NEARLY £400 million was wiped off the stock market value of Weir Group after the Glasgow engineering giant revealed profits had dropped by more than one-fifth amid the oil and gas industry slump.

Weir, which has a big exposure to the US shale gas market, cited the “severe” oil and gas downturn as it reported pre-tax profits of £170m for 2016, down from £219m the year before. Investors sent shares tumbling by nine per cent, closing the day at 1,842p.

The results came a day after Wood Group reported a 62 per cent slump in profits, denting hopes of a nascent recovery in the North Sea.

Weir chief executive Jon Stanton, who succeeded Keith Cochrane in October, said weak oil and commodity prices meant 2016 was a challenging year for the business. But he said trading in the US rebounded in the fourth quarter as crude prices began to recover. The price of Brent crude was trading at $55.8 per barrel last night, having dipped below $29 at the start of 2016.

Mr Stanton said: “[The year] started in quite challenging circumstances with very weak oil prices and commodity prices. Clearly that improved through the course of the year, and we saw that playing though into improved trading conditions in the minerals and oil and gas business.

“We did a really good job on cash generation and managing the balance sheet throughout a very tough downturn.”

Weir’s oil and gas division and has made an operating loss of £9m, as depressed activity saw the rig count in the US drop from a high of 1,900 in 2014 to as low as 380 in May – a post-war low.

That came as the company saw revenue generated from oil and gas operations fall to £401m from £541m.

But Mr Stanton noted trading picked up as the year progressed as the oil price recovered, and rig count bounced back to more than 700. He said that Weir’s oil and gas division had generated £47m of cash throughout the period, describing that as a “real highlight”.

The company, which reported a two per cent fall in total revenue to £1.86 billion, said it generated £293m of cash from all operations during the year.

Mr Stanton said: “Clearly, as we went through the year we saw a recovery both in the oil price and metal commodity prices as well. That played through the strong recovery in the rig count in the US.

“We are still a long way off the peak, but it is very encouraging in terms of the activity signs we are seeing. Across the two main businesses – minerals and oil and gas – we’ve got more optimism coming through about the trading environment. Provided commodity prices remain supportive, that is going to see us make good progress in 2017.”

Underlying its improving fortunes as the period progressed, Weir said it had seen a 10 per cent uptake in order growth in the fourth quarter in its main oil and gas and minerals divisions.

Weir laid off a further 500 staff during the year, largely as a result of restructuring in its minerals division. It has cut 2,000 from its oil and gas headcount since the crude price fall took hold in 2014. Mr Stanton said it had commenced hiring again in pressure pumping the fourth quarter.

Asked if Weir was more positive in its outlook for the oil and gas industry than it was a year ago, Mr Stanton pointed out the firm had made a loss in the first three quarters of 2016 before breaking even in the final quarter of the year and returning to the black “modestly” in January.

That has come as the rig count, general trading activity and business volumes have steadily recovered, he said. Mr Stanton added: “Assuming the rig count continues to modestly grow, we will see good strong growth in our oil and gas revenues for 2017, and a flow through to the bottom line and a good improvement in profitability as well.”

However, he said the prices it can achieve are down by 20 per cent to 25 per cent compared with before the downturn, and pointed to the challenge brought by excess capacity in the sector. “It’s going to take a while for the market to tighten and for that pricing to come back,” he said.

Asked for his views on Donald Trump, Mr Stanton limited his remarks to the positive noises made by the President about the oil and gas and coal sectors and investing in infrastructure ahead of the election. “If that plays through into policy then that could be a positive for us,” he said. “I’m just focused on the recovery at the moment. There is a lot going on politically but for us it is about the economics of the recovery and making sure we are completely prepared to take advantage of that.”

Mr Stanton said it was too early to comment on the effects of Brexit and the prospect of a second referendum on Scottish independence.