SHARES in Weir Group fell to their lowest levels in more than two years after a broker downgraded the engineering company on concerns over the impact of falling oil prices on its shale gas operations.

Analysts at Exane BNP Paribas cut the target price on Weir Group, which is headed by chief executive Keith Cochrane, from 2400p to 1835p, while also changing its opinion on the stock from outperform to underperform, effectively moving from a buy to a sell.

The downgrade came as a result of the current fall in oil prices and the potential impact on shale operations in North America, where Weir Group is a big supplier of equipment such as valves, pumps and compressors.

The broker suggested a sustained period of low oil prices could see a 25 per cent reduction in the number of rigs being utilised in North America.

In early trading yesterday, Weir Group stock was down by as much as 4.5 per cent, hitting lows not seen since 2012, but it recovered slightly as the day wore on.

In excess of 1.6 million shares, worth somewhere north of £3.4 million, changed hands over the course of yesterday.

The stock ended the day down 80p, or 3.76 per cent, at 2047p.

That knocked £170m off Weir Group's market capitalisation, which closed the day at around £4.37 billion. Weir Group's oil and gas business has a large presence in the shale industry and has been among the strongest performers in the wider company.

Brent crude oil slid to a four-year low of less than $80 per barrel at the end of last week and was trading at between $78 and $79 for most of yesterday.

The falling oil price has prompted fears many companies in the sector will cut their capital spending in the coming year.

So far only a small number have confirmed they will reduce investment,

US-based shale player Denbury Resources has said it plans a 50 per cent cut in its capital spending to around £350m.

Fellow US firm Halcon Resources, based in Texas, has halved its rig intentions for 2015 while Continental Resources, which has its headquarters in Oklahoma City, has also scaled back its intentions.

Earlier this month, Weir Group said it was trading in line with expectations and was on course to hit annual forecasts. Its order input in oil and gas had grown by 40 per cent in the third quarter of the year.

Andrew Neilson, Weir's director of strategy and corporate affairs, said there was strong growth in the pressure pumping and pressure control segments which are both weighted towards shale in North America.

At that time Mr Neilson said: "Globally, everyone is wondering what impact oil price falls will have on investment, be it the North Sea or be it in other geographies such as North America.

"It is too early to really call what impact that will really have. Fortunately for us the business is still very much after market driven for spare parts and services."

Weir Group is already on a £35m cost saving drive which will see 350 jobs cut and five factories close around the world. Included within that is a £10m saving from the oil and gas division.

Analysts at Investec and UBS have previously indicated falling oil and commodity prices could have an impact on trading at Weir Group.