Tenaris S.a. · MIL:TEN
Tenaris — Investor Presentation (August 2006)
35 slides from Tenaris's investor presentation, August 2006
Slide 1: Investor Presentation August 2006
Investor Presentation August 2006
Slide 2: Disclaimer
Disclaimer This presentation contains “forward-looking statements.” Forward-looking statements are based on management’s current views and assumptions and involve known and unknown risks that could cause actual results, performance or events to differ materially from those expressed or implied by th
Slide 3: A key player in the global energy industry
A key player in the global energy industry • Leading global supplier of oilfield equipment to the oil and gas US$ Billion US$ Million industry 75 2,800 2,400 60 • Leading supplier of welded pipes 2,000 for oil and gas pipelines in South 45 1,600 America 30 1,200 800 15 • Revenues of US$6.7 billion i
Slide 4: Growth driven by oil & gas activity
Growth driven by oil & gas activity Revenue Gross profit 2003 2004 2005 2003 2004 2005 Seamless 2,388 3,273 5,123 856 1,198 2,407 Welded 351 348 845 76 99 289 Energy 333 418 526 17 19 13 Others 108 97 242 23 43 85 Total 3,180 4,136 6,736 972 1,359 2,793 Net sales by segment Gross profit Others Energ
Slide 5: Global operations
Global operations Distribution of seamless Distribution of seamless sales production (2.8 mill tons) volume (2.9 mill tons) 2005 2005 Middle East & Africa Far East & Oceania 18% 8% Europe 30% Europe Far East & Oceania 23% 14% South America 30% South Americ a 15% North America 29% North America 32% I
Slide 6: With worldwide presence
With worldwide presence Investor presentation Tenaris August 2006 6
Slide 7: Integrated business model
Integrated business model • Focus on sales of high value products direct to end-user customer base • Global industrial system producing comprehensive range of products to a single quality standard • Global R&D network • Global supply chain management integrating tubular supply chain from the mill to
Slide 8: Leading market position
Leading market position World seamless OCTG production 2005 market share Others, 7% Tenaris, 19% Japan, 8% US Steel, 8% TPCO, 9% Rest of USA, 4% V&M, 13% Rest of China, 16% TMK, 11% Rest of CIS, 5% Source: Company estimates Investor presentation Tenaris August 2006 8
Slide 9: Demand for oil and gas continues to grow
Demand for oil and gas continues to grow Projected world oil demand Projected world gas demand (Million of barrels per day) (Trillion cubic feet per year) 140 180 160 120 CAGR 1.6% CAGR 2.3% 140 100 120 80 100 80 60 60 40 40 20 20 0 0 2004 2010E 2015E 2020E 2025E 2004 2010E 2015E 2020E 2025E Source:
Slide 10: But worldwide oil production exceeds discoveries
But worldwide oil production exceeds discoveries 60 Billion bbl/year 55 50 45 40 35 30 25 20 15 10 5 0 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 Annual Discoveries Annual Production Source: BP Statistics 2004 Investor presentation Tenaris August 2006 10
Slide 11: Drilling activity is growing faster than production
Drilling activity is growing faster than production International rig count US and Canada rig count (excluding US, Canada, Russia, onshore China) 1000 2000 CAGR 6.8% CAGR 7.8% 900 1800 800 1600 700 1400 600 1200 500 1000 400 800 300 600 200 400 100 200 0 0 2000 2001 2002 2003 2004 2005 2000 2001 200
Slide 12: Rising reserve depletion leads to higher OCTG consumption
Rising reserve depletion leads to higher OCTG consumption Example of a mature basin Oil Gas 125 400 120 350 115 300 110 250 105 200 100 150 95 100 90 85 50 80 0 2002 2003 2004 2005 2002 2003 2004 2005 Production (Mill m3) Drilling (Km) OC TG consumption (Kton) Production (B m3) Drilling (Km) OC TG c
Slide 13: Reserve development to be in complex operating environments
Reserve development to be in complex operating environments Production trend towards non-conventional sources 2003 Oil & Gas production 2010 Oil & Gas production Acid Sour 0% LNG Tight Gas Arctic 6% Tight Gas Acid Sour 3% 4% 0% 3% Deepwater LNG 3% 10% Heavy oil 7% Arctic 6% Deepwater 14% Conventiona
Slide 14: Well complexity drives demand for premium products
Well complexity drives demand for premium products Land Land Offsh. Shallow Water Offshore Deep Water Shallow Well Directional Deep Well Directional Deep Well Deep Well 30” 50 m 9 5/8” 300 m 20” 800 m 18 5/8” 850 m 13 5/8” 1800 m 13 5/8” 1550 m 5 1/2” 1800 m 13 3/8” 3500 m 3200 m 9 5/8” 9 5/8” 3200
Slide 15: Oil and gas E&P capex will increase
Oil and gas E&P capex will increase Capex survey Billion US$ 300 • Oil and gas industry has +21% 253 250 strong cash flow from high oil 209 and gas prices 200 166 150 139 • Reserve replacement and increased well complexity 100 indicate a strong oil service 22 25 50 cycle and substantial increases 62
Slide 16: Meeting rising demand for OCTG ...
Meeting rising demand for OCTG ... 2003 2004 2005 Increase 05/04 Oilfield (OCTG) 44% 46% 53% 24% Pipelines (risers, flowlines, etc) 10% 8% 9% 22% Process & Power Plant 25% 27% 20% -22% Industrial & Automotive 21% 19% 18% 6% Sales volume (K Tons) 2,270 2,646 2,870 8% Seamless pipe apparent consumptio
Slide 17: … and for high-end products
… and for high-end products • Premium connections Tenaris high-end production • Chrome and CRA Thousand tons 700 45% • Special, sour and high collapse 600 High end/Total 40% steel grades (RHS) 35% 500 30% • Offshore risers and flowlines 400 25% 300 20% • Alloy boilers and heat 15% 200 exchangers 10%
Slide 18: Seamless pipe margins growing
Seamless pipe margins growing US$ 2,200 1,200 2,000 USD/b bl 1,800 1,000 1,600 1,400 800 1,200 1,000 600 800 600 400 400 200 0 200 2001 2002 1Q03 2Q03 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 Margin per ton (RHS) Price per ton Cost per ton Investor presentation Tenaris August 2006
Slide 19: Driving financial performance
Driving financial performance Millions of US$ 2003 2004 2005 1H 2006 Net Sales 3,180 4,136 6,736 3,745 Seamless 2,376 3,273 5,124 3,078 Welded 351 348 845 245 Energy 333 418 526 284 Others 120 97 241 139 1 EBITDA 602 899 2,163 1,404 EBITDA margin 19% 22% 32% 37% 3 2 2 Net income 210 785 1,278 891 Ne
Slide 20: Investing in growth and paying dividends
Investing in growth and paying dividends Million US$ 800 700 600 500 400 300 200 100 0 2002 2003 2004 2005 Acquisitions Capex Dividends Investor presentation Tenaris August 2006 20
Slide 21: Investment program to expand high-end capacity
Investment program to expand high-end capacity • New R&D facility in Mexico and expansion of existing facilities in Italy • Expansion of heat treatment capacity • Increase of premium connection manufacturing capacity • New premium connection finishing facility in China • New non-destructive testing
Slide 22: Liquidity of shares has increased
Liquidity of shares has increased Average daily trading Free float shares by market June 2006 Millions of US$ Mexico 2% ADRs 57% 240 Argentina 16% 200 160 120 Italy 25% 80 40 June 2005 Mexico 0 2% 2003 2004 2005 1H06 ADRs 61% New York Milan Buenos Aires Mexico Argentina 29% Italy 8% Investor present
Slide 23: Summary
Summary • A leading global player in the oilfield services and equipment sector • Well positioned to benefit from increased drilling activity and well complexity • Integrated business model and leading market position • Strong financial performance with solid growth prospects • Improved share liquid
Slide 24: Investor presentation Tenaris August 2006
Investor presentation Tenaris August 2006 24
Slide 25: Agreement to acquire Maverick Tubes Corporation
Agreement to acquire Maverick Tubes Corporation
Slide 26: Transaction overview
Transaction overview • Definitive merger agreement to acquire Maverick Tubes - all cash • Total purchase price: US$3,185 million, including net debt • Value per share: US$65 per share • Premium to average share price over past 90 days - 24% • Subject to: – regulatory approvals – majority approval of
Slide 27: Maverick Tube
Maverick Tube • A leading North American producer of welded OCTG and line pipe for use in oil and gas wells • Producer of coiled tubing and umbilicals • Producer of welded pipes for electrical conduits • Operations in United States, Canada and Colombia with annual production capacity of 2 million sh
Slide 28: MVK: operating results
MVK: operating results 2003 2004 2005 1H 2006 Millions of US$ Net Sales 806 1,287 1,785 1,027 Energy 622 954 1,462 876 Electrical Products 184 333 323 151 Operating income 52 289 257 190 EBITDA 74 315 288 210 EBITDA margin 9% 24% 16% 20% EPS 0.55 4.54 4.02 3.10 Investor presentation Tenaris August 2
Slide 29: MVK: selected financial statistics
MVK: selected financial statistics 2003 2004 2005 1H 2006 Millions of US$ Cash & Equivalents 29 35 23 76 Net Debt 149 146 442 423 Net Debt/Total Capitalization 28% 20% 44% 38% ROE (annual) 6% 40% 30% 33% Investor presentation Tenaris August 2006 29
Slide 30: Factors driving demand growth for OCTG products
Factors driving demand growth for OCTG products • Sustained growth in global demand for oil and gas • Supply constraints led by accelerating depletion of mature fields, lack of discoveries of substantial new reserves and increasingly restricted access of the majors to probable and possible reserves
Slide 31: Reflected in North American drilling activity
Reflected in North American drilling activity Rig count 2,000 1,750 455 1,500 365 341 1,250 372 1,000 263 750 1,383 1,156 1,190 500 1,030 830 250 0 2001 2002 2003 2004 2005 USA Canada Source: Spears & Associates, Baker Hughes Investor presentation Tenaris August 2006 31
Slide 32: OCTG market in USA & Canada
OCTG market in USA & Canada 6 5 4 2.6 2.3 3 1.8 2.1 2 1.3 2.5 1 2.0 1.6 1.5 1.1 0 2001 2002 2003 2004 2005 Seamless Welded Source: Preston Pipe, Statistics Canada and Company estimates Investor presentation Tenaris August 2006 32
Slide 33: Strategic rationale
Strategic rationale Complementary market position • Gain substantial access to United States and leading position in North American market commensurate with our global position • Product offering in North America will cover a wide range of applications from onshore shallow wells to complex deepwater
Slide 34: Enhanced company profile
Enhanced company profile Following acquisition of Maverick • Net sales of approx. US$9 billion and 22,500 employees • 20% market share in North American (USA and Canada) OCTG market (5 million tons in 2005) • 30% of net sales in North America (USA and Canada) • Annual production capacity - 3.3 milli
Slide 35: Investor presentation Tenaris August 2006
Investor presentation Tenaris August 2006 35