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TMK CAPITAL MARKETS DAY
London
October 30, 2017
2
Disclaimer
No representation or warranty (express or implied) is made as to, and no reliance should be placed on, the
fairness, accuracy or completeness of the information contained herein and, accordingly, none of the
Company, or any of its shareholders or subsidiaries or any of such person's officers or employees accepts
any liability whatsoever arising directly or indirectly from the use of this presentation.
This presentation contains certain forward-looking statements that involve known and unknown risks,
uncertainties and other factors which may cause the Company's actual results, performance or
achievements to be materially different from any future results, performance or achievements expressed or
implied by such forward-looking statements. PAO TMK does not undertake any responsibility to update
these forward-looking statements, whether as a result of new information, future events or otherwise.
This presentation contains statistics and other data on PAO TMK’s industry, including market share
information, that have been derived from both third party sources and from internal sources. Market statistics
and industry data are subject to uncertainty and are not necessarily reflective of market conditions. Market
statistics and industry data that are derived from third party sources have not been independently verified by
PAO TMK. Market statistics and industry data that have been derived in whole or in part from internal
sources have not been verified by third party sources and PAO TMK cannot guarantee that a third party
would obtain or generate the same results.
TMK Strategy Update
Vladimir Shmatovich
Vice President for Strategy and
Business Development
Alexander Pumpyanskiy
Member of the Board of Directors
4
Market Fundamentals
Primary energy consumption by fuel
Oil and gas consumption will increase in absolute terms, with the share of natural gas consumption
growing at a faster rate, driven by the growth in the global economy
Demand for high-tech tubular products for hydrocarbon production and transportation will increase
driven by the growing complexity of production conditions and accelerated growth in gas production
Shares of primary energy
0
2
4
6
8
10
12
14
16
18
1990 1995 2000 2005 2010 2015 2020E 2025E 2030E 2035E
Renewables
Hydro
Nuclear
Coal
Gas
Oil
Billion toe*
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
1990 1995 2000 2005 2010 2015 2020E 2025E 2030E 2035E
Oil
Gas
Coal
Renewables
Nuclear
Hydro
Source: BP Energy Outlook 2017
Note: * - tonnes oil equivalent
47 51 56 59 56 62 7075
10%12% 13%
20%
28%33% 36%
40%
0%
10%
20%
30%
40%
50%
0
50
100
150
2010 2011 2012 2013 2014 2015 2016 9M17
km
/d
Total drilling % of horizontal drilling (RHS)
5
Growing Drilling Activity and OCTG Market Demand in RussiaOCTG market demand fundamentals supportive of continuing growth(1) Key considerations
1.0
1.2
1.4
1.6
1.8
2.0
2.2
0
4
8
12
16
20
24
282
00
5
200
6
2007
200
8
200
9
201
0
201
1
201
2
201
3
201
4
201
5
201
6
Tonnes
(mln
)
Mete
rs (
mln
)
Meters drilled (LHS) OCTG demand (RHS)
Increased drilling in Russia, which has demonstrated a
strong 6.9% CAGR between 2010 and 2016 despite the
agreement with OPEC, with OCTG demand having
increased at 2.0% CAGR over the same period(1)
OCTG pipe demand is expected to continue to increase in
line with drilling volumes, based on strong historical
correlation
Increased share of horizontal drilling from 10% to 40%
between 2010 - 9M2017(1) due to the application of
sophisticated technologies to stem the decline in production
Increased footage growth in Russia by 13% YoY in 2016,
according to Russia’s Ministry of Energy
Russian drilling activity is strong and growing
Source: CDU TEK
(1) According to CDU TEK
6
U.S. OCTG Market Stabilization
Source: Baker Hughes, EIA
0
30
60
90
120
0
600
1,200
1,800
2,400
Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17
Directional Horizontal Vertical WTI
U.S. active rig count by type of drillingU
.S.rig c
ount
Cru
de o
ilprice (
U.S
.$/b
bl)
Key considerations
Greater oil price stability has contributed to an
increase in 2017 exploration and production
capital expenditures by E&P operators in North
America compared to 2016
Increased land rig count in the United States,
up 130% from 404 rigs as at mid-May 2016 to
940 rigs as at September 2017, while the
amount of rigs used for horizontal drilling has
continued to increase
Higher share of horizontal and directional
drilling, reaching 93% in October 2017 vs. 69%
in early 2012 and more than doubling for the
last 10 years
OCTG consumption per rig per month has
more than doubled since January 2012 driven
by increased lateral lengths and greater drilling
complexity
Source: Preston Pipe & Tube Report, Baker Hughes
U.S
.rig c
ount
Consum
ption p
er
rig
(t/m
onth
)
200
250
300
350
400
450
500
550
0
500
1,000
1,500
2,000
2,500
Jan-13 Sep-13 May-14 Jan-15 Sep-15 May-16 Jan-17 Sep-17
US rig count (LHS)
Consumption per rig (tonnes/month) (RHS)
U.S. OCTG consumption per rig
7
TMK’s Home Market is One of the Lowest Cost Oil Producing Regions
Russian development drilling activity is strong and growing
Even with oil at 5 year lows, the low cost Russian and Caspian region is able to remain profitable unlike themajority of its international counterparts. In 2015 and 2016, Russia was the only region globally to maintainhealthy drilling activity and stable OCTG demand.
Source: IEA World Energy Outlook; EIA International Energy Outlook; EIA Annual Energy Outlook; Morgan Stanley
Notes: (1) Breakeven price assumes a 10% return, and NPV of zero; *includes Azerbaijan, Kazakhstan, Turkmenistan and Uzbekistan; (2) Enhanced oil recovery; (3) Deep Water
4020 60
Eu
rop
e
Asia
Conv.
Asia DW(3)
Gas to Liquid
Coal to Liquid
NA
conv.
Aus. and Pacific
EO
R(2
)
Arc
tic
Ca
na
dia
n
Oil
Sa
nd
s
VZ
extr
a h
eavy
NA
DW
(3)
Eagle
Ford
Permian tight
Bakken
SA
DW
(3)
(prim
arily
Bra
zil)
Production (MBD)
September 2017 Brent price
Afr
ica
Off
sh
ore
OPEC, Middle East and AfricaRussia,
Caspian region*
Asia
conv.
S.
Am
erica
(No
n-O
PE
C)
Bre
akeven p
rice (
U.S
.$/B
oe)(
1)
Low-cost supply completely in the money at current Brent price
Brent Crude 5 Year Low
0
25
50
75
100
125
80
8
Strategic Objectives 2018-2022
The Company looks at its strategic development until 2027 over two horizons
Horizon I (2018–2022)
1. Sustain position as a well-established supplier in the global OCTG market and the
leader in the domestic OCTG market, which offers growth potential in a low-oil-
price environment:
− Dominate the Russian OCTG and line pipe markets;
− Remain in the TOP 3 leading OCTG producers in the USA.
2. Consolidate position in the TOP 2 global leaders by financial performance
3. Reduce leverage
4. Maximize operating cash flow, optimize the asset portfolio
5. Enhance the level of safety of our employees
6. Improve environmental protection across TMK’s production facilities in the
regions, in which the Company operates
7. Develop a service offering of comprehensive design solutions for customers using
cutting-edge digital technologies
9
Strategic Goals and Priorities
Str
ate
gic
goals
Investment appeal
Industry leadership
Adaptation to a low-oil-price
environment
Participation in industry
consolidation
Str
ate
gic
priori
ties
Enhance leadership in key segments
and enter new product niches
Optimise vertical integration to
reduce costs and develop product and
service range
Enhance the sales platform and
leverage TMK’s global scale
Focus on innovation and digitalisation
Enhance operational excellence
Strengthen financial performance and
investment appeal
10
Enhance Leadership in Key Segments and Enter New ProductNichesTMK premium product offering Strategic options and alliances
Increase the share of high-tech products
in the Russian division’s revenue to 50%
by 2022 and maintain a leading position
in the Russian market for premium
connections
Ensure generation of $100 million of
additional annual revenue from new
innovative products in the Russian
division
Expand presence in the OCTG and line
pipe in Russia and the USA leveraging
the existing capacity, or newly
commissioned capacities, including those
built in partnerships
Source: TMK estimates, based on preliminary 9M2017 numbers
Lite
Series
Classic
Series
Pro Series Torq Series
• Onshore/offshore
• Sour gas
• Thermal
• Arctic
• Horizontal and extended
reach
• Drilling with casing
• Steam-Assisted Gravity
Drainage (SAGD)
• Connections are available
with GreenWell environment
friendly technology
Leading market position in premium connections in Russia
TMK
Others19%
81% of premium
OCTG market
11
Optimise Vertical Integration to Reduce Costs and DevelopProduct and Service Range (1/2)
Development plans
Secure stable supplies of flat-rolled products to
TMK’s facilities for welded OCTG and line pipe
production (incl. Russian division) through
alliances
Increase capacity utilization of steelmaking
facilities through higher production volumes of
steel billets and other products, and maximize
the financial impact
Expand presence in further processing of
tubular products (drill pipe, coating)
Use alliances and acquisitions to enter niche
markets that are new to the Company
12
Development plans
Develop a service offering of ready-to-use comprehensive engineering solutions for customers, including
through adoption of cutting-edge digital technologies, to promote TMK’s high-tech products (example, the
Eternal Well project)
Develop inventory management service
Eternal Well project
SALES
DIVISION
1.
Technical
education
2.
Technical
support and
maintenance
3.
Well engineering
and material
selection
4.
Development
and
qualifications
5.
Packaged supply
of TTMS
6.
Inventory
management
7.
Coordination of
rig operations.
Field service
8.
Accessories,
equipment, well
completion
Through applying new engineering approaches to the
construction and repair of injection wells, customers can
increase operational reliability, release wells from their
dormant stock, improve the efficiency of agent injection
into the seam and the quality of field development
management
TMK engineering service offering
Injection well
Exploitation well
Exploitation well
Compressor station
Optimise Vertical Integration to Reduce Costs and DevelopProduct and Service Range (2/2)
13
Enhance the Sales Platform and Leverage TMK’s Global Scale (1/2)
Development plans
Expand commercial footprint of TMK’s products and services through improved coordination between
divisions, more active development of existing brands, and strengthening of the Company’s global sales
network
Accelerate best practice sharing processes to improve operations across regional divisions
MANAGEMENT
PRODUCTION
SALES
OIL AND GAS SERVICES
RESEARCH & DEVELOPMENT
THE COMPANY OPERATES MORE THAN 30 PRODUCTION SITES IN RUSSIA,Inter-divisional cooperation
OCTG and line pipe
Industrial pipe
Steel billet
14
Enhance the Sales Platform and Leverage TMK’s Global Scale (2/2)
Development plans
Develop strategic partnerships with major customers
(Rosneft, Gazprom) and global consumers:
− In June 2017, TMK and Rosneft signed a 5.5-
year contract for the supply of more than 3.5 mln
tonnes of casing and tubing pipes. The contract
is based on the price escalation formula
− Under the «Future Thing» long-term agreement
with Gazprom, TMK designs, develops and
produces tubular goods under Gazprom’s
specifications. This includes supplies of high-
strength and specialised pipes with TMK UP
premium threaded connections from carbon
steel and alloyed steel and special alloys for
operation in challenging environments
Focus on offering products that have a global
market and stable demand outlook, i.e. high-tech
seamless pipes and premium connections
Develop export supplies from the Russian facilities
while having flexibility to refocuse them depending
on macroeconomic and geopolitical environment
15
Focus on Innovation and DigitalisationDevelopment plans
Develop e-commerce across all divisions via TMK eTrade, the first tubular goods Internet shop in Russia
Via TMK eTrade customers in Russia can quickly and easily place orders for pipes from any of TMK's
Russian plants, track their orders, calculate the delivery cost and obtain required documentation
Use cutting-edge digital technology (Big Data, Industrial Internet of Things (IIoT), machine vision,
3D printing, blockchain etc.) to improve product quality and cut costs
VIPGUEST USER
Availability
Warehouse
Production order
Delivery
16
Enhance Operational Excellence
Development plans
Foster a culture of continuous operational
improvements, lean production and production
cost cutting
Ensure consistent product quality through
increasing the sustainability of technologies
and personnel qualification
Enhance occupational health and safety level
Remain committed to high environmental
standards
Consistently reduce the carbon footprint of
products through improved energy efficiency
17
Strengthen Financial Performance and Investment Appeal
Maximize
operating cash flow
Monetize international assets,
strategic alliances and joint
ventures in all regions of
presence
Reduce leverage to
3.0x Net Debt / EBITDA
as of FY 2019
Reduce leverage to
2.5x Net Debt / EBITDA
as of FY 2021
18
Strategic Objectives 2023-2027
Horizon II (2023–2027)
Enhance global leadership through:
1. Deepen long term partnerships with key consumers and jointly enter into
new oil and gas producing regions
2. Further optimise and expand capacity, including through participation in
the consolidation of the global pipe industry using alliances, partnerships
and acquisitions
3. Adopt breakthrough digital technology and services, including Big Data,
which will be trasformed into one of the key drivers of the Company’s
growth
Russian Market Update:
Focus on High-Value Products
Sergey Alekseev
Director for Marketing
Oil Production in Russia Remains Strong…
20
Oil production remains well above 10.5 MMbpd whilst adhering to the agreement with OPEC …
Source: Interfax, Info TEK
Source: Interfax, Info TEK, Spears & Associates, TMK estimates
Russian total oil output, MMbpd
10.4
10.7
11.0
11.3
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2015 2016 2017
…However OCTG demand is growing supported by existing level of production and development of
greenfields
1.0
1.4
1.8
2.2
2.6
3.0
3.4
0
4
8
12
16
20
24
28
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E
To
nn
es
(mln
)
Me
ters
(m
ln)
Meters drilled (LHS) OCTG demand (RHS)
… However There are Changes to its Composition …
21
Source: Interfax, Info TEK, TMK estimates
… is accompanied by the development of
greenfield projects …Gradual stagnation of oil production from
brownfields …
… Albeit the quality of Russian reserves continues to slowly deteriorate
Brownfields production, MMbpd Greenfields production, MMbpd
Watercut, % Average well depth, km
Source: Interfax, Info TEK Source: Interfax, Info TEK
Source: Interfax, Info TEK
0
2
4
6
8
10
2011 2012 2013 2014 2015 2016
0
0.4
0.8
1.2
1.6
2
2011 2012 2013 2014 2015 2016
85%
86%
87%
88%
89%
'11 '12 '13 '14 '15 '16
New wells
0%
20%
40%
60%
80%
'11 '12 '13 '14 '15 '16
Old wells
2.4
2.9
3.4
3.9
2011 2012 2013 2014 2015 2016
Development Exploration Horizontal
0
8
16
24
32
2011 2012 2013 2014 2015 2016 9M2017
…Creating Long-term Demand for High-End Oil & Field Services
22
Source: Interfax, Info TEK
Russian drilling activity keeps growing …
… with strong demand for advanced oil field services fueled by EOR activity at brownfields
Russian drilling, kmpd 9M2017 Russian drilling growth broken down, km
Horizontal drilling, kmpd Sidetracking progress (# of operations)
Source: RPI 2017
Source: Interfax, Info TEK Source: Interfax, Info TEK
12%13%
20%
28%
33%36%
40%
Share of horizontal drilling
1,000
2,200
3,400
2011 2012 2013 2014 2015 2016 2017E
0
8
16
24
32
2011 2012 2013 2014 2015 2016 9M2017
18,728
20,534(6%)
(3%)
24%
20% 1% 1%
9M2016 Rosneft Lukoil SurgutNG Tatneft GPN Other 9M2017
Attractive Portfolio of Premium OCTG Projects
23
• Contract term: 2008-2019
• Products supplied: OCTG including pipes with
premium connections, GreenWell technology, line
pipes, LDP
Vankorskoye and Suzunskoye fields
• Contract term: 2017-2022
• Products supplied: OCTG with
premium connections
Arctic LNG-2
• Contract term: 2014-2019
• Products supplied: OCTG including pipes with
premium connections, line pipes, LDP
Yamal LNG
• Contract term: 2013-2018
• Products supplied: OCTG with
premium connections and
GreenWell technology
Prirazlomnoye field
• Contract term: 2017-2019
• Products supplied: OCTG with
premium connections
Yuzhno-Kirinskoye field
• Contract term: 2016-2023
• Products supplied: OCTG including
pipes with premium connections
Chayandinskoye field
• Contract term: 2019-2023
• Products supplied: OCTG including
pipes with premium connections
Koviktinskoye field
• Contract term: 2010-2017
• Products supplied: OCTG with
premium connections, LDP
Caspian offshore projects
• Contract term: 2016-2019
• Products supplied: OCTG with
premium connections including
vacuum insulated tubing (VIT)
Russkoe field
• Contract term: 2014-2017
• Products supplied: OCTG of Cr13
Steel
Novo-Urengoyskoye field
• Contract term: 2016-2020
• Products supplied: OCTG including pipes with
premium connections, line pipes, LDP
Messoyakhskoye field
Russian Tube and Pipe Market
24
36% market share of energy pipe demandNo.1 on the Russian tube and pipe market
Source: TMK estimates, based on 9M2017 numbers Source: TMK estimates, based on 9M 2016–2017 numbers
9M16 9M179M17
TMK36%
TMK36%
TMK25%
0
2
4
6
8
10
12
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17E
20
18E
20
19E
20
20E
20
21E
20
22E
Mln
tonnes
Source: TMK estimates
Non-Energy
Energy
Strong Position on the Domestic Market
25
TMK share of seamless OCTG remains high
Seamless OCTG Market Shares, %
Growing oil drilling market in Russia
Development of conventional and
unconventional reserves will require the use of
non-conventional drilling techniques and reliable
OCTG products
Russian seamless OCTG market is up by 12%
YoY in 9M17
TMK is a leader in the production of seamless
OCTG on the Russian market with around 64%
market share for 9M17
Source: TMK estimates
Source: CDU TEK, TMK estimates
64%11%
25%
TMK Import Other local producers
8.4 9.3 11.6
13.3
14.3
14.4
16.5
18.7
20.5
22.2
20.8
22.0 25.6
27.6
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
0
5
10
15
20
25
30
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017E
Units
Mln
mete
rs
Annual development drilling volume
Total new wells drilled (rhs)
54%44%
54%
65%
59%57% 61% 65% 65%
14% 26%
26%
20%
15%
11%11%
11% 13%31% 30%
20%
15%
26%
32% 28% 24% 22%
0
500
1,000
1,500
2,000
2,500
3,000
3,500
2012 2013 2014 2015 2016 2017E 2018E 2019E 2020E
Thousand t
onnes
Gazprom Transneft Others
LDP Demand in Russia
26
LDP demand in Russia, 2012–2020E
Source: TMK estimates
Annual LDP demand for the next three years could amount to approximately 1.9 mln tonnes
Major projects planned: Power of Siberia (GAZP), NS2 Onshore (GAZP), Power of Siberia-2 (GAZP),
Sakhalin – Khabarovsk – Vladivostok GTS (GAZP), maintenance needs of Transneft and Gazprom
Booming market Stable and constructive outlook
Strategic Cooperation Supporting Growth
27
Newly signed long-term agreements with key customers to develop and supply innovative premium
products with related services will strengthen TMK’s position
Import substitution programs guarantee purchase of tubular products and related services
TMK’s innovative products are able to considerably improve the energy efficiency of wells, as well as safety
and environmental impact
Strategic cooperation with key customers
Partnership Memorandum
Scientific and Technological Cooperation
Technology
Partnership
Program
ТМК UP Centum — is the latest generation
of gas-tight premium threaded connections
for casing pipe featuring innovative design.
It is the most recent offer within the line of
TMK UP premium connections. The
connection strength equals the pipe
strength, considerably increasing the
reliability of a pipe string during construction
of wells with complex configurations
ТМК UP Centum is certified to ISO 13679 CAL IV, the highest
international industry standard for premium threaded connections, and
demonstrates 100% tension and compression efficiency
Product Range: 2–3/8’’–13–5/8’’ / 60,32 –346,08 mm
Distinctive Futures
Sealability envelope equal to 100% of pipe body strength
Fastest assembling premium connection
TMK UP Connections for all Conditions
28
The first batch was produced
for NOVATEK’s
Arctic LNG-2 project
developed at Salmanovskoye
oil and gas condensate field
European Market Update –
Sustaining Strong Position
29
TMK European Division
30
TMK is strongly positioned in multiple end-markets for pipes, beyond oil & gas
TMK-ARTROM is a qualified supplier for companies such as
Dacia (a Renault subsidiary) and is a Tier 2 supplier for Toyota
Strengthening market presence with new products and state-of-the-art equipment
TMK Hydra Art
TMK-ARTROM has developed a cold finished product range
strengthening its offer to include Inside Skived and Roller Burnished
(SRB) tubes, positioning the company alongside hydraulic cylinders
producers
TMK-ARTROM is finishing its new heat treatment line investment
project
Thanks to the high production flexibility, the new heat treatment line
can also cost-effectively process smaller batch sizes and different
product groups
TMK is a leading European supplier of seamless industrial pipe with market share of around 10% in 2017
Middle East Market Update –
Substantial Growth Potential
31
TMK Middle East Division
32
TMK Middle East sales structure 2015–2017E In 2014, TMK ME launched an action plan to increase its
share of high-value products (Premium Connections and
proprietary steel grade OCTG for the upstream oil and
gas segment, offshore and deep offshore pipelines as
well as high sour application line pipes)
Today, the share of high-value product sales in TMK ME
SMLS product mix has risen to 50%
TMK GIPI as a pipe management services provider
18%29%
50%
0%
20%
40%
60%
80%
100%
2015 2016 2017E
HVA products Standart productsSource: TMK estimates
TMK is an established supplier of OCTG in
MENA market with market share of around 4%
TMK GIPI is the most modern ERW plant in the region
with a significant upside potential for local and international
sales
TMK GIPI is a strategic supplier for PDO, the leading E&P
company in the Sultanate of Oman accumulates around
70% of the country's crude oil production and nearly all of
its natural gas supply
TMK GIPI also provides high-quality services:
pipe repairing, advanced laboratory testing and protective
coating
Russian oil output remains stable and well above 10.5 MMbpd. However, there are evidences of structural
changes, and stagnating production from brownfields is being replaced by new greenfield developments
Both trends are favourable for TMK. The ramp-up of new projects fuels an increase in conventional drilling,
while EOR activity at brownfields is driving demand for high-end oil field services
As the quality of Russian reserves slowly deteriorates, this leads to long-term demand for complex and high
value-added products, including OCTG
TMK is the leader on the Russian pipe market with focus on products for O&G industry and strong positions
in OCTG and premium connections segments
TMK is well positioned to supply to major international pipeline projects (Gazprom and Transneft)
Conclusion
33
The Middle East remains a stable and attractive market for TMK with the share of high-margin products in
sales increasing over the past 3 years
The European market demonstrates healthy growth, and TMK is aiming to strength its position there
through offering unique and innovative products
Russia
Middle East
Europe
U.S. Market Update:
Positioning and Powering Ahead
Piotr Galitzine
Chairman and CEO, TMK IPSCO
U.S. OCTG Market Overview
35
Strong Fundamentals Driving OCTG Consumption
36
Shale
Production
Growth Driven
by Improving
Oil & Gas
Market
Fundamentals
Increasing
OCTG
Consumption
Increasing
Unconventional
Horizontal
Drilling
Higher Rig
Count and
Higher Footage
Drilled per Rig
Longer
Laterals
More Wells
Drilled per Rig
Shale oil production is growing supported by the
O&G market recovery, which is reflected in
higher unconventional exploration activity
New levels of shale oil production are achieved
by:
• Increased unconventional horizontal drilling
• Higher rig count and higher footage drilled
per rig
• More wells drilled per rig
• Longer laterals
As a result, OCTG consumption is increasing,
driven by growing needs across the energy
value chain
Strong fundamentals support OCTG demand
1
2 3 4 5
6
Improving Oil & Gas Market Fundamentals …
37
Signs that the global glut is easing…
…improve sentiment and price in 2H 2017
Sentiment has improved as the EIA has
lowered its 2017E production forecast and
increased its estimate for global demand
growth
These new estimates signal confidence
that the global oil glut is finally easing
Improved demand outlook, weaker oil and
gas investment, and the prospect of
OPEC prolonging production cuts indicate
a tighter market in 2018E
EIA expects modest growth in WTI to
move from $51/bbl in 4Q 2017 to $52/bbl
in 4Q 2018
Growth in exports and consumption will
contribute to natural gas output rising from
$3.07/MMBtu in 4Q 2017 to $3.23/MMBtu
in 4Q 2018
Source: EIA
Source: EIA
1
90
92
94
96
98
100
102
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2016 2017E 2018E
MM
bpd
Demand Supply
0
1
2
3
4
20
30
40
50
60
70
80
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2016 2017E 2018E
U.S
.natu
ralgas (
$/M
MB
tu)
WT
I cru
de o
il ($
/bbl)
WTI Crude Oil HH Natural Gas (rhs)
Source: EIA
Improving Oil & Gas Market Fundamentals … (cont’d)
38
U.S. natural gas consumption by sector,
2014 – 2040E
Growth in exports and consumption point to
higher Henry Hub natural gas prices in 2018
Source: EIA
Industrial and electric power sectors will drive demand for natural gas over the next 20 years
In early 2000, 16% of electricity was generated by natural gas and 52% by coal, while in 2017 it is
expected that 31% of electricity will be generated by natural gas and 31% by coal
Natural gas storage is projected to end the 2017E injection season at below average levels, creating a
tighter supply/demand balance moving into 2018E and upward pressure on natural gas prices
1
0
3
6
9
12
15
2010 2015 2020E 2025E 2030E 2035E 2040E
Quadrilli
on B
tu
Industrial
Electric Power
Residential
Commercial
Transportation1.5
2.0
2.5
3.0
3.5
1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
2016 2017E 2018E
U.S
. natu
ral gas (
$/M
MB
tu)
U.S. crude oil production
… Drive U.S. Shale Production …
39
According to EIA forecasts, U.S. crude oil
production is set to achieve 9.2 MMbpd and 9.9
MMbpd levels in 2017E and 2018E respectively
vs. 8.9 MMbpd in 2016, driven by a
corresponding recovery of shale oil production
Shale oil production has proven resilient despite
the lower oil price environment, maximizing
output potential at lower profitability levels
U.S. shale oil production reached the pre-crisis
level of approximately 6 MMbpd in September
2017, whereas total U.S. crude oil production
averaged approximately 9 MMbpd in Q3 2017
U.S. shale oil production(1) is growing
Notes: (1) Includes total oil production from Anadarko, Appalachia, Bakken, Eagle
Ford, Haynesville, Marcellus, Niobrara, Permian & Utica
0
1
2
3
4
5
6
7
Sep-0
7
Sep-0
8
Sep-0
9
Sep-1
0
Sep-1
1
Sep-1
2
Sep-1
3
Sep-1
4
Sep-1
5
Sep-1
6
Sep-1
7
Source: EIA
1
U.S
. shale
oil
pro
duction
(1)(M
Mbpd)
5.1 5.0 5.3 5.5 5.66.5
7.5
8.89.4
8.9 9.29.9
0
2
4
6
8
10
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17E
20
18E
Source: EIA
MM
bpd
… Which is Sustainable in the Long Term at Current Oil Price Levels
40
During the past 2 years, U.S. shale players have managed to decrease production costs
─ Drilling technology has evolved, driven by efficiency requirements
─ Key changes included higher intensity of drilling, longer laterals, significantly higher usage of proppants and equipment and well string
standardization
Despite a wide variation between plays, many U.S. shale producers are profitable at oil prices in the U.S.$50-60/bbl range in the long term
─ A number of shale plays, incl. Permian and Eagle Ford basins as well as Mid-continent region of the U.S., are profitable at around U.S.$45-50/bbl
0 1 2 3 4 5 6 7 8
0
20
40
60
80
100
120
Bre
akeven U
.S.$
/bbl B
rent equiv
ale
nt
Cumulative liquids production 2026E (MMbpd)
Other
Bone Spring
(Permian)Wolfcamp
(Permian)
Eagle Ford
Mid-
continent
Bakken
Niobrara
Weighted average breakeven price based on 2026E production
2017
YTD WTI
price:
$43-
57/bbl
Source: Wood Mackenzie
Continental U.S. tight oil cost curve 2026E
1
41
135149
8599
131147 146
158
100
59
111125 130
0
50
100
150
200
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17E
20
18E
20
19EU
.S. D
&C
spendin
g (
$bn)
Source: Spears & Associates
20 19 17 13 11 10 13 10 9 9
25 3448 56 58 63 65 73 79 81
55 4735 32 31 27 22 17 13 11
0
25
50
75
100
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Directional Horizontal Vertical
Source: Baker Hughes
Wolfcamp C
Wolfcamp B
Up Wolfcamp A
Lw Wolfcamp A
3rd Bone Spring
2nd Bone Spring
1st Bone Spring
Avalon
Number of
benches
increased
250%
2010 2017
Source: Spears & Associates, Drilling Production Report as of June 2017
Horizontal and directional drilling reached almost 90%
in 2016 and has nearly doubled for the last 10 years
According to Spears & Associates estimates, U.S.
drilling and completion spending will almost double YoY
in 2017E and increase by 13% YoY in 2018E
Growing number of available productive benches
means that for any drilled well there is the potential for
additional drilling activity further down the line
U.S. drilling and completion spending
U.S. active rig count by type of drilling
Potential for additional drilling activity:
Permian basin (Delaware sub-basin) example
% a
s o
f year
end
Driving Increasing Unconventional Horizontal Drilling …2
…Growing Rig Count and Footage Drilled per Rig …
42
Rig count is expected to increase by 70% YoY in 2017E and 9% YoY in 2018E
After a slowdown in 4Q 2017 caused by exhaustion of E&P budgets, the consensus forecast indicates
that the rig count will average in the mid-900s during 2018E
Number of rigs used for horizontal drilling continued to increase in 2017 YTD, according to Baker
Hughes
According to Spears & Associates, over the past 6 years footage drilled per rig grew at a CAGR of 11%
Source: Baker Hughes, BTU Analytics, Raymond James, Spears & Associates, Inc. Source: Spears & Associates, Inc.
1,768 1,879
1,089
1,546
1,879 1,919 1,761
1,862
983
512
873 951
0
500
1,000
1,500
2,000
2,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017E2018E
169.1 173.7 191.1
211.1 216.8
285.9
319.7
0
100
200
300
400
2010 2011 2012 2013 2014 2015 2016
Footage drilled per rigU.S. average annual rig count(1)
(000’s)
3
Notes: (1) Numbers for 2007 – 2016 based on Baker Hughes data, numbers for 2017E and 2018E based on median between BTU Analytics, Raymond James, and Spears & Associates
estimates
… Coupled with More Wells Drilled per Rig and Longer Laterals …
43
Pad drilling operations allow operators to drill
more horizontal wells per rig per year
In the U.S., the average number of horizontal
wells drilled per rig has increased from an
average of 6.1 wells per rig in 2010 to an
average of 13.7 wells per rig in 2016, according
to Coras Oilfield Research
Increased lateral lengths and greater drilling
complexity are driving greater spending on
technologically advanced drilling consumables,
such as OCTG with premium and semi-
premium connections
− According to Spears & Associates, these
average lengths are set to increase from
7,826 feet in 2016 to 8,706 feet in 2018E
Source: Spears & Associates, Inc.
Source: Coras Oilfield Research, Baker Hughes Rig Count
6.1 6.6 7.6
9.6 11.2
12.3 13.7
0
5
9
14
18
2010 2011 2012 2013 2014 2015 2016
6,880 7,323
7,826 8,194 8,706
0
2,500
5,000
7,500
10,000
2014 2015 2016 2017E 2018E
Average U.S. lateral length
Horizontal wells drilled per rig
(Feet)
54
7.3
3.6
2.1
4.5 4.9 5.4 5.5 5.8 6.1
0.0
2.5
5.0
7.5
10.0
2014 2015 2016 2017E 2018E 2019E 2020E 2021E 2022E
API Semi-Premium Premium
U.S. consumption of OCTG is expected to
reach 4.5 mln metric tonnes in 2017E, more
than twice 2016
Total demand for OCTG in the U.S. is projected
to grow at a CAGR of 6% YoY in 2017E –
2022E
OCTG consumption per rig has nearly doubled
since January 2013, allowing for significant
recovery in the sector despite having fewer
than half of the rigs in operation
Seamless pipe has increased its share of total
U.S. pipe volume as the result of increased
horizontal and directional drilling as well as
longer laterals
Based on the OCTG Situation Report,
seamless pipe now represents over 70% of
total U.S. OCTG shipments as of July 2017
… Resulting in OCTG Consumption Growth …
44
Source: Preston Pipe, Baker Hughes
Total U.S. OCTG consumption
mln
metr
icto
nnes
Source: Preston Pipe, Baker Hughes
200
250
300
350
400
450
500
550
0
500
1,000
1,500
2,000
2,500
Jan
-13
Ma
y-1
3
Se
p-1
3
Jan
-14
Ma
y-1
4
Se
p-1
4
Jan
-15
Ma
y-1
5
Se
p-1
5
Jan
-16
Ma
y-1
6
Se
p-1
6
Jan
-17
Ma
y-1
7
Se
p-1
7
U.S. Rig Count OCTG Consumption per Rig (tonnes/month)
Consum
ptio
n p
er
rig
(to
nnes/m
onth
)
U.S
. rig
count
OCTG consumption per rig
6
… Inventory Normalization, Higher Efficiency …
45
Increased shipment levels bring months-of-
inventory back to pre-downturn levels
Source: Preston Pipe & Tube Report
US OCTG inventories have reached the normalized
levels of 2014 as shipments outpace consumption
Despite months of inventory having reached 2014 levels,
the monthly absolute inventory is meaningfully below
pre-crisis levels due to higher industry efficiency:
Design has standardized resulting in more obsolete
inventory
E&P investment has spilled over into the management
of inventory: the amount of pipe on the ground that
was typically required to maintain a certain rig level
has decreased from previous cycles
6
0
3
6
9
12
15
1.0
1.4
1.8
2.2
2.6
3.0
3.4
Jan-10 Feb-11 Mar-12 Apr-13 May-14 Jun-15 Jul-16 Aug-17
Month
s o
f In
vento
ry
Absolu
te invento
ry,
mln
tonnes
Monthly absolute inventory
Months of inventory (rhs)
Standardized diameters of OCTG piping
Source: Company data
Chevron Permian Cabot Northeast
13 3/8"
9 5/8"
5 1/2"
9 5/8”
13 3/8"
5 1/2"
20"
Total Weight per well:
492 NT
Total Weight per well:
323 NT
Total Weight per well:
267 NT
XTO Bakken
2 7/8" 2 7/8" 2 7/8"
4 1/2"
9 5/8”
7"
200
600
1,000
1,400
1,800
Apr-16 Dec-16 Sep-17
… and Stabilization of OCTG Prices in 3Q 2017
46
U.S. distributor welded OCTG vs. HRC prices(U.S.$/tonne, monthly average)
U.S. distributor seamless OCTG vs. scrap prices(U.S.$/tonne, monthly average)
Source: Pipe Logix, AMM
Prices have rallied from the low in April 2016. Since the trough, welded OCTG prices increased by 40%
and seamless OCTG prices – by almost 30%
Prices have stabilized in recent months: average welded prices were up 0.3% MoM and seamless
prices were slightly down by 0.1% MoM
Raw material prices demonstrated relative flat growth in 3Q 2017 over 2Q 2017: average HRC prices in
3Q 2017 were up 0.7% QoQ and scrap prices were up 0.5% QoQ
Source: Pipe Logix, AMM
6
0
700
1,400
2,100
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Welded OCTG price HRC price
300
700
1,100
1,500
Apr-16 Dec-16 Sep-170
800
1,600
2,400
Jan-13 Jan-14 Jan-15 Jan-16 Jan-17
Seamless OCTG price Scrap price
+40.3%
+28.4%
+29.1%
+41.1%
American Division Performance Update
47
Results of New Go-to-Market Model in 2017
48
Increasing customer base and market share
New customers in 2017 (January -
August 2017) represent 19% of our
current OCTG customer base
The large majority of the new customers
are in the U.S., with some others in
Canada and Latin America
New customers
19%
Established customers
81%
OCTG Customer base in 2017E
Source: Company data
Cost Efficiency in Operations
49
Successful restart and ramp up of welding operations with minimalist structure
100% increase in production in 2017 in comparison to 2016
Effective operations management: matching staffing to utilization level, aggressiveperformance targets, lean manufacturing techniques, campus mentality(production consolidation), “make to order” approach and decreased number ofcustomer claims
─ Matching labour to the utilization of operating facilities allows us to effectively control both hourly
and salaried labour cost in the recovering scenario. 100% projected production increase vs 74%
projected increase in total labour cost in 2017
─ Process Engineering function installed at each operating facility to ensure implementation of
Lean Manufacturing. Lean manufacturing techniques support variable cost and capacity
improvements
─ Quality improvement: 82% reduction in number of customer claims in 2017 compared to 2014
9.0%
(3.0%)
(19.6%)
5.3%
9.1%
(30%)
(20%)
(10%)
0%
10%
20%
2014 2015 2016 1Q 2017 2Q 2017
Seamless pipe production: $30/NT cost
reduction
Seamless pipe finishing: $6/NT - $21/NT cost
reduction
Welded pipe production and finishing: $21/NT -
$22/NT cost reduction
50
Key Drivers of Financial Performance
Key drivers
Continuous cost reduction program:
2017 initiatives
Increasing well count and service intensity
Increasing footage drilled per horizontal well
Increasing OCTG intensity per rig
Volume of pipe sold
Pricing leverage recovering given improved
inventory fundamentals
Improving margins from increasing sales of
connections, including premium integral
connections
Adjusted EBITDA margin
Source: Company data
(48.4%)
(29.8%)
(8.6%) (7.5%)
5.3% 9.1%
1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017
51
Potential Upside for Business
Sales volume (thousand tonnes)
Source: Company data
Adjusted EBITDA (U.S.$ mln)
Adjusted EBITDA margin
Rig count reached the bottom in May
2016 at 404 rigs, but has grown by
almost 540 rigs since then
Average number of rigs in 2Q 2017
increased by 21% QoQ, following the
recovery in oil prices
U.S. domestic crude production
averaged 9.4 MMbpd in July 2017, up
0.9 MMbpd from the trough reached in
July 2016
These factors are reflected in the
IPSCO’s financial performance:
─ Sales volume demonstrate strong
upward trend sequentially
─ Adjusted EBITDA and EBITDA margin
troughed in 1Q 2016, then recovered
in 2Q-4Q 2016 & 1H 2017
5065 74
93
128
158
1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017
$(32)
$(22)
$(9) $(9)
$9
$21
1Q 2016 2Q 2016 3Q 2016 4Q 2016 1Q 2017 2Q 2017
Conclusion
52
OCTG demand is growing driven by increasing shale production and a
subsequent hike in horizontal and unconventional drilling activity
Oil and gas demand/export are growing, whereas price has remained robust for
over a year, with E&Ps adjusted to price
Gains in cost control, yield, operational efficiencies here to stay
Regional marketing efforts continue to bring both new customers and volumes
Standardization of onshore well design leads to efficiencies, from production to
working capital
«Recovery and ramping up» becoming «Positioning and powering ahead»
Q & A
