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PJSC Chelyabinsk Pipe-Rolling Plant
INVESTOR PRESENTATION
February 2017
Strictly Private and Confidential
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MANAGEMENT TEAM
Dmitry Muz, Director, Finance and Investor Relations, PJSC Chelyabinsk Pipe-Rolling Plant (ChelPipe)
Joined ChelPipe in 2016.
Has successful track record in corporate finance, including bond market as well as Russian and international markets for
syndicated loans. Previously held management positions in Uralkali, UniCredit Bank, Nordea Bank and MDM bank.
Among successful projects are over 4 syndicated loans transactions (PXF) with total size of ca. US$3bn; equity financing
and ECA covered financing; domestic bonds and Eurobonds issue of Uralkali.
Graduated from Moscow State University of Railway Engineering with the degree in Economics.
Alexander Grubman, Chief Executive Officer, PJSC Chelyabinsk Pipe-Rolling Plant (ChelPipe)
Joined ChelPipe in 2014 as the First Deputy of CEO of the Company.
Since 2015 – CEO of ChelPipe.
Has solid experience in business processes optimization, maximizing operational efficiency and minimizing costs.
Previously held top executive positions with Severstal, Severstal Russian Steel, Severstal Resources, Cherepovets
Steel Mill.
Graduated from Moscow Technological Institute of Food Industry with degree in Engineering, received an Executive
MBA from INSEAD.
Valery Borisov, Deputy CEO for Finance and Economics, PJSC Chelyabinsk Pipe-Rolling Plant (ChelPipe)
Joined ChelPipe in 2015.
Previously held Director of Finance and Economics position of Cherepovets Steel Mill, Chief Financial Officer position
with Severstal Russian Steel, Director of Operations with LLC Evraz Holdings’ South-African assets.
Among successful projects are implementation SAP, development and implementation of certain KPIs and system of
setting goals and monitoring the performance by subsidiaries and departments; implementation of G&A cost
minimization project.
Graduated from Omsk State University with the degree in Management.
2
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SLIDE NO
SECTION I CHELPIPE AT A GLANCE 5
SECTION II INVESTMENT HIGHLIGHTS 11
SECTION III FINANCIAL INDICATORS 19
SECTION IV REFINANCING OF SYNDICATED LOANS 25
SECTION V APPENDIX 28
SECTION VI CONTACT INFO FOR INVESTORS 34
3
CONTENTS
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SECTION I
COMPANY OVERVIEW
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• Chelpipe is group of industrial companies in the Russian metallurgical
sector. The company is one of the largest domestic pipe making
companies
• Key product segments of the Company are large diameter pipes (LDP),
seamless OCTG pipes, seamless industrial pipes, pipeline equipment,
and services for oil and gas industry companies
• The company secured long-term contracts with Russian Oil & Gas
majors
• High degree of end-product diversification ensuring earnings resilience
• Diversified customer base
KEY OPERATIONAL INDICATORS KEY FINANCIAL INDICATORS
thou.tons 2013 2014 2015 6M’ 15 6M’ 16
Capacity2 2 401 2 533 2 594 1 297 1 260
Operating rate, % 70% 86% 78% 84% 72%
Production 1 680 2 167 2 036 1 083 901
LDP 709 1016 886 512 351
Seamless pipes 931 1104 1094 546 516
Other welded pipes 40 47 56 25 34
RUB mln 2013 2014 2015 6М’ 15 6М’ 16
Revenue 112 428 128 123 148 367 75 958 68 624
Pre-tax profit 27 392 36 008 42 441 21 613 21 945
Profitability3, % 24,4 28,1 28,6 28,5 32,0
EBITDA 18 173 22 741 28 901 14 458 16 961
Profitability3, % 16,2 17,7 19,5 19,0 24,7
Net profit/loss -1 868 -1 216 6 041 4 211 5 810
Net debt 97 445 93 964 86 069 84 704 79 820
Net debt / EBITDA 5,4x 4,1x 3,0x 3,2x 2,5x
5
(1) Company assessment, 2015
(2) For 6M’15 and 6M’16 periods capacity value for 6 months is used
(3) Profitability is rated for revenue
• Main operational assets are located in Chelyabinsk (Chelpipe)
and Pervourlask (Pervouralsk New Pipe Plant – JSC PNTZ)
• Annual production of steel pipes exceeds 2 million t per annum
• Market share in Russia: ca. 17%1
• Andrey Komarov and Aleksandr Federov jointly own more than
80% of Chelpipe shares
• Credit ratings: Moody’s: Ba3, stable
Fitch: BB-, stable
CHELPIPE AT A GLANCE
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CORPORATE STRUCTURE
Public Joint-Stock Company “Chelyabinsk Pipe –
Rolling Plant”
Credit Ratings (Moody’s/Fitch): Ba3/BB-
LLC “ETERNO”1
“MSA a.s.”
JSC “SOT” JSC “PNTZ” LLC “МЕТА” LLC
“Мeta-Invest” JSC “RIMERA”
PJSC “ALNAS”
JSC “Izhneftemash”
- Scrap processing division
- Pipe division
- Oilfield service division
LLC
“RIMERA-Service”
JSC “Uraltrubostal”
Trade House»
6
(1) ETERNO is a joint venture with JSC RUSNANO
JSC “RUSNANO”
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Oilfield services
Manufacturing of pipes
Oil & Gas equipment
Large diameter pipes
(LDP)
Pipes for oil and gas
production
Industrial pipes
Steel pipes production Chelyabinsk
Scrap collection and processing Ural and Povolzhsky Region
Chain of scrap processing
sites
Development of complex
solutions
Engineering Moscow
Round and square billet
Seamless pipe production
Steel melting and seamless pipes Pervouralsk
Trade branched in Russia
and Kazakhstan
16 storage facilities
Distribution network Russia, Kazakhstan
Hot bends
Cold bends
Short-radius bends
Pipeline equipment Chelyabinsk
Pumping units and
aggregates
Oil production – equipment Almetievsk
Czech Republic
K a z a k s t a n
Almaty
Magnitogorsk Chelyabinsk
Pervouralsk
Moscow R U S S I A
Almetievsk Strezhevoy
Nefteyougansk
Dudinka
7
Nanoenabled stainless
steel pipes
Stamped-welded pipeline
joints (SWPJ)
Pipes and stamp welds Chelyabinsk
Industrial valves Czech Republic
Stop valves
Ball valves
Check valves
Special valves
KEY ASSETS AND GEOGRAPHICAL
PRESENCE
Izhevsk
Buguruslan
Repair services of pumping
equipment
Pipe services
Oilfield services Tatarstan, Udmurtia, Khanty-Mansiyskiy
Region., Orenburg Region
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Products
Production
output1,
thou.tons
Revenue1,
% of total
Domestic
market
share2, %
Description Key customers
Large diameter
pipes (LDP) 351
• PJSC Chelyabinsk Pipe – Rolling Plant
• Product range: single-joint longitudinally welded pipes Ø
508÷1422 mm, wall thickness up to 50,0 mm, groups of
strength up to X100. Production process: JCO forming, UOE
forming
Seamless (OCTG) 169
• PJSC Chelyabinsk Pipe – Rolling Plant , JSC Pervouralsk
New-Pipe Plant
• Product range:Ø 60÷426 mm, wall thickness 5,0÷16,5 mm,
groups of strength J55÷P110
Other seamless
pipes 381
• PJSC Chelyabinsk Pipe – Rolling Plant , JSC Pervouralsk
New-Pipe Plant
• Product range:Ø 0,3÷650 mm, wall thickness 0,1÷90 mm.
Production process: seamless hot-rolled and cold deformed
pipes
Pipeline fittings3 704
• Metallurgical plant ETERNO for production of stamp-welded
components using nano-structured aterials for oil and gas
industry, product size range: 530÷1 422 mm, wall thickness
up to 100 mm
• SOT produces hot-bended elbows Ø 219-1420 mm. Products
produced at SOT are aimed for pipeline bends, for oil
satiations piping systems, and for other oil and gas facilities
Oil
field
serv
ices
ESP 2 314
pcs • ALNAS - Products: electric submersible pump units (ESP),
gas separators, pump protectors, submersible electric motors,
alternative products (brake rotors)
• Izhneftemash - Products: installation of sucker-rod pumps
(SRP), special equipment for oil production, spinning
wrenches and pumps, wrenches for wells repair. SRP 2 192
pcs
38% 25%
18% 20%
29% 42%
7% 18%
8%
14%
45%
INTEGRATED SOLUTIONS FOR OIL AND
GAS INDUSTRY
(1) As of 6 months of 2016, Company assessment
(2) As of the end of 2015г., Company assessment
8
(3) Total revenue from sales of stamp-welded components and connecting parts of pipelines
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SECTION II
Investment highlights
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INVESTMENT HIGHLIGHTS
Efficient cost control
Best-in-Class Producer of
Steel Pipe Products in the world
Diversified sales channels,
product and service ranges
Strong supplier base Strong pipeline of LDP projects
1
3 4
5 2
10
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3,9
3,1
2,6 2,4
2,0 1,7 1,6
1,4 1,3
0,6
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
ТМК (B+/B1/-)*
TPCO(-/-/-)
Tenaris(-/-/A-)
ОМК (-/-/-)
Chelpipe(-/Ba3/BB-)
ArcelorMittal(-/Ba2/-)
Baosteel(-/Baa1/A-)
V&M(B+/-/-)
Sumitomo(-/Baa1/-)
US Steel(-/B3/B+)
Mln
.to
ns
ТОП-10 производителей стальных труб в мире (2015)
I – BEST-IN-CLASS PRODUCER OF
STEEL PIPE PRODUCTS IN THE WORLD
• The company is constantly a top 10 world producer of steel pipes (by output)
• Within the last 2 years ChelPipe attained the number 5 position in global production output
Source: companies’ data and assessment
11
22%
20% 18%
15%
10% 08%
06%
02%
-02%
n/a
-0,1
0,0
0,1
0,1
0,2
0,2
0,3
ОМК (-/-/-)
Chelpipe(-/Ba3/BB-)
Tenaris(-/-/A-)
ТМК (B+/B1/-)
Sumitomo(-/Baa1/-)
ArcelorMittal(-/Ba2/-)
Baosteel(-/Baa1/A-)
US Steel(-/B3/B+)
V&M(B+/-/-)
TPCO(-/-/-)
EB
ITD
A i
nte
rest
marg
in, %
* S&P/Moody’s/Fitch ratings
TOP 10 world steel producers (2015)
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102%
92% 92%
85%
Tenaris Vallourec TMK ЧТПЗ
% о
т вы
ручки
II – EFFICIENT COST CONTROL
Operational costs *
Себестоимость реализации* General and administrative expenses**
• Chelpipe is successfully implementing the expenditures optimization
program maintaining however high quality of products manufactured and
services rendered
• Expenses control allows Chelpipe to be ahead of its competition in
terms of expenditures efficiency factors:
– Aggregate operational costs in percentage from 2015 revenue was
85%, which is the lowest value among analogue companies in the
sector
– TMK is the only company prevailing over Chelpipe in terms of
general and administrative costs as percentage of revenue
• The Company keeps searching for additional ways of expenditures
optimization.
Source: Company data
12
* Only data for public companies is available
88% 80%
71% 69%
Vallourec ТМК ЧТПЗ Tenaris
% o
f re
venue
18%
11%
7% 6%
Tenaris Vallourec ЧТПЗ ТМК
% o
f re
venue
Comparison of operational costs within the industry (2015)
Overview
Cost of sales*
Chelpipe Chelpipe
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69% 60% 55%
53%
15%
28% 30%
40%
13%
7% 9%
7%
2013 2014 2015 9 months 2016
ММК Ural Steel
Severstal Alchevsk Iron&Steel Works
Azovstal Import and other
70% 70% 76%
82%
2013 2014 2015 9 months 2016
UralSteel ОЭМК
Evraz NТМК MZ Serov
ChMK Other
Steelmelt plant Zhelezny Ozon 32
III – STRONG SUPPLIER BASE
Flat rolled product BILLETS
13
Purchasing structure Purchasing structure
Scrap processing
META Group
Pipe billet production
Zhelezny Ozon 32
Seamless pipes production
ChelPipe/PNTZ
ТМК
ММК
ChelPipe
1600 km vs 400 km
R U S S I A
High level of vertical integration in the process of seamless pipe
production
Advantageous location near steel slab suppliers for LDP
division
Source: Company data
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III – STRONG PIPELINE OF LDP PROJECTS (1/2)
Client Overview of Key Projects ChelPipe’s Potential Sales Volume (thou. t)
Gazprom
• Ukhta-Torzhok 2: ø1420 mm, К60, pipeline length – 970 km, capacity – 45 BCM
• Power of Siberia: ø1420 mm, K60, pipeline length – 2,960 km, capacity – 60 BCM
• Power of Siberia 2: ø1420 mm, К60, total pipeline length – 6,700 km; including 2,622 km
in Russia, capacity – 30 BCM
• SEG (Gryazovets – Vyborg): ø1420 mm, К60, pipeline length – 2 pipeline strings of 917
km each, capacity – 55 BCM
Transneft • A wide range of pipes for repair and operational needs – reconstruction and section
replacement of oil pipelines: ø 530-1420 mm, К38-К60, with / without coating
Rosneft
• Gathering gas pipeline Kynsko-Chaselskaya group of fields – USGS (Unified Gas
Supply System): ø 1020-1220 mm, К60
• Pipes for repair and operational needs and other construction: ø 530-820 mm, К52-К60
Lukoil
• Gathering gas pipeline Pyakyakhinskoye field – Yuzhno-Messoyakhskoye field: ø1020
mm, К52
• Pipes for repair and operational needs and other construction: ø 530-820 mm, К52-К60
Other (incl.
Surgutneftegas,
Gazprom neft, etc.)
• Pipes for repair and operational needs and other construction: ø 530-820 mm, К52-К60
DOMESTIC MARKET
275 205
345 532 418
2016F 2017F 2018F 2019F 2020F
101 71 78 96 111
2016F 2017F 2018F 2019F 2020F
18 11 14 16 18
2016F 2017F 2018F 2019F 2020F
4 3 4 5 5
2016F 2017F 2018F 2019F 2020F
14
5 6 8 8 8
2016F 2017F 2018F 2019F 2020F
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III – STRONG PIPELINE OF LDP PROJECTS (2/2)
Country Overview of Key Projects ChelPipe’s Potential Sales Volume (thou. t)
CIS
• Middle Asia – China 4:
− The 4th pipeline string will start at Turkmenistan, will pass through Uzbekistan and
Kazakhstan to China, ø1220 mm, total pipeline length - 1,000 km, capaсity of the
string – 30 BCM, total capacity of the pipeline will reach 85 BCM
• Kazakhstan – Gasification of Astana:
− Kaztransgas’s Investment program of gasification: ø530-1220 mm
• Turkmenistan – Galkynysh-Kelif:
− Gas supply from Galkynysh field on Caspian Sea to TAPI pipeline: ø1420 mm, X70
• Republic of Belarus – Reconstruction of Beltransgas:
− Expansion of Yamal-Europe pipeline capacity, from 33 to 48 BCM, ø1220-1420 mm,
К55
International
• Nord Stream 2:
− Two pipeline strings from Russia to Europe through Baltic sea: ø1153mm (internal
diameter), pipeline length 1,200 km, capaсity – 55 BCM
• EUGAL:
− Gas outlet pipeline from Nord Stream (from Germany to Czech Republic), pipeline
length: 865 km, ø1420 mm, capacity – 51 BCM
• Pipe delivery (risers, connectors) for offshore projects
• Other consumption – piles, general construction needs
56 40
155
212
88
2016F 2017F 2018F 2019F 2020F
83
352
243
60 25
2016F 2017F 2018F 2019F 2020F
15
CIS AND INTERNATIONAL MARKET
Speaker: Grubman A. November 2016
Source: Company data
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4%
96%
TOP-7 Customers
Other
2015
V – DIVERSIFIED SALES CHANNELS,
PRODUCT AND SERVICE RANGES
REVENUE MIX IN THE SECTORS
OIL AND GAS SECTOR REVENUE MIX INDUSTRIAL SECTOR REVENUE MIX
16
• Despite 70% of revenue comes from oil and gas sector, other significant
30% of stable income comes from diversified industrial sector
• In oil and gas sector ca. 75% comes from 8 largest clients, including
Gazprom, Rosneft, Transneft, Lukoil and others
• Absence of concentration on certain clients and big number of buyers
creates stable presence on this market
• Other industrial segments is quite client diversified:
− Top 7 customers with revenue exceeding RUB100m (2015) comprise
less than 5% of total sales volume
*
* Including CJSC Kurganstalmost, LLC Belenergomash- BZEM, GAZ Group, TKZ, Kamaz, Rostselmash, AvtoVAZ
67%
33%
Oil and gas sector Industrial sector, power generation sector, etc.
37%
14% 10%
7%
5%
5%
3%
3% 16%
Gazprom
Rosneft
Transneft
Gazpromneft
LUKOIL
Surgutneftegaz
Irkutsk Oil Company
Tatneft
Other
2015
2015
Source: Company data
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SECTION III
FINANCIAL INDICATORS
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Debt
• Conservative debt policy which presumes focus to deleverage and keep Net Debt /EBTIDA level below 3,0x
• Diversification of funding sources with reasonable balance between public and bank debt
• Extension of maturities in line with cash flow projections
Liquidity
• ChelPipe takes all measures to prevent any liquidity risks related to refinancing of its debt at earlier stages
• Maintenance of minimum cash balances to prevent liquidity shortage
• Using excess of cash for earlier debt repayments and minimization of interest expense
• Limitation of dividend pay-outs in accordance with cash flow projections
Investment
program
• Conservative approach to new projects
• Maintenance CAPEX of 1,1 bln RUR per year (or less than 1% of revenues)
Interest/
exchange rate
risk
• Over 90% of debt outstanding has a fixed interest rate and is ruble denominated
Credit reputation • Commitment to the principals of transparency and open communication with investors
18
CONSERVATIVE FINANCIAL POLICY
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KEY FINANCIAL INDICATORS
mln RUR 2013 2014 2015 1H 20164
Key Metrics
Revenue 112 428 128 123 148 367 68 624
Margin, % - 14,0% 15,8% (9,7%)
Gross profit 27 392 36 008 42 441 21 945
Margin, % 24,4% 28,1% 28,6% 32,0%
EBITDA (1) 18 173 22 741 28 901 16 961
Margin, % 16,2% 17,7% 19,5% 24,7%
Cash flow from operations (CFO) (2) 5 381 12 458 11 289 7 147
Free cash flow (FCF)(3) 1 014 5 871 4 348 4 963
Gross debt 100 470 99 429 94 104 88 080
Net debt 97 445 93 964 86 069 79 820
Key ratios
Gross debt / EBITDA 5,5x 4,4x 3,3x 2,8x
Net debt / EBITDA 5,4x 4,1x 3,0x 2,5x
EBITDA / interest expense 1,5x 1,8x 2,3x 2,7x
19
(1) EBITDA = pre-tax profit – general and administrative costs + depreciation and amortization+/- other adjustments. Other adjustments may include creation/recovery of provisions for impairment, profit/loss from assets sales,
share in profits of associated companies
(2) Cash flow from operations (CFO) = EBITDA – net interest paid – income tax +/- change of working capital + dividend received
(3) Free cash flow (FFC) = CFO – capital investments
(4) Ration for 1П 2016 are calculated based on EBITDA for the last 12 months Source: IFRS reports, Company data
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7 372
9 499 10 003
5 164 4 293
2013
2014
2015
6M
'15
6M
'16
мл
н.р
уб
.
6,6% 7,4% 6,7% 6,3% 6,8%
% of revenue
Mln
RU
R
101 159 111 840
126 544
64 353 55 280
2013
2014
2015
6M
'15
6M
'16
мл
н.р
уб
.
90,0% 87,3% 85,3% 80,6% 84,7%
% of revenue
Mln
RU
R 85 036 92 116
105 926
54 345 46 680
2013
2014
2015
6M
'15
6M
'16
мл
н.р
уб
.
75,6% 71,9% 71,4% 68,0% 71,5%
% of revenue
Mln
RU
R
STRONG COST OPTIMIZATION
COGS
Selling expenses General and administrative expenses
Total costs
Source: Company IFRS reports
20
START OF PERFORMANCE IMPROVEMENT PROGRAM IN 2015
8 751 10 226 10 615
4 844 4 308
2013
2014
2015
6M
'15
6M
'16
мл
н.р
уб
.
7,8% 8,0% 7,2% 6,3% 6,4%
% of revenue
Mln
RU
R
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5 248
12 839 12 023
10 286
7 611
4 281
6 587 6 940
3 348 2 183
2013 2014 2015 6М 2015 6М 2016
Cash flow from operations CAPEX
mln
RU
R
CAPEX PROGRAM
CASH FLOW FROM OPERATIONS VS CAPEX
PROJECTS
21
Source: Company data
Entity Project type Completion CAPEX (mln RUR) Description
Iron Ozone 32 billet mill
Development
2012 23,853 Mastered own production of billet for manufacturing seamless pipes supplied
exclusively from own-produced steel
Vysota 239 2010 21,655 Developed new product type (single-joint welded LDP)
LDP production capacity increased
Finishing center in Pervouralsk 2011 6,248 Production capacity for oil and gas pipes (oil well tubes and other oil and gas
pipes) increased
Ceramic flux 2012 763
Developed own production of bonded ceramic flux
Absence of need for external ceramic flux as well as development of sales
channels
Polyurethane coating 2013 461 Mastered new product type which allowed the company to enter LDP market
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STABLE TREND ON REDUCING THE DEBT
BURDEN
DEBT/ EBITDA DYNAMICS
22
5,5х
4,4х
3,3х
2,8х
5,4х
4,1х
3,0х
2,5х
2013 2014 2015 6М 2016
Debt / EBITDA Net debt / EBITDA
Source: IFRS reports, Company data
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SECTION IV
REFINANCING OF SYNDICATED LOANS
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COMPLETION OF REFINANCING OF
SYNDICATED LOANS
24
25%
22%
19%
12%
5%
4%
13%
Syndicated loans
Sberbank
VTB Bank
Gazprombank
Alfa Bank
FK Otkritie
Raiffeisen Bank
Other banks (7 banks)
42%
42%
16%
New loans
Gazprombank
Bank VTB
Sberbank
8,5 11,0
56,2
3,5 5,8 9,7 10,8 12,9 12,0
24,1
2017 2018 2019 2020 2021 2022 2023
New loans
Syndicated loans
78,9
bln RUR
The Company mitigated the possible
liquidity risk in 2019 +46,5
CHANGES IN THE STRUCTURE OF LONG-TERM LOAN PORTFOLIO
OPTIMIZED DEBT PAYMENT SCHEDULE
78,3
bln RUR1
(1) Incl. principal debt and capitalized interest
bln RUR
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THANK YOU FOR YOUR
ATTENTION!
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SECTION V
Appendix
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OPERATING SEGMENTS
STEEL PIPE PRODUCTS
• LDP (Large diameter pipes)
• OCTG (Tubing, Casing)
• Seamless hot- & cold-formed (incl. boiler,
stainless pipes)
• Welded small ODS (incl. shaped pipes)
TRUNK PIPELINE EQUIPMENT
• Hot bends
• Cold bends
• Short-radius bends
• SWPJ (Stamp-welded pipe joints)
OILFIELD SERVICES
• Artificial lift solutions:
• Electric submersible pumping systems
(ESPs)
• Sucker-rod pump unit (SRP)
• Special-purpose oilfield equipment: spinning
wrenches, drill pumps, oilfield vehicles
• Services: oilfield equipment (ESPs and SRP)
and OCTG inspection and maintenance
27
40%
20%
37%
3%
Production structure, 2015-2016
LDP
OCTG pipes
Other seamlesspipes
Other welded pipes
41%
15%
37%
7%
Production structure, 2015-2016
Hot bends
Cold bends
Short-radius bends
Stamp-weldedcomponents
53% 29%
18%
Sales structure, 2015-2016
Services
ESP
Other equipment
Source: Company data
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INFRASTRUCTURE PROJECTS WITH LDP
ВОСТОЧНАЯ СИБИРЬ ИДАЛЬНИЙ ВОСТОК
ХМАОУРАЛО-ПОВОЛЖЬЕ
ЮГ ЗАПАДНОЙСИБИРИ
ТИМАНО-ПЕЧОРА
ЯНАО И СЕВЕРКРАСНОЯРСКОГО КРАЯ
ПРИКАСПИЙСКИЙ РЕГИОН
ШЕЛЬФ МО РЯ ЛАПТЕВЫ Х
ШЕЛЬФ ВОСТОЧНО-СИБИ РСКОГО МОРЯ
ШЕЛЬФ БЕРИН ГОВА МОРЯ
ШЕЛЬФ ЯПОНС КОГО МОРЯ
ШЕЛЬФ
БАРЕНЦЕ ВА
МОРЯ ШЕЛЬ Ф
КАРСКОГО
МОРЯ
ОСТРОВ САХАЛИН
И ШЕЛЬФ КАСПИЙСКОГО МОРЯ
И ШЕЛЬФ ОХОТСКОГО МОРЯ
Geography of pipelines in the Russian Federation
Bovanenkovskoye oilfield
Kamennomysskoye-Sea and North-Kamennomysskoye
oilfields
South-Russian field
Chayandinskoye oilfield
Kovytkinskoye oilfield
Irkutsk gas production
center
Zapolyarnoye oilfield
Bovanenkovo-Ukhta 2,3
Ukhta-Torzhok 2,3
Gryazovets-Vyborg
North-Kamennomysskoye-Sea oilfield
Power of Siberia
Altay Kamennomysskoye-Sea oilfield
Gas transmission network from Obskaya and Tazovskaya bays of the
Karskoye sea
Khabarovsk-Vladivistok
КС7а Gas pipeline
Bologorskaya-Blagoveschensk
Nord Stream-2
Nord Stream
Source: Company data
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54%
20%
15%
11% TMK
ChelPipe
OMK
Other RF
OVERVIEW • In 2015 production volume of steel pipes in Russia was 11.4 mt. Russia
manufacturers are primarily focused on domestic market which achieved 10.8mt
in 2015
• ChelPipe focuses on the following main segments:
− LDP pipes – market focused on manufacturing and repair of main pipelines
(75-80% of the market)
− OCTG – market for oil and gas production market
− Other Seamless Pipe – highly diversified market. The pipes are utilized in
majority of industries, including oil and gas, chemical and petrochemical,
machinery, construction, energy and other industrial sectors
BENCHMARKING BY LDP • There are 4 leading LDP manufacturers in Russia ensuring 97% of total sales
• As of 2015 ChelPipe takes the second place by sales volume
• ChelPipe’s market share in Russia is 25-35% depending on the utilization sector.
• All main producers of LDP pipes (VMZ, ChelPipe,
ITZ, VTZ) share similar product mix (pipes with
508-1420 mm) and similar in composition of
equipment and welding technology – longitudinally
submerged arc welded pipes (LSAW)
• Less expensive in manufacturing; however, have
limitations in product range and use: Volzhsky Pipe
Plant (helical welded LDP) and smaller
manufacturers STW, TEM-PO, UTP (ERW, size
530-630 mm).
BENCHMARKING BY OCTG
• Number of OCTG manufacturers is constantly increasing in Russia. Currently,
there are 3 largest producers which constitute ca. 80% Russian market
• As of 2015, ChelPipe takes 2nd place by sales volumes
• ChelPipe’s market share in Russia is ca. 17%.
• ChelPipe manufacturer all OCTG pipe
products except for drill pipes
BENCHMARKING BY OTHER SEAMLESS PIPES
• In Russia there are 2 main manufacturers of seamless pipes (TMK and ChelPIpe)
– combined market share of 88% in Russia – and 1 smaller manufacturer (ITZ)
• In total Russian manufacturers accounts for over 90% of the market; the rest is
imported
• ChelPipe focuses on 3 main sectors for seamless pipes: oil and gas, machinery
and for general purpose
• Historically ChelPipe’s share in oil and gas line
pipes is ca. 25% while in machinery sector –
50%, in general use – 54%. In more
specialized segment, including pipes used in
energy and petrochemical sectors ChelPipe’s
market share is ca. 60%.
• ChelPipe’s client base is highly diversified
compared to its main competitor TMK, whose
70% supply to the oil and gas sector Source: Company data
3,479
ths t
55% 42%
3% TMK
ChelPipe
Other RF
1,972
ths t 1,601
ths t
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38%
25%
18%
16% 3% OMK
ChelPipe
TMK
ITZ
Other RF
MARKET REVIEW (1/3) Chelpipe is ranked No 2 domestically in all types of pipe products
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RUSSIAN OIL & GAS MARKET
REMAINS ROBUST
CAPEX OF RUSSIAN OIL & GAS MAJORS (2013-2016E) OVERVIEW
Company Capex Dynamics (RUBbn)
H
H
H
Transneft
1 475 1 423 1 693
800
2013 2014 2015 2016E
491 611 607 550
2013 2014 2015 2016E
217 271 349 360
2013 2014 2015 2016E
243 325 333 320
2013 2014 2015 2016E
560 533 595 780
2013 2014 2015 2016E
Source: Сompany data
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* incl. South Stream (2014), Nord Stream -2 (2016-2017) - Russian producers
** expected
*** forecast
New Pipeline
construction*
Large-diameter pipes (LDP), ths tons
Renewal of
existing
pipelines
Large-diameter pipes (LDP), ths tons
Total
utilization in
oil and gas
industry
LDP, OCTG & line pipes, ths tons
Meters drilled
(ths m)
Development drilling, ths m
492 1 182 1 598 902 1 344
2013 2014 2015 2016E 2017F
738 1 052 1 171 700 439
2013 2014 2015 2016E 2017F
3 389 3 370 3 342 3 134 3 160
2013 2014 2015 2016E 2017F
20 839 19 778 22 065 24 002 24 291
2013 2014 2015 2016E 2017F
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STRONG DRILLING ACTIVITY IN RUSSIA
Source: Oil and Gas Vertical 2016
DRILLING ACTIVITY IN RUSSIA HORIZONTAL DRILLING IN RUSSIA
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1 819 2 051
2 687
4 355
5 557
6 954
2010
2011
2012
2013
2014
2015
km
17 233 18 742
20 564 21 656
20 772
22 883
2010
2011
2012
2013
2014
2015
km
NUMBER OF TOTAL WELLS IN RUSSIA NEW WELLS COMPLETION IN RUSSIA
5 802 6 146 6 131
6 556 6 065 6 261
2010
2011
2012
2013
2014
2015
pcs
136 905 139 198 143 835 146 282 148 658
2011
2012
2013
2014
2015
pcs
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INVESTMENT PROJECTS IMPLEMENTED
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Ceramic flux • Unique environmentally friendly production facility
• Capacity up to 14 000 tons
Project Overview
Vysota 239
• Modern facility for production of single-seam welded LDP ø508-1420 mm,
wall thicknesses up to 48 mm and length up to 18 m.
• Capacity: 900,000 metric tons
Finishing center
in Pervouralsk
• OCTG finishing center for casing (114.3 mm to 177.8), tubing (60.3 mm to
114.3 mm) and line pipes (60.3 mm to 114.3 mm). Provides products with
corrosion resistant coating, threading (including premium connections) and
heat treatment
• Capacity: threading – 132,000 metric tons,heat-treatment – 110,000 metric
tons.
Iron Ozone
32 billet mill
• An electric arc furnace mini-mill at the Pervouralsk Plant that provides
ChelPipe with billets (ø140-550 mm) for seamless pipe production.
• Planned Capacity:950,000 metric tons
SOT
• A plant for the production of pipe bends ø50-1420 mm using or cold
bending. There are two production sites in Chelyabinsk and Magnitogorsk.
• Capacity: 24,700 metric tons
ETERNO plant
• Joint project of ChelPipe and RUSNANO, a plant for the production of pipe
connectors using nanostructured materials. ETERNO plant produces
pressed-and-welded pipe joints: pipe bends and T-joints for pipe branching,
as well as pipe seal fittings and pipe adapters
• Capacity:10,000 metric tons
Educational
Centers
• Pervouralsk Metallurgical College offers dual education system (40% -
theory, 60% - practicum). The College is equipped with modern facilities –
analogues of existing Pervouralsk plant units.
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CONTACT INFO FOR INVESTORS For more details please contact the Department for Finance and
Investor Relations
Dmitry Muz
Director, Finance and Investor Relations
+7 (495) 933-2780
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