26th Jun 2020 09:30
(Alliance News) - Engineering business Weir Group PLC said it continues to expect its oil & gas unit to be cash generative for 2020 due to a successful execution of cost savings and despite a "significant step-down in North American activity levels in second quarter".
The FTSE 250-listed company also said it is continuing to explore options to maximise value for the oil & gas unit at the right time. The company put the division up for sale in January.
Work for engineering companies such as Weir has been sharply reduced or delayed in 2020 by the oil price crash and Covid-19 pandemic. Brent was trading at USD41.28 a barrel on Friday, up from USD40.44 late Thursday. Oil began the year around USD66 a barrel.
Shares in Weir were trading 5.9% higher at 1,093.50 pence each in London.
Weir also completed the refinancing of its main banking facilities, with a syndicate of 12 global banks. These facilities comprise a new USD950 million revolving credit facility which will mature in June 2023, with the option to extend for up to a further two years and a new GBP200 million term loan which will mature in March 2022.
"The margin on the new facilities is slightly higher than current levels reflecting market conditions but remains highly competitive and significantly lower than the group's existing long-term bonds. Covenant terms remain unchanged," Weir said.
The company, in its trading update, also said its Minerals division has continued to show its resilience throughout the pandemic period, with second-quarter after-market orders similar to the first-quarter.
ESCO's ground engaging tools business has been resilient, although it has been hurt by some customers running down ore stockpiles and reduced activity in North American iron ore. US-based ESCO was bought by Weir in 2018 for USD1.29 billion.
Weir is scheduled to release its interim results for the six months to June 30 on July 29.
By Tapan Panchal; [email protected]
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