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Hello and welcome to the Hunting half year results call. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I'm pleased to present Jim Johnson, the CEO; and Bruce Ferguson, the Financial Director. Please go ahead with your meeting.
Thanks, Jerry. Well, hello, everybody, and thank you for taking time to be on our call today and discuss our results and somewhat of a look at our guidance and outlook going forward. Before I start today, I just want to say that sitting here in my home in Houston, Texas, we have successfully, at least in the Houston side, it appears rode out Hurricane Laura. But my thoughts and prayers are with those of our team and with everybody in Lafayette, Houma and Marrero right now as Louisiana is getting pretty hit hard. And this is like the 3-year anniversary from Hurricane Harvey. So much like our business, we know how to handle these things. And just again, hope everybody is well. We're going to start on Slide #2. And if you turn there, the real topic, the real theme that we want to get across today is the resilience that the company has in going forward. And there's a lot of bullet points there. But the resilience of our people, the talent that they have -- that they bring to their games on the job every day, the resilience in our quest to continue developing technology, and the technology and products that we have, the resilience of a diversified product offering, the fact that we play in multiple basins, multiple opportunities in the oil and gas segment, those again provide us the resilience that we need to continue to do what the company has done since the energy oil patch in the 1960s, and that is to ride out market swings up and down. And we know that we're always going to have that. And fortunately, we also know how to manage through those. I could spend hours talking about COVID-19 and the effect on the business and woe is me. But at the end of the day, those are things that, to a great degree, are out of our control. And so we're going to focus today on the resilience and on the things that are in our control. If you go through and look at Slide 2, again, a lot of points on there. But I think to sum it all up is the fact that we are extremely well positioned for when this business does recover, and it will recover. The facts and the history have shown it. It's not going away. The challenge this time is just the fact that while normal oil and gas cycles have happened, the effect of a virus makes the future so uncertain because the demand issues are just so much so unclear right now. We'll slip to Slide #3. I'm not going to go through all the bullet points. Bruce will talk the financials more in detail. We think a decent set of results, we'd always like them to be better. But considering the market environment that we've been in, I think we delivered some very good results. We are -- we were very proactive in addressing the cost structure of our business, both on a variable and on a structural basis, as we've seen through some of the moves that we've done. We continue to focus on our productivity. And in those cases, in a challenging market which I'll talk about more a little bit later, our team has done a very, very good job of walking through the battle. The dividend payment to me was showing to the marketplace that we do have strong conviction and faith in our market going forward. Our financial position, I think, is very enviable compared to peers in our industry right now. And it gives us some comfort to know that we can continue to invest in R&D, new product development, making sure we have world-class facilities, taking care of our assets and providing solutions for our customers to provide ourselves more stickiness with them as we try to solve their problems and continue to do the things we've always done. That falls into the new product development there, a lot of different things going on, whether it's on the Titan side, whether it's working on products for 20,000 psi production in the Gulf of Mexico. But we're touching a lot of things right there. And lastly, we talked a little bit about CapEx which we have dramatically scaled back. But when we do spend money, we're spending it on things where the returns are very justified and it's adding more breadth to our offering and what we can do to our clients out there. And I think just one other word on the dividend. This industry of ours has been so beaten up for a lot of reasons. But one of them is its lack of returning anything back to shareholders. And if you listen, there's a lot of people out there. James West from Evercore, they talked about the pledge that they have. And I think from our point of view, we want to make sure that we are doing things to return some value back to our shareholders as I think we've shown in the past. So we'll get into some of this in a lot more detail, but I'm going to hand it over to Bruce now to start on Slide #4.
Okay. Thanks, Jim. Good afternoon, everybody. If I can take you to the income statement on Slide 4, this slide shows our revenues booked for the period at $377 million. That is a reduction of 26% reflecting the market contraction in quarter 2. Just to give you an idea on the phasing of that -- of those sales, at quarter 1, we booked $227 million. And in quarter 2, that fell to $150 million. Gross margin held up reasonably well, considering the backdrop of the market at 22%. We did see margins for the quarter to slide down to 19%, a little bit of pricing pressures from customers and some under recovery on their overheads. EBITDA was $28.4 million for the period; phased $21.8 million for quarter 1; $6.6 million which is for quarter 2, which is slightly better than we expected. That was a better performance for you to pack in June and also some costs that we took out of underlying input exceptionals in June as well. So $28.4 million for the 6-month period. Profit for operations was $5.7 million and a PBT of $3.9 million. If we can move to Slide 5, I'll give a little bit more color to the segmental results in terms of revenues and operational profits. Hunting Titan, you can see the big impact there, down 50% as the U.S. land business fully contracted from quarter 2. The U.S. business held up reasonably well. Subsea and U.S. connections saw a good performance. And also, we had an element of order book that came into April and May which gives a little bit of shelter to quarter 2. The market is really tough, really struggled, and that led to the closure, the next closure of our Calgary facility. Our Europe, Middle East and Africa business, again, was scheduled to have a decent year, especially that the U.K. market was fairly active, protectively active. But with the oil price collapse, that fell from 14 offshore rigs into 4 and impacted numbers there. Asia Pac held up well, but predominantly, that was sales coming out of -- to the 2 OCTG in the Middle East from Asia Pac mills. And that was a good 6 month performance for them, giving us a revenue of $377 million and operational profit of $5.7 million. That $5.7 million was split $10.1 million quarter 1 with a loss of $4.4 million in quarter 2. Moving on to Slide 6, again, discussing it slightly different in terms of revenue. All right. So one there, the $97.2 million, that's all the Titan business and shows the reduction there. OCTG, Asia Pac and U.S. connections, which did well, but offset a little bit by the underperformance by OCTG in the U.K. Advanced Manufacturing intervention tools well down on the corresponding period last year, strongly suffering from lower customer activity, CapEx cutbacks and also destocking from the customers. Customers using up their stocks before they're buying any more items. Subsea with a bright start in terms of our coupling, traditional coupling business up 25% year-on-year. And then we added RTI in August last year and Enpro to the stable in February 2020. Drilling Tools had a tough year, down 44% year-on-year and reflecting the really tough market conditions in their key markets. Moving on to Slide 7. This is going through the amortization and exceptional items. With the decline in the market conditions, a significant impairment of $174 million, then $89 million in total for the amortization exceptionals. The main components there were the goodwill, other intangible assets. Predominantly, that was Titan in terms of the carrying value of the goodwill and also the customer relationships within Titan itself. We see the opportunity to impair those items. $19 million of property, plant equipment that was primarily the -- some U.K. property. The market value fell and also some underutilized machinery there. And a $33.3 million venture provision. These were older, less marketable products and management felt it would be difficult to sell in the new market conditions. So those are the main components of the $189 million that you see through the income statement against the $14.5 million we did last year. If we could move on to the balance sheet on Slide 8. Again, the premise here is the solid financial footing even post the [indiscernible] impairment numbers. We're still sitting at $1 billion of net assets. Not much movement in terms of property plant equipment, some assets coming on for Enpro, minus depreciation, minus impairments. We've got IFRS 16 leases on there. Still $207 million of goodwill and other intangible assets. 65% of that is Titan, so good quality there. Our working capital, that is net of impairment, so that's still relatively high. We'll go through the next -- a bit more analysis on the next slide, we give some more detail there. Our bank and cash, key figure there, strong bank and cash figure still of under $49 million. As of the end of August, that figure is $68 million. So we're making progress in the right direction and obviously looking to unwind some of that working capital between now and the end of the year as well. Moving on to Slide 9, a little bit more detail on our working capital. We're sitting at $429 million. The biggest component of our working capital is our inventories. We saw a small increase over the period in our Titan and our U.K. OCTG. Some longer lead items in our U.K. OCTG in preparation for an active 2020 billing programs, the stock about 4 to 1, drilling programs moved to the right. And that will take a little bit more a timing issue to get the outflow of those items between now and the end of the year. In terms of receivables, again, good receivable collections over the period, that's reduced and lower payable number as we buy less. That number has reduced on the balance sheet. Inventory days, slightly higher and concerns there. And receivables going up a little bit as we see customers trying to place some payment terms. Move on to Slide 10, that's a good cash flow. Over the piece, we saw a $78.2 million outflow over the period. And I'll just take you through the main components here. Our EBITDA really cancel out the working capital movements. We had a little bit of tax paid of $6 million, some lease payments to give us a negative free cash flow of $11.2 million. We have a CapEx of intangible assets of $12 million to add on to that. And then a big outflow was on acquisition of Enpro in 2020. We had around $70 million of dividends and other share buybacks and share awards, and that takes us back to the bridge to get it back to the $78.2 million. On Slide 11, a little bit more detail on the CapEx. As I mentioned, really good handbrake on the CapEx there. We've got $10.5 million of CapEx year-to-date, with $1.5 million intangible, it was $12 million. And really, the major spend there is the completion of the detonation cord line at Milford and some other bits and pieces, some IT ERP system came through here as well. And obviously, over the next 6 months, we don't see that figure -- frankly, that figure below $20 million for the year-end and trying to really minimize the CapEx going forward. And with that, I'll hand back to Jim in Houston.
Okay. Thanks, Bruce. Now on to Slide 12. Every business, I think, in the world has a slide similar to Slide 12 right now. So we just wanted to put that up there to, again, highlight the operational issues that we've had dealing with COVID-19. We were fortunate in one way with that Daniel Tan and his team in Asia Pac, they were the first ones to see it in a real-time exposure impacting and hitting our business. So I can remember in March, April, sitting with the team talking about what was going on and seeing what was happening in the market, and we all could comment that we've seen this movie before and know how it ends, and I think that helped accelerate as well our quick response to rightsizing the business. On the response from a health and safety point of view, we did -- we followed the CDC guidelines or guidelines in other international areas. We had -- I can't understate the impact to productivity, I think, we've had since March. Whether it's been in Singapore or Saudi Arabia or in Aberdeen, working from home on an office basis is one thing, but we're a factory, we're manufacturing people. So to split shifts, the lag you that you have in that, to make sure our people are safe, the constant cleaning, the shutting down, it was a drag on operations, but our team responded very, very well. Rodney Borden, Greg Farmer, [ Lisa Borden ], 3 that really led the charge on this throughout our group on the North American side. They did a great job on making sure that we did everything right. So again, I just want to highlight, it wasn't expense. It was an impact to the business. And you'll see the comments in the right-hand corner. It also have hampered business. I think our friends at Schoeller-Bleckman made a comment about how it hampered business decisions because you had people working at home. You somewhat had a freeze up in a lot of the client base because you couldn't make calls, you couldn't make presentations. We tried and we continue to, but it just slowed down everything on top uncompounded on a declining collapsing oil and gas business. Moving on to Slide #13, talks about decisive measures that we made. We hate to see the human toll on the business. I hate to be reducing headcount. I don't think any CEO comes in joyfully wanting to see headcount go down. You want to grow businesses and see them increase. But we had to do that. So hated to see the human toll that went through part of our team. But those were some of the main things that we had to do to structure the business to get its performance where it needed to be. Those decisive actions, there's a lag to that. So for example, our cost basis in August is now better than it was in June. We announced the closure of the Canada facility. We'll talk more about that, which is a big structural cost initiative for us. But the key is that we didn't wait around. And I think I give the credit to the team, I think we responded very quickly. Moving on to Slide 14, just some comments about Canada. We have been there for a long, long time, and it's just the politics has changed, the economic outlook has changed, a very difficult marketplace to support a large manufacturing facility. And some of you, we've talked presentations before, the Calgary facility was primarily OCTG-related as well as perforating gun manufacturing. And at one time, we were using the Canadian facility to supply guns in places like the Bakken, even south of the border. And with the decline in business, the economics just isn't there. So again, we hate to see a closure and shutdown, but long term, it's the best move for us and structurally to reduce our footprint and go back to a sales function up there. Stay with distribution on the Titan side, and just again, the market is not the same. So one of the things you can't do is look at 2020, 2021 and relate back to what happened in 2014 or '15 because those days are gone and they may never be back. So -- and they have a lot of detail there on 14. With that, we'll move to 15, operational overview of North America. Again, I don't like to read bullet points because you're seeing all that right now. But we talk about some significant areas where we have had some great opportunities and wins. Everybody has read the same thing. The bottom right-hand corner, you see about the huge fall in CapEx. You all read about companies shutting down rigs. You had people like Occidental going down to 1 rig in the Permian. Pick a client, all of them were dropping rigs as fast as they could. And ultimately, that affects our business in the marketplace. We think that last week, we saw the first increase in rig count in quite a long time with 10 rigs being added. I think we are at the bottom, and I'll talk more about that later. And I think that the recovery will be slow. But I think -- I do think that the worst is over right now for North America land. On Slide 16, we talked a little bit about that more with more of a focus on the completion side of the business. And as of last week, according to Primary Vision, the frac fleet was -- in operation was at about 80, give or take. That is still a horrific number compared to what we were at, at the start of the year or 1 year ago when we were in numbers of -- in the 300 range and higher. That shows that companies obviously have pulled back with production needing to be reined in. You've seen the production numbers in the U.S., how the production has fallen there. And so right now, the 2 areas of focus, I think, are going to be on probably stable to flat drilling, but completions, we're hoping do pick up because there is a large quantity of drilled and uncompleted wells out there that is money in the bank for a lot of struggling operators. I think at this current price point in the $43 a barrel range for WTI, they can justify some cash flow coming in. And so we believe you will see more of the DUCs completed the rest of this year. Another area that we are seeing some light at the end of the tunnel is in the natural gas market. I've seen from a number of different product lines, an increase in orders and activities back up in the Northeast for natural gas. And right now, with the price in the mid-$2 range and LNG exports, I think, starting to pick up again, it could be a bullish fall and winter for natural gas. Not gangbusters, not adding hundreds of rigs, but at least in a state of stability and a way to crawl out of this. And I think one of the -- if you talk about an example of showing what the -- the market in general, the announcement this week of Exxon being removed from the Dow index, I think it's just incredible. So our industry remains unloved. And a lot of people are just struggling out there right now. Going to Page 17, some comments about our Advanced Manufacturing business. The business has performed well. On the electronics side, we're being -- it's being affected to a degree because of the lack of switch manufacturing because of the decline in Titan. And both of these businesses when it comes to oilfield are capital expenditure-focused because we're making capital equipment for some of the major oilfield service companies. So that right now is going to be probably challenging for the rest of the year as far as new order bookings go. But fortunately, we have had some diversification. Dearborn has performed very well this year. And the fact that 60% of their business is not related to downhole is a nice cushion. We've actually been awarded some major business from GE for some jet engine business going forward, some other clients. So we remain bullish on that business and they should continue to generate good returns this year. Slide 18, we talk about our connection technology, actually a business that has not seen an impact year-over-year. And a lot of that -- first of all, it's always due to the people. And so the team Mike Mock leads has done a very, very good job working with distribution. I made comments to many of you in the past that, thanks to one of our peers that decided to go rig direct, there have been opportunities open up for us in the distribution channels. And so we've been working closely with distribution and closely with some independent mills. The products have performed well. And so this has been a bright spot for us in a very tough year. We've also seen some increases in Gulf of Mexico, tenders and activity. And so while people are making decisions about reevaluating projects, there still is some work going on there. So that pretty much sums up 18. On Slide 19, internationally, there's -- Asia Pac has performed well this year. The business that we had primarily going to the Middle East and actually some business in China. Our facilities over there were hampered. Some of them are still -- like in Singapore, there's still local issues where we can't operate fully like we were 6 months ago because of social distancing issues and requirements and all. But the business is performing well. The outlook there is going to be -- it's pretty uncertain going into 2021. And usually, with our Asia Pac business, this is a longer lead time business. So it's very little spot business. A lot of it because it gives -- it's project-focused. It gives you time to go out and source from our suppliers in Asia. And so we're just -- it's just uncertain right now, and we need oil prices to go up to get programs kick back in. The Indian relationship with Jindal is continuing to show us new opportunities. One of the issues there is the geopolitical issues that India has with China are making this a better opportunity for us because of the preference to not have Chinese materials used in India. The Europe, Middle East, Africa, tough, tough market in the North Sea. The team up there has continued to focus on what they can, which is reducing costs, trying to drive in new business, but it's been very, very difficult. Moving on to number -- Slide #20, we show a lot of the things that we're doing technology-wise. And I'm very proud of the team. Jason Mai leads the Titan business. Many of you have met him. They continue to have a very close relationship with the customer base. Trying to figure out and say, what do you need? What can we do? What's the new product? The Page 20 shows just kind of a total overview. If we turn to Page 21, it gives you some more specifics. The exploding bridge foil initiator cartridge, we're very excited about this product. It is a -- it's an advancement on our EFI cartridge, and it allows better service quality time because it now focuses on the reliability of the detonator more than -- as well as the switch. And so when you put all these things together, right now, we think we're the only one out there that have this product. One of our competitors have a similar scenario, similar product but theirs only can really analyze that the detonator is connected. It can't tell you whether it's going to actually work or not. So this gives -- again, it's a higher form of service quality and it shows, again, going through our system, trying to figure out what we can do quicker, faster, better, which is one of our traits at Hunting. The EGun-RC system, there's been talk about recompletion, some of our peers have talked about that. That is not a big marketplace, but it is one that we haven't -- we've participated in for a long time. We're proud of the fact that due to our expertise in electronics, we are the only ones that can offer -- compared to our peers, offer the complete kit for these recompletion perforating systems. Moving on to 22, some other new products. Digital Free Point Tool is really used for pipe recovery. Most of these had been analog tools in the past. So now we have a digital version. Again, it's a more accurate product, more service quality-oriented and better. High Side Indicator tool is used to avoid problems downhole with things like fiber optic lines. And so that product is -- it's another avoidance of problem issue that we are selling to our clients. And then our PowerSet Power Charges, which are used to set plugs. So we think that we have the best one in the industry. And the reason has been in the math -- the proprietary technology we've put into developing this. It has a consistent burn. And with our Power Charge, we can fine-tune it for various plugs. And if you look at -- this is the tool that sets off the plug in the frac stages, the frac strings down there. And one of the issues from a service quality point of view is existing products are in a way kind of like using a sledgehammer when you only need a ball-peen hammer to set something. And in some times, because of the over force applied in these plugs -- to activating these plugs, they don't set right, and there's problems with it. So again, this is focusing on a service issue downhole and we're getting a great response on our PowerSet Power Charges. On Slide 23, we talk about the offshore marketplace. The key there is -- that I keep harping to people, we're not just an onshore shale player. We want people to remember that we participate in lots of markets. The offshore market is very, very important to us. A lot of the kits that we make that comes out of our AMG division goes into the offshore marketplace. Our premium connections are in the offshore marketplace. And now we build up a more substantial subsea business that we will see continue to grow. And so again, I'm not going to read through all of that, but it does show you Gulf of Mexico, which is the one near and dear to my heart. I mean it's just a depressing rig count. I think 2 weeks ago, it was at 11 or 12, we're at 13 right now. And those are just horrible numbers. I mean you can see the graph. Looking back, I can't imagine what business would be like if you ever had 100 rigs working in the Gulf of Mexico again. Will we ever have that? Probably not. But the fact is that we are doing well, we're focused on this business, and we like the offshore marketplace. Slide 24, we have a brief topic there. We talk about the RTI and Enpro acquisitions that have both done very, very well for us. RTI's backlog, I think, last week was in the neighborhood of $23 million, and we made that acquisition -- I think I remember telling everybody, we -- it had a run rate of like $8 million a year. So the team that came over from RTI, they continue to work hard. They've had some nice wins out there. And we're excited about that business. And our Enpro acquisition, the newest one to the company just came on board in February. It's performing as well as it can in the marketplace. We are excited about it. It's been one of those businesses that's been slowed down decision-making process-wise because of COVID and getting decisions done. But great technology, great people, and we're going to see that business continue to do well. And our existing subsea business, the coupling business is good. They've had a strong year so far. And we have seen things being pushed out because of project delays and things like that. But overall, the subsea business is going to perform well in 2020 and should be well positioned for 2021. In Slide #25, the last one we're really going to talk about, it lists all the key points there, the summary of our investment case. We -- I'm not going to go down and read them all, but all of those points, it goes back to that word, resilience. And when you put in the technology, the balanced portfolio, the strength of our people, the financial strength, the fact that we can continue to invest in what we need to service our customers. And first and foremost, the team that we have at this company I think that we're extremely -- I must say, we're extremely undervalued in the marketplace, but our team has done a very, very good job. And I'm just excited about the future. I'm optimistic. And again, we've been through these before. This isn't the first rodeo, as they say here, that we've seen, and we will come out of this probably stronger than we ever have. And with the team in place, I'm confident on the future. And with that, I'm going to close. And just one other thing: I do want to, again, give thanks to all those on the Hunting team for all the hard work they've done. It's been a stressful time because of COVID, because of everything that's happening. But this group of people that I'm fortunate to work with every day has done a very, very good job, and I continue to be very proud of the performance that we've delivered. And again, I want to thank our clients out there, our customers and for -- our investors. And with that, I'm going to go through Slide 26. It's kind of like our basic one that sets that. And we'll open it up for questions.
[Operator Instructions] And our first question comes from the line of Mick Pickup of Barclays.
I'm glad to hear people are safe from the storms. A couple of questions, if I could. Firstly, obviously, you're running at group level at the moment around about breakeven. But if I look at your numbers, I can only assume that Titan is still negative at the operating level line at the moment. With the cost savings coming out of the business, do you think Titan gets back to breakeven in current conditions as we go through the second half? That's the first question.
I do. I think that what we've seen, Mick, is domestically, we saw a bottom in business, I think it was in May. And we were fortunate, like some of our competitors were, we did have some decent international business that we booked -- that we took in and delivered in May and June and July. And the thing about the international business, it's very lumpy. So because it's poor project-oriented or longer time, it doesn't have the same dynamics as the shale business. But we are on track with the new cost bases that we have. We do think that there is a destocking even in the Titan side of the business out there. But our goal is, to answer your question shortly, the answer is yes on getting to that breakeven or profit point of view. And I mean, just some things -- I mean, one of the notes that was interesting to me was we got our det cord facility now running. And we have to go through Department of Transportation testing. A lot of different things to get this so we can ship these products all over the place. But even the equipment for that detonation cord line, most of it came from Italy. And we had a lot of delays because of COVID. The technicians that were supposed to be here to set it up couldn't come over, they couldn't travel. We were doing a lot of installation by Zoom. So -- and it just slows things down. But new products offered, like I mentioned in the presentation, cost structure adjusted, I think the business will continue to perform better throughout the rest of the year.
Okay. And then secondly, a couple of questions around working capital, in the same question. Obviously, if I look at your inventory level and of your net cash, nearly the market capital company, if not a bit more. So obviously, the market's suggesting there's a risk to that inventory or you're not going to be making profits going forward. So can you just talk about the inventory? I know you did a small write-down, but you mentioned that write-down was because of obsolescence of equipment. But is there a pricing impact in there? Or are you comfortable with that inventory level at the moment when you start seeing more come back?
I am totally comfortable with that inventory. And when I look at our business this year, Mick, I think it's important to realize that as of March 31 or April 1, we had a growing backlog and order stream. So the graph was going from lower left to upper right at that time. And we were anticipating a good 2020. We have products, for example, in Aberdeen. We ordered 13 chrome tubulars from our supplier and partner in Japan. That's a 9-month lead time. So we were taking deliveries of material. And like for the U.K., it's just like a $14 million impact. We had materials ordered in last summer and those materials were showing up, and then workovers are delayed, programs are delayed, you're stuck with that material. So long story short, inventory needs to be worked down. There's no question about it. But in part of our resilience, we also are there when this thing recovers. And we are -- Rick Bradley and the team will tell you, it's a daily conversation on inventory, but we're also not giving it away either. So I think our inventory is very well positioned. Strategically, we're there to gain market share and profitability at any signs of an upturn. And that's kind of my story on inventory right now. Bruce, do you want to offer or add anything else?
No, I think that you covered it, Jim. In terms of the lead times, certainly for the U.K. of 9 months, and a real focus on converting that to cash from now on in.
Yes. If I look back to 2014, 2015, you released your inventory at this sort of level and you released maybe $130 million. Is that the price of ambition again?
Who knows, Mick? Yes, it would be nice if it was. But I mean, the goal is to get the number down. To go for a specific number, I can't tell you because the product lines and the businesses are different now than what they were. RTI being added on, we're taking on titanium for projects in the Gulf of Mexico. So it's a different product mix, too. So the goal -- can it be that number? Absolutely, but it's going to depend on each business segment, what happens and what are the opportunities to adjust it with.
Our next question comes from the line of Erwan Kerouredan of RBC.
I hope you're all keeping well in this tough environment. So I guess the first question on U.S. onshore. Hunting's logistics footprint was often cited as a key element for Hunting's strategy. And we understand there's been a lot of announcements around like facilities closures. And in the meantime, more positive news with like new technology and product launches. I just want you to clarify how we should think about the leadership U.S. onshore with those 2 aspects, like both the supply chain and the technology. That's my first question.
Well, on the technology side, I still say that we are the leader. I think market share-wise, we are the leader. And the team has done a great job, and we have a great position in that both -- on both sides of it. From the distribution point of view, we're -- we look at this real-time all the time, and we've made some cuts mainly going to the activity levels. And so any place that somebody's drilling, I think, that our distribution -- and I've mentioned before, like an Amazon model. I think our distribution setup is better than any of our peers out there, and we're able to respond quickly. But some of this is just rad good business, rationalizing some things. We had -- if you go back this time a year ago, we had 3 distribution areas basically serving The Rockies. And one of the most startling things that I saw this year was, I think it was in July. In Wyoming, the rig count went to 0 for the first time in 136 years or something like that. Well, we don't need 3 distribution areas around when you have the Bakken and Wyoming in places with no activity. So the good news is when activity comes back in certain areas, we've got the people, the technology and the skills to add those back. So I'm not -- on distribution, we will respond and take care of the market as we need to. Erwan, I hope that answers your questions.
It does. And I guess the second question, can you just clarify the outlook outside U.S. onshore? Obviously, there's a lot of interesting things happening. I remember, when it comes to offshore, like deep-sea proprietary technologies was often cited as a preferred type of activity. This is the first part of the question. And the second part of the question is there's obviously very, very interesting applications for Hunting's high-end manufacturing products outside of oil and gas, including in aviation, military and aerospace and medicine. Where would be the most attractive end market right now outside of oil and gas?
Whichever pays the most money. No, I don't know. The area on the manufacturing side that you've talked about, we take a lot of pride in the fact a lot of the work we do, there's just a handful of people capable worldwide that's doing that. We picked up submarine business in this past quarter, we have products on jet engines. Elon Musk and SpaceX are a customer of ours. So we're very proud of that, the skills that, that shows what the company can do. And our business development and salespeople in Dearborn are always out there, looking for new opportunities, whether it's in natural gas generation, whatever's the deal with. So to say what is best, whatever is high-end manufacturing and not a commodity machine shop work, that's what we're focused on. As far as the offshore market, your question there, we've added some new technologies already with the Enpro product line, with RTI. Acquisition-wise, that's one of the main focuses for the company, is looking at growing the subsea offshore side of the business from a product and proprietary point of view. On the existing businesses, we're continuing to develop new premium connections that were being asked by some majors to look at on like new strange pipe sizes, weights, grades and material. The subsea coupling business is continuing to look at higher -- more higher pressure applications. So I don't know if I'm answering your question right, but overall, we like that space, and we want to grow it.
Our next question comes from the line of Sahar Islam of Goldman Sachs.
Firstly, on the premium frac guns, I was wondering if you could comment a bit on what pricing has done since the pandemic? And also just what the general competitive dynamics are? Because I guess, last year, there was a lot of talk around new entrants and competition increasing there. Has that eased a bit given what the market is doing?
Okay. So you're talking about the premium -- you cut out there for a second. You are talking about the premium gun market? Is that your question?
Yes, for H1.
Okay. Yes, so what we have found on that is like everything else in the oil patch now, my other 3 peers all have, like, I call them smart guns. They all have plug-and-play, those type of guns out there. Fortunately, I don't see a big erosion in pricing. But honestly, I was anticipating this question. It's very hard to get any type of analysis on pricing today for almost any product-related to onshore operations in the U.S., a, because of inventory being dumped, it's just a whole number of factors. It's a very confused marketplace. But at the end, pricing is not going up, I can tell you that at 80 frac fleets out there. But it appears to be stable.
Okay. That's helpful. And then secondly, I mean, we discussed that you obviously have a very strong balance sheet. Are there interesting opportunities out there on the M&A side? And if there are, should we expect more bolt-ons or would you consider doing something bigger if the right opportunity came up?
I think the answer is yes to both. And right now, like saying this 6 months ago, I'm still getting deals and ideas brought by me on a regular basis. Most of them are, today, a lot of them are only land-focused, lack IP or any really competitive advantage in the marketplace and just haven't found anything that made any sense. I think as the stress continues in the industry, and when you look at the bankruptcies, you look at the balance sheets of a lot of people out there, I've been told by some of our banker friends about certain private equity firms ready to get out of businesses, there's going to be opportunities. But for Hunting, it needs to be the right one, it needs to be something, again, that highlights technology, proprietary products and some, hopefully, some synergies within the group. And we're actively looking, but they're just few and far in between right now. And there's still a disconnect, too, for a lot of them on pricing. So anytime somebody comes in and says to me, well, here's what we did in 2014, and here's the hockey stick in 2022. It's immediately garbage to start talking about. So there is -- it's just difficult to put any value on things right now.
Our next question comes from the line of Amy Wong of UBS.
Just a question on -- really appreciate all the discussion about the new products and technologies and the new releases in the first half 2020. If you can help us think about a bit like how do these products -- are they complementary? Do they -- are they additive to your current slate? Are they really more replacement products? And then how to think about the pricing and margin profile as you add these new products and your pipeline into future sales? And help us think a little bit around that.
Okay. Well, if you look at the EFI ControlFire cartridge improvement that we've made, that is a -- it's better on pricing, but it's also -- it's an upgrade to existing technology. So again, we try to -- what I hate doing is being out there and trying to sell us 3 bids and a buy. And if you're a salesman, you want to have some kind of competitive advantage. And I think on the frac side of the business right now, there's really -- it's really 3 different groups out there. You've got a group of clients that really value the uptime that your tools provide, the safety that they provide, the way that they can, the efficiencies and things like that. They're going to be the ones that are going to be buying into the EFI ControlFire cartridge. They are going to pay the margins that we want and off we go as we put that in with the rest of our system. There's a middle ground right now that is trying to buy components and really trying to pick and choose different parts, whether it's guns, charges, switches, whatever. And for them, I think that they are chasing a false value out there. But they also will look at some of these things, again, but they're more on a price point -- price point sensitive. And then on the lower end, there's those guys that are just going to keep using conventional products forever. But so a lot of these, whether it's the EFI ControlFire cartridge, the PowerSet tool, we never made those before. So that is new for us within the last year. And we're very excited about that and it is a very high-margin profitable item that I'm not going to talk about on the conference call. But -- and if you look at our Digital Free Point Tool, the High Side Indicators, these are tools that sell -- they sell for $10,000 to $14,000, $15,000 apiece. So it is higher dollars, it's less commoditized, and that's really a strategy that we want to do within Titan. But if you look at it, many of you toured our facilities, we've always had that segment of the business. So it's really -- some of these are new, and some of these are improvements.
Okay. I'm going to follow-up on the M&A theme as well here, and I maybe try to ask the question a slightly different way. You made 2 acquisitions, still in more -- mostly in upstream recently. The way you're talking about M&A, it still sounds like you're more focused on upstream oil and gas. So I don't really want to put words in your mouth, but is that the right way to think of your direction? Or will you look at acquisitions outside of upstream oil and gas?
I am focused on upstream oil and gas. We have looked at businesses that have diversification that are not 100% oil and gas. So I think companies can make very, very stupid decisions and mistakes chasing green things or chasing diversification into product lines they know nothing about. At the end of the day, the couple of thousand people that are Hunting -- that are at Hunting today, we're an oilfield service company. And yes, we read the same thing everybody else does in green technology. In Southeast Asia, for example, we -- in our Asian facilities, Daniel Tan has done a great job. We're actually making products that use water. They're water -- it's a generator that's basically a -- uses water power to create electricity. So we're working with the company, doing some things along that side. But I don't want to get us out of our core competencies, which is we are great manufacturers, we have great technology for oil and gas. And to go completely and buy, I don't know what, something off the wall, we're just not going to do that. I mean we believe in the energy business long term, oil and gas is going to be here for a long time. We love to buy -- I'd love to buy another example like a Titan -- I mean, I'm sorry, a Titan as well, but as a Dearborn that has some diversification in other industries, but it's just -- we just haven't found anything else that made sense, Amy.
Our next question comes from the line of Mark Wilson of Jefferies.
I'd like to ask about the EBITDA margin progression from here and also the cash. So for instance, you beat your own guidance into the middle of the year. You mentioned that cash has grown $20 million by August. But you also comment that EBITDA has been near to or at breakeven levels since March. So can we just talk about that progression through the year? Because it does appear that you might be doing better from midyear or into.
Yes, well as far as the EBITDA progression, I don't want to make an outlook statement on activity and rig count levels for the next 4 or 5 months because it is very unclear. There's an old saying that one robin doesn't make spring. And so we are seeing signs of things improving. I'm confident that they are. But at the end of the day, it all comes down to activity level. And so I'm going to be cautious on that. The good news, along with that line, though, is also we have reduced our cost basis. So for example, whether it's Titan, whether it's our U.S. manufacturing business, the cost structure that they operate on in August and the numbers that we're going to deliver are going to be better than what they were in June because of the -- again, unfortunately, because of the layoffs, the people reductions, things like that. So Mark, I don't know if I'm answering it clear enough, but that's about all I can say right now.
Our next question comes from the line of James Thompson of JPMorgan.
So just had a question, really, on utilization and kind of your response to COVID. I mean, clearly, you have to shut a few facilities. It's a very difficult market. COVID, as you said yourself, you're a manufacturing business and COVID-19 obviously is making that hard from a sort of cleaning shift perspective. Now I suppose that's made easier by the fact that you probably would have been cutting shifts anyway, given the low level of activity. But I just wanted to understand maybe whether you found a solution for when things do hopefully or inevitably get better, if we do still have the restrictions when facilities are working at 100%. Is that going to be possible when we have these social distancing type restrictions and there's very much a big focus on hygiene, et cetera?
Well, we've always had a good focus on having a clean safe workplace. And I think right now, my answer is we will adapt and do what we have to do to take care of the clients and match our production with the demand. We did have to do a lot of staggered shifts and things like that. That means the good news is, though, at least as far as our U.S. operations, we've been very COVID-free now for a while. So we did have incidences at our facility in Tampa, in Houma, in Sam Houston Parkway, different locations. But I think, for one, the incident rate is falling. And two, like you said, today, we've already reduced shifts because of lack of demand and laid people off, not because -- not just because of COVID. So I think it's the confidence I have in the management team that we will respond to whatever demand needs to be. And that's really all I can offer today as far as comment on that.
Okay. So in a sort of normalized environment, you don't think you need a larger manufacturing footprint just to kind of meet the new guidelines, whatever they might be down the line.
Yes. No, I don't.
Okay. Okay. Fair enough, fair enough. And I just -- obviously, there's been a couple of questions on M&A, so it's obviously on people's minds. But we can all see the data on U.S. activity. You kind of repeated it a couple of times, frac spreads pretty low at this point in time, rig count as of May and the DUC in July, I'll say, given where we are, I mean, how long do you think you can -- the industry, if you like, can go before a meaningful consolidation needs to happen along the different service verticals? I mean the outlook led by CapEx is going to be pretty flat year-over-year, '21 over '20. I mean was that a long enough period of time to drive some very meaningful consolidation in the sales space?
Again, that's a theoretical question that it really depends -- for the oilfield service side, a lot of it depends on when does private equity throw its hands up in the air and say, "Call uncle." It's -- there's a lot of pain out there. And the pain still hasn't been great enough, though, to a big degree. So I'm sure there's conversations going on, but there are still way too many players. There's too many zombie companies out there operating today. And a bunch of them need to go away. So bankruptcy, in some cases, is just -- I think we had FTSI, I think, went bankrupt this week. They're wiping off $700 million worth of debt, and off they go, they're still in business. That's not making it healthy for consolidation. So I don't know what the final answer is going to be to that. It's just going to -- it's still going to take time and it's going to take management teams understanding that they need to -- that there needs to be consolidation because pricing won't improve, those things are all going to be hampered until there's less players.
[Operator Instructions] And it seems we have no further questions on the line. So if I could hand back to our speakers for closing comments.
Okay. Well, I thank you all for participating today. I look forward to the time where I can see you in person and not do this from conference calls. But again, I'm thankful for the organization that I'm a part of, I think we're well positioned for the future. And I look forward to talking to you again later. And with that, I'm done.