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Weir, Rolls Royce JV Create Integrated Fracking System

Pressure pumping manufacturer Weir Oil & Gas said Monday it is teaming up with a unit of Rolls Royce plc to provide what they claim is the industry's first integrated hydraulic fracturing system, as efficiency moves front and center.

Fort Worth, TX-based Weir Oil is a unit of Scotland's The Weir Group plc, a global engineering giant. In 2011 and 2012 Weir began to beef up its U.S. onshore oilfield services business by acquiring Oklahoma's Mathena Inc., Dallas-based Novatech LLC and Houston's Seaboard Holdings Inc. (see Shale DailyDec. 21, 2012Jan. 27, 2012Nov. 29, 2011). The Rolls-Royce Power Systems subsidiary MTU America, which is working with Weir Oil, provides high-speed engines and propulsion systems for several sectors, including the oil and gas industry.

"Our industry is facing many challenges, but as a business with an almost 150-year history of innovative engineering, we know the importance of accelerating momentum when times are tough," said Weir Oil's Paul Coppinger, divisional managing director "Markets are changing and our industry needs to adapt by becoming even more efficient so that it can fully benefit when markets recover."

At the Offshore Technology Conference (OTC) 2016, which kicked off Monday in Houston, Weir and MTU America said the first product of their new joint venture company EPIX would be a fully integrated power system designed purposely for fracturing. EPIX is headed by CEO Douglas Schwedland.

"The industry is asking for comprehensive solutions that will remain productive in harsher, continuous operation environments, and we are answering with innovations that deliver on all levels, from productivity and efficiency to reduced total cost of ownership," Schwedland said.

Weir is placing a bet on an upturn in the oil and gas business, because recent results have been sharply lower, in line with its peers. Weir Group CEO Keith Cochrane, during a conference call last week to discuss 1Q2016 results, said there was a week-long furlough in March across the North American oil and gas operations. It also cut its North American pressure pumping workforce by 50. However, management remains optimistic about an upturn beginning later this year.

"Our strategy has been focused on maintaining share in these extremely competitive markets," Cochrane said. "And in some segments such as fluid ends, pressure pumping has actually increased share..." But work in U.S. fracturing (fracking) has fallen sharply, he said.

"More broadly, it’s now estimated 70% of the U.S. frack fleet is idle with industry consolidation, including among our customers and competitors a recurring theme," Cochrane said. To provide a sense of the scale of the market contraction, he said the "entire market" for total U.S. land rig equipment has fallen by an estimated 8% from 2014. And it's not only in the United States. "Outside North America, international markets became increasingly challenging with newbuild activity reduced and rising pricing sensitivity across the Middle East," he said.

The continued decline in activity levels "means that while visibility remains low and markets continue to be volatile, a slower than previously anticipated recovery through 2016 is now anticipated, with slightly lower full-year constant currency revenue expectations as a result. Operating margins will also be further impacted by negative operating leverage, although we anticipate revenue and profitability of the division will still improve modestly in the second half."

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