Piotr Galitzine, Chairman, TMK IPSCO - NASPD

naspd.com

Piotr Galitzine, Chairman, TMK IPSCO - NASPD

An Industry Outlook

Presented By: Piotr Galitzine

TMK IPSCO

2012 NASPD Summer Conference

June 21-23, 2012

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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. OAO 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 OAO 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 OAO 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 OAO TMK cannot guarantee that a third party would obtain or generate the

same results.

2


Jan-07

Apr-07

Jul-07

Oct-07

Jan-08

Apr-08

Jul-08

Oct-08

Jan-09

Apr-09

Jul-09

Oct-09

Jan-10

Apr-10

$ per bbl

Jul-10

Oct-10

Jan-11

Apr-11

Jul-11

Oct-11

Jan-12

Apr-12

$ per MMBtu

Accelerated OCTG Shift Towards Oil

Operators have

accelerated their shift

away from gas towards

oil and liquids as the

price differential

between crude oil and

natural gas remains

near all-time highs.

$160

$140

$120

$100

$80

$60

$40

$20

$0

EIA Short-Term Energy Outlook

May 2012

23:1 45:1

29:1

$16

$14

$12

$10

$8

$6

$4

$2

$0

2,500

2,000

1,500

1,000

500

0

U.S. Rig Count Oil & Gas Split

1:2 1:1 2:1

WTI Crude Oil

Henry Hub Natl Gas

The gas rig count has fallen

below 2009 levels due to

U.S. gas storage nearing

capacity. Lack of demand will

keep natural gas prices

depressed, which has led

analysts to temper their rig

count forecasts.

Gas Oil Other

Sources: EIA STEO & Smith Technologies Rig Count


The Era of Line Pipe

The energy landscape’s

shift will continue to drive

line pipe growth.

4


An Industry Outlook

o TMK Company Overview

o Massive Growth Transforms the Market

o Implications of Energy Abundance

o Unyielding Growth in Line Pipe

o Will Similar Trends Follow Across the Globe?

5


TMK Company Overview

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TMK – A World-Class Tubular Producer

o 4.2M tonnes of pipe shipments from 24 facilities

o ~ $6.7 billion annual revenue

o 2 Research & Development Facilities

o 300 global customers in 80 countries

7


TMK IPSCO – “Americas-focused”

TMK IPSCO is one of the largest North American

producers of welded and seamless pipe and premium

connections for the energy industry.

We take great pride in:

o Our strong legacy of quality

o Providing industry-renowned customer service

o Our powerful customer base including

major and independent oil and gas companies

o Engineering innovative tubular

solutions for unconventional drilling

8


Line Pipe Product Offering

TMK IPSCO is a leading line pipe producer that continues to

grow market share as a result of a broad product offering,

increased project business, and continual investment.

ERW

o 1.8 million tonnes of capacity

o Sizes up to 16” OD

o Wall thicknesses up to 0.5”

o Grades up to X70

Seamless

o 1.5 million tonnes of capacity

o Sizes up to 16” OD

o Wall thicknesses up to 1”

o Grades up to X80

LSAW

o 650 thousand tonnes of capacity

o Sizes from 20” through 56”

o Wall thicknesses up to 1.25”

o Grades up to X100

HSAW

o 500 thousand tonnes of capacity

o Sizes from 22” through 100”

o Wall thicknesses up to 1”

o Grades up to X100

9


TMK Project Business

Nord Stream

Murmansk

Shtokman

Ukhta-

Torzhok

Murmansk-

Volkhov

Vyborg

Bovanenkovo-

Ukhta

Ukhta

Volkhov Gryazovets

BTS-2

Pochinki-

Torzhok

Gryazovets

Novy

Urengoy

Zapolyarye-

Yamal-Europe

Tengiz-

Novorossiysk

South

Stream

Ankara

Stavropol

Blue

Stream

Pre-Caspian

Pipeline

Bovanenkovo

Sakhalin-

Khabarovsk-

Vladivostok

Sakhalin

ESPO-2

Khabarovsk

SRTO-

Torzhok

Purpe-

Samotlor

Completed Gas Pipeline

Current Gas Pipeline Project

Expected Gas Pipeline Project

Completed Oil Pipeline

Current Oil Pipeline Project

Expected Oil Pipeline Project

Purpe

Altai

Project

ESPO-1

Vladivostok

(thousand tonnes)

Company Project 2011-2013

Gazprom Ukhta-Torzhok (I&II lines) 1,050

Yakutiya-Khabarovsk-Vladivostok 725

Bovanenkovo-Ukhta (I&II lines) 538

Altai 475

South Stream 475

Nord Stream (II line) 459

Murmansk-Volkhov 125

Shtokman 125

Pochinki-Gryazovets 59

Maintenance 1,190

Total Gazprom 5,221

Transneft ESPO-2 163

Zapolyarye-Purpe 134

Maintenance 831

Total Transneft 1,127

Rosneft Miscellaneous 217

Lukoil Miscellaneous 202

Other Miscellaneous 180

Total 6,947

Source: Ministry of Energy of Russia

Estimated Russian LDP

Demand 2011-2013

10


TMK IPSCO’s Commitment to Continual Investment

o Developing pipe threading

and service facility in

Edmonton, Alberta to better

serve our Canadian

customers (Q4 2012)

o Added a second premium

thread line to our facility in

Brookfield, Ohio to meet the

growing demand for ULTRA

Premium Connections

o Invested significant capital

including a slitter, forming

equipment, and double-ended

PMC thread line in our Wilder,

Kentucky ERW facility

K

k

o Opened our state-of-the-art

R&D center in Houston

dedicated to innovating new

products and providing

enhanced technical support

for our customers

11


Massive Growth Transforms the Market

World-Class Quality-Focused Commitment Innovation Performance World-Class Quality-Focused Commitment Innovation Performance World-Class

Quality-Focused Commitment Innovation Performance World-Class Quality-Focused Commitment Innovation Performance World-Class Quality-Foc

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thousand megawatthours per day

Abundant Natural Gas & the Decline of Coal

12,000

U.S. Electricity Generation by Sector

10,000

8,000

6,000

4,000

50% 50% 49% 49% 48% 44%

45% 42% 36% 37%

18% 19% 20% 22% 21% 23% 24% 25% 31% 30%

Coal

Nat Gas

Nuclear

Hydro Power

Renewables

Petroleum

Other

2,000

0

2004 2005 2006 2007 2008 2009 2010 2011 2012F 2013F

Despite the low price of coal, demand continues to decline as

power generation converts to cheap and abundant natural gas.

Source: EIA Short-Term Energy Outlook – May 2012

13


Quadrillion Btu

$/ MMBtu

Natural Gas Surplus Leads to LNG Exports

30

25

20

15

10

5

0

U.S. Natural Gas

Production vs. Consumption

2009 2010 2025 2035

Gas Production

Gas Consumption

18 Bcf/d of LNG

export facility

applications

2016 = LNG

Net Exporter

$18.00

$16.00

$14.00

$12.00

$10.00

$8.00

$6.00

$4.00

$2.00

$-

o U.S. natural gas supply will

continue to outpace demand

o Global market prices create

strong economics

o Proposed LNG export projects

equate to 26% of 2012 U.S.

production

$2.50

U.S. LNG Arbitrage Opportunity

$6.35

$4.10

$3.75

$9.15

$15.75

$12.60

Sources: DOE Summary of LNG Export Applications, FERC, EIA, Cheniere

14


Million b/d

Liquids Production Soars

“Surging supply growth could

transform North America into

the new Middle East by 2020.”

– Citi GPS

30

25

20

North America Liquids Production vs. Consumption

Mexico

Canada

74% increase in

North America

production by 2020

15

10

5

0

Mexico

Canada

Canada

U.S.

U.S.

U.S.

2011 2015 2020

U.S. Consumption (Citi)

2011 NA Consumption

Driven by growth in tight oil plays, NGLs, and oilsands;

North America liquids production will surpass the current

level of consumption by 2020

Sources: Citi Global Perspectives & Solutions (March 2012), EIA

15


Implications of Energy Abundance

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Fuel Substitution “Flipping the Switch”

o Re-industrialization powered by abundant, domestic natural gas

o Industrial plant’s natural gas & NGLs consumption set to expand

o Growth of natural gas as a fuel substitute for coal and petroleum

will decrease operating costs

North America Natural Gas Consumption by Sector*

*Direct energy only

Sources: Citi Global Perspectives & Solutions (March 2012), EIA

17


U.S. Capacity (MM lbs.)

Industrial Feedstock Flexibility

Petrochemical Cost Advantage

o Petrochemical industry has steadily invested in additional feedstock

flexibility to process more NGLs

o North America ethane-based ethylene producers now have a $0.35 per

pound cost advantage over naphtha-based ethylene producers in

Europe and Asia

o U.S. fractionation capacity grew 3.4% in 2011 and significant

investments planned for U.S. ethylene capacity expansions

80,000

Incremental Etheylene Capacity

75,000

70,000

65,000

60,000

Other

LyondellBasell

Sasol

Formosa

Shell

Dow

Chevron

55,000

2012 2013 2014 2015 2016 2017

Sources: Citi Global Perspectives & Solutions (March 2012)

18


Industrial Feedstock Flexibility

Other Industrial Growth Trends

Agriculture

o Natural gas accounts for 80% of the cost of producing ammonia

o 72% of ammonia is used to produce fertilizer

o 5 ammonia plants will come online in the U.S. by the end of 2013,

after 29 closures from 1990 to 2007.

Propane Exports

o Seeking markets outside of North America for superior pricing

o Export capacity is on track to triple by 2013

Natural Gas Vehicles

o Heavy-duty truck & pickup truck fleets

o

= 80% of new annual truck replacements

o National Clean Fleets Partnership = AT&T, FedEx, PepsiCo, UPS,

and Verizon

Sources: Citi Global Perspectives & Solutions (March 2012), Bentek Energy, Tudor Pickering Holt, Waste Management, Inc.

19


Unyielding Line Pipe Growth

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Net Tons

The Impact of Pad Drilling

Developments in drilling

technology have dramatically

increased volumes from a

single pad, causing a shift to

larger O.D. gathering lines

(10” to 20”).

Multiple factors continue

to drive line pipe growth

in the 10”, 12”, & 16”

O.D. sizes:

o Pad drilling

o Increased production

o Refracking

o New and reborn

drilling locations

U.S. Line Pipe Shipments - Small vs. Large O.D.

(Preston)

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

0

2007 2008 2009 2010 2011 2012

Annualized

Under 16" Over 16"

21


Kinder Morgan & El Paso Pipelines

Source: Kinder Morgan official website

22


Where is the Pipeline Demand?

23


Where is the Pipeline Demand?

24


The Era of Line Pipe

Transformational

Developments

Re-Industrialization

Abundant Nat Gas &

the Decline of Coal

LNG Exports

North

America

Line Pipe

Growth

Cost Advantages

Fuel Substitution

Liquids Production

Soars

Feedstock Flexibility

TMK is well positioned to facilitate growth in the era of line pipe

25


Unconventional Hydrocarbon as a Multiple of

Traditional Oil and Gas Deposits

5x

3x

3x

5x

3x

Sources: North America, Europe, and Asia per E.ON

26


Unconventional Hydrocarbon as a Multiple of

Traditional Oil and Gas Deposits

5x

Poland

12x

3x

3x

5x

3x

PRC

25x

Argentina

42x

Sources: North America, Europe, and Asia per E.ON

27


Will Similar Trends Follow

Across the Globe?

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Contact

TMK IPSCO - Canada

John Kearsey

Director of Sales

150 6th Avenue SW #3000

Calgary, Alberta T2P 3Y7, Canada

(403) 538-2184

jkearsey @tmk-ipsco.com

TMK IPSCO – U.S.

Chuck King

Director Industrial Division Sales

10120 Houston Oaks Drive

Houston, TX 77064

(281) 949-1078

cking@tmk-ipsco.com

TMK IPSCO – U.S.

Mike Stefko

Manager Sales – Line Pipe & Standard Pipe

10120 Houston Oaks Drive

Houston, TX 77064

(281) 949-1844

mstefko@tmk-ipsco.com

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www.tmk-ipsco.com

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