TMK Announces 1H 2018 Operational Results

2Q 2018 shipments data is preliminary and can be adjusted.

TMK, one of the world’s leading producers of tubular products for the oil and gas industry, announces its operational results for the second quarter and first half of 2018.

2Q and 1H 2018 Summary Results

(thousand tonnes)

Product 2Q 2018 1Q 2018 Change   1H 2018 1H 2017 Change
Seamless pipe 716 677 6%   1,393 1,346 4%
Welded pipe 359 303 19%   662 462 43%
Total 1,075 980 10%   2,056 1,808 14%
Including:

 

OCTG

492 460 7%   952 856 11%

 

2Q 2018 Highlights

– Total pipe shipments grew 10% quarter-on-quarter, to 1,075 thousand tonnes, driven by higher demand for both seamless and welded pipe.
– Seamless pipe shipments increased 6% quarter-on-quarter, to 716 thousand tonnes, due to stable demand for seamless OCTG and seasonal growth of demand for industrial pipe.
– Welded pipe shipments increased 19% quarter-on-quarter, to 359 thousand tonnes, mainly driven by higher demand for all types of welded pipe in Russia, including large diameter pipe.
– OCTG shipments increased 7% quarter-on-quarter, to 492 thousand tonnes.
– Shipments of premium-threaded connections increased 11% quarter-on-quarter, to 249 thousand joints.

 

1H 2018 Highlights

– Total pipe shipments grew 14% year-on-year, to 2,056 thousand tonnes, mainly driven by higher shipments of welded pipe at the American division on the back of increased drilling activity in the North America and ramp-up of TMK’s US facilities.
– Seamless pipe shipments increased 4% year-on-year, to 1,393 thousand tonnes, due to higher shipments of OCTG and line pipe.
– Welded pipe shipments increased 43% year-on-year, to 662 thousand tonnes, mainly driven by higher shipments of welded pipe at the American division and increased shipments of large diameter pipe in Russia.
– OCTG shipments increased 11% year-on-year, to 952 thousand tonnes.
– Shipments of premium threaded connections increased 40%, to 473 thousand joints, driven by the increased complexity of hydrocarbon production projects in Russia and the USA, where premium products are used.

Alexander Shiryaev, TMK’s CEO, said:

“I am pleased to report that in 2Q and 1H 2018 TMK has achieved solid growth in shipments of all of our key segments, including our seamless pipe products. Our American division performed strongly, with 34% year-on-year growth in overall shipments in 1H 2018, following the re-opening of existing production capacity to respond to high market demand.

TMK remains confident in the outlook for 2018. Demand for our core products, OCTG, is expected to remain strong, with customers requiring more sophisticated pipe solutions as well as premium connections to access more complex reserves. Our American division has continued to perform well, driven by higher E&P spending, contributing to the Group’s strong performance.”

2Q 2018 Results by Division

RUSSIAN DIVISION

Product 2Q 2018 1Q 2018 Change   1H 2018 1H 2017 Change
Seamless pipe 524 510 3%   1,035 994 4%
Welded pipe 251 194 29%   445 363 22%
Total 775 704 10%   1,479 1,357 9%
Including:

 

OCTG

310 303 2%   613 579 6%

(1) Total includes shipments from TMK’s Russian facilities, TMK-Kaztrubprom and TMK GIPI to the Russian, CIS and non-CIS markets (excluding North America).

2Q 2018 vs. 1Q 2018 

– Total pipe shipments increased 10% quarter-on-quarter, mainly driven by seasonal demand for industrial pipe and higher LDP shipments.
– Shipments of seamless pipe increased 3% quarter-on-quarter, with stable demand for seamless OCTG from the oil and gas companies and higher shipments of industrial pipe due to the seasonal factor.
– Shipments of welded pipe increased 29% quarter-on-quarter, due to higher shipments of welded industrial and line pipe, as well as large diameter pipe (+41% quarter-on-quarter).
– Shipments of OCTG grew 2% as drilling activity in Russia continued to grow.

1H 2018 vs. 1H 2017

– Total pipe shipments increased 9% year-on-year, reflecting growth in both seamless and welded pipe shipments.
– Shipments of seamless pipe increased 4% year-on-year, supported by higher demand for seamless OCTG and line pipe.
– Shipments of welded pipe increased 22% year-on-year, due to a stronger performance across all welded pipe segments.
– OCTG shipments increased 6% year-on-year.

AMERICAN DIVISION 

(thousand tonnes)

Product 2Q 2018 1Q 2018 Change   1H 2018 1H 2017 Change
Seamless pipe 138 121 14%   259 257 1%
Welded pipe 109 109 0%   218 99 120%
Total 247 230 7%   477 356 34%
Including:

 

OCTG

182 157 16%   339 276 23%

 

(thousand tonnes)

Product 2Q 2018 1Q 2018 Change   1H 2018 1H 2017 Change
Total shipments 247 230 7%   477 356 34%
Including:

 

Imported pipe

37 34 7%   71 70 1%

 

2Q 2018 vs. 1Q 2018

– Total pipe shipments increased 7% quarter-on-quarter, primarily due to the stronger sales of seamless pipe.
– Shipments of seamless pipe increased 14% quarter-on-quarter, as continued growth in US drilling activity and higher complexity of oil and gas extraction drove increased demand for seamless OCTG.
– Shipments of welded pipe were flat quarter-on-quarter, with lower shipments of welded line and industrial pipe fully compensated by higher shipments of welded OCTG, which were in high demand in 2Q 2018 in the US oil and gas market.
– Shipments of OCTG increased 16% quarter-on-quarter, due to stronger shipments of both seamless and welded OCTG, supported by the continued growth of drilling activity in the US oil and gas market.
– Imported pipe shipments at the American division grew 7% quarter-on-quarter.

1H 2018 vs. 1H 2017

– Total pipe shipments grew 34% year-on-year, supported by a significant increase in welded pipe shipments.
– Shipments of seamless pipe increased 1% year-on-year, due to higher seamless OCTG shipments.
– Shipments of welded pipe more than doubled compared to 1H 2017. This was due to continued improvements in the US oil and gas market and the restart of welded facilities at the American division in spring-summer 2017.
– OCTG shipments increased 23% year-on-year, mainly driven by stronger shipments of welded OCTG.
– Shipments of imported pipe at the American division increased 1% year-on-year.

 

 

EUROPEAN DIVISION

(thousand tonnes)

Product 2Q 2018 1Q 2018 Change   1H 2018 1H 2017 Change
Seamless pipe – Total 54 46 16%   100 95 5%

 

 

2Q 2018 vs. 1Q 2018

– Shipments of seamless pipe increased 16% quarter-on-quarter, recovering to normalized shipment levels after 1Q 2018, when low shipments of industrial pipe were recorded due to pre-planned maintenance works in January 2018.

1H 2018 vs. 1H 2017

– Shipments of seamless pipe increased 5% year-on-year due to more favourable market conditions. In 1H 2018, a significant shift in the product mix towards higher margin products was recorded.

2018 Outlook

TMK reiterates its previous outlook for the remainder of 2018 and expects demand for OCTG in Russia to remain strong in 2018, supported by stable drilling activity and high oil prices. Demand for LDP in 2018 is not expected to fall below 2017 levels.

The North American pipe market has seen continued improvement due to sustained consumption of OCTG and energy related products, buoyed by what we believe to be a fundamentally strong oil price environment, supporting continued capital investment by energy producers.

In Europe, TMK expects shipments of seamless pipe to increase. This is in part due to the launch of a new heat treatment facility at TMK-ARTROM, which will increase the division’s offering of premium pipe as a share of the sales mix.

Overall, the Group expects pipe shipments to increase in 2018 compared to 2017, building a foundation for TMK’s stronger financial performance throughout 2018 as the company guided before.

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