Home Business NewsBusiness Industrials giant Weir exits oil and gas

Industrials giant Weir exits oil and gas

by LLB Editor
5th Oct 20 9:23 am

It says something about the low regard in which the oil and gas industry is held by investors that the decision of Glasgow-based engineer Weir to exit the sector is taken so positively.

“In fairness this move had been in the works for a while but has been accelerated as events have overtaken the company,” according to Russ Mould from AJ Bell.

“Weir was a big supplier of equipment such as valves, pumps and compressors to shale operators in North America and, as a result, has seen a big impact from the downturn in activity driven by falling oil prices.

“By exiting oil and gas, Weir is effectively taking a big bet on mining – placing all of its chips in this area because, while oil and gas is a victim of a move away from fossil fuels, mining could benefit.

“Weir clearly expects continued demand for metals in the production of items like renewables infrastructure and electric vehicles.

“The proceeds from the divestment of Weir Oil & Gas to its much larger US counterpart Caterpillar can be funnelled into the mining business.

“However, the relatively modest amount of cash generated by the sale of a business which, as recently as 2018, generated nearly £100 million in profit probably reflects the fact it is being sold at the bottom of the cycle.”

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