1. North America. See for more information

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1 MBR assumes that the production flowchart will allow the company to fully supply itself with couplings, with total coupling capacity estimated at 1,000,000 units per year. The Tenaris Canadian division operates two pipe and tube facilities, acquired via the acquisition of the Maverick Corporation by Tenaris in 2006 and from Algoma in The Calgary-based Prudential tube mill produces welded pipes from 4 to 16. Total annual production capacity is 400,000 tpy, of which we estimate 120,000 tpy is OCTG. The facility s four threading lines can thread up to 380,000 tpy. Algoma Tubes is a seamless tube producer with annual production of 250,000 tpy, of which we estimate up to 188,000 tpy is OCTG. The mill has 160,000 tpy of threading and some 100,000 tpy of heat treatment capacity installed. In addition, MBR believes that the facility can produce up to 1m coupling units. Tenaris Tamsa is the major OCTG producer in Mexico producing seamless pipe with diameter from up to 20. The mill is capable of producing 780,000 tpy of tubulars, with OCTG being 75% of the output, from H40 up to Q125 and proprietary grades. Total threading capacity is estimated at 600,000 tpy at three threading lines with 450,000 tpy of heat treatment. The facility has a nominal capacity of up to 4m units of coupling. In addition to on-site threading, Tenaris owns the Hydril repair and manufacturing facilities, offering Tenaris local presence. The acquired network brought some 1.45 m tpy of threading capacity to Tenaris s portfolio. We believe this operated 95% of its total threading capacity in 2011, with 20% being API and 80% premium. These four companies dominate OCTG tubular capacity in North America particularly in seamless, where they total 95% of capacity. In welded, their market share is much smaller at just 60%. Figure 22: NAFTA seamless OCTG market by company Figure 23: NAFTA welded OCTG market by company MBR has also provided analysis on what we would term the second-tier suppliers in terms of market size. While the majors were historically dominant and they have invested in upgrading and new capacity, a couple of factors have increased the penetration of new mills. 1. The relatively low capital cost of building welded capacity has encouraged new market entrants, such as Lakeside, WTC and NW Pipe. 2. The imposition of anti-dumping action against Chinese welded and seamless OCTG in USA, Canada and Mexico has removed the low-priced threat, allowing higher prices for commodity products. It has also encouraged inward investment by TPCO in seamless. 3. The growth of demand in the shales in particular has increased overall market demand. 56

2 A brief summary of the second-tier players is included. Evraz EVRAZ owns Calgary- and Red Deer-based welded tubular operations in Canada with a combined capacity of 524,000 tpy, with 210,000 tpy of this output being OCTG from to The Calgary facility operates three threading lines with capacity of 330,000 tpy. Its heat treatment capacity is estimated at 127,000 tpy. Red Deer has a single threading line capable of processing of 127,000 tpy of tubulars. We believe both facilities utilised 90% of their threading capacity in 2011, while the Red Deer output distribution was 70% API and 30% premium in The company also threads externally sourced pipe for the local market. It also owns Rocky Mountain Steel in Pueblo, Colorado, where it produces seamless casing only. We estimate output is around 100, ,000 tpy at the site. It also intends to add to capacity. It is adding around 100,000 tpy of capacity at its Portland, Oregon structural tubular mill and similar threading capacity. We expect the size range will be and produce both casing and tubing. Output is destined for the Bakken and BC shales. Northwest Pipe The company owns two plants in Bossier, Louisiana and Houston, Texas that produce welded OCTG. Bossier mill has a total production capacity of 125,000 tpy, with some 100,000 tpy being welded OCTG from in grades J55-P110.Total threading capacity is about 80,000 tpy, while 100,000 tpy of output can be heat treated annually, although this includes line pipe. The Houston plant can produce 50,000 tpy of welded OCTG from 4.5 to in grade J55-P110. The facility has a single threading line capable of handling 30,000 tpy. Heat treatment capacity is estimated at 40,000 tpy. Boomerang Based in Liberty, Texas, the $150m Boomerang welded pipe mill produces OCTG casing and tubing from to and in grades from J55 to Q125. The plant has a total annual capacity of 400,000 tpy, with some 250,000 tpy being OCTG output. Operating since 2010, the Boomerang mill has four threading lines with a combined capacity of 250,000 tpy. Installed heat treatment capacity allows processing of approximately 100,000 tpy of tubular products, with third-party inspection on site. MBR estimates that Boomerang utilised 65% of threading capacity in 2011, with all output being API. Lakeside Steel/JMC John Maneely Company acquired Lakeside Steel assets in 2011/12 comprising a two-line plant in Welland, Ontario, Canada and a single-line mill in Thomasville, Alabama. The Welland mill has a production capacity of some 240,000 tpy. We estimate that OCTG capacity is around 144,000 tpy, although it only really entered this market in significant volumes from 2008 onwards. It can produce ERW casing and tubing from 2 to 12. Its biggest single product is tubing at its stretch reduction mill primarily 2 3/8-4 ½ while it also produces 4-12 casing at its ERW line. The plant has a total threading capacity of 120,000 tpy through a single threading line. A single Q&T line has heat treatment capacity of 80,000 tpy. MBR believes the Welland facility achieved at least 75% of its threading capacity utilisation in 2011; 100% of output was API. It therefore utilises external threading and heat treatment capacity locally and closer to market. 57

3 Brought online in 2011, the Thomasville, Alabama plant has 175,000 tpy total capacity of Of total production capacity, 85,000 tpy is dedicated to OCTG with the remainder being line pipe. A single threading line is capable of processing up to 100,000 tpy of tubulars. The installed on-site heat treatment facility has a capacity of 80,000 tpy. Thomasville mill saw a 50% threading capacity utilisation in 2011, with all output being API, although this reflects the start-up of the plant. Much less output at this plant is sold plain-end at lower grades. Welded Tube of Canada (WTC) WTC has total production capacity of 400,000 tpy of welded pipe at its Concord, Ontario mill. In addition, the company operates threading operations in Port Colborne and Welland and a heat treatment facility in Welland covering L80, N80 and P110. We estimate OCTG output was in the region of 120,000 tpy. Total threading capacity is estimated at 350,000 tpy, while some 120,000 tpy can be heat treated. We believe the Concord facility used 60% of its threading capacity in 2011, with output being 100% API. It therefore threads external clients. The company announced planning to build a welded pipe mill in either the north-east United States or Canada to serve the energy market by The new OCTG-dedicated mill will have a total annual capacity of about 350,000 tpy at a cost of $50m in sizes of 4 1/2 to 10, producing OCTG and line pipe. It will be sited at Lackawanna in upstate New York, but as of mid-2012, the plant had not begun construction, but is still being planned and may be delayed until Threading and heat treatment capacity is likely, but has yet to be confirmed. 1.3 Independent Threaders Hunting Hunting owns the largest network of independent manufacturing and threading facilities dedicated primarily to premium threading in the NAFTA region. MBR estimates that Hunting brings to the market some 2m-2.5m tpy of threading and some 200,000 tpy of heat treatment capacity, allowing it to upgrade some commodity pipe. Most of the capacity is concentrated in the USA, in Texas and Louisiana. This can be explained by the company s orientation toward offshore and shale gas premium connections technologies. The two largest facilities are in Marrero and Calgary, Alberta, accounting for 35% of the company s output in NAFTA. MBR believes that Marrero has up to 60 lathes employed and some 50,000 tpy of tubulars can be heat treated. Similarly, we estimate the Calgary site to have up to 62 lathes, offering up to 430,000 tpy of threading capacity with up to 120,000 tpy of heat treatment capacity. The remaining assets are mostly located in Houston or in Louisiana, with smaller sites in Nisku, Alberta, Pennsylvania and Mexico. We believe the company had an average threading capacity utilisation of 94% in 2011, with 45% being API and 55% premium. The company is undertaking ongoing capital investment projects, but was unwilling to provide details. Nevertheless, Hunting admitted increased pressure from the US government to introduce higher safety standards for its products, requiring significant R&D costs. Outside these core groups, there are a large number of large and small local threaders that provide API threading capability along with licensing premium connections from the majors. These are largely concentrated in the USA. VAM has the strongest penetration into all three markets with the largest number of licensees. Tenaris and Hunting share the same number of licensees, while Hunting has a stronger presence in the USA. Tenaris on the other hand has a stronger position with more licensees in Mexico, reflecting the dominance of its local output. 58

4 Figure 24: Number of licences with independent threaders by country USA Canada Mexico Global Network Large local Minor local Figure 25: Licenses for premium threading by country 100% 80% 60% 5.6% 5.6% 10.1% 11.1% 10.1% 22.2% 25.8% 16.7% 16.7% 40% 27.0% 27.8% 33.3% 20% 21.3% 33.3% 33.3% 0% USA Canada Mexico 89 licenses in total 18 licenses in total 6 licenses in total Source: Tenaris VAM Hunting JFE voestalpine Ultra USA With some 2,000 rigs operating in the USA as of mid-2012, most of the threading capacity has been concentrated in Texas, reflecting its historic position as the centre of oil and gas production and also the largest presence for independent producers. 59

5 Figure 26: US threading capacities Louisiana 22% California 1% Pennsylvania 1% Alaska Ohio 2% 1% Oklahoma 10% Texas 63% Figure 27: Licenses for premium threading by US States Total number of licenses