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Capital Markets Day – Tmk Group

Tmk Group · Oct 19, 2015 · 48 slides

Investor presentation from the Shale Experts oil & gas presentation and slide database. Every page is imaged and its text indexed for search across operators, plays, basins and time.

Slides

  1. Capital Markets Day – Tmk Group – slide 1
    TMK CAPITAL MARKETS DAY London October 19, 2015
  2. Capital Markets Day – Tmk Group – slide 2
  3. Capital Markets Day – Tmk Group – slide 3
    Presentation Team Dmitry Pumpyanskiy Sergey Alekseev Piotr Galitzine Vladimir Shmatovich Chairman of the Director for Marketing Chairman, TMK IPSCO Vice President for Strategy Board of Directors and Business Development 4
  4. Capital Markets Day – Tmk Group – slide 4
    Agenda Dmitry Pumpyanskiy, Chairman of the Board of Directors Welcome Sergey Alekseev, Director for Marketing Resilience of the Russian market Piotr Galitzine, Chairman, TMK IPSCO US market update Vladimir Shmatovich, VP for…
  5. Capital Markets Day – Tmk Group – slide 5
  6. Capital Markets Day – Tmk Group – slide 6
    Executive Summary Russian oil production remains profitable, economic returns (IRRs) on drilling a marginal oil well in Russia are higher than 2014. Two main factors behind resilient upstream profitability in Russia:…
  7. Capital Markets Day – Tmk Group – slide 7
    Russian Upstream Oil Sector is More Profitable than Last Year Marginal oil well returns increased in 2015 Russian upstream EBITDA resilience 160 30% 120 Brent = US99/bbl 140 EBITDA margin 15% 25% 100 120 20% 80 100 US US 69.4…
  8. Capital Markets Day – Tmk Group – slide 8
    Russian Oil Production Keeps Growing, Up 1.4% YoY in Sep 2015 Russian total oil output, mmbpd 10.8 10.74 10.70 10.7 10.67 10.62 10.65 10.63 10.67 +1.4% 10.60 10.59 10.62 10.60 10.59 10.6 10.52 10.52 10.50 10.50 10.51 10.50 10.5…
  9. Capital Markets Day – Tmk Group – slide 9
    Russian Drilling Activity is Strong and Growing Russian drilling growth broken down, km Russian drilling activity, km/d 65 6% (7%) 45% 3% (5%) (15%) 60 6% 5% 6% 102% 55 28% 50 +7% 45 10,721 40 9,992 35 30 Rosneft…
  10. Capital Markets Day – Tmk Group – slide 10
    Russian Oil & Gas Market Overview Growing drilling activity (footage) in selected regions 2015E/2014 Russia 7% -11% SEA Middle East 5% -44% NAFTA -50% -40% -30% -20% -10% 0% 10% Increasing depth of Russian wells Source:…
  11. Capital Markets Day – Tmk Group – slide 11
    Shift to Horizontal Drilling Horizontal drilling is increasing in Russia 100% 11% 12% 13% 21% 29% 35% Share of horizontal drilling is constantly 80% growing for the last five years and it drives 60% demand for higher value added…
  12. Capital Markets Day – Tmk Group – slide 12
    Russian Oil Companies Upstream CAPEX is Set to Grow in RUB Terms Cumulative upstream CAPEX budget growth decomposition, RUB trn 1.90 +19% +1% +46% +8% 1.85 +100% +33% 1.80 +23% 1.75 1.70 +32% +22% 1.65 1.9 1.60 1.55 1.50…
  13. Capital Markets Day – Tmk Group – slide 13
    Russian Tube & Pipe Market 12 11 10 Non- 9 Energy Mln tonnes 8 7 6 5 4 Energy 3 2 1 0 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E Source: TMK estimates 1 on the Russian tube & pipe market…
  14. Capital Markets Day – Tmk Group – slide 14
    Strengthening Position on the Domestic Market TMK share of seamless OCTG is growing Seamless OCTG market shares, % 100% 9% 25% 19% 24% 75% 19% 15% 50% 62% 67% 60% 25% 0% 1H 2014 2H 2014 1H 2015 TMK Other local…
  15. Capital Markets Day – Tmk Group – slide 15
    Russian Market Share Positions OCTG 67% Line pipe 64% Industrial pipe 36% SEAMLESS +8% HoH +10% HoH +5% HoH Seamless OCTG for Seamless line pipe for High-margin products for oil and gas oil and gas industrial needs 1 1 2…
  16. Capital Markets Day – Tmk Group – slide 16
    Premium Solutions: TMK UP Series Why do they choose premium in Russia Gas wells When casing is rotated and pushed into place Oil wells with high gas-oil ratio Steam-Assisted Gravity Drained (SAGD) Higher pressure Offshore Lite Series…
  17. Capital Markets Day – Tmk Group – slide 17
    Unique Innovative Solutions for Import Substitution TMK long-term agreement to supply premium products to Gazprom: Long-term agreement up to 2023 Products will be Guaranteed purchase of Gazprom is ready to designed and supplied…
  18. Capital Markets Day – Tmk Group – slide 18
    Oilfield Services Going Beyond Pipe Engineering OCTG threading support and repairs Running services Pipe coating Repair Technical support services and Well well maintenance maintenance Remnant management Supervisory…
  19. Capital Markets Day – Tmk Group – slide 19
    Gazproms Eastern Program Creates Additional Demand LDP demand in Russia, 2012-2018E 3,000 15% 21% 16% 2,500 15% 20% 22% 17% 16% 11% Thousand tonnes 2,000 26% 1,500 31% 30% 1,000 15% 26% 67% 63% 63% 74% 54% 500 54%…
  20. Capital Markets Day – Tmk Group – slide 20
    Gazproms Approach to Access the New Markets Power of Siberia Strong demand for Russian gas in Asia-Pacific countries, primarily China. Gazprom seeks to grow its share of North-East Asia markets to 1015% long-term. Power of…
  21. Capital Markets Day – Tmk Group – slide 21
    Demand for Gas in EU is Growing Nord Stream-2 onshore Gazprom intends to maintain its share on the traditional European markets. Gas imports to the EU are anticipated to grow in the coming decade by nearly 200 billion cubic…
  22. Capital Markets Day – Tmk Group – slide 22
    Playing in the Top League Yuzhno - Kirinskoye gas & condensate field Discovered in 2010 Located in the sea of Okhotsk Water depth: 210-320 meters Operator: Gazprom The field is planned to be commissioned in 2018 TMK packaged…
  23. Capital Markets Day – Tmk Group – slide 23
    Conclusion Russian oil production and drilling activity growing due to favorable tax regime and sharp ruble depreciation. Share of horizontal drilling more than tripled for the last five years. TMK is the leader in the OCTG and…
  24. Capital Markets Day – Tmk Group – slide 24
  25. Capital Markets Day – Tmk Group – slide 25
    Executive Summary Having grown 15% CAGR 2000-2014, crude weakness drove global upstream CAPEX correction by 27% in 2015. The near-term outlook for upstream spending in North America appears challenging in case the oil price stays…
  26. Capital Markets Day – Tmk Group – slide 26
    Global Exploration & Production CAPEX Correction in 2015 Global E&P CAPEX 1,200 111 112 50% 109 98 100 40% 1,000 30% 80 800 20% Growth YoY % 65 62 72 10% US bn 600 55 0% 55 38 400 (10%) 29 29 24 25 (20%) 200…
  27. Capital Markets Day – Tmk Group – slide 27
    2015 Industry Performance Review: A Challenging Year Drop in rig count followed drop in oil prices 2,400 Oil Gas Crude Oil WTI Spot 120 Average number of rigs in 3Q2015 2,000 100 decreased by 5% QoQ and dropped by Crude Oil…
  28. Capital Markets Day – Tmk Group – slide 28
    Impact on US OCTG Demand FY2015 forecast remains unchanged, with OCTG Lower consumption pushed inventory levels to 8.3 consumption expected to drop sharply months in August 2015 7,000 Monthly Absolute Inventory Months of Inventory…
  29. Capital Markets Day – Tmk Group – slide 29
    Price Decline Being Aided by Drop in Raw Material Costs US distributor welded OCTG vs HRC prices US distributor seamless OCTG vs. scrap prices (Monthly Average) (Monthly Average) 2,000 1,000 2,400 800 1,800 Seamless OCTG / tonne…
  30. Capital Markets Day – Tmk Group – slide 30
    Producers Response Cost-cutting is the order of Reduced drill time Water conservation and the day recycling Cost of drilling came down by 20- Reduced the time it takes to drill a Cut overall water use by 12%. 25%. rig down to a low of…
  31. Capital Markets Day – Tmk Group – slide 31
    US Shale Oil Production Costs Decreased Significantly from Pre-Crisis Oil production cost curve pre and post oil crisis snapshot 140 Pre oil crisis production cost curve Post oil crisis production cost curve 120 Breakeven, (Brent…
  32. Capital Markets Day – Tmk Group – slide 32
    Strategy 2020 Profitably growing market share in core seamless, Premium connections and import business, while retrenching welded business to the most efficient mills. Go-to-market model: Sales focus will be on providing broader…
  33. Capital Markets Day – Tmk Group – slide 33
    Integrated Well Solutions: TMK IPSCO, OFSi and TMK Completions Bundling pipe, distribution and services Provide customers with creative solutions by leveraging the strengths of TMK IPSCO, OFSi and TMK Completions. Develop proposals to…
  34. Capital Markets Day – Tmk Group – slide 34
    Brent Price is Expected to Recover to US70-80/bbl levels in 2017-2020 Brent historical and forecasted prices, US/bbl 120 111 112 109 100 100 86 80 80 80 75 74 69 69 78 73 60 70 70 70 59 60 55 58 53 49 40 2011 2012…
  35. Capital Markets Day – Tmk Group – slide 35
    North American E&P CAPEX Double-Digit Growth Likely to Return in 2017 US horizontal rig: rebound in 2017 North American E&P CAPEX 1,400 350 60% 1,200 300 40% 1,000 250 20% Horizontal rig count Growth YoY % 38% 200…
  36. Capital Markets Day – Tmk Group – slide 36
    Conclusion The US demand for OCTG will remain low for the remainder of the year as a result of on-going reduction of drilling volumes. Gradual recovery of the North American pipe market is not expected until 2016, subject to oil…
  37. Capital Markets Day – Tmk Group – slide 37
  38. Capital Markets Day – Tmk Group – slide 38
    Points to Cover Operational and financial overview Working capital improvement Spending discipline Revised CAPEX program Debt repayment as scheduled Key targets and achievements 39
  39. Capital Markets Day – Tmk Group – slide 39
    3Q2015 Operational Results 3Q2015 pipe shipments, QoQ 1,200 977 including: In 3Q2015 TMK shipments increased 962 1,000 by 1.5% QoQ to 977 k tonnes. Thousand tonnes +6% OCTG shipments 800 369 391 350 In 3Q2015, seamless pipe…
  40. Capital Markets Day – Tmk Group – slide 40
    Outstanding Performance of the Russian Division 1H2015 Adj. EBITDA in US Dollars 1H2015 Adj. EBITDA in Rubles 350 +8% 20 +68% 300 16 250 12 US mln RUB bn 200 150 324 18 300 8 100 11 4 50 0 0 1H2014 1H2015 1H 2014 1H…
  41. Capital Markets Day – Tmk Group – slide 41
    Seamless Core to Profitability, While Welded Improve the Mix Sustainable margins 2Q2015 gross profit breakdown 500 27% 30% Other 24% 25% operations SEAMLESS PIPE Gross profit margin, % 25% 1% Gross profit, US mln 400 22%…
  42. Capital Markets Day – Tmk Group – slide 42
    Addressing the Challenges The negative effect is mitigated by Ruble depreciation. Brent and WTI remained at a low level Oil prices during 2015 and demonstrated a 13% Most Russian oil companies are FCF decrease YTD. positive and…
  43. Capital Markets Day – Tmk Group – slide 43
    Optimization of Working Capital Position Working capital position to be optimized 160 In 1H2015, release of working capital in the 120 amount of US91 mln: Improved payment discipline of the 80 150 major clients; Decrease in…
  44. Capital Markets Day – Tmk Group – slide 44
    Ongoing Cost Cutting Program 2015 cost cutting program breakdown Total effect of around US80 mln* 2015 cost cutting program as scheduled: around Volumes and Others; 10% product mix; 75% of the program has already been realized.…
  45. Capital Markets Day – Tmk Group – slide 45
    Revised Capex Program US565 mln Total US565 mln capex program for three years, including approximately US100-120 USmln mln maintenance capex annually. Capex was cut by more than 30% to adjust to current macroeconomic conditions.…
  46. Capital Markets Day – Tmk Group – slide 46
    Commitment to Deleverage Continuous decrease of debt level 3,600 For 9M2015, net repayment of debt 3,000 amounted to around US284 mln. 2,400 US mln Target to achieve 2.5x Net Debt-to- 3,546 3,508 3,223 1,800 * EBITDA…
  47. Capital Markets Day – Tmk Group – slide 47
    Comfortable Debt Maturity Profile Debt maturity profile as of September 30, 2015 As of September 30, 2015, total loan 700 RUR portfolio amounted to US2,761 mln 648 USD based on management accounts compared EUR to US3,148 mln as of…
  48. Capital Markets Day – Tmk Group – slide 48
    Key Targets and Achievements Strategic investment program completed. CAPEX Capex program cut t0 around US600 mln for 2015-2017, which translates to more than 30% decrease compared to initial capex budget. For 9M2015 net repayment…

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