Weir Gains After Reporting an Improved Forecast for Oil Unit

Weir Group Plc (WEIR), the U.K.’s biggest supplier of pressure pumps, gained the most in a month after saying full-year revenue from its oil and gas division will be better than previously forecast.

“With order momentum picking up in Oil & Gas, we think the division is well positioned for 2014,” Bank of America Merrill Lynch analysts including Alex Toms wrote in a note to clients. “With the stock one of the cheapest in the sector we retain our buy.”

Weir rose as much as 4.4 percent, the biggest intraday increase since June 27. The stock traded 3.7 percent higher at 2,154 pence at 3:39 p.m. in London, giving the company a market value of 4.6 billion pounds ($7 billion).

Full-year revenue from oil and gas will probably be “slightly better” than previous expectations, supported by higher pressure-pumping sales, the Glasgow, Scotland-based company said today in a statement. First-half orders at the minerals division rose from the second-half of last year amid more projects on underused or abandoned land.

Weir, the largest supplier of hydraulic fracturing, or fracking, equipment in the oil industry, boosted after-market sales by 9 percent in the first half compared with the same period a year earlier. The company’s order book grew 13 percent compared to the second half of last year.

Revenue Blips

First-half revenue fell 10 percent to 1.2 billion pounds compared with the same period a year earlier, the company said in the statement. Operating profit, adjusted to exclude exceptional items and intangibles amortization, slid 12 percent compared with the same period a year earlier.

Whether destocking and project delays which hit first-half revenue are “just blips or something more structural” will determine how the company performs after the second half, said Harry Philips, an analyst at Oriel Securities Ltd.

Assuming a continued recovery in the oil and gas division and no further delays in mining markets, Weir should meet “full-year expectations and continue to expect to deliver low single digit revenue growth and broadly stable margins on 2012,” Chief Executive Officer Keith Cochrane told reporters on a conference call.

A U.S. federal antitrust probe into competitors Halliburton Co. (HAL) and Baker Hughes Inc. (BHI) relating to pressure-pumping services, which include fracking, has put the $36 billion industry under increased regulatory pressure. The Justice Department confirmed the probe, and gave no details about what it’s looking into.

To contact the reporter on this story: Alex Pashley in London at apashley@bloomberg.net

To contact the editor responsible for this story: David Risser at drisser@bloomberg.net

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