The following contains
forward looking statements concerning future events. These forward looking
statements are based on current information and assumptions of TMK management
concerning known and unknown risks and uncertainties.
OAO TMK (“TMK” or “the Company”), one of the world’s leading oil and
gas steel pipe suppliers, announces its operational results for the first half
of 2012.
1H 2012
Highlights
·
TMK shipped a total of 2,105 thousand tonnes of steel pipes to customers, a decrease of 2.8% year-on-year. Reduction in total
shipments was primarily due to lower sales volumes in the welded large diameter
pipe (LDP) business. Shipments in the second quarter of 2012 were flat with the
first quarter of 2012.
·
Seamless
pipe shipments grew by 3.2% year-on-year to 1,259 thousand tonnes. Quarter-on-quarter decrease was minimal and stayed at
-0.9%.
·
Welded
pipe shipments fell by 10.6% to 846 thousand tonnes as compared to the first half of 2011
driven by a fall in demand for LDP from Russian consumers. Compared to the first
quarter of 2012, second quarter shipments increased by
1.0%.
·
OCTG total
shipments exceeded the first half of 2011 by 13.9%. Shipments of OCTG increased
by 0.2% quarter-on-quarter
·
Shipments
of premium connections rose to 303 thousand joints, representing a 34.1%
increase over the same period of 2011. Quarter-on-quarter growth was
19.4%.
1H 2012
Summary Results
(thousand
tonnes)
Product
|
2Q
2012
|
1Q
2012
|
Q-o-Q,
%
|
1H
2012
|
1H
2011
|
Y-o-Y,
%
|
Seamless
Pipe
|
626
|
632
|
-0.9%
|
1,259
|
1,220
|
3.2%
|
Welded
Pipe
|
425
|
421
|
1.0%
|
846
|
946
|
-10.6%
|
Total
|
1,051
|
1,053
|
-0.2%
|
2,105
|
2,166
|
-2.8%
|
including
OCTG
|
446
|
445
|
0.2%
|
892
|
783
|
13.9%
|
2Q and 1H
2012 Market Overview and Performance by
Division
Russian Division
According to Company estimates, Russian pipe consumption fell
year-on-year by almost 22% in the first half of 2012. TMK’s Russian division
outperformed the market with a shipment reduction of just 9.5%, down to 1,452
thousand tonnes1. As a result, the Company continued to strengthen
its market position; the Russian division’s share of domestic pipe supplies rose
to 26.4% year-to-date vs. 24.5% for the same period last year. The reduction in
shipments was driven primarily by the continuously shrinking demand for LDP
caused by the completion of a number of major projects and the postponement of
new main pipeline construction projects. In the second quarter 2012, total
shipments remained virtually unchanged against the first quarter of 2012 and
stood at 723 thousand tonnes. TMK’s LDP shipments fell by 43.4% year-on-year and
5.5% quarter-on-quarter. The reduction of TMK’s LDP shipments in relative terms
proved to be much lower than the market average, thus leading to a year-on-year
growth of TMK’s LDP market share in the Russian market by 2%,to
18.5%.
Due to increased oil and gas production in Russia, during the first
half of 2012, TMK’s Russian division added 9.5% and 6.0% to the shipments of its
seamless OCTG and seamless line pipe, respectively. Due to seasonal
fluctuations, these shipments fell quarter-on-quarter by 7.8% and 3.2%,
respectively. In the first half of 2012, the Company’s share in the seamless
OCTG segment went up from 60.5% to 66.0%. Welded line pipe shipments showed a
quarter-on-quarter increase of 32.7% in the second quarter of 2012, as well as a
year-on-year increase of 1.6% in first half of 2012. In the second quarter of
the year, shipments of seamless industrial pipe grew by 4.1% quarter-on-quarter,
but the total seamless industrial pipe shipments of the first half 2012 fell by
22.8% year-on-year due to the observed weakening of the
market.
1 This includes shipments from TMK’s Russian facilities and
TMK-Kaztrubprom to the Russian, CIS and non-CIS markets (excluding the North
American market).
American Division
In the first half of 2012, shipments of tubular products from TMK’s
American division grew by 19.4% year-on-year to 572 thousand tonnes2.
Shipments in the second quarter of 2012 remained flat with the prior quarter and
equaled 286 thousand tonnes.
In the first half 2012, the American division increased shipments of
seamless and welded OCTG by 22.1% and 20.6% year-on-year respectively. The
quarter-on-quarter growth was 17.9% and 10.6% respectively. TMK’s American
division decreased welded line pipe shipments by 50.3% quarter-on-quarter,
primarily due to plant downtime related to the completion of a capital project
in the Wilder, Kentucky facility.
As of June 30, 2012, the Baker Hughes rig count was 1,959 rigs,
representing a 3.9% year-on-year growth. Over 70% of the rig count activity is
horizontal or directional due to continued development of U.S. shale plays.
Likewise, more than 70% of active rigs are now employed in oil drilling due to
relatively stable crude oil prices and continued weakness in gas prices. Even
as rig count activity continues to shift from gas to oil, oil exploration
continues support demand for TMK premium connections.
2 This includes products manufactured by TMK’s Russian and Romanian
facilities and sold on the North American market.
European Division
In the first half of the year, the European market was challenging,
with monthly declines in pipe consumption. The market conditions continued to
worsen in the second quarter of the year when customers became more reserved
about placing new orders. Customers’ orders are irregular as they focus on
maintaining low inventory levels and thus reducing costs. Additionally,
European customers are choosing to purchase lower cost welded products over
similar sized seamless products. Some customers are also holding off on orders,
in anticipation of some price softening. Against this background, pipe
producers observed dropping demand for pipes for the construction, machine
building, automotive and power generation industries.
In spite of this trend, TMK’s European division grew by 9.1%
quarter-on-quarter, shipping 42 thousand tonnes of pipe in the second quarter of
2012. The growth was driven by higher export shipments from TMK’s Romanian
plant. On the whole, in the first six months of 2012, shipments went down by
1.6% year-on-year to 81 thousand tonnes.
Premium Segment
In the first half of 2012, the demand for TMK’s premium connections
continued to grow both in North America and Russia. During the first six months
of the year, TMK shipped 303 thousand premium connections designed by the
Company’s Russian and American plants, representing a 34.1% year-on-year
increase. Shipments in the second quarter of 2012 grew by 19.4%
quarter-on-quarter.
Expanding its technical capacities and the premium product range, in
the second quarter of 2012 TMK shipped casing pipes with ULTRA-FJ™ premium
connections – a product patented by the American division and produced at Orsk
Plant in Russia to Gazprom and Lukoil. In early June, a pipe string that
included TMK’s pipes was successfully run into a well at the Yuzhno-Parusovy
field developed by Gazprom on the Yamal Peninsula.
2012 Outlook
Through the remainder of 2012, the Company expects continuing high
demand for its key products, in particular OCTG and line pipe. The total 2012
shipments are expected to remain flat as compared to 2011 with the increasing
volumes in the seamless segment of TMK’s business. Under these conditions the
Company conservatively expects to maintain its financial results at the 1Q 2012
level.
TMK is a leading global manufacturer and supplier of steel pipes for
the oil and gas industry, operating 24 production sites in the United States,
Russia, Romania and Kazakhstan and two R&D centres in Russia and the USA. In
2011, TMK’s pipe shipments totaled 4.23 million tonnes. The largest share of
TMK’s sales belongs to high margin oil country tubular goods (OCTG), shipped to
customers in 85 countries. TMK delivers its products along with an extensive
package of services in heat treating, protective coating, premium connections
threading, warehousing and pipe repairing.
TMK’s ordinary shares are listed on Russia’s major stock exchange –
MICEX-RTS. Its GDRs are traded on the London Stock Exchange, and its ADRs – on
the OTCQX International Premier trading platform in the U.S.
TMK’s production assets structure:
Ø
Russian division:
·
Volzhsky
Pipe Plant;
·
Seversky Tube Works;
·
Taganrog Metallurgical Works;
·
Sinarsky Pipe Plant;
·
TMK-Kaztrubprom.
|
Ø
American division:
·
11
plants of TMK
IPSCO.
Ø
European division:
·
TMK-ARTROM;
·
TMK-RESITA.
Ø
TMK-INOX;
Ø
TMK-Premium Service;
Ø
TMK Oilfield Services.
|
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