Company Presentation “Supplying the infrastructure for Russian oil & gas expansion” - PowerPoint PPT Presentation

slide1 n.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
Company Presentation “Supplying the infrastructure for Russian oil & gas expansion” PowerPoint Presentation
Download Presentation
Company Presentation “Supplying the infrastructure for Russian oil & gas expansion”

play fullscreen
1 / 15
Company Presentation “Supplying the infrastructure for Russian oil & gas expansion”
182 Views
Download Presentation
abiola
Download Presentation

Company Presentation “Supplying the infrastructure for Russian oil & gas expansion”

- - - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript

  1. Company Presentation “Supplying the infrastructure for Russian oil & gas expansion”

  2. Chelpipe today is the most modern Russian tube & pipe producer with a value-add OFS platform TPS division Pipe division LDP Pipeline construction solutions • Pipeline bends and hubs OFS division OCTG Oil & gas extraction/delivery solutions platform • Electric submersible pumps (ESP) & motors • Range of OFS services Note: LDP = Large diameter pipe, defined as Ø of 508-1,420 mm with one or 2 welded seams OCTG = Oil country tubular goods, wide variety of Ø seamless pipe

  3. Chelpipe benefits from integrated facilities that are strategically located in the industrial heartland of Russia Chelpipeproduction and distribution network State-of-the-art new and modernised production facilities Scrap collection & processing, Ural and Volga regions OCTG & Industrial pipe manufacturing, Pervouralsk • In-house scrap capacity up to 1.5 mil ton per year • Over 25,000 types of tube & pipe • Seamless capacity: • Welded capacity: • New Finishing Center • New steel mini-mill Distribution network, 12 regions 950 kt 100 kt • Fully owned warehouse and trading house network • 17 warehouses • 12 trading houses St-Petersburg Dudinka Usinsk Russia Moscow Nyagan Kogalym LDP & Industrial pipe manufacturing,Chelyabinsk Pervouralsk Izhevsk Ukraine Nizhnevartovsk Almetyevsk Strezhevoy Chelyabinsk Burguslan Surgut • Over 3,600 types of tube & pipe • Welded capacity: • Seamless capacity: • New LDP shop • Capacity: 600 kt Nefteyugansk 1,000 kt Khanti-Mansiisk 350 kt Magnitogorsk Kazakhstan OFS manufacturing,Almetyevsk Pipe: Production units TPS manufacturing,Chelyabinsk TPS: Production units • Electric submersible pumps and motors • ESP capacity: • ESM capacity: OFS: Production units • Pipeline bends • Hot bends capacity: 7,500 t OFS: Drilling and geophysics 6,900 units OFS: Service centers 7,200 units (ALNAS Service) Source: Company data

  4. Chelpipe — Russia’s most modern pipe mill and integrated tube & pipe service provider for the oil & gas industry 1 Successfully completed transformational modernisation and acquisition strategy − state-of-the-artasset base 2 Fast growing end-markets and attractive industry position 8 Experienced management team with modern business practices 3 Widest product platform with unique capabilities 7 Unique platform of pipe and OFS products/services 4 Blue-chip customer base with focus on Russian oil & gas 6 Strong future growth trajectory 5 Low cost position supported by strategic location

  5. Well-invested asset base as a result of a comprehensive investment program and a successful M&A strategy Modernisation and formation of ChelpipeGroup Integrated pipe mill with value-add OFS offering Comprehensive investment program The Future… 2002 to 2009 – modernisation 2009 – OCTG expansion 2010 – LDP expansion 2010 – vertical integration 2011 to 2012 – complete OFS modernisation and integration Reconstruction of existing shops Commission new state-of-the-art Finishing Center at PNTZ Commission new, state-of-the-art 0.6 mil ton LDP mill at Chelpipe Commission new 1 mil ton state-of-the-art EAF 2002 Reconstruction and expansion of ALNAS facilities Integration of OFS platform into group 2011–2012 2010 2009 2008 2006 2004 2002 • Chelyabinsk Pipe Rolling Plant • Start transformation with $50 mil EBRD loan • Complete pipe, tube & OFS solutions provider • Vertically integrated, quality & cost leader 2004 and 2006 – OCTG segment entry 2008 to 2009 – vertical integration 2008 – OFS segment entry 2010 – Bends platform consolidation Acquisition of PNTZ (2004 initial stake and 2006 remaining stake) Acquisition of scrap supplier Acquisition of ALNAS pumps and other OFS service providers Acquisition of TPS division1 M&A growth strategy 1 Was acquired from an affiliate of Chelpipeand certain members of its Board of Directors and management were also members of Chelpipe’smanagement and Board of Directors before the acquisition

  6. ChelPipehas invested about $1.8 billion to create Russia’s most modern and integrated pipe and tube making complex SOUTH Strong revenue growth through new capacity and products with higher unit prices LDP mill “Vysota 239” • Most modern LDP shop in Russia with 18 key structural cost advantages designed into the 600 kt mill • Entry into new 1.42 m Ø one seam segment with up to 18 m length and 45 mm wall thickness • Strategic agreement with MMK – high-quality steel plate supplier • Employees follow “white coat metallurgy” practices Finishing Center –Pervouralsk • Upgraded and expanded our OCTG product range • Full capabilities for quenching, tempering, threading, coupling production and sealing of joints • Capability to develop premium connections for growing Russian market Significant cost reduction through backward integration for seamless pipe Metal scrap yard • Own scrap network (+60 yards) with capacity up to 1 mil ton per year • Creates cost advantage vs. market purchases of ~$100 per ton 1 mil ton EAF –Pervouralsk • Own 1 mil ton electric arc furnace, casting high quality round billet for seamless pipe production • Significant expected cost advantage vs. market purchase of over $100 per ton • Running at world-standard labor efficiency with 318 employees State-of-the-art pipe making in the 21st century 8 Note: Capital expenditure calculated with average FX rate of 1$=28.66RUB (2007-2010); total figure includes remainder of 5 bil RUB contracted for 2011 (exchange rate used 1$=31.10RUB)

  7. LDP “Vysota 239” shop – production of state-of-the-art LDP portfolio New LDP “Vysota 239” shop in Chelyabinsk Most modern Russian LDP mill • State-of-the-art technical configuration and production facilities • Capacity: 600,000 ton per year • Employees: 1,000 • Expands product offering platform for Russia’s oil & gas companies • One of two LDP producers in Russia with all three technical capabilities • Diameter up to 1,420 mm • Length up to 18 m • Wall thickness up to 45 mm • Launch: July 2010; full ramp-up: 2011 (coating line to be completed by 2012) “Vysota 239” benefits from 18 different cost advantages that ensure ability to reduce mill costs over time

  8. Finishing Center – high-margin, value-add product line expansion New Finishing Center at PNTZ, Pervouralsk Provides world class OCTG product quality • State-of-the-art technical configuration • Capacity: up to 115,000 ton per year (40,000 ton line pipe for oilfield applications and 75,000 ton tubing and casing) • Employees: 625 • Modern, cost-efficient production facilities • Expands product range – including high-margin, value-add finishing, i.e. corrosion resistance, heat treating, enhanced threading capabilities, couplings • High margin products – ~ $1,1001 price per ton in H1 2010 • Launch: May 2009; full ramp-up: during 2010 Source: Company data 1 Converted into $ at average exchange rate of 1$=30.05RUR in H1 2010

  9. Steel mini-millwith 1 mil tons annual capacity – vertical integration and production cost reduction New steel mini-mill in Pervouralsk State-of-the-art technical configuration and production facilities in line with international safety and environmental standards • Low cost billet producer – minimal employee number compared to existing Russian steel mini-mills • – Employees: 318 • Vertical integration of billet production supported by in-house scrap supply capabilities • Substantial raw material cost savings • Launch: October 2010; full ramp-up: 2011

  10. We have the broadest product spectrum of all Russian mills with a range of unique capabilities Chelpipepipe product range Large- Ø1,420 mm • One seam LDP up to 45 mm wall thickness, 18 m long • High pressure and corrosion resistant • Inside and outside coated, • Wide Ø for oil & gas applications globally • Full product range for utilities • Range of construction and bearing products • Unique boiler pipe for power plants Pipe diameter • Automotive • Capital goods • Plane and spacecraft fuselage • Unique helicopter blades • Fluid tube for medical and aerospace/defense applications Unique hair-thinØ~0.3 mm Welded Seamless Chelpipe’spipe end-market breakdown Russian market pipe demand breakdown Other 11% Other²10% Chemical andpetrochemical sector 2% LDP24% Seamless industrial7% Power 4% Construction / maintenance12% Oil & gas56% Chelpipeproduct range90% Equipmentmanufacturing15% Welded industrial34% OCTG¹25% • Strong base in oil & gas • Diversified exposure across manufacturing sectors • With new investments we can cover nearly all types of pipe demanded in Russia • Market share gains for Chelpipein Russia Source: Company data Source: Metal Bulletin Research, Russian Pipe Industry Development Fund ¹ Includes 7% of seamless line pipe for OCTG applications and 18% OCTG (casing and tubing)² Includes drilling pipes, medium diameter welded pipes, cast iron pipes, cracking pipes

  11. We serve a blue-chip Russian customer base with over 50% exposure to Russian oil & gas • National Russian oil and gas pipeline operators • Pipe customer breakdown by revenue • Over 50 year relationships • We enjoy a strong market reputation with 75% of pipelines constructed in the Soviet Union originating from our mills Rosneft 17% Other 35% Transneft 17% Lukoil 3% Tatneft 4% Gazprom15% Surgutneftegaz 8% Source: Company data • Russian oil and gas companies • Industrial and energy customers • Power and chemical industry • Nuclear • Aerospace • Automotive • Utilities • Long-standing relationship with Russian oil & gas sector • Participate in most major programs • All currently produced pipe and OFS products are industry accredited and approved by oil and gas companies • Range of unique special products • Full certifications for nuclear and power plant construction Source: Company data

  12. Our TPS and OFS divisions provide extensive cross-selling opportunities in high-margin products • TPS Overview • Strong potential growth factors With our TPS division we intend to leverage the strength of our LDP products to generate additional high margins • Leverage knowledge of pipeline design to supply high margin pieces specific to each project • Significant growth prospects and strong position on new pipeline projects • Chelpipehas unique offering as only 3 close peers exist in Russia for hot bends and hubs • High value-add pipe bend produced in own shop • High-price pieces, each to unique specifications • Capacity of 7,500 ton of hot bends p.a. • OFS Overview • Strong potential growth factors • Intention to grow market share in Ni-resist cast iron pumps • Full new casting production line for Ni-resist cast iron pumps already arrived at plant • Improved product mix and Ni-resist segment expansion with well known brand and only 2 main competitors • Sales to current customers using existing sales force • Historically largest Soviet ESP manufacturer • Strong brand reputation and service business with 6,000 wells under management • Strong capabilities to produce wide power range of ESPs (from 18m3to over 500m³ daily output) With our OFS division we leverage our oil & gas pipe customer base and build on our strong historic position

  13. Russian oil & gas production and economic recovery fuel strong pipe demand SOUTH 6 Market CAGR 2009A – 2013E ChelPipepipe sales volume (kt) Pipe2(kt) LDP New pipeline constructionRenewal of existing pipelinesFuture opportunities LDP OCTG1 Seamless industrial Welded industrial 54.2%1,2 9.6%1,2 943 908 +19% 843 717 631 601 OCTG: Oil production CAPEX of oil majors Russian drilling activity +23% 530 5.3%1 357 291 Industrial seamless and industrial welded Macroeconomic drivers: GDP, infrastructure construction, industrial production Power generation capacity construction 12.8%1 H1 2010A 2007A 2008A 2009A Q3 2010A 8.1%1 Hot bends(kt) 4,595 3,823 2,845 2,403 1,357 ESP(units) 5,508 5,681 4,596 2,053 971 Source: Company dataNote: Q3 2009 determined by subtracting H1 2009 from 9m 2009 and Q3 2010 determined by subtracting H1 2010 from 9m 20101 Tubing, casing and line pipe for OCTG applications2 Pipe volume is not accounting for intercompany pipe sales between ChTPZ and PNTZ; Consolidated figures are 1,839 kt in 2007, 1,473 kt in 2008, 527 kt in H1 2009, 819 kt in 9m 2009, 291 in Q3 2009, 1,113 kt in 2009, 708 kt in H1 2010, 1,065 kt in 9m 2010 and 357 kt in Q3 2010 Source: 1 Metal Bulletin Research2 CAGR 2010E-2013E – 9.6%, growth 2009A-2010E – 54.2%, CAGR 2009-2013E of 19.4% 18

  14. ChelPipe’s 9m 2010 results show strong improvement in performance SOUTH 6 ChelPipekey financials, IFRS-consolidated ($mil) • 2007 – expansion year when Russian pipe industry reached peak production • Until mid-2008 ChelPipe on track • Growth resumed during 9m 2010 Source: IFRS accounts,Company data Note: P&L items converted at average exchange rates of 1$=25.55RUB in 2007, 1$=24.87RUB in 2008, 1$=31.74RUB in 2009, 1$=33.27RUB in H1 2009, 1$=32.58RUB in 9m 2009, 1$=30.05RUB in H1 2010, 1$=30.18RUB in 9m 2010; Q3 2010 determined by subtracting H1 2010 from 9m 2010 1 Pipe volume is not accounting for intercompany pipe sales between ChTPZ and PNTZ; Consolidated figures are 1,839 kt in 2007, 1,473 kt in 2008, 527 kt in H1 2009, 819 kt in 9m 2009, 1,113 kt in 2009, 708 kt in H1 2010, 1,065 kt in 9m 2010 and 357 kt in Q3 20102Growth in H1 2009 vs. FY 2009, 9m 2009 vs. H1 2009, FY 2009 vs. 9m 2009, 9m 2010 vs. H1 2010 3 EBITDA reported as defined by ChelPipein IFRS accounts 4EBITDA calculation adjusted for impairment of assets, losses/gains on disposal of assets and subsidiaries, excess in share of net assets acquired in a subsidiary over purchase consideration, foreign exchange loss, share of profit of associates, other financial income/costs; Adjusted EBIT = Adjusted EBITDA – Depreciation & Amortisation 2007: Impairment of assets of $18 mil, loss on disposal of assets of $4 mil, excess in share of net assets acquired in a subsidiary over purchase consideration of $3 mil, foreign exchange gains of $0.5 mil, other fin. costs of $0.5 mil 2008: Impairment of assets of $372 mil, loss on disposal of assets of $7 mil, gain on disposal of subsidiary of $3 mil, excess in share of net assets acquired in a subsidiary over purchase consideration $4 mil, foreign exchange loss of $62 mil, share of profit of associates of $11 mil, other financial costs of $0.3 mil 2009: Impairment of assets of $82 mil, loss on disposal of assets of $4 mil, gain on disposal of subsidiary of $3 mil, foreign exchange losses of $30 mil, share of profit of associates of $0.4 mil H1 2009: Impairment of assets of $64 mil, gain on disposal of assets of $0.1 mil, foreign exchange losses of $13 mil, share of losses of associates of $0.02 mil 9m 2009: Impairment of assets of $72 mil, gain on disposal of subsidiary of $3 mil, foreign exchange losses of $12 mil, share of losses of associates of $0.01 mil H1 2010: Impairment of assets of $(6) mil, loss on disposal of assets of $1 mil, gain on disposal of subsidiary of $2 mil, foreign exchange gains of $48 mil, share of losses of associates of $3 mil 9m 2010: Impairment of assets of $(10) mil, loss on disposal of assets of $2 mil, gain on disposal of subsidiary of $2 mil, foreign exchange gains of $21 mil, share of losses of associates of $3 mil 5 Growth in H1 2010 vs. H2 2009; H2 2009 determined by subtracting H1 2009 from FY 2009; Pipe volume for H2 2009 was 601kt, avg. pipe selling price $1,154 and revenue $940 mil 19

  15. Integrated cross selling product platform with leading market share and global low cost position Complementary productplatforms OFS provides additional product entry into the oil supply chain + & & LDP TPS OCTG OFS Target • Complete pipe, tube and OFS solutions provider with a 25% target share in Russian oil & gas markets • Vertically integrated, quality & cost leader • Positioned for future outsourcing trend – global cost pressure will require Russian oil & gas companies to be more efficient and to seek outsourcing opportunities • Prepared for new oil & gas environment requiring higher product quality  