Weir Group PLC
LSE:WEIR
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
1 759.5
2 218
|
| Price Target |
|
We'll email you a reminder when the closing price reaches GBX.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Weir Group PLC
You don't have any saved screeners yet
Ladies and gentlemen, thank you for standing by, and welcome to The Weir Group PLC Q1 2019 Interim Management Statement Conference Call. [Operator Instructions] I must advise you that this conference is being recorded today, Tuesday, 30th of April 2019.I would now like to hand the conference over to your first speaker today, Mr. Jon Stanton, the CEO of Weir Group. Thank you, and please go ahead, sir.
Thank you, operator, and good morning, ladies and gentlemen, and welcome to today's first quarter update call. I'm joined by our CFO, John Heasley, and we'll be delighted to take any questions you have in a few moments. But first, let me take you through the highlights of the first quarter performance, starting with the group overview. ESCO made a significant contribution to headline gross levels with Minerals also delivering another good performance. In total, orders from continuing operations increased 18% year-on-year as we saw the ongoing benefits of our portfolio changes. Excluding ESCO, orders were 7% lower, principally reflecting the changing conditions in North American oil and gas relative to Q1 last year when we were in the midst of very strong activity as pressure pumpers repaired and refurbished their previously stacked frac fleets. Group revenues were broadly consistent with orders, and we generated a positive book to bill of 1.09, which will support further growth through the balance of the year. Let me now turn to divisional performance, starting with Minerals. Miners continued to be focused on generating cash by increasing the productivity of their current assets and expanding their operations to meet future demand. These themes really played to our strengths. Firstly, we have more engineers on the ground able to help customers solve some of their toughest operating challenges. To many, our technology and equipment are proven and trusted to deliver more ore for a lower total cost and in an increasingly sustainable way. Thirdly, our greatest exposure is to commodities such as copper that have the most attractive long-term prospects. And finally, our aftermarket-sensitive business model ensures we are focused on the best parts of the mining value chain.These themes, alongside our focused approach to maximizing opportunities, have now delivered 10 quarters of order growth for the division. The 3% increase in the first quarter orders includes a 9% increase in aftermarket orders, which was a little ahead of expectation due to a handful of sites placing a full year of orders.We saw good growth in core pump spares across most regions and particularly in Australia, Russia and Eastern Europe. Mill circuit demand was also good, particularly for spools and hoses. Central Africa was weak though with tax changes and operational issues at some customers causing a pause in spares ordering. In non-mining markets, demand from oil sands was also strong with operators anticipating increased activity following the Alberta elections and removal of the production cap. Original equipment orders, which, as you know, tends to be much lumpier in nature, were 10% lower. This included some delays in the few larger project orders, which we fully expect to see coming through a little later in the year. Our integrated solutions strategy continued to make good progress, including a multimillion-pound order for a complete classification system in North Africa. We've also seen an increase in inquiries for our terraflow solution, which can transform wet shavings into a 90% solids paste that can be pumped with our GEHO product line to safe storage or reprocessing facility. And this is an area of increased focus for miners following the tailings dam tragedy in Brazil earlier in the year.Overall, our project pipeline continues to grow and is now at record levels. If we just look at mine developments worth $1 billion or more, we continue to see a possible total investment in the medium term of up to $220 billion, which gives you a sense of the planning miners are undertaking to replace depleting resources and meet future increases in demand.In the shorter term, while the macro environment remains a little opaque, commodity fundamentals and our experience on the ground underpins our view of the positive outlook for mining markets. Therefore, our full year guidance for the division is unchanged. We continue to expect good growth in constant currency revenues and profits with broadly stable operating margins.Let me now turn to ESCO, which is almost entirely aftermarket focused and which benefits from the same structural trends in mining as Minerals. During the first quarter, the business continued to demonstrate its quality with orders up 5% on a reported pro forma basis. It continued to extend its technology leadership in ground engaging tools with the launch of the Nemisys N70 lip system for large mining machines. It's had a good initial reaction from customers who liked that it last longer than competitive offerings and, with its fully mechanical system, makes change acts shorter and safer. We also continued to make good progress on our original 3-year $30 million cost synergy targets with phasing remaining ahead of our initial plan. In the first quarter, we've largely completed functional integrations, and we've built the sales and other infrastructure to deliver our $50 million revenue synergy target. That has already delivered $5 million in initial orders with ESCO benefiting from Minerals customer relationships in Latin America and Minerals' Linatex technology securing a new order to provide linings for a fleet of mining trucks in Northern Europe. We've also invested $15 million in safety and operational enhancements to support future growth. Around 1/3 of ESCO's orders are from infrastructure markets, and these also experienced good growth in demand, particularly in construction in North America. Overall, our full year outlook for revenue and operating profits for ESCO is unchanged with good growth expected in constant currency revenues. Expectations for operating margin progression will be supported by integration synergies alongside ongoing operational improvements.Let me then turn to Oil & Gas where, as expected, the capital and pipeline capacity constraints in North America continued to subdue activity in the first quarter. While oil price has trended up during the period and have accelerated in recent weeks, we saw no sign of an increase in E&P budgets in North America, reflecting operators' focus on free cash flow and a lack of confidence in the sustainability of the current oil price. We are therefore still expecting to see E&P CapEx decline by up to 10%, and we are seeing this play through with U.S. rig count at its lowest level since March 2018 after falling for 3 straight weeks.International markets did see an uptick in quotation activity, leading to modest sequential growth in what remains a highly competitive environment. Divisional orders were 23% lower compared to the same period last year, which included a significant increase in refurbishment and replacement activity as pressure pumpers brought back their cold stacked fleets. Original equipment orders were down only 7% with a reduction in new pumps meaningfully offset by good demand for our large bore simplified frac system, which reduces the complexity and cost of frac site operations. Customer feedback on this new solution has been excellent, and we expect high levels of demand to continue.Aftermarket orders were 28% lower, which also reflects the lack of replacement activity in comparison to early 2018. However, if you strip out the impacts of last year's strong refurbishment activity, underlying aftermarket volumes are broadly as expected for the division. On a sequential basis, the first quarter was also slightly up on the fourth quarter of 2018. [ More ] generally, low frac fleet utilization and weak pressure pumping pricing fed through to the equipment manufacturers. For Weir, this meant pricing was mixed with weakness in certain product lines offset broadly by gains in our largest technology solutions -- latest technology solutions, sorry. While the theme of capital discipline is expected to endure, we also expect capacity constraints in the Permian to gradually reduce. This will help unlock future growth in North America's most prolific oil patch where we have strengthened our position recently with the opening in April of our circa 100,000 square-foot Permian supercenter, providing state-of-the-art pressure pumping and pressure control assembly, repair and testing facilities. Looking ahead, the year is progressing as we anticipated when we set out our planning assumptions in February with WTI averaging $55 per barrel in the first quarter and no material changes to other market drivers. While there has been some improvement in the oil price recently, our customers will want clear evidence of a longer-term sustainable recovery before confidence improves. Therefore, there's no change to our outlook for the full year with divisional operating profit expected to be in the range of GBP 55 million to GBP 95 million.Let me also say a few words on the sale of Flow Control. It is progressing as planned, and we still expect to complete the transaction by the end of the first half. The division had some great momentum in the first quarter with orders up 46%, principally due to strong growth in downstream markets.Finally, a few words on the balance sheet. Net debt at 31st of March 2019, excluding the impact from IFRS 16 lease liability obligations of circa GBP 200 million, were slightly higher than that reported at 31st of December 2018 but in line with normal seasonal patterns. We also expect strong cash generation and further balance sheet deleveraging in 2019.So let me quickly recap the main highlights of the first quarter. The group's performance is in line with expectations. We continue to benefit from our excellent market position in mining with Minerals delivering 10 straight quarters of order growth and ESCO continuing to show its quality. Oil & Gas is navigating some tough market conditions, but it continues to benefit from the strength of its technology and service offering which is well placed to take advantage of North American production growth over the longer term. Finally, there is no change to the group's guidance for the full year. With that, thank you for your time, and John and I would now be delighted to take any questions you have. Back to you, operator.
[Operator Instructions] Our first question comes from the line of Robert Davies.
Yes. I have 2, one was just on the Minerals aftermarket trends. I just wondered if you could flesh out a little more detail. You mentioned some preorders from customers. Perhaps you could quantify the impact within that 9% growth from that effect as well as just give a little more color on some of the underlying trends. And then just on the volatility on the Minerals OE part. Could you just give us some color on where you're seeing orders sort of being pushed out or kind of not coming as quickly as expected? Is there a particular commodity or regional customer? Or what are the reasons that customers are giving you for those delays? That would be great.
Robert, thanks for the question. Yes. So in terms of the aftermarket, obviously, a really strong first quarter, which was quite pleasing to see. I think the specific point in relation to how much was due to the larger sort of one-off orders, it's probably 1 or 2 points of the 9% as a result of that. But the underlying market is very buoyant. By and large, we're seeing the production growth around the world that we were expecting. We're benefiting, as you know, from declining ore grades, and the only real soft spot was Central Africa, which I touched upon in the speech. But elsewhere, conditions were really good and we -- as we talked about last year, continue to push pricing in the aftermarket. And that's continued to be successful. On the original equipment side, yes, I mean it is lumpy, and we've always said that. If you look at the comp, I would start there and just say last year, we did have a lot of dewatering orders come through. There was a big reset in Asia in that space and some big HPGR orders. So it was a tough comp. But the reality is for us, the market, as we see it, is very buoyant. There's a lot of activity going on. The pipeline continues to grow, and we fully expect to see, over the course of the year, sort of double-digit order growth in original equipment that we've been talking about. I think it's just the customer portion that we talked about before means that some of these projects have been a little slower to come through. I think there's probably a little bit of a bottleneck in engineering amongst some of our customers in the engineering houses at the moment, which is also just sort of slowing it down a little bit as well. But for me, it is literally a phasing issue and we fully expect to see the growth over the course of the year. And there's no particular sort of commodity mix in terms of the -- in terms of that order profile. So -- and we've seen a couple of big projects come through in copper and iron ore in the quarter.
And maybe just one follow-up. Just on -- in terms of the current activity you're seeing now between replacement and sort of expansion and upgrade work, how does the balance of your business fit between those different categories at the moment? What are customers telling you their intentions are for the next sort of, I don't know, 6 to 18 months, for example?
The underlying replacement piece continues to be very, very strong after a period of probably underinvestment through the downturn. So to see more customers trying to extract more from their existing operations, drive efficiency, drive throughput continues. So that underlying replacement and maintenance piece is very strong, and it's really the expansion projects, the larger projects, which is to say are more lumpy and will move around. But the real point is that the pipeline is very, very strong, and we have a lot of confidence that it will translate over the course of the year.
Your next question comes from the line of Alexander Virgo.
I wondered if you could talk just a little bit about the way we should think about your order intake converting to revenue through the year. Obviously, I have knowledge that you've left guidance unchanged and that's strong or solid constant currency growth to the full year. I just wondered if you could talk a little bit about the phasing, given what we've seen or what you're seeing in the order intake phasing.
Yes. So it's obviously different for the -- across the divisions. So I'll probably just give a little bit of color on each. If you think about ESCO, high-volume, very short-cycle products, so you look at that 5% order growth in the first quarter, they're [ not broadly ] in line with the revenue guidance that we've given for the division over the year. So I'd expect that to sort of translate 1:1 pretty much. As we look at the Minerals business, again, the revenue guidance for aftermarket is mid-single digit so -- and that's what we'd expect to revert to over the course of the year in terms of the order profile and the fact that we're a bit higher than that in the first quarter is reflective of those full year orders, which will phase over the full year. And the original equipment order, we had a very strong finish to the year, if you remember. And as I said earlier, we're continuing to expect double-digit growth over the course of this year. So that's how we would expect -- that's broadly where we'd expect the revenue growth play over the full year. Oil & Gas, the aftermarket's life is very short cycle. So that's clearly going to play through and is inherent in our guidance for the year. On the OE side, the fact that we had a relatively strong print there in Oil & Gas at the time, just 7%, that actually reflects some of the simplified frac systems that we're selling on a longer lead time. So they will convert over the balance of the year, albeit that we are expecting demand to remain relatively strong for that product line.
Okay. And I guess the H1-H2 weighting is pretty consistent with what you said before as well.
Yes, really no change.
Your next question comes from the line of Max Yates.
Just my first question is on the sort of lumpiness of orders, and I just want to understand. Have you -- some of those orders that maybe slipped from Q1, have we actually seen any of those being booked in April? Or is it more that we'll probably see the Minerals orders in OE have a stronger second half rather than H1 and Q2 perhaps? Just a little bit of color on that would be helpful.
Yes. Thanks, Max. So just to put it in perspective, I would say that GBP 20 million in OE is the difference between minus 10% and plus 10%. So that's literally 3 or 4 medium-sized orders for -- is my starting point. So I just don't want to get too carried away. And yes, so the change in phasing means that some of those orders will come through in Q3 -- Q2 and some a little bit later in the year. But it's a bit of a moving feast at the moment. But as I say, the overall pipeline is very, very strong, and we're very confident in the conversions that we'll see as the year goes on.
Okay. And maybe just secondly on the Oil & Gas side, you talked about orders being slightly up sequentially versus Q4. Could you give any color on how profitability evolved versus Q4? Was there any meaningful change in terms of the EBIT to the Oil & Gas business in the first 3 months?
No. It's where we expect it to be. So if you think about what we said back at the end of February, it was that we expect profitability in the Oil & Gas division in H1 2019 to be broadly consistent with where it was in the second half of last year. And we've really got no change in expectation for that phasing at this point. That means we need to see a ramp up in the second half of the year to hit the midpoint of our range. And so we'll need to see an uptick from where we are today to deliver that.
Okay. That's it -- And just finally on working capital in 2019, obviously, we've had 3 months of the year. You've got an idea, I guess, on deliveries for the rest of the year. So do you think you'll need to see an increase in working capital through the year? Or do you think sort of as you deliver on that backlog, you'll be able to keep working capital flat versus where it was in '18?
Okay. John, do you want to answer that?
Yes. Max, yes, really no change to what we said in February around working capital, which is as we have the expectation of good growth through the year for the business as a whole. And clearly, that will have a demand on working capital, which will likely result in a small cash outflow in the year as a whole. But as ever, we continue to look to drive improvement in the key metrics across inventory turns and receivables days and working capital as a whole as a percentage of sale. So I think still expecting a modest outflow in the year, but looking to move the metrics forward as we always do.
Your next question comes from the line of Jonathan Hurn.
Just a couple of questions for me. Firstly, can you just talk a little bit about Minerals? I think last time you spoke, you said you needed to put some more capacity into the business there for machining and for foundry. Where are we on that? Has that all been added? And is there sort of a one-off cost that we see coming through in the first half, please?
I think there's -- I think when we were talking about potential expansion, that's sort of a little bit down the track. So we are thinking about foundry capacity longer term, but that's really not going to hit our CapEx during the course of 2019. So the place this year where we've got a sort of step-up in CapEx is in ESCO, which is really in relation to the operational upgrades and the safety enhancements that we're putting through, but nothing significant happening in Minerals this year over and above the sort of general level of absolute replacement CapEx that we'd expect to see in the business.
Okay. And so there's no sort of constraints out there or bottlenecks from machining either, would you say?
No. No.
Okay. Second question was just on Oil & Gas, obviously talking about the sort of pickup in profitability, you're looking for pickup in profitability in the second half. I mean can you just give us a feel of the level of overhead under recovery in that business right now, please?
I'm not -- we'll not put a number on that. So I won't sort of get into absolute numbers at this level. But given where aftermarket volumes are today, then we've clearly got some under recoveries running through the business. That's -- the high-volume aftermarket is what really drives the potential for recovery or whatever recovery in the longer term. So that is currently a drag on the profitability today. As I said before, we are not undertaking any radical cost restructuring in the business other than sort of general tight control of overheads because I think we're going to pick up from here. And whilst this -- the visibility for the back half of 2019 is somewhat limited at the moment, I think the mist will begin to clear as we get through the second quarter and we understand how our customers expect the year to play out. But beyond that, I think North American shale is a great place to be, and the potential for growth and value creation is very significant. So we are bearing those under-recoveries at the moment. We don't want to get caught out if the market picks up quickly or more quickly than we're expecting, that we haven't got the capacity to grab that opportunity as soon as it emerges. So we are taking a bit of pain on that at the moment.
Okay. Fine. And just maybe one final one, just in terms of the Oil & Gas international business. Where are we on that right now? Is it all kind of breakeven, I think, from memory or we improved a little bit?
Yes. But if you look at the Pressure Control, at least in the hemisphere business in EMEA and around, it's broadly breakeven. But I would say the first quarter was a little more encouraging in terms of the pickup in activity and project opportunities that we saw coming through. So it should continue to evolve positively from here.
Your next question comes from the line of Jack O'Brien.
First question is just on cost inflation, indeed, the extent to which we should think about that this year and whether you're seeing any labor tightness or if you expect that to be a factor.
For sure, it will be a factor in certain parts of the world but I would say nothing exceptional. Probably the bigger challenge that we're dealing with in inflation is some of the tariffs which are still in place, which we're working to mitigate either by getting exemptions or passing through to customers or swallowing where we need to swallow. So -- in the round across the businesses, we're getting enough pricing through to cover off any cost inflation that we're seeing, but not really any sort of huge hot -- or sort of tight markets at the moment in terms of cost inflation.
And then just on that tariff point, have you sort of communicated the expected sort of impact net -- on a net basis for 2019?
Yes. On a net basis, we're covering it off, and it's clearly inherent in the guidance that we've given.
Okay. And just one final question on Minerals' margins. Obviously, you're expecting broadly stable. You had a terrific start to the year from the aftermarket side. To what extent do you see scope for some margins to actually come through slightly more strongly? And did you see sort of profitability up in 1Q year-on-year?
No. Look, the margins are exactly where we expect them to be at this stage in the cycle. We've been very clear on that. As the OE growth picks up and -- as you know, that has created something of a headwind, but that will be offset because of the volume growth that we'll see and the strength of the aftermarket. So we see the -- we're seeing a headwind because of the margin mix, because OE is expected to grow more strongly this year and we're carrying the cost that we need to operate and win in a project expansion environment, which means we have to have more project management, engineering, sales capability in the business than we would in the down part of the cycle.
Your next question comes from the line of Mark Davies Jones.
The Oil & Gas outlook is obviously unchanged, but the oil price is up quite a bit. I've met your caution around customers believing sustainability of that, of this -- there's still some volatility. But in terms of the moving parts within the Oil & Gas outlook and where we might be surprised, are you already seeing some of those capacity constraints easing? And where are we in terms of the trending comps on that refurb activity? Has that peaked in Q1 last year? Or is it equally strong in Q2? Just trying to see how we might go sequentially from here.
Yes. No, it was strong in Q2 as well. So it's literally the back half of -- last 6 months of '17 and the first 6 months of '18 had that big surge of refurbishment and repair activity going through, and it waned quite strongly in the second half of the year. So it's really Q3 that the comps get a little bit easier, as you say. So that's really how we expect the year to play out. I'm sorry. The second question was, Mark?
Just in terms of customer behavior with that big move-up we've seen in the oil price, how long do we need to see some stability before you actually see that translate into CapEx? Clearly you're right, that they're being very cautious to date, but if we stay up to these levels, you would've thought there might be some easing of constraint.
Yes. I think customers have recent history very much in their minds at the moment. If you think about how last year played out, then the oil price was very strong in the first half of the year and there was a lot of excitement about that continuing and activity levels accelerating as the year went on. And quite quickly, it -- the oil price deteriorated. So I think that the -- they're a little bit stung by that experience. So I think you're going to need a good couple of quarters of elevated oil price and a good outlook in terms of the supply/demand and geopolitical perspective to support that. And clearly, there are both pluses and minuses at the moment on the geopolitical side, and I think customers will kind of wait to see how that plays out over the balance of the year. Clearly, with the pipelines coming on as we get towards the end of the second quarter, we expect that to be a factor in terms of increasing the potential. But it is going to require, frankly, a change in confidence levels from where our customers are today to take advantage of that. So we're just not seeing it yet.
Okay. Great. And one other thing, obviously it's less relevant now, but it's a huge mover, the Flow Control business in terms of orders. Is that just a couple of lumpy things coming on? Or is the downstream market really turning from your perspective?
No. I think the market's -- a couple of factors. I think the market is good at the moment, and so we're benefiting from that. But the work that David, the divisional president, has done to -- which we have been talking about for years, to really improve the front end of the business, go to market with a single sales force in an integrated way, choose our battles, has really paid dividends as well. So it's a mixture of a better market, but also good execution in terms of our growth strategy.
Your next question comes from the line of Lars Brorson.
I have 3, if I could, one in Oil & Gas pricing, one Minerals and the opportunity in tailings dams and one in ESCO synergies. Maybe first, Jon, on Oil & Gas pricing. I think I heard you say pricing mixed. I wonder whether you could help us with a little more granularity on that. I presume it probably means about flattish overall with fluid ends probably lower, but OE and other consumables holding out a bit better. But if you could give us a little sense for -- in terms for what you're seeing right now and also maybe looking forward through the rest of the year. That was difficult to say at this point, but what are you thinking in terms of price and cadence for the remainder of the year? Orders up quarter-over-quarter, and I heard you say acceleration in recent months is obviously great. But it does feel like we need to see not just a pickup in demand but also a decrease, quite frankly, in supply to create a slightly tighter market in the North America pressure pumping market, in particular. So any thoughts on pricing through the year would be helpful.
Yes. So you kind of answered the question for me, Lars. Thank you very much. You're spot on. Fluid ends, as I think you've said, at the end of February is the most competitive product segment at the moment, and that's where Weir Group’s [ a lot of ] capacity at the moment and more challenges. Of course, we're continuing to focus on our technology differentiation, and we'll have more of that coming over the course of the year as we launch some product upgrades. But as of today, particularly with the mindset of our customers, that's a pretty tough market. And as I said in the speech, it's really the latest technology solutions that would bring you to the market where pricing is strongest and more robust. So yes, net-net, we're kind of flat on mark -- on pricing to date, and that's broadly where we expect it to be for the rest of the year. I think you're going to need quite a bit of tightening in the market, as you say, before we get to [ applying ] through the pricing, and it's probably difficult to see that coming through much before the end of the year. But it will be a combination, I think, of -- actually, if the market picks up and we see an increase in completions activity, partly demand driven but also partly on the supply side because attrition is a factor that is playing at the moment and we expect that our customers are working the equipment that is being utilized incredibly hard and probably not spending as much on maintenance or care of that equipment just now, so I think it will remain subdued. As we go through that attrition, that will be also a factor in tightening up the overall market. And therefore, in due course, that will hopefully flow through the pricing.
That's helpful color. Secondly, if I can ask to Minerals. I was intrigued by your comment around tailings dams, and I think you mentioned specifically GEHO pumps, I recall you might see an impact more broadly across your product portfolio. Can you comment on that? And maybe more specifically, are you already seeing an impact right now from the tailings dam disaster, impact that part of your business? And is that part of your optimism for OE orders going forward for the remainder of the year?
Yes. Look, I think it's going to be a -- it's clearly a theme, and I think there's lot of focus from our customers on it at the moment. Difficult to quantify exactly at this point the scale of the opportunity. We're happy working with a couple of customers on specific problem locations where they needed to do something quite quickly, which is encouraging in terms of our ability to demonstrate the capability in the technology. But alongside that, there is a lot of planning work going on, a lot of people thinking about where they are, expansions coming, how tailings are dealt with. And there is a big exercise underway in the industry at the moment, as you will know, in terms of essentially auditing and certifying all of the tailings dams around the world. So as that process works through, we expect to sort of see opportunities arise to help customers fix problems where they're identified.
Understood. And then just thirdly on ESCO synergies. I was a bit late on the call, so sorry if you've already covered it. But are you in a position to firm up the incremental synergies you expect in 2019? I seem to remember a $15 million annual run rate as we exited '18. But what are you expecting just for '19 specifically, please?
Yes. I'll get John to answer that. Do you mind?
Yes. So the $15 million, you're right, Lars, was the run rate as we came out of 2019. You will also remember, I'm sure, that we said we had realized about $6.5 million of that in 2018. So $7.5 million to come in '19, that's dollars, U.S. dollars, based on the run rate at the end of '19. Clearly, we continue to drive forward, and we'll get ahead of that $15 million in terms of run rate by the time that we get through 2019. So the fuel target of $30 million remains. I think we said previously, we'd expect to be at least through the $20 million in terms of run rate by the time we get to the end of 2019 as clearly things get ordered, but tougher to deliver as we move through. Nothing in terms of challenge, but it starts to take a little bit longer after we've had the easier things of central and corporate costs that we're working our way through. So I think that's broadly where we're at from a cost synergy perspective, Lars.
And your last question comes from the line of Ed Maravanyika.
Just had a question on the Oil & Gas space. So just reading through what some of the U.S. oil census companies were talking around, talking around expecting a more moderate growth rate in terms of U.S. shale in the coming years. But then you see sort of larger majors like Exxon, Chevron stepping up their claiming growth profile plans quite aggressively. Where would you sit in that discussion? Do you feel increasing technical challenges and demand for more discipline from investors will maybe slow down shale growth? Or are you more in the Exxon, Chevron camp?
Yes. So that's a great question, Ed, thank you, to finish on. I think certain companies are just talking about moderate growth rates, and others are probably more bullish. So I would say there is a range of views out there. I think the fact that the IOCs are very active now in terms of moving more aggressively into the space and driving consolidation, I think, frankly, is a statement of faith in the long-term potential in North American shale. And I am very much in that camp. There are some more technical difficulties being talked about in terms of can we continue with the efficiencies that we've seen from a drilling and completion perspective. My view is that the industry has been hugely innovative over the years and has solved some very challenging sort of technical recovery problems, and I expect the industry to continue to do that. As one of the engineering and technology providers, I expect us to participate significantly in that. So I think North American -- fundamentally, North American shale is very well positioned on the cost curve. And we expect, over the longer term, that North American production growth will continue to grow strongly.
Thank you. There are no further question at this time. Please continue.
Okay. Well, thank you very much, everybody, for participating. Appreciate the questions, and we'll catch up with you in due course. Thank you very much.