OAO TMK, a leading Russian producer of pipes for the oil and gas industry, announces its unaudited IFRS financial results for the six months ending June 30, 2010.
Revenue increased by 73.6% to US$2566.2M from strong seamless and welded tube sales following growth in key markets.
Gross profit increased to $585.8M, a year-on-year increase of 161.7%, from a combination of higher capacity utilisation rates, higher sales volumes and higher prices for pipe products.
Adjusted EBITDA increased from $145.8M in the first half of 2009 to $414.7M in the first half of 2010.
Loans and borrowings decreased by 2.9% as compared to December 31, 2009, and amounted to $3606.4M. The share of short-term loans and borrowings, representing 41.4% as of December 31, 2009, decreased to 22.9% as of June 30, 2010. TMK’s weighted average nominal interest rate as at June 30, 2010 was 9.0% compared to 12.3% as at June 30, 2009.
Total pipe sales volumes increased by 57.7% to 1886kt with a 210.2% increase in the US segment.
Seamless pipe sales volumes increased by 41.4% compared to the previous year. This increase in sales volumes was mainly driven by the recovery in demand in North America, in particular for higher grade pipe for horizontal drilling in shale gas deposits.
Welded pipe sales volumes increased by 86.3% to 811kt from robust demand for oil and gas and large-diameter (LD) welded products. Sales of LD pipe, stimulated by large-scale Russian pipeline projects, increased by 227.3%.
OCTG sales volumes increased by 50.5% to 746kt as strong demand from the North American market boosted sales volumes and favourable oil prices kept Russian drilling activity healthy.
In May 2010, TMK’s US plant, Ipsco opened a new Ultra Premium Connections production facility in the Marcellus Shale Region.
The mill, located in Brookfield, Ohio, threads pipe with TMK Ipsco's line of Ultra Premium Connections to support TMK Ipsco's growing market share in the Marcellus Shale gas field.
In June 2010, TMK established TMK Africa Tubulars. Located in Cape Town, this new subsidiary oversees the sale of pipe products in Sub-Saharan markets.
In August 2010, TMK Ipsco established a sales office in Calgary, Alberta, Canada. The new office will serve as TMK Ipsco's Canadian headquarters for sales and will support both conventional and unconventional hydrocarbon exploration and development programmes in Canada.
Russia remains TMK’s key market and accounted for 59.7% of total ??? sales volumes in the first half of 2010. TMK’s Russian pipe market share remained strong with approximately 27% of the market.
In its core seamless oil and gas pipe market, the company retained its dominant position with an estimated 65% of the Russian seamless market even as the latter grew by 27%.
In the welded tube business TMK’s market share increased from 14% in the first half of 2009 to close to 18% as of June 30, 2010.
The welded large-diameter landscape continued to benefit from the implementation of major Gazprom and Transneft pipeline projects in Russia.
During the period, TMK supplied Transneft with over 90kt of longitudinal welded large-diameter pipes for the construction of the second phases of the Baltic Pipeline System (BPS-2) and Eastern Siberia - Pacific Ocean Pipeline (ESPO-2) and the Purpe-Samotlor line.
TMK also supplied 149 thousand tonnes of welded large-diameter pipes to Gazprom as part of supply agreements covering deliveries of pipe for such projects as the Sakhalin-Khabarovsk-Vladivostok, Bovanenkovo-Ukhta and Pochinki-Gryazovets gas lines.
Although industrial pipe is a non-core product group, the company enjoyed a 32.6% seamless industrial pipe market share in the first half of 2010. Seamless industrial pipe sales volumes increased by 35.4% in the first six months of 2010 y-o-y mainly as a result of increased demand from the automotive sector.
Following its rapid recovery in the second half of 2009, North American drilling activity remained robust throughout the first six months of 2010.The number of active drilling rigs in the US increased by close to 70% between June 2009 and June 2010.
Despite relatively weak natural gas prices, Shale Plays continued to be the major demand driver behind TMK Ipsco production and Ultra premium products.
North American domestic producers continued to benefit from trade restrictions against low-cost Chinese pipe products. With the Chinese withdrawing from the market at the end of 2009, industry inventory levels as high as 14 to 15 months of supply were worked down to more normal levels of 4-5 months of supply.
Pipe products sold outside Russia amounted to 759.3kt and represented 40.3% of the company’s total sales volumes, up from 31.9% in the first half of 2009. The increase in volumes sold outside Russia was mainly driven by the significant growth in sales observed at TMK Ipsco. Exports from the company’s Russian plants amounted to 258.5kt.