AROUND £170 million was wiped off the stock market value of Weir Group after the engineering giant reported falling orders from the US oil and gas market, sending shares down nearly four per cent.

Glasgow-based Weir said orders from oil and gas customers plunged by 23 per cent in the first quarter of 2019 compared with the same period last year, amid lower demand for the refurbishment and replacement of equipment from North American oilfield services companies. Weir’s oil and gas activity is focused largely on supporting the onshore fracking sector in the Permian Basin, which spans western Texas and south-eastern New Mexico.

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Although oil prices recovered in the first quarter, Weir chief executive Jon Stanton highlighted the impact of “capital and pipeline capacity constraints” over the period, which led to greater caution among oil and gas E&P (exploration and production) in their activity. This was said by the firm to have impacted capital spending and in turn demand for Weir’s pressure pumping and pressure control solutions.

Mr Stanton also said the first quarter of this year suffered in comparison with the opening three months of 2018, highlighting the “absence of the strong levels of first-half refurbishment activity seen last year”.

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However, Weir said the strong contribution from ESCO, the ground-engaging tool supplier to the mining and construction sectors it acquired last year, had helped lift overall first quarter orders by 18 per cent.

Oregon-based ESCO, which was acquired for $1.3 billion and will operate as a new division within Weir, performed ahead of initial expectations, with orders up by 5% on a pro forma basis.

The expansion of ESCO came as Weir reported “good momentum” in mining markets. Its minerals division, which supports the global mining sector, saw orders rise by 3% on the same quarter last year. Aftermarket orders were up 9%, though orders for original equipment dropped by 10%.

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Speaking after the company’s annual meeting in Glasgow, Mr Stanton said the “capital constraints” facing US shale operators are a reflection of external investors saying they have not generated sufficient returns from the investment made in the last few years.

Noting that the current expectation of investors towards shale is for operators to “live within your own means”, Mr Stanton said: “The capital markets are closed to these guys and that is providing a constraint.

“The oil price increasing is positive, because that means they will generate more cash and do more, but for the time being at least the sector is quite unloved by the capital markets, and the investment is not available.”

Asked whether he sees the capital constraints as a short-term phenomenon, he said: “I think it is likely to continue throughout 2019. I think the industry needs to demonstrate discipline, and restore belief and trust from capital markets.

“We need a good oil price[and] a good gas price to ensure that activity is strong. But fundamentally I would step back and say North American shale is actually in a really good place over the long term. There are huge resources available.

“It’s pretty low on the cost curve. The industry just needs to demonstrate it can make money and deliver a return to investors, which it will do over time.”

Mr Stanton used part of a presentation to shareholders to illustrate technology being developed by Weir to boost the sustainability of the projects it supports.

Asked whether recent climate change protests have led the company to focus more on the environment, he said Weir’s “momentum has been growing” in this area in recent years. Mr Stanton said: “When I became CEO in 2016, we knew that we needed to do more to demonstrate that what we did enabled our customers to operate more sustainably, use less energy and less water, and cut their own emissions. We are very focused on that… and it’s really getting momentum. Our technology pipeline is very much focused on those drivers.”

Asked whether the company would look to make further acquisitions, he said the short-term focus will be on delivering the ESCO integration and completing the complex process of carving out Weir’s Flow Control division, which has been sold to global private equity firm First Reserve for £275m.

The extrication of Flow Control, which provides pumps and valves to the power, industrial and downstream oil and gas sectors, is expected to be completed in the second quarter.

Mr Stanton said: “That’s keeping us very busy at the moment, but inevitably we will then turn our attention to what next. Particularly on the mining equipment side we have got a lot of ideas in terms of how we’d like to take the portfolio forward.”

Meanwhile, Mr Stanton was relaxed about the impact which restrictions on immigration arising from Brexit will have on Weir.

He said Weir will simply “go elsewhere” for talent if the “UK does shoot itself in the foot”, highlighting its close ties with universities around the world and the strength of its  engineering workforce in countries like India.

John Moore at stockbroker Brewin Dolphin, said: “Weir Group has had a good start to 2019 and a great deal of that can be put down to the smooth integration of ESCO. While oil and gas orders fell nearly a quarter on 2018, the mining division is performing beyond expectations.”

All resolutions passed at the AGM were passed.

Shares in Weir closed down 3.74%, or 64.5p, at 1,659.5p.