Weir Group shares fall despite a rise in US drilling activity in the first quarter

 
Courtney Goldsmith
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Weir Group says it's back on track for a recovery in 2017 (Source: Getty)

Shares in engineering giant Weir Group fell more than three per cent despite like-for-like order input for its oil and gas unit growing 50 per cent in the first quarter.

The figures

In a trading update for the first three months of 2017, the maker of pipes and valves for energy and mining companies said first quarter input is expected to grow 15 per cent overall, driven primarily by increased activity levels in North American oil and gas.

Oil and gas orders rose 50 per cent while minerals aftermarket orders increased 13 per cent.

Flow control orders fell 11 per cent while downstream and power markets continue to be challenging, Weir said.

On a constant currency basis, revenue was in line with expectations and slightly higher than the first quarter of 2016.

Shares in the FTSE 250 company were down 3.21 per cent at 1,988p at the time of publishing.

Why it's interesting

The Scottish pump maker said it was on track for a strong recovery in 2017 after struggling amid the downturn in the commodities market as less profitable oil and mining firms slashed spending.

Output has rocketed in the US, where drillers added oil rigs for a 14th week in a row, extending an 11-month recovery that is expected to boost US shale production in May in the biggest monthly increase in more than two years, energy services firm Baker Hughes said in its latest update.

Weir noted a "significant increase" in North American onshore oil and gas activity over the first quarter, which helped boost oil and gas orders. However, pricing in the market has remained at low levels.

Read more: Peak oil demand is still decades away, says the boss of Saudi Aramco

What Weir Group said

Chief executive Jon Stanton said the mining and oil and gas markets grew in the first quarter, supporting the view the company is at the beginning of a cyclical upturn in its main markets, and he said: "I'm confident the group is well positioned to benefit."

"Assuming commodity prices remain supportive, we continue to anticipate good growth in constant currency revenues and strong cash generation, with full year profits anticipated to be in line with current market expectations and weighted towards the second half."

Read more: 2017 will be another year of low oil discoveries after they plunged in 2016

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