Shale oil drilling rig

Weir group reports boom in shale oil and gas

Weir Group has said the shale oil and gas industry is starting to pick up pace around the world.

The British pumps and valves maker has posted a 34 per cent rise in 2011 profit that was at the top end of expectations, and said the industry was picking up pace in countries like Poland, Argentina and China after a boom in the US.

Weir Group last year twice upgraded its profit guidance due to rapid growth in drilling for rock-trapped hydrocarbon reserves in the United States.

"We are seeing the internationalisation of shale really starting to move forward. It is probably moving forward a bit quicker than we thought," chief executive Keith Cochrane said.

However, Weir disappointed some analysts by sticking with existing profit expectations for 2012, which would suggest more modest progress after an exceptionally strong 2011.

"There is more caution on their oil and gas division where there's no particular disaster, it's just them saying that the growth rates are going to tail off from the very heady rates they've seen in previous years," Investec analyst Chris Dyett said.

Profits in Weir's oil and gas division soared 61 per cent last year compared to 2010.

Weir said oil and gas customers would order less new equipment in 2012 but that lower orders would be partially offset by strength in its repairing and servicing business, the so-called aftermarket.

"Our upstream business grew ahead of our expectations in 2011. We're guiding that in 2012, we expect it to be somewhat ahead of our previous expectations, and if anything, the market is growing faster than we previously expected, driven by oil," Cochrane told reporters, shrugging off concerns that weak U.S. gas prices were impacting the business.

U.S. gas prices have been under pressure for the past couple of years because a production glut, caused in large part by shale development, and reached a 10-year low in January, causing some shale firms to cut back production.

The Glasgow, Scotland-based firm, whose heavy-duty pumps are used by shale producers to force water and chemicals into the ground to fracture rocks and pump out oil and gas, posted a 34 percent rise in 2011 pretax profit to £396 million pounds, compared with a forecast for 381 million in a Thomson Reuters I/B/E/S poll.

Weir, whose pumps are also used by miners extracting copper and iron ore, said it was confident that demand from mining customers would remain robust in 2012.

The company added it was asking for a review of an Australian regulator's decision after being dealt a blow in a takeover battle on Tuesday, when the country's Takeover Panel ruled in favour of a bid by rival suitor, Danish group FLSmidth , for mining equipment firm Ludowici.

"We will review the position once that process is complete," said Cochrane, declining to comment on whether Weir would try to trump the Danish company's offer.

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