Q4 2020 Tenaris SA Earnings Call
Ladies and gentlemen, todays conference is scheduled to begin and a few minutes. Please continue to standby. Thank you for your patience, ladies and gentlemen, todays conference is scheduled to begin and a few minutes. Please continue to standby. Thank you for your patience.
[music].
Ladies and gentlemen, thank you for standing by and welcome to the <unk> S. A fourth quarter and full year 2020 results conference call. At this time all participant lines are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during the session and you wanted to price.
Star one on your telephone please be advised that today's conference is being recorded if you require any further assistance. Please press star zero and would now like to hand, the conference over to your speaker today Giovanni Danya. Thank you. Please go ahead Sir.
Thank you Gigi and welcome to fanatics and it hasn't been <unk> fourth quarter and annual results conference call.
Before we start I would like to remind you that we'll be discussing forward looking information and the coal and that's and actual results may vary from those expressed or imply youre into school.
With me on the call today are Rocca, chairman, and CEO, and lithium envelope and Chief Financial Officer, and Kevin Hogan, Vice Chairman and member of our board of directors.
Months without Vice Chairman and member of our board of directors that'd be helpful. Thanks, Scott and I see them for eastern Hemisphere operations, and Luca Zanotti, President and COO.
West operations.
Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results.
During the fourth quarter.
2000, and <unk> reached one per 1 billion down 35% compared with those of the corresponding quarter of the previous year, but up.
12% sequentially, driven by a gradual recovery and drilling activity and the Americas and a good mix of profit sold individually.
Our quarterly EBITDA.
And I'm, very and 92 million, which included severance charges of $37 million and one off gains of 17 million was 17, 9% sequentially, reflecting a better and better performance and.
The operating leverage of volume on a lower fixed cost base after the restructuring measures implemented during the year.
Our quarterly EBITDA margin recovered from 17%.
Average selling prices and our food segment declined 2% compared to the corresponding quarter of 2019, that's went up 2% sequentially.
During the quarter cash flow from operations was 59 million.
Our net cash position remained stable and a $1 1 billion following the payment from dividend of $83 million in November last year and capital expenditures of 38.
Yeah.
Both of their expert and decided to propose for the approval of the annual general shareholders' meeting to be and at the beginning of May and the payments of an annual dividend of 21 cents per share or 42 cents per ADR.
Which includes the interim dividend of seven <unk>.
Yes sure.
That's the idea.
And we paid at the end of November of last year.
If approved a dividend of 14 cents per share or 28 cents per ADR will be paid on may 26.
Now I will ask Paolo to say a few words before we open the call for questions.
Yes.
Thank you Joanne and.
Good morning to all of you.
And I and 'twenty was it a particular year and we just left an indelible mark on the world.
And I think the reshaping and societal expectations and changing established.
But it is still too early to understand the full extent of the transformation that it would be.
And then as you transition is also accelerating and we as a company we used to maintain flexibility and the short China as we are.
And redefine what strategy and action to move to the new reality.
And Tonight.
And opened a year by concluding the acquisition of IPSCO.
And at least the expectation that U S drilling activity would soon and start to recover.
And in year long decline.
So altogether.
And that can change as the pandemic spread rapidly around the world.
From one day to the next day.
And for a lot of product and services began to shrink and.
And our way of walking changed.
Global oil demand collapsed all per.
Right.
And then becoming <unk> and.
Got it.
And do you.
But he didn't activity plans.
And if it doesn't meet and we had to close most of our newly acquired facility.
The challenge involved and every aspect of our business and effects of all of our growth.
We had to adopt a new safety protocols to ensure the safety of all of the person entering our plants and offices to halt production, while minimizing labor costs and what the interest and demand planning.
Provide support for the medical system and many of our communities.
And new ways of making customer commitments and change the way, we work and communicate.
And while implementing and intense restructuring program and <unk>.
<unk> financial and the stability and long term sustainability forward momentum.
We responded rapidly and have been disciplined and implementing a little bit of objectives.
I will have to forgive me.
A special thanks to all our employees and for the way they adapted to the circumstances and their contribution to our net.
And the pandemic.
And we actually had a total of 2000 and 250 person affected by the virus and well not really even constructors and infra.
Excellent rate of little over 10 per se.
Currently we have and less than one and other big cases and.
550 people in the ex risk category.
And I prevented them from coming to work.
And the same time, we maintain and improvements and we made over the past year and almost 50 acres.
Our contributor from tour and enforcing the medical infrastructure and it keeps them and our communities.
With me.
Leveraging our global procurement and structure.
And then either being today.
Intensive care unit.
And for you and it and.
And first from a protection.
Founded.
And for Newfield hospitals, and our diverse from there.
Our employees are weighted to.
So solidarity and initiatives.
And the onset of the pandemic and beta gamma and which was a and b. If it turns out of the country something new and renewed.
They work tirelessly to go.
The deal with Occidental EBITDA for the local hospitals and income.
And I didn't see net they design and produce more than 80000 face shields for medical stuff, but the storm, but the local community using wonderful working from that and.
And now these total maintaining service quality and are rapidly changing the vitamin and waiting for our rig direct costs and our program by integrating digital and excessive aimed at simplifying.
And I mean, you started processes and making them more reliable and the U S. For example.
Good call out and made as well where rig that are customer and now made it through our rig direct force and.
And customers are starting to use our price praised as the stem from per cool digital package.
And we'll continue to defend these duties and integration and interest to reinforce certain dependent patients and customer loyalty.
Just a few of the financial stability of the company, we implemented a detailed plan to reduce our fixed cost structure by Colombia and self media.
Or 25%.
By the end of 2000 and plan.
And virginity cash toward reducing inventories and managing the receivable growth.
And they are using and vessels, we have met or exceeded our targets.
And $1 3 billion and free.
Cash flow for the over the year.
This includes a $1 1 billion reduction and working capital our net income excluding impairment and restructuring charges remain positive.
And the fourth quarter, we ended the year with a higher EBITDA margin that we had at the end of 2000 and team.
And so it's got the sense at all and revenue.
With these results.
And the balance sheet and a variety of all with Luca.
But we are proposing to race face and the annual dividend and swiftly.
Per cent of the live and it was probably out of the country.
And as drilling activity in North America picked up.
We are strengthening our position and the U S and Canada market building on our rig direct service proposition.
And so reducing our offer and advertising and wages connects from products and taking advantage of the market opportunity sulfur by consolidation and the shale sector and the competitive and die.
Yeah, I could've made and corporate databases.
Full capacity and to start a practice, the cockpit and himself and and but its seamless and 5 million.
And together with their associates, and finishing facilities make it easier and the market continues and cool.
Meanwhile, we are proceeding with our investments and integrate seamlessly premium and welded pipe production, if that would've made and sold to Murray and Canada.
The growth in the prevention Malian cut of it.
If you go to market, we have strengthened our per region.
And introduction of Blue Dolphin connect zone.
Gulf of Mexico, and book out and that's why and Brazil.
And also successfully introducing a lot sooner and if the rise of products.
He plays and flexible riser solutions.
And I can see that the implementation of a new plant and gas.
And it's going to reactivate activity and they are back on line cash same thing.
And I mean, yes.
And for the expansion of the North Sea and.
Qatar, which will provide that the gas for the regulatory and the recently sanctioned Qatar LNG expansion.
These products will include our duplex technology, which is now firmly established and good luck.
Oh, so demand and the middle East could do and without answering the one will be affected by ongoing and stuff.
The market, we continue to consolidate our position in the United Arab Emirate investments and net premium trading facility, which will begin operations from 2022.
Looking ahead our.
Total material costs will be.
Hi.
And also by Chrysler.
Moving up it's shown and defied logic index, which has risen 23 per cent and it seems to be reached in Boston and over.
Total increased operating leverage and will contribute to further margin improvement during the year.
Hey, good morning, Nissan has become a major issue for all over the world and in particular for a weighted.
Yesterday, our board of director approved and need.
And third target zone.
And it would reduce the carbon emission intensity, but he's from.
And by 30%.
Hello, and my 2000 feet and base line and the introduction of an internal carbon price of $80 per ton, what facilitated the investment necessary to achieve and stack and.
Our long term objective of eventually reaching Cod line.
We would have gave at least one of the financing and evaluate some to the program, which will be followed on a quarterly basis and our growth when we joined the carbon disclosure project.
It would be and we retire.
And even more important facet of our agenda and the timing yes.
And we can now receive all of it gets done and to make it happen.
And as a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Igor Levi from D. T. I G. Your line is now open.
Thank you so as you mentioned in 'twenty and 'twenty generated.
Over 1 billion.
And free cash flow from working capital, maybe about 200 million from operations and does the working capital tailwind turn into a headwind in 'twenty and 'twenty one as the market recovers what is the best way for us to think about our free cash flow this year.
Yeah.
Thank you and Eagle.
And what are your question on that day.
And no doubt.
During 2020, and we have been able to do an extraordinary force.
A reduction of whole working capital and now the market is weak and after our volume is picking up and we need to start.
And building back some of our working capital.
Starting in the first quarter of 2000 and change.
One.
And then you also have to consider.
The cash.
And even in the fourth quarter Southern and 20.
We anticipate that some procurement Osama photo metallic.
And envisaging, the price increase and what kind of and so to some extent and stuff and then.
Yeah.
And good evening, some power working capital even in some items during the fourth.
And it hurts you will recover.
And but are there and I think we will be able and a whole too.
Continue to maintain a strict discipline and our and I will.
Working capital net.
And just falling.
Quarter.
Yeah.
The net at a corporation and will also be irregular route and to afford it.
Great.
And for that and could you provide a little more color on the price of pilot projects around our carbon capture and hydrogen and what is the road map like to grow that business would you plan to develop it mostly internally or would you also be looking to make bolt on acquisitions in the space.
Well.
And the deal we are.
And I'm very confident in and exploring new and he goes to reduce.
It's kind of on contract.
And in defense and.
And the timing of project and we had allowance change on a yoga and that is an interesting day.
We will basically use a renewable.
Our power and energy.
Together with our partner and they still have definitely changed and is on it and it's not.
And for it and I'm swarming, it's worthwhile and they've been they've rolled eyes and.
And either during that for feeding.
Hydro and as to our electric arc furnaces and.
And to the extent possible and rest of the heat treatment.
And now a lot of financing government and D.
And this is net.
And let's say.
First by the soldiers and which we will explore the feasibility of the costs and the complexity and day technologic or that expired and so.
Poor utilization of hydro and and supposed to give you can catch up on them and.
And for heating purposes.
This would be a little difficult and we estimated this momentum.
And these projects and maybe.
Monica and Evaluable, if we can see the cost cut and whatnot and that range of 80 to one and that's called all of that.
They would be and we will use.
Our support finance and the support from the European community with gone to explore these.
Uh huh.
These projects done.
And.
By adopting and Jordan.
Value and Florida, Collarbone line, and we will reevaluate our investment and the deeper into it over to Collin County, and life of crab underneath them and see where we can.
Eventually extends to me, that's what order or substitute.
Just from a kind of on line at least.
And new Ebola or per.
Adjusted for.
Keep in your opinion and based on them and.
And some of this thing.
Great. Thank you I'll turn it back.
Thank you. Our next question comes from the line of Ian Macpherson from Simmons. Your line is now open.
Hi, Thanks.
Paolo you mentioned.
And the raw material inflation, which we've seen has been staggering recently, but you are getting.
And our pricing to offset that.
And when we.
Think about your your goal towards getting to 20% EBITDA margins over the course of this year.
What level of average selling price do you need to average and two in order to.
To get to 20% margins relative to where your Q4 ASP It was.
And thank you for the question.
And I would say the channel.
And by the way for the and we'll move some of our.
From a cost of goods sold you should go see it.
The cost of the inputs that are like and metallics and there are and getting it into our cost of sales and gradually because that all day zain in Saudi.
And going over.
So these will sort of gradually and cost of sales.
And then also being present and production.
And prove up so strong. So this is also important in the evolution of our workforce on.
The other side on the price per cent.
And now the technology.
And to access and by around 33% and.
And it seems.
Yes.
And I'd say almost the.
Up.
And now also this price increase and then.
And we continue because if you look at the structure of a little pricing.
The price logic is right in line.
And <unk>.
Seamless and it gives a weighted the increase has been shrinking per cent.
Greetings.
Through the net increase.
In the hospital and Carl I understand.
And not only in the United States, but also elsewhere and the world. So the.
And the increasing price and what have you will gradually get and dwell Athene and also the cost will increase.
And we think that we can reach and maintain and margin in the range of 20%.
Okay.
And might be something crazy.
All of the psychology not match.
Compared to the effect that has been done up to now.
Okay understood. Thank you.
So wanted to ask about your insights into the U S land market I think we've been positively surprised by your results so far and your expectations for this year given.
The recovery has been driven so much by the private E&ps and we think of your business being much more oriented towards.
And the bigger players and.
So.
You can speak to the recent evolution and the expectation.
Going forward with your customer book as the more.
Commodity price sensitive privates are driving the increase and share that.
Of activity, so far and when do you think.
Yeah.
Well, what sort of visibility you have and wait for your larger independent and E&P customers to get back and the saddle and and and.
And that more activity and the second half of this year or into next year.
Thanks.
Yeah. Thank you again and then.
And.
The hour.
And the view of AR and the dynamic.
TB into United States.
And it probably is not considering now the navy and off price.
Price and floor and above 60 day do we see today and all these main.
And to reduce some from that.
Additional labor PV, because India and.
And Shane.
Sure.
And increased free cash flow and now with the price and foreign at 60 or 62.
Yeah and.
And cash flow from that and we will see holiday and we react but I wouldn't ask huh.
Luca Zanotti to give us a view on standard dynamics at all different client and that.
<unk>.
And yes, Paolo good morning, everybody. Thank you, Yeah and Florida.
For the question now.
And so Paolo.
You've seen them.
Yes, we are seeing.
The market to continuously and pool being a because as you probably have listened to some of the large independents conference call.
And our thinking to gradually step being and and inquiries are increased activity, but not a full additional effects that I would like to mention that relevant full finales and.
At least in the United States first is the effect of the consolidation.
You know that we have been seeing consolidation and so far we've been able to roll out all of our contracts up to the company that are being acquired by hour by hour and a cash from historical cash flow matters.
And we think that this will continue and going forward given the long term relationship that we have and all the tools.
And could use the technology that is helping game is helping them up two eight share longer lap. It up so we think that these are.
And we'll.
We will continue so.
And I believe the D. He says something that that he's and he's oh simple sensor and they started was mentioning before with a 50 55 years old and.
And our BARDA.
The great majority of the shale plays.
Profitable and so it's gonna be a decision of the operators and where they wont do too.
Invest they are proceeding and we believe that also towards the end of the year if their.
The situation and maintain.
And do your level in generality, we're going to see the bigger guy I hate to even increase first and so I believe that these three points.
Explaining a little bit.
And our forward looking.
Environment.
That's great. Thank you Luca Thanks Paolo.
Yeah.
Thank you. Our next question comes from the line of Sean <unk> from Jpmorgan. Your line is now open.
Thank you.
I thought maybe we could follow up on the energy transition topic.
Could you maybe just.
Elaborate on any incremental technological capabilities that maybe you don't have today that.
It will be necessary to take on a leadership role, whether it's hydrogen and carbon capture.
Yeah.
Whether it's necessary to pursue some of these with internal R&D.
Or if there could be.
Technology bolt on acquisitions that May help you and those pursuits.
Thank you.
Sure.
And that is.
And because of its prospects based on electric arc furnaces today.
Yeah.
And mid teen and much less and your average and the industry.
And the innovation that is using aeronautics is using and Argentina on that.
Alright, So also we severely limited now.
And we see the target and you have seen the targets that we set for 2013.
And thats kind of 30% could be achievable within the existing technology Keith recovery.
Yeah.
And Oh.
On the and.
The <unk> foreign assets.
Okay.
And Oh.
Right.
And I'll follow up and as Shaun.
And better use that.
Net income.
And let's say selection of supply.
And our.
And our operations. So we can reduce scope 123, well it all right and so now when we think about 1050.
We will need to introduce a disruptive technologies like either and we are considering offsetting investment.
And Ian.
And Europe or to support product and poet Eastern and so we are looking globally at all what we can do to Decarbonize our chain.
And there's really two items.
Tyler.
Different and vivo too.
Florida.
Book to Bill at the opportunity for production and.
In terms of carbon.
Capturing and Sodexo.
We may have.
We'll participate in projects and join us and with other companies and each week.
And part of the kind of on a route and meeting these would not be something that could be done and thats on the scale of our school base needs to be integrated into growth.
And he's had already let's say idea on that generic could be very important.
Promoting the carbonization and.
Promoting.
Cash coming off the <unk>.
Relative to.
And maybe if I can go back and.
And I gave an example on I don't yes, we ought to produce and while cylinder four very high pressure, either and we're producing and its ties from infrastructure users and the hydrogen chain. We are also and for Samsung and supporting the project.
And.
And I'll talk to center on cash.
Well and capture and store Roger.
One example is northern white and.
See I mean, the know how that will develop.
And Mcdonald's.
Are you, making and and.
All the chain of our production could be very important and no loss of the settlement of ex.
Allergies.
To be able to take that.
We will be.
And we will actually be starting base, but today, we had no almost automatically and four.
Sure.
And let's say the second step.
All the de Carbonization, and secondly, Graeme path.
Yes.
Okay.
Yeah.
And the definition of a.
Reasonable.
And I guess that fourth line since 1000 feet.
Yeah.
Very interesting and very helpful. Thank you.
Offshore.
Activity tastes pretty challenged but we did have a lot of fid's into 2019 and they'll need to ramp.
Activity in 'twenty, two and 'twenty three.
And maybe just talk about.
Which markets you see offshore is most attractive medium term I think Brazil.
Brazil looks like one market and maybe just broader South America North sea it could be another perhaps Asia Pac to some degree just how are you seeing.
And the offshore market on a medium term basis.
Yeah.
And.
If we look at the price.
Awesome.
And let's talk.
So net net.
And the deep offshore and real strength.
Okay.
And a suite of products that are pretty unique and on which we can have an important.
And then Asia.
And basically the South America and Brazil.
And while you're on that.
Gulf of Mexico, and North Sea and the price.
Great.
And to some extent.
And we feel so.
To a lesser extent some development in Africa, and moving forward. We are present in all of them, but I would ask Gabriel.
And he is responsible for the eastern hemisphere to start on time.
Some of the projects.
And could.
Could be relative and some destocking, if I understand well.
Got it.
We'll do a follow up on this and then Luca could comment briefly on the Gulf of Mexico.
Okay.
Yeah.
Hello.
Okay.
Yeah.
And I've always said, okay. It was under Diana and.
And I can't get over and I can't think of it over and Hawaii.
On the Gulf of Mexico.
Yes, well as you said Paul at all and we are present in all the.
And the developments that are now going on and therefore cash it tools to answer.
And in our in the Gulf of Mexico and.
And in some cases, we also and Crazy and go I'll hop off.
Irritation, and let's let's say shifting.
And the technology towards our full price and.
So I believe that as far as Gulf of Mexico is concerned.
And we are very well placed.
And not to mention Dan and I. We are not we are these these are big Exxon.
And I apologize growing glaucoma and even there we are.
And the incumbents and and and we are well placed there and continuing.
Let's say leveraging these yes these opportunities sure.
Gulf of Mexico.
Offshore is a it's.
Ghana and prove up and we're gonna see also our EVP and building and getting these and gives us ex.
I don't know what's going on there and then just.
The pool and they mined.
We have a very and complete suite of probe for.
Sure and especially be before we go from the core next door.
To the REIT index.
To all of the power of the colon and the most demanding and high pressure high temperature colorful and.
Do you believe or deepen.
Okay.
Sure.
Pool water.
And this is recognized by the operator.
And so not only in Gulf of Mexico, and Brazil.
And now where we work with all of the major.
And as Devin and it means that.
Yes, it's not all about.
Uh huh.
And you hear me.
Okay and you hear me.
Hello.
Yes, yes.
Okay.
And so.
Okay, Great sorry, I got disconnected the ethical book.
So we try and on the point of offshore and the eastern Hemisphere.
First I would come and that their drilling activity and Destocking theory, and major offshore basins have been decreasing over the last 12 months, we're probably running today at the level of about 35% below the levels that we've had that the below the EBITDA before the pandemic. So this is what we see today.
We expect this to be the bottom line.
And we foresee a drug under recovery.
Or pick up of activity towards especially the second half of the year.
The key areas that Brody, we're gonna lead this increase are the core countries in the middle East could.
Could be.
So and Arabia could be Qatar and.
UAE Kuwait and these are the areas that we have some onshore and some offshore activity as well and these are going to cause that.
Curtailment of production and produces duty during the year, we see this increasing production and supporting a higher labor and all activity.
And the other basins, so, but north sea with Africa Southeast Asia, We remained a challenge and will take longer to lease for these markets to recover we're going to see some pockets associated mainly with gas might be Indonesia up when you be unique Egypt and.
Most of them because well so some projects and exploration and that he is going on related to gassy regimens either for export or existing infrastructure or domestic markets. Those are going to be areas of ob interest into the future, but it will take a while before these markets pick up again activity.
Thank you and as far as the South and I think I mentioned, but I think the burden and.
Yeah.
With me.
And we need to be there and will expand on the long run and so.
And let's say dynamic.
Oh sure day.
Pool area, and which we had already paid.
Yeah.
Very good thanks for all that detail.
Yeah.
Thank you. Our next question comes from the line of Marc Bianchi from Cowen. Your line is now open.
Thank you.
I wanted to follow up on the and the.
The margin and pricing discussion.
I heard that the pipe logic is up 23% from August and.
The expectation to get to your choice and that it doesn't need to go up quite that much at the increase from here would be less and 23 per cent.
I'm curious if you don't get that increase what would margins look like because there is some component of operating leverage that you mentioned and then the next question is what kind of increases it's something like two or 3% or are we talking about a 15% increase that you would need.
And thank you Mike one on one side and pleased that I mentioned.
And I mean index fast and easy product and the.
And with that comes out yesterday, and showing the agreed that I mention ooh ooh. So today many of the formula that we have.
And <unk> now the parties and win in the coming months and the price at all sites.
And continue to increase to recruit.
And let's say, it's stronger cost and higher cost of.
And I do.
And we will.
We will not increase and the same pace as we will have a different and please no.
Compete a book.
And you're not.
And let's say.
And for any new contracts.
Plus or minus.
And from negotiation from from the difference in <unk>.
The extent and germs and service, but this and your life and in support and new contract.
It's always something that either.
In the market.
Good day.
And so we are pretty good.
Total quarters been net.
And frankly it will continue.
Also I think.
Net.
And we will.
Louis and face that.
The price of cultural Corey So I don't know if commodity.
Absolutely high for a while I mean, it's not that we are and it's tight but I think that the visa demand and if we assume that.
People, who are losing the United States and.
These kind of stimulus and the other region.
From increased mobility and.
And because of the preferred progress of vaccination.
Anything should driver.
The economy and flow rebound and just kind of.
And I.
Should preserve a claim.
And that cost that force and price.
In our profit.
And do we have and the new one which is based on.
Our vision of a medium term 20 per cent of masking competencies and with price.
Please proceed.
The increase in cost that we need to get to.
And and I was mentioning before and.
And.
And in terms of upsell from keep in mind that if the market really program and we are.
And put into operation from our facility.
Facility, and David and I anticipate and call the name, but it and if anything from J D.
And it will be and.
So being up.
And then we also absorbed some net of a lot of the Soc Tam off picks up and people.
Thank you for that Paolo I guess following on to that.
You've had some nice improvements and you're.
And the way you run your business right larger proportion of rig direct and in North America, you've done the M&A, which gets you more integrated I'm curious now.
Do you think what do you think the medium term or long term margin profile is for the business as it exists today, because we'd be into the mid twenty's or care to put a number out there.
Yeah.
And according to the margin.
And the midterm to long term margin.
And in the U S market or demand and Florida and of course.
For all of our business.
Yes.
Okay. Thank you very much I'll turn it back.
No it's funny because.
And I understand.
Recurring to total.
Overall manager non North America, because it's been benign and Cebu and Ah.
And so can you repeat the question Yeah sure sorry, certainly the question is you've made some structural improvements to your business you've taken the cost out.
<unk> gotten more integration and.
And more rig direct.
But even still with these high raw materials, you think youre going to be the 20% and the back half of this year I'm wondering if you know as we get into 'twenty and 'twenty two and beyond.
And what type of margin would we expect for your overall business.
Compared to the 20% level could we be seeing something 25 or higher than that.
Your medium to long term expectation for the overall company.
And I don't think day.
And.
On the very low very cool very and the level of drilling and that's D C region.
The day around four and that is that even in the states.
And Dave the bottom has been 250 <unk> now we are and the range of four and the rates and the Vaca <unk>.
And we expect a decent net up middle east could increase to around 500 rigs by the end of the year, but yeah.
And the T.
EBITDA and free cash flow of the company and now.
Yeah.
Let's see.
Net investment team day, 98, and the recovery also and.
The Easton and St.
Right.
We have tried to force there.
And I think with Hyatt and what it is.
And when do we know.
And obviously have more pricing power in net.
And dealing and environment that is more dynamic, but it's difficult to say these things to be.
Yes.
Understood. Thank you very much.
Thank you. Our next question comes from the line of Frank Mcgann from Bank of America. Your line is now open.
Hi, Thank you very much I wanted to just ask your basically your view based on what Youre seeing from your clients and and in your.
And as far as a little bit of up on an earlier question, but just with a little bit longer term view and there is a view that oil prices are going to stay quite robust and potentially could go much higher over time given that.
Producers are going to continue to exercise significant capital discipline, even with higher prices because of shareholder day.
Man's and and their own concern for balance sheet et cetera.
Just wanted to do do you see that happening do you think that the.
The main.
Companies are your largest customers anyway is or are likely to continue for an extended period.
To see.
We see very limited activity.
For those reasons or do you think over time things can can loosen up pretty pretty substantially if we continue to see oil staying at $65 70, and and potentially higher.
Okay.
I think that.
And we are talking here about it very differently.
You have players like the major a bit out of promoting large complex projects.
Poor.
All right.
And following.
Do you keep leaning the projects. So you can expect.
The pro blessing Big Com.
Complex project offshore deepwater and I. So all will be to some extent compete then you have the middle East and.
And the labs.
<unk> and reserve and data.
And at different game day one.
To remain the key supply. This is also true for Russia and in place.
On the effects of that and any transition and any way to acquire and.
For a time to the supply of oil and gas to the world. They play out of IATA falling data on Capex.
And even in the UA day, you'll have it.
And did the divided opinion because there are companies that are.
Focusing on cash flow JV, then and then shut all the other day.
And that's a big thing.
Okay.
And even the transition from the energy transition.
Anyway lead space.
Flora and.
Oil and gas and the price of oil and gas assets.
And could it be a scoring.
Sure and important return and they look at issue like the Texas freezer and they perceive that imbalance.
And the energy system and they also have opportunities so and.
And.
And diverse.
And as a group of Pts and <unk>.
Players are a very disciplined and wants to shift out from data.
Other than want to take the place that the first one at least so in my view.
And you cannot.
Let's say, one attitude and fifth floor and.
And in this environment, I, frankly think that channel investment and the oil and gas.
And maybe by default and player in the U S and outside.
Continuing on and maybe the more complex projects.
Okay.
And proceeding or.
At the more cash.
Core pace.
Okay. So does that and it sounds like you believe that that can lead to at least over a period of time or and number of years.
Substantial recovery in activity.
I think that any transition.
And so sedated with expansion of the world economy weighted.
Require.
And let's say.
Substantial investments in digital side oil and gas, especially in the coming years. So this is not.
And the transition that could be done without substantial investment there.
Our company that bet on this that our company.
And that's on reducing that exposure.
And.
We'd have to follow this.
And in the end and then you'll get the view I think the thing.
The it would be pre COVID-19 in 2022.
And beyond.
And the.
The growth.
In the emerging markets.
Daniel.
This will need to be a substantial.
Okay. Thank you very much.
Thank you. Our next question comes from the line of Alan Spence from Jefferies. Your line is now open.
Thanks, and good afternoon, and I've got two questions and I'll take them one at a time and the first one is around working capital and you released about $1 6 billion combined and the last two years.
There any component of this that we should think is structural or is it going to be predominantly and cyclical and ultimately in the next few years come back and.
It kind of handle the first question is concerning.
Concerning our working capital and.
It would be.
Recovery of working capital, because when especially in the first quarter and.
And if any.
And because the volume is increasing and we have and they need some of the longer lead time that road.
And.
It would go over and the working capital need and then the net that easily I would say ex one issue that EPS, when we and PV.
Nathan.
Cockpit steelmaking in the United States, and finishing the in that and.
United States and these new wins.
And we required some working capital and the other side.
And the introduction and offer.
Level of digitalization program and getting that.
And next day.
And.
Reduction into the system that is something that isn't part of our digital transformation will contribute to a strict discipline and the existing facility. So the combination of these two.
And you will not bring back and added to the same level of inventory that we had and by the past.
And Boston.
No.
The increase.
A lot and.
And I'm sorry.
And so.
First of all day.
And so.
And to some extent.
Also in the second quarter, while we are combining the status of the plan.
Okay. Thank you and.
The second one on this 30% production and share.
Q intensity, if I understood correctly and earlier question I think you said that could be achieved with your current portfolio of assets.
That means that you don't foresee any material increase and capex related to achieving those targets medium term.
Yes.
When we win.
And.
And we had.
If you see that line.
Mentor has been reduced in 2020, like Florida, and 200 and media now and.
And 2000 2021.
And Matt to.
And I remain net in the range of $200 million.
Capex, including some of the first and the line investments and.
In energy <unk> and <unk>.
<unk> also.
Let's see.
Yeah.
And the investment in day translation of the planes of Prudential to source and muddy Ghana and.
Debenture in net.
In the Emirate and each day and.
So and these.
And these will be the range of investment book with Us.
And I think Ken.
Oh.
The decision on and off Capex.
For the following day.
Very much depend on the evolution of the market and the second part.
And thank you too.
And to reach the reduction among our.
A third at the same time.
Uh huh.
And listen.
And the P&L and three four year.
Not.
Let's say.
And order of magnitude.
Troy, we think that day we.
We will either be flat and dairy.
And $150 million.
And in the timing.
40.
<unk> reached the target of 30% of attacks.
Very clear and very helpful. Thank you.
Thank you. Our next question comes from the line of David Anderson from Barclays. Your line is now open.
Hey, good afternoon, just a question on the U S O CTG market.
Where do you think the inventory kind of overhang is today and someone's you're kind of keeping an eye on and I'm just kind of curious how much has come down and where you think it needs to come down how much more needs to come down before.
Demand starts to kind of truly improve.
Just looking at the U S land market.
Thank you.
On this.
Luca.
To give an overview of how we see this situation and obviously stock and the market.
Yes.
So Paulo morning day.
Okay.
And the USA as we speak that we see a level of inventory and the angel of a six to six five.
Months of inventory, which as you know is starting to get in and and in it.
And a situation and which in some cases and some items where you.
Gonna be short and you can easily see this that when you look at the pipe logic.
Okay.
And as well.
And now going forward I believe that we're gonna see and a little bit of additional degrees up but then that wind production in the states and to a certain extent impulse and we began that the situation is going to be.
And stabilizing.
And this is basically eight as far as the inventory and they don't.
The ground and the United States are concerned.
Okay. Great. Thank you. My other question is probably for Gabriel I don't know if you're selling the line, but you'd indicated the middle East was pretty strong for you this quarter and it's not something we've heard from the service companies. So far haven't seen really rigs being picked up and were generally here and kind of middle East and North seas are playing to ramp up and the second half of 'twenty.
I'm just wondering are you seeing your customers and the middle East you are starting to order Oce T G and advance of that I guess I'm. Just wondering is are we starting to see the beginning of a potentially prolonged international cycle.
And.
Well thanks, Joe on each day are related GAAP and that he is very close to the major client and middle East.
To give his view and a guy.
And after you.
I had a feeling where we didn't have that problem. That's okay. You can follow up with me.
Afterwards.
Thank you Daniel I guess, Andrew I'll walk and.
Yeah, our view and I can tell you it is a good thing.
Yeah.
And the league and wind down that during these periods and didn't really cool videos and we expect 2021 to be subdued.
Right.
In the company.
And even if the project that we see.
And the unconventional.
And in Saudi.
And then.
And substantial.
Very important revenue, but we will see more in 2022 and 2020 line. This is right now and for us because I mean, we expect our water and.
Probably I want sales to be more contained.
And during 2021 and that.
This is important because some of our very special products.
Got it.
Boeing day.
Part of the World and.
But we are very confident and very cool ready in 2022.
Great.
Thank you very much.
Yes.
Okay.
Yeah.
Thank you. Our next question comes from the line of Amy Wong from UBS. Your line is now open.
Okay.
Oh, Hi, there a couple of questions from me. Please the first one relates to I think you mentioned you guys have an award from Qatar LNG North field expansion can you give a bit more color on that project well you know what you intend to bring their whether its casing and line pipe or both and kind of one of those deliveries.
And we'll start for you. That's my first question. Please.
And just total.
Certified and is turning the project.
And in.
If I understand and starting to go.
And it's not so clear at Heathrow.
Yeah.
Yeah, sorry, yeah and Qatar.
And our North field you mentioned in your opening remarks that you guys have won some work that and I just wanted to get a day of color on the size of the award one two and you're going to strike and my brain.
Okay.
Okay.
And.
What can I take that.
Program.
And Matt and his substantial day divided and knoll feeling toward that would be later this week and very solid relation and weak.
<unk> developed for this project.
And do place to throttle that I'm sorry.
Much appreciated and.
Okay.
And.
Net sales.
And we will be the supply of these day of these broad now.
And that is proceeding.
Collectively again, we will have value.
Yes.
Dean.
The project and the long term unfilled drift and so we will have that.
Demand.
Growing in 2020, we expect that.
And I expect it to 2019 and when we speak to.
2021 model and the same the same line.
The projects and very importantly, innovation strong relative to development get the sea Salt Lake.
And.
And.
I think we have.
A good opportunity for the long run and that's why they developed pet stores of LNG. They have a big program for us.
Enhancing.
Production of LNG, and they need that gas coming from North Sea and.
And I can always be opportunity for additional comments or color on day in day rate.
And I would add Haynesville and.
Please call me.
Yes, Paolo embargo.
Apologies for the peninsula and the line today.
I guess the topic was the Qatar project LNG.
Correct.
Yes.
Yes, okay.
Yes, Okay. Yes. This has been a unimportant project and we're happy and our sourcing from the last couple of years and under the framework over a multiyear agreement.
And we hope we've cut our guest and major operator of LNG.
And Qatar, which they have recently this quarter.
And if I do the first.
Expansion.
This is a we're having a dominant share.
And these are and this important development.
Majority.
This supply.
He is with our adult plus technologies the drilling team.
You can cut or has it been so.
Elected.
And the technology based on its safety and.
Efficiency.
And.
And so this is something that will push our shipments supporting 2020, and it's something that we expect to increase.
And to 'twenty 'twenty, one and bill.
And this has been one of the pockets so highly differentiated broiler.
And that helps.
Our shipments into 'twenty and 'twenty.
Okay. Thank you.
And okay. Thank you for that.
I just have another separate question unrelated to that and then regarding your target.
Target of reducing carbon emissions intensity.
And I spent 20, 30% and 2030 and could you talk a little bit more about and you know.
And how youre defining that is it is it total C O two admissions over that tons of tubes produced but just getting a bit more color on line.
Using and give us what the baseline you're measuring against it.
Okay.
And.
And this time.
And we have Florida and he spent on.
Please call per the scope, one and now for what I mentioned is called tool and material and energy that we buy and that's it.
As you said, we married that scope III with additional materials and we are.
And that we acquire.
And.
I don't want and need to know and I'll, let Shane so.
And it's a following.
And.
And this time by their rules and we will.
And the process of qualifying debt.
For the caribou and disclosure project.
Yes.
We didn't say that.
And in a more precise and verifiable way, we play and also too and to price Waterhouse.
And we east to our sustainability report and two.
All day.
The data that we presented and the number that we presented.
So.
Yes.
The very demanding on day.
Sure.
And Asia.
Two of our number and exotic and.
And our commitment and then we will follow these.
Quarterly and what role does that throw off.
Weighted average qualification Ocala, Florida, but litigation rates it would be maybe during next year because of the process and all.
And then qualifying and presenting our case it was a day cardamom disclosure program and.
And get repaid by then but this would be a process and.
There will be.
And let's say.
[noise] audited and qualified and Toyota.
With numbers.
And in line and net according to the standard.
And.
And also policy that index.
Let's say two.
Rely on and the science based targets that process and four.
Sure.
Refining.
And with clarity.
And the actions that we are thinking and day.
The impact that we had expected and that they can.
<unk> pulls back.
Great. Thank you and look forward to getting more information on that thank you.
Yeah. Thank you Joanne.
Okay.
Thank you. Our next question comes from the line of Conor <unk> from Morgan Stanley. Your line is now open.
Yes, Thank you and extra squeezing me in.
I just wanted to square some of the comments you made around eastern hemisphere, and the release it sounded relatively conservative.
Pointed to some longer term potential and the middle east It sounds like offshore is probably.
And maybe stable, but not really increasing much I'm, just sort of wanted to square that and.
In light of day expectation that most of the OPEC producers will be raising production somewhat this year.
And the commentary that we've heard from the other service companies that suggest a second half ramp and interest.
And with productivity.
Do you think there is a destocking effect that you're pointing to or are you just being conservative because customers have been communicated these plans yet and I'm. Just wondering if you could sort of square the circle in terms of why you wouldn't expect that to be recovering more significantly this year.
And a very good one.
And I don't know I on this issue.
Gavin and I recall that a benign and he.
He may yes.
Yes.
Some comments and I would maybe maybe to you to add some color on that the attitude that you see.
Our major financing the growth.
Yes. Thank you Paolo Thank you for the question.
And the activity is expected to.
And to slowly go up for the major countries and the middle East, especially in the second half.
From a low level. This is a did you book, we expect on the other hand as you're pointing out there has been a.
And there is a destocking, the ease and efficiency and optimization of cash flow going on and some of the key markets and the middle East and that's why with this.
Subdued activity.
Coupled with these are they and so.
Shipments and purchases, we expect upper and demand and shipments and 2021.
And to be lower than in 2020 and.
Activity.
Improve during this year on the purchasing cycle normalizes, and that's why we expect and rebound into 'twenty and 'twenty two.
Yeah.
Okay got it I mean I guess.
Sorry.
Yes, I guess I guess, there's sort of a follow up here is you have these relatively large projects I guess, just one small clarifying question.
And you were alluding to the threatening plant and.
And the UAE being on line next year are you are you going to be making shipments under the aetna contracts before that's completed or is that necessary in order for that to move forward I think the prior expectation was back half of this year that that would start up but.
But I guess the follow up question integrator sensors could you could you maybe level set.
Once this destocking, presumably activities recovering it seems like you're setting up for with somebody and specific things are relatively big year over year growth in 2022, and a middle Eastern area could you maybe quantify at all how we should think about the magnitude of that.
Yeah, Yeah indeed.
Related to the to the UAE.
The Mega tender.
Contract.
And last we before at least five years and there are options to extend started in 'twenty and 'twenty with very little shipment because there is a change.
Supply chain model into our rig direct typically and this contract at six one or two years to work through their existing inventories until we synchronized shipment and.
And with drilling activity.
Contract started we have the new service center and out without being played started.
The mid of 'twenty and 'twenty this year were.
Slowly during the year ramp up our shipments are still inventories come down and it's probably going to be until 'twenty 'twenty. Two that we will have our food shipments in line with the level of both consensus and nobody knows what this is how it typically the first three years of this contract will be played out and then and.
Continuing to the following years with an increase of expenses of activity a lot of milk and the midterm and this is something that we.
We can give strength recently and it's here.
And in other areas, although they are not working on the rig day rate, but still there is a.
And in terms of the.
To keep.
Capex still contain that he said cash flow.
Our concern with wind and some of these countries. So the laser purchasing delays of tenders are putting some let's say.
Additional lower shipments scenario and in the 'twenty to 'twenty, one, but we foresee that to Scott.
And.
And apartment demand and consumption to be more in line into 'twenty and 'twenty book.
Alright, thank you.
And thank you Oleg.
Thank you at this time line is showing no further questions I would like to turn the call back over to Giovanni Danya for closing remarks.
Thank you Gigi and thank you all for joining us sorry for the inconvenience with.
Parts of our line from.
We will do better.
Next the next quarter, Thanks, a lot.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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