.3)

–
0.4
0.4
589.4

61.7
153.0
(4.6)
379.3
589.4

6.6
2.2
16.0
24.8

1.3
6.5
0.3
8.1
16.7

0.2
0.5
0.7
624.1

61.6
151.9
(4.1)
414.7
624.1

The notes on pages 127 to 132 are an integral part of these consolidated financial statements. The financial statements on pages 124
to 126 were approved by the Board of Directors on 3 March 2016 and were signed on its behalf by:

D E N N I S P R O C T O R
D I R E C TO R

P E T E R R O S E
D I R E C TO R

Registered number: 974568

Hunting PLC
2015 Annual Report and Accounts
124

COMPANY STATEMENT
OF CHANGES IN EQUIT Y

At 1 January

Loss for the year
Total comprehensive expense

Dividends
Shares issued
– share option schemes and awards
Treasury shares
– purchase of Treasury shares
Share options and awards
– value of employee services
– discharge
Total transactions with owners

At 31 December

At 1 January

Profit for the year
Other comprehensive expense
Total comprehensive (expense) income

Dividends
Shares issued
– share option schemes and awards
Treasury shares
– purchase of Treasury shares
Share options
– value of employee services
– discharge
Total transactions with owners

Notes

C14

C12

Notes

C14

C12

Year ended 31 December 2015

Share
capital
$m
61.6

Share
premium
$m
151.9

Other
components
of equity
$m
(4.1)

–
–

–

0.1

–

–
–
0.1

–
–

–

1.1

–

–
–
1.1

–
–

–

6.2
(6.7)
(0.5)

Retained
earnings
$m
414.7

(0.7)
(0.7)

Total
$m
624.1

(0.7)
(0.7)

(39.8)

–

(1.4)

–
6.5
(34.7)

1.2

(1.4)

6.2
(0.2)
(34.0)

61.7

153.0

(4.6)

379.3

589.4

Year ended 31 December 2014

Share
capital
$m
61.3

Share
premium
$m
150.6

Other
components
of equity
$m
(6.5)

–
–
–

–

0.3

–

–
–
0.3

–
–
–

–

1.3

–

–
–
1.3

Retained
earnings
$m
259.1

195.9
–
195.9

Total
$m
464.5

195.9
(0.2)
195.7

(44.1)

–

(7.5)

–
11.3
(40.3)

1.6

(7.5)

7.2
6.7
(36.1)

414.7

624.1

–
(0.2)
(0.2)

–

7.2
(4.6)
2.6

(4.1)

At 31 December

61.6

151.9

Hunting PLC
2015 Annual Report and Accounts
125

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONCOMPANY STATEMENT
OF C A SH FLOWS
FOR THE YEAR EN DE D 31 DE C E MB E R 2 015

Operating activities
(Loss) profit from operations
Gain on disposal of subsidiaries
Decrease in receivables
Increase (decrease) in payables
(Decrease) increase in provisions
Other non-cash flow items
Taxation received
Net cash inflow from operating activities
Investing activities
Interest received
Dividends received from subsidiaries
Net proceeds from disposal of subsidiaries
Net cash inflow from investing activities
Financing activities
Interest and bank fees paid
Equity dividends paid
Share capital issued
Purchase of Treasury shares
Loan issued
Loan issued repaid
Repayment of borrowings
Net cash outflow from financing activities

Net cash outflow in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effect of foreign exchange rates
Cash and cash equivalents at the end of the year

Cash and cash equivalents at the end of the year comprise:
Cash at bank and in hand
Bank overdrafts included in borrowings

Notes

C14

2015
$m

(3.0)
–
6.3
1.9
(0.1)
6.1
1.7
12.9

2.8
–
–
2.8

(0.3)
(39.8)
1.2
(1.4)
–
–
–
(40.3)

(24.6)
9.5
0.1
(15.0)

0.1
(15.1)
(15.0)

2014
$m

50.1
(36.3)
21.2
(11.6)
0.3
7.5
0.9
32.1

1.9
144.6
103.1
249.6

(2.9)
(44.1)
1.6
(7.5)
(171.2)
15.5
(92.2)
(300.8)

(19.1)
28.1
0.5
9.5

16.0
(6.5)
9.5

Hunting PLC
2015 Annual Report and Accounts
126

NOTES TO THE COMPANY
FINANCIAL STATEMENTS
C ONTIN UED

C1. Basis of Preparation
The financial statements have been prepared in accordance with the Companies Act 2006 and those International Financial
Reporting Standards (“IFRS”) and IFRS Interpretations Committee (“IFRS IC”) 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 those financial assets and financial liabilities held at fair value through profit or loss. The Board’s consideration of going concern is
detailed further in the Strategic Report on page 30.

The Company’s principal accounting policies applied in the preparation of these financial statements are the same as those set out in
note 37 of the Group’s financial statements, except as noted below. These policies have been consistently applied to all the
years presented.

Investments in subsidiaries are stated at cost, which is the fair value of the consideration paid, less provision for impairment.

From the perspective of the Company, the principal risks and uncertainties are integrated with the principal risks of the Hunting PLC
Group and are not managed separately. The principal risks and uncertainties of the Hunting PLC Group, which include those of the
Company, are discussed on pages 26 to 29 and further detail on financial risks is provided within note C7.

In accordance with the exemption allowed by Section 408 of the Companies Act 2006, the Company has not presented its own
income statement and statement of comprehensive income. A loss of $0.7m (2014 – $195.9m profit) has been accounted for in the
financial statements of the Company.

C2. Employees
The Company had no employees during the current or prior year.

C3. Auditor’s Remuneration
Services provided by the Company’s auditor, PricewaterhouseCoopers LLP, and its associates comprised:

Fees payable to the Company’s auditors and its associates for:

The audit of these accounts

Taxation compliance services
Taxation advisory services
Total services relating to taxation

Total fees

C4. Investments in Subsidiaries

Cost:
At 1 January
Disposals
At 31 December

Impairment:
At 1 January
Disposals
At 31 December

Net book amount

2015
$m

2014
$m

0.5

0.1
–
0.1

0.6

2015
$m

436.8
–
436.8

–
–
–

0.5

0.1
0.1
0.2

0.7

2014
$m

509.9
(73.1)
436.8

9.3
(9.3)
–

436.8

The Company’s subsidiaries are detailed in note C17. Investments in subsidiaries are recorded at cost, which is the fair value of the
consideration paid, less impairment. The Directors believe that the carrying value of the investments is supported by their underlying
net assets.

Hunting PLC
2015 Annual Report and Accounts
127

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONNOTES TO THE COMPANY
FINANCIAL STATEMENTS
C ONTIN UED

C5. Other Receivables

Non-current:
Receivables from subsidiaries
Prepayments

Current:
Receivables from subsidiaries
Prepayments
Other receivables

2015
$m

171.2
0.1
171.3

0.1
0.1
0.1
0.3

2014
$m

171.2
0.1
171.3

6.3
0.2
0.1
6.6

None of the Company’s other receivables (2014 – none) were past due at the year end and the Company does not consider it
necessary to provide for any impairments. The Company’s maximum exposure to credit risk is the fair value of each class of
receivable. The carrying value of receivables approximates their fair value.

The Company does not hold any collateral as security and no assets have been acquired through the exercise of any collateral
previously held. Non-current receivables due from subsidiaries are unsecured and interest is charged based on a margin over bank
lending rates. Current receivables due from subsidiaries are unsecured, interest free and repayable on demand.

C6. Other Payables

Current:
Payables to subsidiaries
Accruals
Other payables

2015
$m

2.2
0.8
0.3
3.3

2014
$m

0.3
0.8
0.2
1.3

C7. Financial Instruments: Fair Values
The carrying value of receivables, cash and cash equivalents, accruals, other payables, provisions, borrowings and bank overdrafts
approximates their fair value.

C8. Financial Risk Management
The Company’s activities expose it to certain financial risks, namely market risk (including currency risk, cash flow interest risk and fair
value interest risk), credit risk and liquidity risk. From the perspective of the Company, these financial risks are integrated with the
financial risks of the Hunting PLC Group and are not managed separately.

(a) Foreign Exchange Risk
The Company is mainly exposed to foreign exchange risk from its financing and operating activities in respect of Sterling. Foreign
exchange risks arise from future transactions and cash flows and from recognised monetary assets and liabilities that are not
denominated in US dollars. The Company has Sterling denominated financial assets and financial liabilities.

The carrying amount of the Company’s financial assets included in receivables from subsidiaries at 31 December, on which exchange
differences would be recognised in the income statement in the following year, is $nil (2014 – $0.9m) for Sterling, $nil (2014 – $0.1m)
for Euro and $nil (2014 – $0.4m) for Canadian dollar denominated financial assets. The Company’s cash and cash equivalents of $nil
(2014 – $13.8m) are denominated in US dollars and $0.1m (2014 – $2.2m) are denominated in Sterling.

The carrying amount of the Company’s financial liabilities included in payables to subsidiaries, other payables and provisions at
31 December, on which exchange differences would be recognised in the income statement in the following year, is $2.1m (2014 –
$1.9m) for Sterling denominated financial liabilities and $0.1m (2014 – $nil) for Canadian dollar denominated financial liabilities.

The Company’s borrowings comprise $15.1m (2014 – $6.5m) of bank overdrafts at the year end, of which $14.8m (2014 – $nil) are
denominated in US dollars and $0.3m (2014 – $6.5m) are denominated in Sterling.

(b) Interest Rate Risk
The Company is exposed to cash flow interest rate risk from its cash and cash equivalents, bank overdrafts and from amounts owed
by and to subsidiaries, which are at variable interest rates.

(c) Credit Risk
The Company’s credit risk arises from its outstanding receivables and cash and cash equivalents. The Company is exposed to credit
risk to the extent of non-receipt of its financial assets; however, it has no significant concentrations of credit risk other than from
related parties. Credit risk is continually monitored and no individual exposure is considered to be significant in the ordinary course
of the Company’s activities.

Hunting PLC
2015 Annual Report and Accounts
128

C8. Financial Risk Management continued
The Company’s outstanding receivables are due from subsidiaries, and no losses are expected from non-performance of these
counterparties. Funds are only invested with approved financial institutions and no losses are expected from non-performance of
the counterparty.

(d) Liquidity Risk
The Company has sufficient facilities available to satisfy its requirements.

The table below analyses the Company’s non-derivative financial liabilities into relevant maturity groupings based on the remaining
period at the balance sheet date to the contractual maturity date of the financial liabilities. The amounts presented in the table are the
contractual undiscounted cash flows, whereas the carrying amounts in the balance sheet are the discounted amounts.

Non-derivative financial liabilities:
Payables to subsidiaries
Accruals
Other payables
Bank overdrafts

2015
On demand
or within
one year
$m

2014

On demand
or within
one year
$m

2.2
0.8
0.3
15.1
18.4

0.3
0.8
0.2
6.5
7.8

The Company did not have any derivative financial liabilities.

(e) Capital Risk Management
The Company’s capital consists of equity and net cash. Net cash comprises cash and cash equivalents and borrowings.

It is managed with the aim of maintaining an appropriate level of financing available for the Company’s activities, having due regard to
interest rate risks and the availability of borrowing facilities.

Changes in equity arise from the retention of earnings and from issues of share capital. Net cash is monitored on a periodic basis.
At the year end, capital comprised:

Total equity
Net debt (cash)
Capital employed

2015
$m
589.4
15.0
604.4

2014
$m
624.1

(9.5)
614.6

The decrease in total equity during the year is mainly attributable to the retained loss for the year of $0.7m, together with dividend
payments of $39.8m. The increase in net debt during the year is mainly due to a reduction in dividends received from subsidiaries.
There have been no significant changes in the Company’s funding policy during the year.

C9. Financial Instruments: Sensitivity Analysis
The following sensitivity analysis is intended to illustrate the sensitivity to changes in market variables on the Company’s financial
instruments and show the impact on profit or loss and shareholders’ equity. Financial instruments affected by market risk include
non-current receivables from subsidiaries, cash and cash equivalents and borrowings. The sensitivity analysis relates to the position
as at 31 December 2015.

The analysis excludes the impact of movements in market variables on the carrying value of provisions and on non-financial assets
and liabilities.

The following assumptions have been made in calculating the sensitivity analysis:

• Foreign exchange rate and interest rate sensitivities have an asymmetric impact on the Company’s results, that is, an increase in

rates does not result in the same amount of movement as a decrease in rates.

• For floating rate assets and liabilities, the amount of asset or liability outstanding at the balance sheet date is assumed to be

outstanding for the whole year.

• The carrying values of financial assets and liabilities carried at amortised cost do not change as interest rates change.

Positive figures represent an increase in profit or equity.

(a) Interest Rate Sensitivity
The post-tax impact on the income statement, with all other variables held constant, at 31 December, for an increase of 0.5% (2014
– 0.25%) in US interest rates, is to increase profits by $0.6m (2014– $0.4m). If the US interest rates were to decrease by 0.5% (2014
– 0.25%), then the post-tax impact would be to reduce profits by $0.6m (2014 – $0.4m). The movements arise on US dollar
denominated intra-group loans.

There is no impact on OCI for a change in interest rates.

Hunting PLC
2015 Annual Report and Accounts
129

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE COMPANY
FINANCIAL STATEMENTS
C ONTIN UED

C9. Financial Instruments: Sensitivity Analysis continued
(b) Foreign Exchange Rate Sensitivity
The post-tax impact on the income statement, with all other variables held constant, at 31 December, for an increase of 10% (2014 –
10%) in the Sterling foreign exchange rate, is to increase profits by $0.2m (2014 – $0.4m). If the Sterling foreign exchange rate was to
decrease by 10% (2014 – 10%), then the post-tax impact would be to reduce profits by $0.2m (2014 – $0.5m).

The movement in the income statement arises from Sterling denominated accrued expenses, intra-group balances and borrowings.

There is no impact on OCI for a change in foreign exchange rates.

C10. Post-Employment Benefits
The Company has no employees and therefore does not participate in any of the post-employment benefit schemes shown in note 28
of the Group’s financial statements, although it does guarantee the contributions due by the participating employers.

C11. Share Capital and Share Premium
Please see note 29 of the Group’s financial statements.

C12. Other Components of Equity

Year ended 31 December 2015
At 1 January
Share options and awards
– value of employee services
– discharge
At 31 December

Year ended 31 December 2014
At 1 January
Fair value gains and losses:
– gain on available for sale financial investment arising during the year
Share options and awards
– value of employee services
– discharge
At 31 December

Capital
Redemption
$m
0.2

Share
option
reserve
$m
14.9

Currency
translation
reserve
$m
(19.2)

Other
reserves
$m
–

–
–
0.2

Capital
Redemption
$m
0.2

–

–
–
0.2

6.2
(6.7)
14.4

Share
option
reserve
$m
12.3

–

7.2
(4.6)
14.9

–
–
(19.2)

Currency
translation
reserve
$m
(19.2)

–
–
–

Other
reserves
$m
0.2

–

(0.2)

–
–
(19.2)

–
–
–

Total
$m
(4.1)

6.2
(6.7)
(4.6)

Total
$m
(6.5)

(0.2)

7.2
(4.6)
(4.1)

C13. Retained Earnings

At 1 January
(Loss) profit for the year
Dividends paid
Treasury shares
– purchase of Treasury shares
Share options and awards
– discharge
At 31 December

2015
$m
414.7
(0.7)
(39.8)

2014
$m
259.1
195.9
(44.1)

(1.4)

(7.5)

6.5
379.3

11.3
414.7

Hunting PLC
2015 Annual Report and Accounts
130

C13. Retained Earnings continued
Retained earnings include the following amounts in respect of the carrying amount of Treasury shares:

Cost:
At 1 January
Purchase of Treasury shares
Disposal of Treasury shares
At 31 December

2015
$m

(14.8)
(1.4)
4.4
(11.8)

2014
$m

(13.8)
(7.5)
6.5
(14.8)

The loss on disposal of Treasury shares during the year, which is recognised in retained earnings, was $4.4m (2014 – $6.5m).

C14. Dividends Paid
Please see note 32 of the Group’s financial statements.

C15. Share-Based Payments
Please see note 33 of the Group’s financial statements.

C16. Related Party Transactions
The following related party transactions took place between the Company and wholly owned subsidiaries of the Group during the year:

Transactions:
Royalties receivable
Management fees payable
Recharges of share options and awards and administrative expenses
Loans from subsidiaries repaid
Loan to subsidiary
Loans to subsidiary repaid

Interest payable on inter-company loans
Interest receivable on inter-company loans

Dividends received from subsidiaries
Year end balances:
Payables to subsidiaries
Receivables from subsidiaries
Loans owed by subsidiaries

All balances between the Company and its subsidiaries are unsecured.

2015
$m

11.5
(11.2)
9.8
–
–
–
–
2.6
–

(2.2)
0.1
171.2

2014
$m

19.4
(8.0)
9.6
(92.2)
(171.2)
15.5
(0.7)
0.2
144.6

(0.3)
6.3
171.2

The Company also serves as the Group’s intermediary for the provision of UK group tax relief, VAT and certain group insurances.
At the year end, the outstanding payable for group tax was $0.1m (2014 – $2.5m receivable).

The key management of the Company comprises the executive and non-executive Directors only. The details of the Directors’
compensation are disclosed in note 9 of the Group’s financial statements. The Directors of the Company had no material transactions
other than as a result of their service agreements.

Hunting PLC
2015 Annual Report and Accounts
131

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NOTES TO THE COMPANY
FINANCIAL STATEMENTS
C ONTIN UED

C17. Subsidiaries
All Companies listed below are wholly owned by the Group, except where otherwise indicated.

Country of incorporation
and/or operations

Subsidiaries
Oil and Gas activities
Australia
Hunting Energy Services (Australia) Pty Ltd
Australia
Hunting Titan (Australia) Pty Ltd
Canada
Hunting Energy Services (Canada) Ltd
Canada
Hunting Energy Services (Drilling Tools) Ltd
Canada
Hunting Titan ULC
Canada
Hunting Energy Services (Canada) Holdings Ltd
Hunting Energy Services (Wuxi) Co. Ltd (70%)
China
Hunting Energy Completion Equipment (Wuxi) Co., Ltd China
Hunting Energy Services (International) Limited
Hunting Energy Services Overseas Holdings Limited
PT Hunting Energy Asia
Hunting Energy Services Italy S.r.l.
Hunting Energy de Mexico
Hunting Energy Services BV (60%)
Hunting Energy Services (Norway) AS
Hunting Energy Services Limited
Hunting Energy Services (UK) Limited (60%)
Hunting Energy Services (Well Intervention) Limited
Hunting Welltonic Limited
Hunting Energy Services (International) Pte. Ltd.
Hunting Energy Saudi Arabia LLC (60%)
Hunting Energy Services Pte. Ltd.
Hunting Energy Services (China) Pte. Ltd. (70%)
Hunting Welltonic Asia Pte. Ltd
Hunting Energy Services (Well Intervention) Pte. Ltd
Hunting Energy Services (South Africa) Pty Ltd
Hunting Energy Services (Thailand) Limited (49%)
Hunting Energy Services (Uganda) Ltd
National Coupling Company, Inc.
Hunting Energy Services, Inc.
Premium Finishes, Inc.
Hunting Dearborn, Inc.
Hunting Energy Services (Drilling Tools), Inc.
Hunting Innova, Inc.
Hunting Specialty Supply, Inc.
Hunting Titan, Inc.

England and Scotland
England
Indonesia
Italy
Mexico
Netherlands
Norway
Scotland
Scotland
Scotland, USA and UAE
Scotland
Singapore
Saudi Arabia
Singapore
Singapore
Singapore
Singapore
South Africa
Thailand
Uganda
USA
USA
USA
USA
USA
USA
USA
USA

Business

Holding company
Oilfield services
Oilfield services
Drilling equipment
Oilfield services
Holding company
Oilfield services
Oilfield services
Oilfield services
Holding company
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield services
Oilfield and trenchless drilling products and services
Dormant
Oilfield services – precision engineering
Drilling equipment
Oilfield services electronic component manufacturer
Oilfield services
Oilfield services – perforating systems

USA

Oil and natural gas exploration and production

Other activities
Tenkay Resources, Inc.

Corporate activities
Hunting Energy Holdings Limited*
Hunting Oil Holdings Limited*
Hunting Knightsbridge Holdings Limited
Hunting Knightsbridge (US) Finance Limited
Huntaven Properties Limited
Hunting Pension Trust Limited*
HG Management Services Ltd
Huntfield Trust Limited
Stag Line Limited
Field Insurance Limited
Hunting U.S. Holdings, Inc.
Hunting Energy Corporation

England
England
England
England
England
England
England
England
England
Guernsey
USA
USA

Associates
Tianjin Huaxin Premium Connection Pipe Co Ltd (28.5%) China
Hunting Airtrust Tubulars Pte. Ltd (50%)
Tubular Resources Pte. Ltd (30%)

Singapore
Singapore

Country of incorporation
and/or operations

Notes:
1 Except where otherwise stated companies are wholly owned, being incorporated and operating in the countries indicated.
2 Interests in companies marked * are held directly by Hunting PLC.
3 All interests in subsidiaries and associates are in the equity shares of those companies.

Hunting PLC
2015 Annual Report and Accounts
132

Holding company
Holding company
Finance
Finance
Group properties
Pension Trustee
Provision of management services
Dormant
Dormant
Captive insurance company
Holding company
Holding company

Business
Oilfield services
Oilfield services
Oilfield services

NON- GA AP ME A SURES
(UNAUDITE D)

The Directors believe it is appropriate to include in the Strategic Report and financial statements a number of non-GAAP measures
(“NGMs”) that are commonly used within the business. These measures supplement the information provided in the IFRS “reported”
financial statements and accompanying notes, providing additional insight to the users of the Annual Report.

This section provides a definition of the non-GAAP measures, the purpose for which the measure is used, and a reconciliation of the
non-GAAP measure to the reported IFRS numbers. The auditors are required under the Companies Act 2006 to consider whether
these non-GAAP measures are prepared consistently with the financial statements.

Income Statement Non-GAAP Measures
The Directors have applied the provisions of IAS 1 with regards to exceptional items and have chosen to present these, together with
amortisation of acquired intangible assets, in a separate column on the face of the income statement. All profit and loss measures
adjusted for amortisation of acquired intangible assets and exceptional items are referred to as “underlying”. This is the basis used by
the Directors in assessing performance.

A. EBITDA
Purpose: This profit measure is used as a simple proxy for pre-tax cash flows from operating activities.

Calculation Definition: Underlying earnings before share of associates’ post-tax results, interest, tax, depreciation, impairment and
amortisation for continuing operations.

Reported (loss) profit from continuing operations (consolidated income statement)
Add:
Depreciation charge for the year on property, plant and equipment (note 14)

Impairment of property, plant and equipment (note 14)
Impairment of goodwill (note 15)

Amortisation of intangible assets (note 16)
Impairment of intangible assets (note 16)

Reported EBITDA
Add: Exceptional items impacting EBITDA
Restructuring costs (note 7)
Release of foreign exchange on liquidation of subsidiaries (note 7)
Excess property provision release (note 7)
Underlying EBITDA

2015
$m
(282.2)

43.6
33.2
208.2
40.8
11.2
54.8

7.1
–
–
61.9

2014
$m
113.9

52.0
11.3
49.6
42.8
–
269.6

–
4.8
(4.6)
269.8

B. Effective Tax Rate
Purpose: This weighted tax rate represents the level of tax, both current and deferred, being borne by continuing operations on an
underlying basis.

Calculation Definition: Taxation on underlying profit before tax from continuing operations/profit before tax from continuing operations
expressed as a percentage.

Taxation (note 11)
Underlying profit for the year from continuing operations (consolidated income statement)

Effective tax rate

2015
$m
5.4
9.4

2014
$m
57.2
212.4

57%

27%

Hunting PLC
2015 Annual Report and Accounts
133

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION

NON- GA AP ME A SURES
(UNAUDITE D)
C ONTIN UED

Balance Sheet Non-GAAP Measures
C. Working Capital
Purpose: Working Capital is a measure of the Group’s liquidity identifying whether the Group has sufficient assets to cover liabilities
as they fall due.

Calculation Definition: Trade and other receivables, excluding receivables from associates, derivative financial assets, environmental
escrow and promissory notes, plus inventories less trade and other payables, excluding payables due to associates, derivative
financial liabilities, dividend liabilities and retirement plan obligations.

Trade and other receivables – non-current (note 18)
Trade and other receivables – current (note 18)
Inventories (note 20)
Trade and other payables – current (note 21)
Trade and other payables – non-current (note 21)
Less: non-working capital loan note (note 18)
Add: non-working capital non-current other payables (note 21)
Less: non-working capital current other receivables and other payables

2015
$m
4.0
140.2
331.2
(104.2)
(11.3)
(2.9)
9.1
(0.3)
365.8

2014
$m
3.3
285.6
381.8
(197.7)
(11.2)
–
8.9
(0.1)
470.6

D. Inventory Days
Purpose: This is a working capital efficiency ratio that measures inventory balances relative to business activity levels.

Calculation Definition: Inventory at the year end divided by underlying cost of sales per day, adjusted for the impact of acquisitions
and disposals.

Inventory (note 20)
Underlying cost of sales (consolidated income statement)

Inventory days

2015
$m
331.2
615.3

Restated
2014
$m
381.8
942.6

196 days

148 days

Management has revised the method for calculating inventory days as they believe that the new measure provides them with a more
relevant KPI. Previously inventory at the year end was divided by revenue per day.

E. Trade Receivables Days
Purpose: This is a working capital efficiency ratio that measures trade receivable balances relative to business activity levels.

Calculation Definition: Trade receivables at the year end divided by revenue per day, adjusted for the impact of acquisitions
and disposals.

Net trade receivables (note 18)
Revenue (note 4)

Trade receivable days

F. Other Net Assets

Retirement benefit asset (note 28)
Investments in associates (consolidated balance sheet)
Non-current investments (note 17)
Net assets held for sale (consolidated balance sheet)
Non-working capital loan note (NGM C)
Non-working capital non-current other payables (NGM C)
Non-working capital current other receivables and other payables (NGM C)

2015
$m
116.4
810.5

2014
$m
253.1
1,386.5

52 days

67 days

2015
$m
41.4
3.7
9.1
–
2.9
(9.1)
0.3
48.3

2014
$m
30.9
4.4
8.9
4.8
–
(8.9)
0.1
40.2

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2015 Annual Report and Accounts
134

G. Net Debt
Purpose: Hunting operates a centralised Treasury function that manages all cash and loan positions throughout the Group and
ensures funds are used efficiently through the use of interest offsetting arrangements and other such measures. As the Group
manages funding on a net debt basis, internal reporting focuses on changes in net debt and this is presented in the Strategic Report.
The net debt reconciliation provides an analysis of the movement in the year for each component of net debt split between cash and
non-cash items.

Calculation Definition: Net debt comprises bank overdrafts, current and non-current borrowings, less cash and cash equivalents and
bank deposits maturing after more than three months.

Cash and cash equivalents (consolidated balance sheet)
Bank overdrafts (note 22)

Current investments (note 17)
Non-current borrowings (note 22)
Current unsecured bank loans (note 22)

2015

At
1 January
2015
$m
88.5
(50.5)
38.0
3.8
(157.9)
(14.9)
(131.0)

Exchange
movements
$m
(2.9)
1.0
(1.9)
(0.3)
4.7
2.7
5.2

Amortisation
of loan

facility fees
$m
–
–
–
–
(0.3)
–
(0.3)

Reclassified
from held
for sale*
$m
3.8
–
3.8
–
–
–
3.8

At
31 December
2015
$m
54.4
(32.5)
21.9
4.6
(117.2)
(19.8)
(110.5)

Cash flow
$m
(35.0)
17.0
(18.0)
1.1
36.3
(7.6)
11.8

* The net assets of Gibson Shipbrokers disposed of on 31 March 2015 included $3.9m of cash and cash equivalents that were classified as held for sale at

31 December 2014.

Cash and cash equivalents (consolidated balance sheet)
Bank overdrafts (note 22)

Current investments (note 17)
Non-current borrowings (note 22)
Current unsecured bank loans (note 22)

At
1 January
2014
$m
167.4
(115.0)
52.4
2.0
(239.3)
(20.9)
(205.8)

2014

Exchange
movements
$m
(3.2)
1.7
(1.5)
(0.2)
2.7
0.8
1.8

Amortisation
of loan

facility fees
$m
–
–
–
–
(1.8)
–
(1.8)

Cash flow
$m
(71.9)
62.8
(9.1)
2.0
80.5
5.2
78.6

Classified
as held
for sale
$m
(3.8)
–
(3.8)
–
–
–
(3.8)

At
31 December
2014
$m
88.5
(50.5)
38.0
3.8
(157.9)
(14.9)
(131.0)

H. Capital Employed
Purpose: Used in the calculation of the return on average capital employed (see NGM P).

Calculation Definition: Capital employed is the amount of capital that the Group has invested in its business and comprises the
historic value of total equity plus net debt at amortised cost.

The Group’s capital comprised:

Total equity (consolidated balance sheet)
Net debt (NGM G)

2015
$m
1,168.1
110.5
1,278.6

2014
$m
1,438.3
131.0
1,569.3

I. Gearing
Purpose: This ratio indicates the relative level of debt funding, or financial leverage, that the Group is subject to with higher levels
indicating increasing levels of financial risk.

Calculation Definition: Gearing is calculated as net debt as a percentage of total equity (see NGM H).

Gearing

2015
9%

2014
9%

Hunting PLC
2015 Annual Report and Accounts
135

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
NON- GA AP ME A SURES
(UNAUDITE D)
C ONTIN UED

Cash Flow Non-GAAP Measures
J. Cash Flow Working Capital Movements
Purpose: Reconciles the working capital movements in the summary of changes in net debt in the Strategic Report.

Working capital – opening balance
Foreign exchange
Add:
Gibson Shipbrokers cash flows on working capital balances shown as discontinued operations
Purchase of subsidiaries (consolidated statement of cash flows)
Non-cash flows: LTIP liability extinguished using Treasury Shares
Transfer from property, plant and equipment (note 14)
Capital investment debtors/creditors cash flows
Other non-cash flow movement
Less:
Capital investment debtors/creditors cash flows
Other cash flow movement
Working capital – closing balance (NGM C)
Cash flow

2015
$m
470.6
(12.3)

–
–
–
0.2
3.5
–

–
(0.2)
(365.8)
96.0

2014
$m
467.6
(4.6)

3.7
3.0
6.9
–
–
(0.1)

(1.6)
(0.5)
(470.6)
3.8

K. Capital Investment
Purpose: Capital investment identifies the cash resources being absorbed organically within the business to maintain or enhance
operating activity levels. The split of replacement and expansion capital investment is used in the calculation of free cash flow (see
NGM M) used in the summary changes in net debt presented in the Strategic Report.

Calculation Definition: Capital investment is the cash paid on tangible non-current assets. Replacement capital investment is the cash
spent on non-current tangible assets to maintain existing levels of operating activity. Expansion capital investment is the cash spent
on tangible non-current assets that will grow the business from current operating levels and enhance operating activity.

Property, plant and equipment additions (note 14)
Capital investment debtors/creditors cash flows (NGM J)
Adjustment to provisions (note 23)
Cash flow

Replacement capital investment
Expansion capital investment
Cash flow

Well Construction
Well Completion
Well Intervention
Exploration and Production
Central
Cash flow

2015
$m
77.1
3.5
0.5
81.1

22.0
59.1
81.1

49.4
20.0
8.6
3.0
0.1
81.1

2014
$m
125.1
(1.6)
–
123.5

69.0
54.5
123.5

69.0
42.5
4.5
7.0
0.5
123.5

L. Other Operating Cash and Non-Cash Movements
Purpose: Reconciles other operating cash and non-cash movements in the Summary Group Cash Flow in the Strategic Report.

Loss on disposal of property, plant and equipment (consolidated statement of cash flows)
Decrease in provisions (consolidated statement of cash flows)
Other non-cash flow items
Charge to the income statement for PSP and Hunting PSP share options and awards (note 30)
Pensions
Other

2015
$m
1.8
(6.7)

6.2
4.6
–
5.9

2014
$m
6.0
(3.4)

7.2
0.3
(0.2)
9.9

Hunting PLC
2015 Annual Report and Accounts
136

M. Free Cash Flow
Purpose: Free cash flow is a measure of financial performance and represents the cash that the Group is able to generate after
replacement capital investment, which is required to maintain existing levels of operating activity. Free cash flow represents the amount
of cash the Group has available to either retain for investment, whether organic or by way of acquisition, or to return to shareholders.

Calculation Definition: Underlying profit from continuing operations adjusted for working capital, tax, replacement capital investment
and interest.

Underlying EBITDA (NGM A)
Working capital movements (NGM J)
Interest paid and bank fees (consolidated statement of cash flows)
Tax paid (consolidated statement of cash flows)
Restructuring costs (consolidated statement of cash flows)
Replacement capital investment (NGM K)
Other operating cash and non-cash movements (NGM L)

2015
$m
61.9
96.0
(7.4)
(10.5)
(5.9)
(22.0)
5.9
118.0

2014
$m
269.8
3.8
(5.6)
(26.6)
–
(69.0)
9.9
182.3

Other Non-GAAP Measures
N. Dividend Per Share Declared
Purpose: Identifies the total amount of dividend declared in respect of a period. This is also used in the calculation of dividend cover
(see NGM O).

Calculation Definition: The amount in cents returned to Ordinary shareholders. Figures shown are calculated on an accruals basis.

Interim dividend
Final dividend

2015
cents per
share
4.0
4.0
8.0

2014
cents per
share
8.1
22.9
31.0

O. Dividend Cover
Purpose: An indication of the Company’s ability to maintain the level of its dividend and indicates the proportion of earnings being
retained in the business for future investment versus that returned to shareholders.

Calculation Definition: Earnings or loss per share from continuing operations attributable to Ordinary shareholders divided by the cash
dividend per share to be returned to Ordinary shareholders, on an accruals basis.

Earnings (loss) per share
Basic – from continuing operations (note 13)
Diluted – from continuing operations (note 13)

Dividend (NGM N)

Dividend cover
Basic – from continuing operations
Diluted – from continuing operations

2015

2014

Underlying

Reported

Underlying

Reported

3.1c
3.1c

8.0c

0.4x
0.4x

(156.1)c
(156.1)c

102.6c
100.0c

45.9c
44.8c

8.0c

31.0c

(19.5)x
(19.5)x

3.3x
3.2x

1.5x
1.4x

P. Return on Average Capital Employed
Purpose: Measures the levels of return the Group is generating from its capital employed.

Calculation Definition: Underlying profit before interest and tax from continuing operations, adjusted for the share of associates’
post-tax results, as a percentage of average gross capital employed. Average gross capital employed is a monthly average of capital
employed based on 13 balance sheets from the closing December balance in the prior year to the closing December balance in the
current year.

Average monthly gross capital employed (13 point average)

Underlying profit from continuing operations (consolidated income statement)
Share of associates’ post-tax losses (consolidated income statement)
Underlying profit from continuing operations including associates

Return on average capital employed

Hunting PLC
2015 Annual Report and Accounts
137

2015
$m
1,532.9

2014
$m
1,660.7

16.4
(0.2)
16.2

217.8
(0.5)
217.3

13%

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
FINANCIAL RECORD*/ **
(UNAUDITE D)

Revenue
EBITDA
Depreciation and non-exceptional amortisation and impairment
Profit from continuing operations
Finance expense
Share of associates’ post-tax (losses) profits
Profit before tax from continuing operations
Taxation
Profit for the year from continuing operations
Profit (loss) for the year from discontinued operations
Profit for the year

Basic earnings per share
Continuing operations
Continuing and discontinued operations

Diluted earnings per share
Continuing operations
Continuing and discontinued operations

Dividend per share#

Total assets
Non-current assets
Net current assets

Financed by:
Shareholders’ funds (including non-controlling interests)
Non-current liabilities

Net assets per share

2015
$m
810.5
61.9
(45.5)
16.4
(6.8)
(0.2)
9.4
(5.4)
4.0
–
4.0

2014
$m
1,386.5
269.8
(52.0)
217.8
(4.9)
(0.5)
212.4
(57.2)
155.2
0.3
155.5

2013
$m
1,293.6
244.0
(44.0)
200.0
(2.9)
0.4
197.5
(52.1)
145.4
(1.4)
144.0

2012
$m
1,265.4
240.7
(40.1)
200.6
(8.7)
1.5
193.4
(53.9)
139.5
1.1
140.6

2011
$m
933.4
160.0
(34.1)
125.9
(2.7)
1.7
124.9
(34.8)
90.1
2.7
92.8

cents

3.1
3.1

8.0

102.6
102.8

100.0
100.2

31.0

96.8
95.8

94.5
93.5

29.5

92.2
93.0

90.0
90.8

28.4

62.0
63.9

60.7
62.6

23.9

932.0
387.4
1,319.4

1,168.1
151.3
1,319.4

1,187.1
471.5
1,658.6

1,438.3
220.3
1,658.6

1,249.1
483.0
1,732.1

1,414.8
317.3
1,732.1

1,254.9
464.4
1,719.3

1,332.7
386.6
1,719.3

1,234.1
357.9
1,592.0

1,146.9
445.1
1,592.0

cents
785.0

cents
968.6

cents
957.9

cents
906.6

cents
783.9

Information is stated before exceptional items and amortisation of acquired intangible assets.

* Prior years have been restated for the designation of Gibson Shipbrokers as a discontinued operation.
**
# Dividend per share is stated on a declared basis. Following the change in functional currency from Sterling to US dollar in 2013, dividends are declared in US dollars
and paid in Sterling. The Sterling value of dividends paid is fixed and announced approximately two weeks prior to the payment date. For 2012 and prior years,
dividends were declared in Sterling and have been presented in cents using the exchange rate on the date they were paid or approved for interim and final dividends
respectively.

Hunting PLC
2015 Annual Report and Accounts
138

SHAREHOLDER AND
STATUTORY INFOR M ATION
(UNAUDITE D)

Annual General Meeting 2016
The AGM of Hunting PLC will be held on Wednesday, 13 April 2016 at The Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS
and shall commence at 10.30 a.m.

Business of Meeting
The AGM is an opportunity for shareholders to meet with the Board of Directors. The usual format of the meeting starts with the
Chairman’s introduction followed by an invitation to take any questions from shareholders and, finally, the formal business of the
meeting which involves putting to the meeting a number of ordinary and special resolutions. Details of the resolutions will be
communicated to shareholders ahead of the meeting in a formal “Notice of AGM”. The Notice also contains explanatory notes
which will detail to shareholders how to lodge their vote. Those shareholders who have elected to continue to receive hard copy
documentation or have signed up to receive a notification by e-mail will also receive a proxy form, which will contain details of how
to lodge a vote by proxy.

Documents on Display
Copies of the executive Directors’ service contracts and letters of appointment of non-executive Directors will be available for
inspection at the Company’s Registered Office from the date the Notice of AGM is issued (being 21 clear days’ notice ahead of the
meeting) until the time of the AGM and at the Royal Automobile Club, 89 Pall Mall, London SW1Y 5HS from 15 minutes before the
AGM starts until it ends.

Registered Office
5 Hanover Square
London
W1S 1HQ

Company Number: 974568 (Registered in England and Wales)

Telephone:
Facsimile:
Email:

+44 (0) 20 7321 0123
+44 (0) 20 7839 2072
pr@hunting.plc.uk

Financial Calendar
The proposed financial calendar is as follows:

Date
3 March 2016
10 March 2016
13 April 2016
13 April 2016
10 June 2016
6 July 2016
August 2016
October 2016
October 2016

Event
Final Results Announcement
Publication of Annual Report and Notice of AGM
AGM
Proxy Voting Results of AGM
Final Dividend Record Date
Final Dividend Payment Date
Half-Year Results (TBC)
Interim Dividend Record Date (TBC)
Interim Dividend Payment Date (TBC)

Financial Reports
The Company’s Annual Report is available on the Company’s website from the date of publication. Shareholders may elect to receive
a copy by contacting the Registrar. Copies of previous financial reports are available at www.huntingplc.com.

In common with many public companies in the UK, the Company no longer publishes a printed version of its half-year report.
The half-year report is only available online from the Company’s website at www.huntingplc.com

Registrar
The Company’s Registrar, Equiniti, offers a range of shareholder information and dealing services at www.shareview.co.uk.
The address and contact details of Equiniti are as follows:

Equiniti Limited
Aspect House
Spencer Road, Lancing
West Sussex BN99 6DA
Telephone (UK): 0371 384 2173
Overseas: +44 (0)121 415 7047

Equiniti is also the Company’s single alternative inspection location where, with prior appointment, individuals can inspect the register
of members.

Hunting PLC
2015 Annual Report and Accounts
139

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
SHAREHOLDER AND
STATUTORY INFOR M ATION
(UNAUDITE D)
C ONTIN UED

Analysis of Ordinary Shareholders
At 31 December 2015, the Company had 1,921 Ordinary shareholders (2014 – 2,000) who held 148.8 million (2014 – 148.5 million)
Ordinary shares analysed as follows:

Size of holdings
1 – 4,000
4,001 – 20,000
20,001 – 40,000
40,001 – 200,000
200,001 – 500,000
500,001 and over

2015

2014

% of total
shareholders

% of total
shares

% of total
shareholders

% of total
shares

73.4
11.3
3.3
6.4
3.0
2.6

1.0
1.4
1.3
8.0
12.5
75.8

72.9
12.4
3.2
6.3
2.5
2.7

1.0
1.6
1.2
8.4
10.8
77.0

Share Capital
Hunting PLC is a premium-listed Company with its Ordinary shares quoted on the London Stock Exchange.

The Company’s issued share capital comprises a single class, which is divided into 148,841,508 Ordinary shares of 25 pence each.
All of the Company’s issued Ordinary shares are fully paid up and rank equally in all respects.

Details of the issued share capital of the Company and the number of shares held in Treasury as at 31 December 2015 can be found
in note 29 to the financial statements.

The Company’s total issued share capital as at 31 December 2015 was 148,841,508.

Subject to applicable statutes, shares may be issued with such rights and restrictions as the Company may, by ordinary resolution, decide, or
(if there is no such resolution or so far as it does not make specific provision) as the Board (as defined in the Articles of Association) may decide.

Voting Rights and Restrictions on Transfer of Shares
Holders of Ordinary shares are entitled to receive dividends (when declared), receive the Company’s Annual Report and Accounts,
attend and speak at general meetings of the Company, and appoint proxies or exercise voting rights.

On a show of hands at a general meeting of the Company, every holder of Ordinary shares present in person or by proxy, and entitled
to vote, has one vote, and, on a poll, every member present in person or by proxy and entitled to vote has one vote for every Ordinary
share held. None of the Ordinary shares carry any special rights with regard to control of the Company. Proxy appointments and
voting instructions must be received by the Company’s Registrars not later than 48 hours before a general meeting.

A shareholder can lose his entitlement to vote at a general meeting where that shareholder has been served with a disclosure notice
and has failed to provide the Company with information concerning interests in those shares. Shareholders’ rights to transfer shares
are subject to the Company’s Articles of Association.

Transfers of uncertificated shares must be carried out using CREST and the Directors can refuse to register a transfer of an
uncertificated share in accordance with the regulations governing the operation of CREST.

The Directors may decide to suspend the registration of transfers, for up to 30 days a year, by closing the register of shareholders.
The Directors cannot suspend the registration of transfers of any uncertificated shares without obtaining consent from CREST.

There are no restrictions on the transfer of Ordinary shares in the Company other than:

• certain restrictions that may from time to time be imposed by laws and regulations, for example insider trading laws;
• pursuant to the Company’s share dealing code whereby the Directors and certain employees of the Company require approval to

deal in the Company’s shares; and

• where a shareholder with at least a 0.25% interest in the Company’s certificated shares has been served with a disclosure notice

and has failed to provide the Company with information concerning interests in those shares.

Interests in Voting Rights
Other than as stated in the table of Substantial Interests on page 53, the Company is not aware of any further agreements between
shareholders that may result in restrictions on the transfer of Ordinary shares or on voting rights.

Market Capitalisation
The market capitalisation of the Company at 31 December 2015 was £455.5m.

Share Price

At 1 January
At 31 December
High during the year
Low during the year

The table above sets out the middle market closing prices.

Hunting PLC
2015 Annual Report and Accounts
140

2015
p
524.0
305.5
664.0
275.5

2014
p
768.5
531.5
910.0
471.1

Dividends
The Company normally pays dividends semi-annually. Details of the dividends paid are set out in note 32 of the financial statements.

Prior to January 2014, dividends were declared and paid in Sterling. On 5 December 2013, the Company announced that the
presentational currency of the financial statements was changing from Sterling to US Dollars and as a result of this change future
dividends would be declared in US Dollars. Following the change, dividends are still paid in Sterling with the Sterling value of the
dividend payable per share fixed and announced approximately two weeks prior to the payment date and based on the average spot
exchange rate over the three business days preceding the announcement date.

Dividend Calendar

2015 interim dividend
2015 final dividend*

* Subject to shareholder approval.

Ex-Dividend Date
8 October 2015
9 June 2016

Record Date
9 October 2015
10 June 2016

Payment Date
28 October 2015
6 July 2016

Directors
Powers of the Directors
Subject to the Company’s Articles of Association, UK legislation and any directions prescribed by resolution at a general meeting, the business
of the Company is managed by the Board. The Articles of Association may only be amended by special resolution at a general meeting of
shareholders. Where class rights are varied, such amendments must be approved by the members of each class of share separately.

Appointment and Replacement of Directors
The rules about the appointment and replacement of Directors are contained in the Articles of Association. On appointment in
accordance with the Articles, Directors may be appointed by a resolution of the Board but are then required to be reappointed by
ordinary resolution by shareholders at the Company’s next AGM.

Directors’ Interests
Details of Directors’ remuneration, service contracts and interests in the Company’s shares and share options are set out in the
Directors’ Remuneration Report and Annual Report on Remuneration, located at www.huntingplc.com. Further information regarding
employee long-term incentive schemes is given in note 33 of the financial statements.

Directors’ Conflict of Interest
All Directors have a duty under the Companies Act 2006 to avoid a situation in which they have, or could have, a direct or indirect conflict of
interest with the Company. The duty applies, in particular, to the exploitation of any property, information or opportunity, whether or not the
Company could take advantage of it. The Company’s Articles of Association provide a general power for the Board to authorise such conflicts.

Directors are not counted in the quorum for the authorisation of their own actual or potential conflicts. Authorisations granted are
recorded by the Company Secretary in a register and are noted by the Board.

On an ongoing basis, the Directors are responsible for informing the Company Secretary of any new, actual or potential conflicts that
may arise, or if there are any changes in circumstances that may affect an authorisation previously given. Even when provided with
authorisation, a Director is not absolved from his or her statutory duty to promote the success of the Company. If an actual conflict
arises post-authorisation, the Board may choose to exclude the Director from receipt of the relevant information and participation in
the debate, or suspend the Director from the Board, or, as a last resort, require the Director to resign.

As at 31 December 2015, no Director of the Company had any beneficial interest in the shares of Hunting’s subsidiary companies.

Statement of Disclosure of Information to Auditors
In accordance with the Companies Act 2006, all Directors in office as at the date of this report have confirmed, so far as they are aware,
there is no relevant audit information of which the Group’s auditors are unaware and each Director has taken all reasonable steps
necessary in order to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of
that information. This confirmation should be interpreted in accordance with the provisions of Section 418 of the Companies Act 2006.

Research and Development
Group subsidiaries undertake, where appropriate, research and development to meet particular market and product needs. The
amount expensed by the Group during the year was $0.6m (2014 – $0.8m).

Political Contributions
It is the Group’s policy not to make political donations. Accordingly, there were no political donations made during the year (2014- $nil).

Significant Agreements
The Company is party to a revolving credit facility in which the counterparties can determine whether or not to cancel the agreement
where there has been a change of control of the Company.

The service agreements of the executive Directors include provisions for compensation for loss of office or employment as a result of
a change of control.

Statement of Listing Rule Compliance
In accordance with Listing Rule 9.8.4C, the Directors confirm that all waivers of dividends over the Company’s Ordinary shares are
noted on page 53.

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141

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATION
AGM
Annual General Meeting

AMG
Advanced Manufacturing Group –
combines the precision engineering and
manufacturing capabilities in the Well
Construction segment for the Electronics
division (Hunting Innova) and Hunting
Dearborn product lines. Hunting is aiming
to become a leading single source of
MWD/LWD tools.

API
American Petroleum Institute.

GLOSSARY

Diluted EPS
Diluted earnings per share – earnings from
continuing operations before amortisation
and exceptional items, attributable to
Ordinary shareholders, divided by the
weighted average number of Ordinary
shares in issue during the year, as
adjusted for all potentially dilutive
Ordinary shares.

Intensity factor
The total controlled scope 1 and scope 2
emissions divided by the total facilities
footprint of the Group.

Inventory days*
See NGM D.

ISO
International Standards Organisation.

Dividend cover*
See NGM O.

Downhole
Downhole refers to something that is
located within the wellbore.

KWh
Kilowatt hours.

Lean
A production practice that eliminates
wasteful processes, thereby reducing
production time and costs, and
improving efficiency.

Average gross capital employed*
See NGM P.

EBITDA*
See NGM A.

Basic EPS
Basic earnings per share – calculated by
dividing the earnings from continuing
operations attributable to Ordinary
shareholders by the weighted average
number of Ordinary shares in issue during
the year.

bbl
Barrel of oil – one barrel of oil equals 159
litres or 42 US gallons.

BOE
Barrel of oil equivalent.

c
Cents.

CAGR
Compound annual revenue growth rate.

Capital employed*
See NGM H.

Capital investment – “Capex”
See NGM K.

CGU
Cash generating unit.

CO2
Carbon dioxide.

CO2e
Carbon dioxide equivalent.

CPI
Consumer Price Index.

CTR
Currency translation reserve.

DPS*
See NGM N.

ESOP
Executive Share Option Plan.

LNG
Liquefied Natural Gas.

Free cash flow*
See NGM M.

LPG
Liquefied Petroleum Gas.

GAAP
Generally Accepted Accounting Principles.

LTIP
Long-Term Incentive Plan.

Gearing*
See NGM I.

GHG
Greenhouse gas.

m3
Cubic metre.

mcf
1,000 cubic feet.

Growth capital investment
See NGM K.

mmBtu
Million British Thermal Units.

HEMS
Hunting Equipment Management Services
– provides downhole tool rental equipment
in the Well Construction segment.

MWD/LWD
Measurement-while-drilling/Logging-
while-drilling.

MWh
Megawatt hours.

Net debt*
See NGM G.

NYMEX
New York Mercantile Exchange.

OCI
Other comprehensive income.

OCTG
Oil Country Tubular Goods – pipe and
tubular goods and products used in the oil
and gas industry, such as drill pipe, pipe
casings and production pipes.

Hunting PSP
Hunting Performance Share Plan.

HS&E
Health, Safety and Environment.

IAS
International Accounting Standards.

IFRIC
International Financial Reporting
Interpretations Committee.

IFRS
International Financial
Reporting Standards.

Incident rate
The US Occupational Safety and Health
Administration (“OSHA”) Recordable
Incident Rate (or Incident Rate) is
calculated by multiplying the number of
recordable incidents by 200,000 and then
dividing that number by the number of
labour hours worked.

Hunting PLC
2015 Annual Report and Accounts
142

Wellbore
The wellbore refers to the drilled hole.

Well completion
Well completion refers to the processes of
preparing a well for production. This
involves the assembly of downhole
tubulars and equipment required to enable
safe and efficient production from an oil or
gas well.

Well construction
Well construction refers to the initial drilling
and processes of constructing the
wellbore in an oil and gas well. These
processes typically include drilling and
logging the hole; running, cementing and
logging the casing; hydraulic fracturing or
stimulating the well and monitoring well
performance and integrity.

Well intervention
Well intervention refers to any operation
carried out on an oil or gas well that
maintains or enhances the production of
the well or provides well diagnostics.

Working capital*
See NGM C.

WTI
West Texas Intermediate – the price per
barrel of Texas light sweet crude oil.

* Non-GAAP measure.

p
Pence.

PSP
2009 Performance Share Plan.

Recordable incidents
An incident is recordable if it results in any
of the following: death, days away from
work, restricted work or transfer to
another job, medical treatment beyond
first aid, or loss of consciousness. Also
included are any significant injuries or
illnesses diagnosed by a physician or
other licensed health care professional,
even if it does not result in death, days
away from work, restricted work or job
transfer, medical treatment beyond first
aid, or loss of consciousness.

Replacement capital investment
See NGM K.

ROCE*
See NGM P.

Scope 1
Scope 1 emissions are direct GHG
emissions from sources that are owned or
controlled by the entity. Scope 1
emissions include fossil fuels burned on
site, emissions from vehicles and other
direct sources.

Scope 2
Scope 2 emissions are indirect GHG
emissions resulting from the generation of
electricity, heating and cooling or steam
generated off site but purchased by
the entity.

Trade receivable days*
See NGM E.

TSR*
Total Shareholder Return – the net share
price change plus the dividends paid
during that period.

Underlying
Results for the year, as reported under
IFRS, adjusted for amortisation of
acquired intangible assets and exceptional
items, which is the basis used by the
Directors in assessing performance.

Hunting PLC
2015 Annual Report and Accounts
143

STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSOTHER INFORMATIONPROFESSIONAL
ADVISER S

Solicitors
CMS Cameron McKenna LLP

Independent Auditors
PricewaterhouseCoopers LLP

Joint Corporate Brokers
Deutsche Bank and Barclays Bank

Financial Advisers
DC Advisory Limited

Insurance Brokers
Willis Towers Watson

Pension Advisers & Actuary
Lane Clark & Peacock LLP

Financial Public Relations
Buchanan Communications Limited

Registrars & Transfer Office
Equiniti Limited
Aspect House
Spencer Road, Lancing
West Sussex BN99 6DA
Telephone (UK): 0371 384 2173
Overseas: +44 (0)121 415 7047

Hunting PLC
2015 Annual Report and Accounts
144

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HUN TING PLC
5 Hanover Square, London W1S 1HQ, United Kingdom
Tel: +44 (0)20 7321 0123
Fax: +44 (0)20 7839 2072