Weir shares rise as HSBC upgrades rating to 'hold' from 'reduce'

Weir Group’s shares rose on Friday after HSBC upgraded the oil and gas services stock to ‘hold’ from ‘reduce’ and raised the target price to 1,150p from 750p.

HSBC said it expects the company to benefit from a pick-up in crude prices in 2017-18.

“We believe 2017-18 will see increased oil and gas activity, which drives our view of oil and gas margin expansion from low levels,” the bank said.

“The company has said a Brent price of $45 for a prolonged period would be enough to kick start North American shale activity. Our HSBC oil and gas team forecasts $60/$75 per barrel as a long term (2017-18).”

Weir on Thursday said it expects first-half profits to be slightly ahead of market expectations, despite a decline in oil and gas activity, supported by cost-cutting and a "resilient" minerals division.

The engineering equipment firm reported a 47% year-on-year fall in orders for its oil and gas division. Original equipment orders dropped 40% while aftermarket orders slid 49%.

Weir said oil and gas markets have continued to slide despite the limited improvement in oil prices since February.

In North America, the division's biggest end market, the US land rig count has fallen by nearly 20% in the past two months. The market expects a 46% reduction in wells drilled in 2016.

Chief executive Keith Cochrane said: "The group remains focused on cost reduction measures which have helped to deliver first-quarter profits slightly ahead of our expectations.

"As a result, we expect first-half profits to be slightly ahead of market expectations. Our full-year expectations remain unchanged, reflecting the slower recovery now anticipated in oil and gas markets."

Shares increased 1.32% to 1,229p at 1101 BST.