Further evidence of the toll that the crude oil price slump is having came yesterday with the announcement from Glasgow-based Weir Group that orders from its oil and gas business fell 23% in its first quarter.
Weir, which makes valves and pumps for the energy and mining industries, plans to cut another 125 jobs, mostly in its North American oil and gas business, and to consolidate its service centres in the region.
Keith Cochrane, Chief Executive, explained: “Oil and gas markets were impacted as oil prices remained around 50% lower than the prior year period, leading to significant reductions in activity levels.
“Since the start of 2015, the US oil-directed rig count has fallen by more than 50% and gas-directed rigs have reduced by nearly one-third as E&P companies cut capital spending in response to lower prices.
“These rig count declines were greater than we had planned. There remains limited visibility on when the market will stabilise, with divisional revenues expected to decline further in the second quarter. In response, further efficiency measures are being implemented across the division’s upstream businesses including additional workforce reductions and service centre consolidations, which will deliver annualised savings of £10m.
“The cost reduction actions announced in November and February have largely been completed.”
Peter Ward, dealer at London Capital Group, commented: “Weir shares have consistently found support around £17 following the fall in oil prices last Autumn and have rallied as further belt tightening is planned to help it survive the current oil market slump.”
Meanwhile, Edinburgh-based Cairn Energy is to appoint two new non-executive directors – Keith Lough and Peter Kallos – after hiring a recruitment agency.
Lough is also a non-executive director and chairman of the audit committee of Rockhopper Exploration plc, and a non-executive director at Papua Mining plc. He is also a non-executive director and chairman of the audit committee of the UK Gas and Electricity Markets Authority, which has supervisory responsibility for Ofgem. He was previously finance director of British Energy – the then Edinburgh-based UK nuclear power company. Kallos is currently chief executive at Buried Hill Energy, a UK based oil and gas business with activities in the Caspian Sea.