Tenaris S.A.

Good day and thank you for standing by. Welcome to Q2 2023 Tenatis SA Earnings Conference Call. At this time, all participants 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, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Giovanni Sardagna. Please go ahead.

Thank you, Gigi, and welcome to Tenaris 2023 Second Quarter Conference Call. Before we start, I would like to remind you that we will be discussing forward-looking information in the call. and that our actual results may vary from those expressed or implied during this call. With me on the call today are Paolo Rocca, our chairman and CEO, Alicia Mondolo, our chief financial officer, Gabriele Podkuska, our chief operating officer, and Luca Zanotti, president of our U.S. operations. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results. Our second quarter sales reached $4.1 billion, up 46% year-on-year, but down 2% sequentially, mainly due to lower OCTG sales in Colombia and Canada and lower pipeline sales in Argentina, partially offset by higher offshore sales and higher sales in the Middle East. Average selling prices in our tubes operating segment increased 21% compared to the corresponding quarter of last year, and 1% sequentially. Our EBITDA for the quarter was down 5% sequentially to $1.4 billion due to lower sales and higher SG&A expenses. Our EBITDA margin for the quarter was 34.6%. On the other hand, our net income for the quarter increased 1% sequentially to $1.1 billion as it benefited from an improvement in final results and higher income from non-consolidated companies. With operating cash flow of over $1.3 billion and capital expenditure of $165 million, our free cash flow for the quarter reached a record level of $1.2 billion. After a dividend payment of $401 million in May, our net cash position increased to $2.3 billion at the end of the quarter. Now, I will ask Paolo to say a few words before we open the call to questions.

Thank you, Giovanni, and good morning to all of you. In our second quarter, we almost matched the record results for our first quarter, and the combined results of the first half amply exceed our previous record for the semester. This performance was driven by a high level of sales in both the U.S. onshore market and in offshore markets. as well as a solid contribution from our sales in the other region. It was also quarter when our net income and free cash flow each exceeded a billion dollars. Our industrial supply chain system are operating at record levels in many plant and production line, as well as in logistic movements. In the US, we sold a record level of wedge 400 series connections, which have been specifically designed for drilling operation in shale environment. Large operators, in particular, appreciated the value we can bring to their operation with our rig direct service, which now include the delivery of pipes in run-ready condition. This service involved taking care of the supply of pipes from their production until they are run in the well using our pipe tracer system that provided technical specification for each pipe supplied and the running dope applied in the factory. By avoiding the need for rigged site pre-checking processes and making digital tallies with all the data needed for installation, the service reduces cost and enhances safety and environmental performance at the rig. For offshore operations, we again sold the record levels of blue dock connector and dopless connections. In Brazil, we have developed a red zone customer value proposition focused on reducing manual operation on the rig floor and thus enhancing safety. We were also awarded the supply of 95,000 tons for an offshore pipeline and seamless risers for the BMC33 deep water development in Brazil campus basing, as well as a contract for the supply of 46,000 tons of seamless pipe for an offshore pipeline for the Zacaria development in the Black Sea. In Saudi Arabia, we began consolidating the operation of Global Pipe Company from May 17, after increasing our indirect shareholding in the company from 35 This company produces larger diameter pipes for gas pipeline infrastructure, structures, and conductor casing application. The sale of GPC contributed $20 million to this quota. We've increased in Aramco's gas drainage operation, both in conventional and unconventional operation, and its master gas development plan. The demand for OCTG and Lime Pipe in Saudi Arabia is expected to increase strongly over the coming years. OCTG stocks are at a relatively low level, and Aramco is seeking to replenish them rapidly. Tenaris, with a wide range of products, manufactured in Kingdom, where we employ over 800 persons, and extensive global capabilities worldwide, is well positioned to supply Aramco requirements. In July, the Argentine government inaugurated the first stage of the next location pipeline that was built with our pipes in record time. The pipeline opened the road to develop the prolific Vaca Muerta shale resources to transform the country's energy balance. There are further projects for pipeline infrastructure development aiming to expand evacuation capacity of oil and gas from Vaca Muerta. which will attract additional investment in drilling. But this will depend on political development following the election in the coming months. We are well positioned to serve this expansion with our integrated range of local production and service capabilities, from OCTG, pipelines, and sucker rod to fracking and coil tubing services. We are nearing the completion of some investments that will contribute to our target of reducing the carbon emission intensity of our operation by 30% by 2030, compared to 2018. This month in Italy, we are completing the installation of a heat treatment furnace, which is designed to work with hydrogen and natural gas, and will improve the energy efficiency of our Italian operation. In Argentina, we have installed 23 out of the 24 wind turbines for the wind farm, which will supply close to 50% of our electric power requirement for our operation in the country. We expect to start operating the wind farm in October. In our release, we mentioned that our sales and margin in the second half would be significantly lower than our record results in the first half. Our EBITDA will be lower than $1 billion in the third quarter due to market pricing condition and specific activity declines in onshore activities in the Americas. On the other hand, our operating cash flow will again exceed $1 billion as we continue to reduce working capital. Looking ahead, we expect that the specific factors that are affecting drilling activity in the second half of this year will fade away. The structural differentiation that Tenaris has established, with its unique global reach, competitive in data system, and positioning with leading oil and gas producers around the world, will support our financial performance over time. We are ready now for any questions you may have.

Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Arun Jaram from JPMorgan Securities, LLC. Yeah, good morning.

Paola, I wanted to get your thoughts on how, call it, the pullback in market fundamentals for OCDG impacts, you know, the company's thoughts on establishing a return of capital framework beyond the based dividend. And, you know, if you do, you know, move in that direction, you know, where the board's thoughts are on buybacks versus, you know, variable dividends just given the, you know, the presence of a controlling shareholder at the company.

Well, thank you, Arun. I think the board will... We'll evaluate the medium-term perspective, as you say, of our market and of our positioning in this market. We'll also evaluate the capital investment that may be required for different kind of operation. And keeping this in mind, we'll then look at the situation the available liquidity for the company and the decision on dividend or other option. I think all options are open for the board meeting in November to take a decision on this ground.

Great. And Paolo, my follow-up. I was wondering if you could give us more detail on some of the import trends which have been impacting your thoughts on the second half outlook. Have you seen any change in the pace of imports and any thoughts on when you think we could reach, call it a bottom in North America for OCTG?

Thank you. You know, we were expecting a reduction in our EBITDA in the second half of the year because of the decline in pricing in North America. The pipe logic went down up to now in July by around 27% from the peak. of the late last year. So this was something that we were expecting. But on top of this, we had to consider, there are some additional considerations. One, we have been able to advance shipment and production because the performance of the mill has been very good in the last quarter. We have been able to advance some of the material in the order and to ship material that is contributing to the very good performance, I would say, of the second quarter. But it is, to some extent, reducing volume in the next. The other factor is the situation in Argentina is not easy to predict. There are projects that we completed, like the pipeline and the next location. There are other projects that are pending. But there is a situation of uncertainty due to the economic instability of the country, the high inflation, and the restriction to import of necessary materials for the oil and gas industry. This is impacting TVT to some extent, and I think that it will not be really addressed until the election cycle is completed by the fourth Q of this year. This, to some extent, slows down the level of consumption in some of the projects in Argentina. Other factor has been some reduction in expectation in Colombia and Ecuador compared to what we were considering maybe three months ago. On this specific, let me ask Gabriel to add some color on it because things are moving in these countries.

Yeah. Thank you, Pablo. Good morning, Arun. Certainly, Colombia has been... a country that has been affected by uncertainty on political changes. Also, we have in some areas of the country, social unrest. So these have diminished our outlook for the region, at least in the third and fourth quarter. To give you an idea, in Colombia, we were serving 50 operating rigs as of 2022. Today, the level of activity is around 28 rigs. But we are forecasting this level to continue for the next two quarters at least. There are some early signs for recovery into 2024, but it's a bit early for that. So this has been one of the markets that have been softer than originally anticipated.

These are, let's say, some of the factors that are guiding our forecast in the third queue and in the second half. But the medium-term perspective that we see didn't change substantially on this. We think that the oil sector is pretty firm. The level of investment of the oil companies solid the price of oil in the 80s is supporting recovery of activity in the United States later on during the fourth quarter of 2023 or in 2024. In the rest of the world, offshore and Middle East and the Eastern Hemisphere, the level of activity is gradually increasing. So in this sense, I think the environment for oil and gas is solid. But from the exceptional results of the first semester, let's say we will reduce our EBITDA. That's the reason why we call this a significant reduction, but still will be a very solid result. and the operative cash flow will be higher than $1 billion in Q3. Great.

Thanks a lot. Thank you. One moment for our next question. Our next question comes from the line of Mark Bianchi from TD Cowen.

I thank you. So I wanted to ask a little bit more on the progression in the back half here. If third quarter EBITDA is below a billion dollars, as I think you said, curious what margin that would would mean. And then as we go to fourth quarter, I know there's probably some less visibility, but just there's there's probably some seasonal factors at play. If you could give us any kind of a steer on how fourth quarter looks versus third, that would be helpful as well.

Thank you, Mark. Well, for the third quarter, we expect a margin close to 30%, maybe slightly below 30%, but in that range. And then I think that for looking to the fourth quarter, we had to have a more clear view on the dynamic factor, especially in the United States. On this, I will ask Luca, because the United States, you know, North America is important, but United States at the core of our North America operation. So I will ask Luca to give us some element to evaluate the perspective of the medium term.

Yeah, sure. Morning, Mark. Now, I believe that to describe a little bit what our view is on the U.S., we should look at two aspects, the demand on the one side and the supply on the other side. When we look at the demand, what we see, and this is very much in line with what all the big drillers have established in previous earnings call, that we're going to see some rigs coming off maybe during the third quarter of 2023. This is mainly due to gas, maybe some gas rigs will come out, and mainly due to the fact that there are still some M&A going on, and usually when they combine entities, the rig count of the combined entity is lower than the two separate companies. But overall, we see the trend downward to decelerate during Q3. And then we see this stabilizing, moving into Q4. And maybe we can have some surprises on the upside, given the fact that the new oil price in the 80s has changed a little bit the horizon for the operators. When we look at the demand, sorry, when we look at the supply, well, then we go back to the imports that was asked before. And what we see on the imports is that imports have come down as we were expecting. If you look at Q1 compared to Q2, imports have come down about 150,000 tons. But more specifically, when you look at the first month of the quarters, which is usually where the quota resets and the imports are a little bit higher. And if you see, for example, July, which obviously are still not imports but licenses, and compared to April, well, you see that the trend is even more steep. We saw this coming off by 100,000. So we expect with some delays, obviously linked to the lead times of the decision, Import will come down and will continue to come down through the year. Also, the domestic will adjust. We've seen some already stating that they're going to adjust production down. So overall, a reduced offer, especially on the side of the imports and An activity that is still slowing down, but at a lower pace with help somewhat consume the overhang inventory that we still have on the ground.

I don't know if this is... I think it's clear, but let's say these are the factors that will basically drive the medium-term dynamics of this market that is very important. and will also influence the price over time.

Do you think the stabilization and all the factors that Luca mentioned, is that enough to result in an EBITDA that's from the U.S. that's flat in the fourth quarter versus the third quarter? Or is it still likely lower? It's just a matter that it's more stabilizing and maybe it starts to increase as we get into 2024.

Well, the decline in the pipe logic to some extent is affecting our contract with some delay. I expect that we will still have some price reduction, maybe not the pipe logic reduction, but some price reduction in our contract in the fourth quarter. But at that time, there will be also some positive factor driving from the rest of the world. But these are the factors that are affecting, let's say, the medium term.

Okay, that's helpful. The other question I had was just on these uncertainties in Colombia, Ecuador, and Argentina that you mentioned. Is there any way to help us understand the magnitude of that, maybe collectively on an EBITDA basis? Is that, you know, 50 million EBITDA hit in the back half or just any way to help us understand how significant that is. And if it goes away, how much we could be adding back to the level of profit.

Well, for sure, Argentina is the most important of these. Because in the end, in Argentina, we are we have an invoicing that is in the range of 2 billion per year i mean if we consider pipeline the entire sales of octg line pipe but also the service you know in argentina we are performing a coil tube service fracking service, we have units for fracking that are working for different clients. So the extent of our presence in Argentina is very substantial. If there is some difficulties of the operator in maintaining their performance of drilling because of lack of key imported material or difficulties in managing the operation in a volatile macroeconomic environment, this has an impact. Now, let me tell you that the perspective of Argentina over time, once this election cycle is completed, is pretty impressive, because Argentina needs to build and is There is, I would say, overall consensus on the need of strengthening infrastructure to build evacuation channels for Vaca Muerta for gas, for oil. There are projects from different companies that will enhance this and allow the country to start exporting oil and integrating gas into with the surrounding countries. And this will also drive additional drilling and additional production. All of this is, in my view, very positive for a company like Tenaris that has very large prices in Argentina. The perspective is good, but the election here is creating turmoil. When we look at Canada, and the the size let's say of aquanet operation and colombian operation these are not so relevant but still maybe gabriel i mean this could also be you can give an idea of the size of our operation there and the impact that this could have the perspective of it yes considering also the

The change in perspective in Canada, we didn't comment it before. Canada had a very strong first half of the year, but we see some of our key customers adjusting the level of investment, focusing a policy of preservation of cash. We believe that this will be reverted in 2024, but this is our expectation for the second half of the year. So this contributes as well to the onshore decrease in the second half versus the first half, in addition to Argentina, Colombia, and Ecuador. But I would say that in this market, the drop of invoices in the second half versus the first half is in the range of $200 million to $250 million approximately. And that's revenue, $200 million to $250 million, correct?

Yes. Yeah, great.

Okay, thank you very much. Thank you. One moment for our next question. Our next question comes from the line of Alessandro Pozzi from Mediobanca.

Hi there. Thank you for taking the questions. I have a couple of them on South America. You mentioned, of course, the weakness in Colombia, Argentina as well. But at the same time, I believe Mexico is having a really strong year. And I was wondering whether the strength of Mexico, where we see the recount going back to I think the highest level since 2014 is not offsetting some of the weaknesses that you see in other regions as well. The second question is on the home material costs. I believe they're coming down in your COGS, and I was wondering whether there's a reflection of scrap coming down or what are the main components of that reduction. Finally, back to Argentina, Exxon, I believe, has been rumored potentially to exit the country, and I was wondering whether how you see that, if that is confirmed, and whether it could create additional uncertainty there. That's all from me. Thank you.

Thank you, Alejandro. Well, on the first point on Mexico, Mexico, I would say, is gradually increasing level of operation. Also, some of the private operators in Mexico are advancing in their project. So there is a gradual, let's say, increase in the activity. But this is not, let's say, a sudden and relevant increase. What we expect is a very gradual increase, constrained to some extent by some financial situation in Pemex. And also, you know, Mexico is facing next year election for president. So also, you know, to some extent, some of the private companies are moving on. But maybe this is a trend that may or could be stronger in the second part of next year once the space has been cleared and the new government will take care. In the second point, well, on the other side, let me add, you know that in Mexico, the nature of our contract is that the tie, the relation with the pipe logic is stronger, and so any change in pipe logic is reflected in our pricing, the long-term contract. WePayMX has this component, and this component is also applied to other countries. So you will see volume increasing, but sales reflected this factor. When you look at the cost, basically I think that there is a slight reduction of cost, due to the IFRS and the level of inventory in our system, this will be reflected in our profit and loss, in our cost of goods sold, basically starting from the first quarter of 2024. It's going down, but will be reflected only over time. And on the other side, there is no major change. I mean, the movement in scrap, in hot-roll coils, in energy, are relatively limited. I mean, we do not see sudden change like the one we saw in gas last year, as a consequence of the invasion of Ukraine. This year, what we see is some reduction in cost, but as I say, will turn out in our cost of goods sold later on in the first quarter of 2004 mainly. The last point is about Exxon. Exxon announced the dismissal of areas in Vaca Muerta, but mainly I think the reason is that Exxon has an extraordinary opportunity in Guyana, is concentrating investment in the very big project. Guyana is throwing an opportunity. And by the way, we are supporting Exxon in Guyana for all the OCTG long-term contract. So they are concentrating on, let's say, the opportunity that they have. I don't see that this is reducing activity in Argentina because in this area there has been very limited activity going on up until now uh we will see what will happen later i mean but vacamerta is very it's a very large play this is just one player thank you very much thank you as a reminder to ask a question please press star 1 1 on your telephone and wait for your name to be announced

To withdraw your question, please press star 11 again. Our next question comes from the line of Steven Gingaro from Stifel.

Thank you, and good morning, everybody. I guess two questions for me. What I'd start with is when we think about consumption of pipe per rig work, and I'm thinking about this kind of from a U.S. land perspective, Are you seeing any change? Has it stabilized as far as kind of consumption per rig, the type of OCTG in the well? I mean, are there any trends underlying consumption that are positive or have they sort of stabilized that at current levels?

Well, you know, we are serving rigs operating in deep offshore in a very different environment. Also, the consumption per rig is very different depending on the play. But the most, let's say, homogeneous play is the U.S. and the shales. So I will ask... to look to give you some view productivity increase very much over time, but to give you an idea of where this could go in the coming quarters.

Yeah, thank you. Morning, Steven. Now, to answer your question on trends, specifically as far as the consumption is concerned, We see specific consumption increasing. This has been increasing a lot since the inception of the shales, but still keeps on creeping up and will continue going up. Just to give you a color, if you take the largest operator, while you see that in some cases they drop down one or two rigs, obviously the big drop in the market in the lower 48 comes from smaller operator. Even the one that took some rigs off, they are not reducing the number of wells that they are drilling. So our customer, even in some cases, they reduce a little bit activity in terms of rigs. They are still drilling the same number of wells. And this means that the specific consumption went up. This will continue because As they move on, let's say, out of the sweet spots, the number of wells that they're going to have to drill to maintain production or to increase production is going to increase. So overall, under this aspect, we see a nice future ahead of us. And the second trend that we see establishing the more we go ahead is more and more larger use of seamless semi-premium in the production casing, which obviously is 45% of the total market in the United States. I overall believe that these two trends that are well established will favor our positioning in the United States. Obviously, I'm always referring to the level 48.

Yes. I think just in terms of data, No, we were assuming in 2019 some slightly less than 5 tons per year per rig. And today we are in the range of 6.3, 6,000.3. So the increase from 5 to 6.3 is part of what Luca is describing. And it's coming from different trees, but also I think the length of the laterals is increasing and we see today more wells in the 3.5 kilometer or 3,500 meters of laterals and even more. This is good for us because it's requiring a more complex product, more seamless premium or semi-premium. to stand the demand of the longer lateral. So in a sense, this is a trend that is making the market a little more selective.

Thank you. And the other question, and this is maybe a little, I'm trying to think of a word, but detailed. But when we think about, your rig direct model has obviously done a phenomenal job over the last five, six, seven years, however long you've had it in place, I forget. So when we think about like looking at U.S. inventories and looking at, you know, kind of months of supply on the ground, like I think that's calibrated based on, you know, the market and what inventories are in the system. But because you're serving a pretty sizable part of the market with a rig direct model, does looking at inventories on the ground give me a false picture of what the real supply demand is? Because it feels like the inventory on the ground is still pretty low on a kind of a per-rig, you know, on a month supply basis. So I'm trying to sort of triangulate those two, where month of supply looks pretty healthy, but prices have been down year-to-date. And I'm wondering if that's partially because your rig direct model doesn't show up in those numbers.

Well, if you see the numbers that are reported into the – let's say, main trade publications, we are reporting our inventory on the ground. But obviously, I mean, our management of inventory is still, in my opinion, more efficient than the average of the industry. So this is one kind of correction that you need to introduce. But when you take out our inventory from this one, Well, then the remainder of the market is serviced by a level of inventory which is not dissimilar to the ones that used to be in place before we introduced the redirect. So it is a kind of mixed answer to what you're saying. And in our calculation, when we look forward, the inventory estimation is in the range of 8.5, 9 months, which is a number which is not as high as we saw 12, 13, 14 back in the past, but still high enough to determine some inventory overhang, which obviously reflects into the into the prices.

Great. Now, that's good detail. Thank you. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Mark Bianchi from TD Cowen.

I thank you. I had a couple of follow-ups. The first one was on, if we look out a few years here, I'm wondering if you're going to need to build some new seamless capacity. I think you're probably in the high threes million tons of seamless volumes on a run rate basis now. I think you're almost 5 million tons of capacity, but all that capacity might not be able to serve the whole world, right? So you might need some capacity in certain parts that are growing. Can you talk about that and how that might relate to your decisions around capital return here later in this year?

Thank you, Mark. Well, I think that we still have available capacity of seamless rolling in our system. If we have bottlenecks in our production system, this is more in specific value-added areas. In some cases, we need to enhance our coating capability. In some case, we need to strengthen ability to produce the couplings of premium because we have, I mean, our bottlenecks are more below the line of, because below the rolling mill end on one side. On the other side, remember, we have an important capacity of welded product. And to some extent, there are products that we may bring to the market with all the technical sophistication that could compete, maybe not in the more demanding application, but can to some extent substitute some of the seamless in different parts of the column. So by a combination of investment in value-added heat treatment, premium, dopless, or coating, or areas in which we may have demand and exceed our capacity, and using our capacity of welded, and in this area also increasing or expanding heat treatment capability, I think we are able to, let's say, to cover the need of our client and to support a very relevant market share worldwide and a substantial market share in an area like North America. Remember, we invested in a new mill in Canada for welded product. It's going on. Investment like GPC in Saudi, to some extent, over in the market with material produced locally. This is welded, but still has an impact in our ability to satisfy demand from this. We also have to take in mind that we expect some demand of complex product for the energy transition. We are looking ahead, and we plan function of this.

Okay, thank you, Paulo. The other question I had was probably for Luca. I think in the past few quarters, we've kind of talked about maybe pipe logics stabilizing at around $2,500 a ton. Is that still how you see it? And what sort of timeline do you think it would take to get there? You made the comments earlier about some of the supply-demand dynamics in the market. It seems like maybe that could be happening fairly soon.

Yeah, Mark, this very much, so if you want to... No, no, what I'm saying is there are structural factors here that has changed this pricing level comparing to the historical level, and we have to take this in mind.

But anyway, look, maybe... I was going along the line that you introduced. Yeah, Mark, I mean, I believe that the demand-supply balance, which... I mean, in the end, the pipes logics, I already introduced this in my previous answer. Now, here there are, on top of what I was saying, where we see slowly going into, let's say, the end of 2024, balancing the demand supply, and this has clearly an effect on the pipe logics. I believe that it is worth noticing that there have been changes structurally in uh the demand and in the supply and so even if uh the pipe logics will evolve in a certain way within the pipe logics we're going to see differences among different uh categories i was mentioning before that for a number of reasons we see seamless consumption semi-premium consumption high toxin consumption being more demanded for the application there were 48 And so I believe that in there we're gonna have a differentiation that will drive prices differently than the overall pipe logics. We have to take into consideration increasing costs in general inflation that is gonna stay there. And so I believe that the base is gonna be different and higher than the one that we saw in the past.

Yeah, I think this is... Luca is saying there are structural factors that are supporting a level of pipe logic very different from the past. One. Two, there are positioning factors in our product offering and in the demand of the industry today that are differentiating our price. It is true that in our contract, Typologic is used as a reference, as a factor for adjustment in many cases. Our prices are then driven by the specificity of the service, the product, and the differentiation that Teneris is able to establish in the market.

Very good. Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of Arun Jaram from JPMorgan Securities, LLC.

Yeah, good morning. I wanted to see if you could maybe give us some more details on trends you're seeing in international offshore markets in the Middle East. I know SLB in their latest presentation, you know, did highlight the fact that, you know, the deep water rig count could grow in double digits this year and next year. So I want to get some thoughts on what you're seeing on the pipe side, tubular side.

Yeah. Thank you. Gabriel, you see this all worldwide, which is your view on this?

Yeah. Thank you, Paolo. Arun, indeed, positive perspectives on the offshore market. drilling continues to increase, as you said, the expectations of growth. Let me tell you that the offshore rigs have been consecutively increasing for the last 10 quarters, so this is a cycle that we see very strong. There is quite consensus in the industry that this is going to be a multi-year cycle. We saw a lot of CAPEX decisions and FID decisions in the last quarter, and we see this already in our results. I think the second quarter was very high on on offshore sales for Tenaris. And we expect the second half of this year to be higher than the first half as we ramp up shipments of the deliveries associated with the Qatar NFE pipeline project. We are building our backlog. Paolo commented in the open remarks about the two water pipelines that we secured last quarter, 100,000 tons. on the Brazilian BMC33. This will transport gas and condensate 200 kilometers from the shore to a water depth of 3,000 meters in Brazil. This is a complicated, sophisticated pipe specification requiring coating as well. Also, we have been entrusted after the delivery of phase one of the Zacaria project, we have been awarded the second phase. which will also come into 2024. So these are signs that FIDs are happening, awards are happening, and this is gonna be an area of strength. This is not only pipelines, this is also OCDG. We have had several awards in the last few months related to OCDG projects. For example, one FID that was concluded in this quarter related to Romania Black Sea, Neptune Deep. We have been awarded 100% of the OCG campaign there. And we have awards in the North Sea, Sub-Saharan Africa, Gulf of Mexico, the Mediterranean, North Africa as well. So we are building a backlog into 2024 and beyond as typically the lead time for this type of products takes typically nine to 12 months to deliver. So this is an opportunity for DENISE to enrich its mix of products as typically in this, especially in the deep water, top-of-the-line technologies are required. So we are pretty confident of the strength of the offshore cycle going forward.

Yeah. Thank you, Gabriele. This is very important. Even if the share of, let's say, offshore in our overall invoicing is the range between 18% and 20%, But this is also an area in which pipe logic is basically irrelevant, apart from the offshore of Pemex that is influenced by this. In the rest, prices are following a different dynamic.

Thank you, sir. Indeed, the demand of offshore and Middle East, as we said, is high, and the supply is becoming tighter. So the pricing trends in international markets is completely different. It's a growing path. So this is important. We are taking advantage of these favorable market conditions and new opportunities. We are booking at higher prices, expanding margins versus the past. So this will be favorable for next year. Thank you. Thank you.

Thank you. At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks.

Thank you, Gigi. Well, thank you all for joining us on our quarterly results conference call. Thanks. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.