Is Now The Perfect Time To Buy Hunting plc & Falkland Oil And Gas Limited?


Shares in Hunting (LSE: HTG) are up as much as 10% today on the back of improved sentiment for the oil and oil services sectors. In fact, there is no significant news flow out today for Hunting, with the most recent being the company’s in-line management statement in the first week of the year.

Clearly, the company’s fortunes are closely tied to the price of oil but, even if the oil price does return to a decline, it seems to be well positioned to outperform the wider sector. That’s because Hunting has a considerable margin of safety included in its share price with, for example, it having a price to earnings (P/E) ratio of just 9.1 even when next year’s forecast fall in earnings is taken into account.

Furthermore, Hunting is expected to return to earnings growth in 2016, with bottom line growth of 2% being forecast following the current year’s anticipated 19% decline. Still, the company has a very well-covered dividend, with profits exceeding shareholder payouts by over 2.5 times. And, with Hunting currently yielding 4.3% after its 40% share price fall in the last year, it seems to be a very appealing income, as well as value, play. As such, it could be a company worth buying at the present time.

Falkland Oil And Gas

Shares in Falkland Oil And Gas (LSE: FOGL) are up 11% today after a strong showing yesterday following news that the Eirik Raude rig had started to be moved from West Africa to the Falkland Islands for the 2015 drilling programme.

This is very good news for Falkland Oil And Gas because the planned drilling programme will provide the company with greater clarity regarding its total oil assets, which could have a major impact upon the company’s share price.

And, looking ahead, Falkland Oil And Gas has sufficient cash to move ahead with plans to drill the first four wells, with it having no debt at the end of the last financial year and around $100m in cash. This is a major plus for investors, since exploration companies can burn through cash at a rapid rate, so the fact that Falkland Oil And Gas is well funded should provide holders of the shares with a degree of confidence.

Of course, the results of the drilling programme are a known unknown but, for investors who can take risk, Falkland Oil And Gas seems to be a relatively appealing smaller company, with its financial standing and bright future prospects having the potential to improve market sentiment even further.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.