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Will Falling Oil Continue To Crush BHP Billiton plc, Petrofac Limited and Weir Group PLC?

The crashing oil price has had a predictable and well-documented impact on the shares of FTSE 100 majors BP and Royal Dutch Shell. But these aren’t the only victims — far from it.

Metals, Minerals, Oil

Most of us think of BHP Billiton (LSE: BLT) as a mining monolith, but it is an oil and gas producer as well. This has only aggravated its recent slide, which has seen its share price slide an astonishing 50% over the last five years.

Falling energy prices have forced BHP Billiton to cut its exposure to US onshore shale oil and gas, which was becoming increasingly unprofitable at $50 a barrel, while its diminishing conventional offshore oil reserves have further knocked production. It now plans a reduced $2.9bn of petroleum capital expenditure for the 2016 financial year, down 6% from prior guidance of US$3.1bn.

BHP isn’t giving up, however, buying prospective oil acreage in Western Australia and the Western Gulf of Mexico. Chief executive Andrew Mackenzie recently said it remains on track to meet its production targets with $200m less capital investment. Production is one thing, but higher prices are another. Until oil recovers, BHP’s juicy 7.52% yield remains on sticky ground.

Just The Fac, Ma’am

Oil services company Petrofac (LSE: PFC) is available at a tempting valuation of 7.62 times earnings, but experienced investors know this kind of number points to trouble down below. The company’s share price is down 43% over the last five years, yet it has shown signs of life lately, rising nearly 15% in the last month.

Actually, Petrofac got off relatively lightly in the recent crisis, largely due to its focus on the Middle East and Central Asia, where fields are cheaper to build and operate. It has also enjoyed success in winning new business and now has a backlog worth $20.9bn, up £2bn over the last year.

While underlying first-half profits slipped by 4% it should enjoy a second-half uplift, as a number of projects are delivered, while earnings per share are forecast to rise a whopping 174% in 2016. Suddenly, that valuation looks tempting. The yield is decent at 5.1%, covered 2.6 times, and looks more sustainable than many in the sector. It could still do with pricier oil, though.

Uh-Oh, Weir In Trouble

It has been a dismal 12 months for Glasgow-based engineer Weir Group (LSE: WEIR) — its share price has halved during that time. It’s up 10% in the last few days, however, after delivering a less-worse-than-expected trading statement yesterday.

Yes, all major classes of business were down, with oil and gas original equipment falling a whopping 60%, but thanks to hefty cost-cutting, full-year earnings are still on course for consensus estimates. There is always a reward for beating expectations, no matter how low those expectations were. Trading at eight times earnings and yielding 3.71%, some will be tempted.

Weir is still hurting from the plummeting US shale rig count and mining sector retrenchment, as its clients delay investments, slash spending and mothball higher cost mines. Weir responded with £25 million of savings and workforce reductions, but may have to dig even deeper if the Saudi attack on the US shale industry continues.

We all know exactly what these companies need to turn things round. If oil does recover they should fly again. That remains a big ‘if’.

If you think oil has further to fall you might want to look elsewhere on the FTSE 100. There are plenty of promising investments if you know where to look.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Petrofac. The Motley Fool UK has recommended Weir. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.