TMK announces 2011 second quarter and first half production results and trading update

OAO TMK, one of the world’s leading oil and gas steel pipe producers, today announces its production results for the period ending June 30, 2011.

For the first six months of 2010, TMK shipped a total of 2,166 thousand tonnes of steel pipes to customers representing a 16.2% increase over the same period of 2010.

Volume of shipped pipe products

(thousand tonnes)

In the second quarter of 2011, almost all TMK’s major markets maintained its positive trend of the previous period. OCTG pipes shipment volumes increased by 6.1% quarter-on-quarter reflecting the positive dynamics of oil and gas fields development in Russia and the United States. In the first half of 2011 shipment volumes of OCTG pipes increased by 7.4% compared to the same period of 2010.

For the first six months of 2011, large-diameter pipes shipment volumes amounted to around 377 thousand tonnes that is 33.7% more compared to the same period of 2011. At the same time in the second quarter of 2011, large-diameter pipes shipment volumes declined quarter-on-quarter following the completion of several projects of Gazprom and Transneft as well as the maintenance of the mill at Volzhsky Pipe Plant.

Industrial seamless pipes segment also demonstrated an upward trend in the reporting period due to the demand growth largely from machine building industry as well as from nuclear power generation, chemical and petrochemical sectors. Thus, in the first half of 2011, shipment volumes of industrial seamless pipes increased by 22.9% and 10.6% over the first six months of 2010 and the first quarter of 2011 respectively. 

In the first half of 2011, pipe products shipment volumes of TMK IPSCO amounted to around 479 thousand tonnes exceeding the level of the same period of 2010 by 16.3%. In the second quarter of 2011, shipment volumes increased by 6.3% quarter-on-quarter. Line pipes segment grew with the highest rate due to the need of transportation of the increased hydrocarbons volumes to processing and storage sites. An increasingly active development of shale deposits in the US, where the share of TMK IPSCO’s shipments of premium connections used for shale gas production exceeds 30%, allows the Company to have enough positive view on further utilization of its US division.

The US drilling activity remained high throughout 2Q 2011 with active drilling rigs amounting to 1,886 as of 1 July 2011 (source: Baker Hughes) that represents a 25.2% year-on-year growth and a 6.2% increase compared to the rig count as of 1 April 2011. The increase was mainly driven by the oil drilling activity with an oil rig share growing to more than 53% supported by high crude oil prices.

Demand for premium products is growing due to the gradual shift of Russian and US oil and gas companies to more complex drilling. In the first half of 2011, TMK shipped around 226 thousand of premium connections developed by the Company’s Russian (TMK Family) and US (ULTRA) divisions that represents a 3.2% growth compared to the first half of 2010. In May-June 2011, TMK successfully certified two of its premium connections (TMK PF and ULTRA-QX) in accordance with the ISO 13679 CAL IV standard that enabled the Company to become one of the three world leaders in terms of premium product mix supply for oil and gas sector.

The Company confirms its previously announced guidance that in the second quarter of 2011, Adjusted EBITDA and Adjusted EBITDA margin will remain more or less flat compared to the first quarter of 2011.