Tenaris S.A. (NYSE:TS) Q4 2022 Earnings Call Transcript

In Qatar, we are also consistently supporting drilling needs of Qatargas as they want to expand their gas production capacity. And this month, going back to your point of pipelines, we are starting the first delivery of this massive North Field pipeline order that we have. We will probably take the whole year, but this is happening this month, the first shipment. So we will expect sales of Qatar to ramp up as well strongly during the year. Saudi Aramco (ph) is also growing steadily in the drilling activity. We have booked several orders in all business segments in the quarter with a strong backlog already going well into 2024. So overall, we expect a growing trajectory in Middle East that we have seen already in the second half of 2022, but this will strongly accelerate, especially in the first of ’23 and continue into the second half of the year.

Touching on offshore very quickly. This is a segment that is also very dynamic demanding pipelines and OCTG, rig counting offshore already worldwide has recovered to pre-pandemic levels, and we expect the number of FIDs in 2023 to be the best in the last 10 years. And this is something that will support new projects. So this is something that we are seeing in several basins. We talked about the Middle East. We see North Sea very active. There are projects being developed looking for additional capacity to be connected to Europe. We see also Sub-Saharan Africa moving very, very strongly. Angola, Ivory Coast are two particular areas where we’re booking projects in OCTG and in line pipe as well. And also the Mediterranean, North Africa, the Black Sea are areas where new projects are being sanctioned and some others are in the making, but that also will give some important prospects of pipeline activity as well.

So overall, we see offshore increasing into 2023 and probably beyond that. So this would be a growing segment in Tenaris contributing to a richer mix of the company into 2023 and beyond.

Alessandro Pozzi: Thank you. Just going back to the line pipes. If you just look at the big projects that you have already been awarded, what is the volume that you’re planning to ship during 2023 for those big line pipe projects already in the backlog?

Paolo Rocca: Well, in — let me tell you, in Argentina, in 2023, we should be delivering in the range of 200 — approximately 220,000, 250,000 tons international only the North Field expansion is a project in the range of 200,000 tons of welded pipes (ph), all of this are basically welded pipelines. And then there is a sizable number of projects in the international area. There are more seamless pipeline for offshore operation like the one that will feed gas for Europe from different sources.

Alessandro Pozzi: Okay. That’s very clear. Thank you.

Operator: Thank you. Our next question comes from the line of Stephen Gengaro from Stifel.

Stephen Gengaro: Thanks and good morning, everybody. Two things for me. I wanted to follow up first on, I think a question Marc asked to start off the Q&A. When we think about the international and offshore markets strengthening throughout the year and in 2024, is that accretive to the current EBITDA margin level?

Paolo Rocca: Well, there are some project that has been acquired almost more than six months or one year ago, in which we still have a relatively limited margin because of the price and the cost increase that we suffered during this year. The new project or acquired a margin that are, let’s say, substantially, I would say, positive margin and relatively high margin, but the mix, you have to keep in mind is also considering some of the product that has been acquired some time ago. One example is, North Field expansion is a big project that has very limited margin.

Stephen Gengaro: Okay. And is that — those are clearly contemplated in your expectation that margins are around these levels over the next couple of quarters?