Annual Report 2013

North American Market

In 2013, oil and gas prices went up year-on-year: by 4% for WTI crude oil and by 35% for natural gas.

Despite the price uptrend, the average rig count decreased by 8% to 1,761 from 1,919 year-on-year, driven by a steep decline in gas drilling, while oil drilling intensified. The average share of oil rigs went up to 77.9% in 2013 compared to 71% in 2012.

US gas and oil rigs

The growing share of oil wells results in a declining demand for seamless pipe and hermetic premium connections widely used in gas field development.

US rigs by drilling method

The share of welded pipe sales is therefore rising with its accompanying lower margins. Moreover there was strong competitive pressure from Asian producers driving the prices down.

While rig count fell, the number of pipe per rig went up as operators continued to drill more horizontal and directional wells, with their average share in total wells increasing to 75% in 2013 from 71% in 2012.

In addition, the reduced rig count was partially offset by more efficient drilling. In 2013, the average number of wells per rig rose by 6.5% to 5.24 from 4.92 year-on-year.

The increasing share of horizontal and directional wells and higher drilling efficiency result in the growing demand for high-margin pipe and overall OCTG consumption, offsetting the premium market decline caused by oil drilling enhancement.

In 2013, TMK’s American facilities continued to promote pipe shipments to shale oil and gas fields, with sales of premium connections reaching 192 thous. tonnes.

TMK IPSCO increased its sales of TMK UP products as well as all services associated with premium connections. Opening the new production facility in Edmonton (Canada) in March 2013 added to this trend. As such, the company’s focus continues to be to participate in those segments where its valueadded premium connections and services make a difference.

In 2013, TMK IPSCO developed and launched various standard API products with improved chemistries for enhanced resistance to corrosion. The company also launched new combinations of pipe sizes, wall thicknesses and grades.

In addition, in April 2013, OFS International (USA), a TMK subsidiary, acquired pipe service and accessory manufacturing assets located in Houston (Texas). This acquisition marks another step in TMK’s expansion in the U.S. and reinforces the company’s focus on developing service and producing high value-added tools for the oil and gas industry.

US OCTG consumption, thous. tonnes

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Premium connection pipe shipments by American division,
thous. tonnes

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