Tenaris SA (TS) 2014 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the second-quarter 2014 Tenaris S.A. earnings conference call. My name is Jackie and I will be your operator for today. (Operator Instructions).

I would now like to turn the conference over to Mr. Giovanni Sardagna, Investor Relations Director. Please proceed.

Thank you, Jackie, and welcome to Tenaris' 2014 second-quarter results conference call. Before we start, I would like to remind you that we will be discussing forward-looking information during the conference 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; Guillermo Vogel, Vice President of Finance and member of our Board of Directors; Edgardo Carlos, our Chief Financial Officer; German Cura, Managing Director of our North American operations; Gabriel Podskubka, our Managing Director of our Eastern Hemisphere operations; and Javier Martinez Alvarez , head of our operations in the Southern Cone.

I would like to start by mentioning that we will host an Investor Presentation in New York on October 16 and we hope to see many of you there.

Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our results. During the second quarter of 2014 sales decreased 6% to $2.7 billion compared to those recorded in the second quarter of last year and increased 3% sequentially.

The sequential increase was driven primarily by a record level of sales in Sub-Saharan Africa affecting the seasonal effect in Canada. Our EBITDA reached $702 million which was 4% lower than the corresponding quarter of last year and 2% lower sequentially. Our EBITDA margin [of] 26% continued to maintain a good level, but was impacted by higher SG&A expenses mainly due to higher service costs and the less favorable logistic mix.

Average selling prices were flat compared to the corresponding quarter of last year and up 2% sequentially, thanks to a better seamless welded product mix. Our second-quarter sales of high-end seamless products were 61% of our total seamless volumes.

During the quarter, cash flow from operations remained strong at $566 million and we ended the quarter with a net cash position of $1.3 billion after the payment of $354 million in dividends we paid in May.

Now I will ask Paolo to say a few words before opening the call to questions.

Thank you, Giovanni, and good morning to all of you. The recent determination by the US Department of Commerce to impose duties on the import of OCTG from nine countries, including South Korea, is a significant for Tenaris. Duties is confirming the injury ruling by the US International Trade Commission scheduled for August 14 would provide a welcome relief to the US domestic producer, allowing sales to increase and profitability to recover.

In the first half of the year, imports from the subject countries accounted for 29% of US OCTG demand and the share of imports from South Korea alone exceeded the share of the largest US producer. Our sale in North America represented 45% of our total sales in the first half of 2014. And we are investing in strengthening our US industrial system in the expectation that the US and North America will be a significant driver of growth for Tenaris in the coming years.

In May, we concluded negotiations with JFE in Japan to extend and enforce our NKKTubes joint venture for a further 15 years until 2013 -- 2030. Since 2000, this joint venture has been important for Tenaris, extending our products and R&D capabilities, including high chromium alloy pipes used in corrosive environments and giving us an important industrial capacity in the Asia-Pacific region.

Additionally, in July, we renewed our alliance with Sandvik for the joint supply of corrosion-resistant alloys, CRA materials, for complex wells and agreed to work together to develop new materials for the industry over the next five years.

During the second quarter, we had a record level of sales in Sub-Saharan Africa which accounted for 8% of total sales in the quarter. We confirmed our leadership in the region offshore project with the award of the principal offshore line pipe package including coating and double jointing services for the Kaombo development in Angola.

In Brazil our sales will remain very low this year with virtually no shipments for line pipes project and lower sales of surface and conductor casing. During the quarter we were finally awarded the contract to supply the Rota 3 pipeline in Brazil which will transport the hydrocarbons from the Lula Field to the Comperj processing facility in Rio de Janeiro. Delivery will be made during 2015.

Following five consecutive quarters of a high level of shipments to the Middle East, our sales and product mix in the coming quarters will be affected by inventory adjustments at Saudi Araco who plan to reduce OCTG inventory levels from now until the end of 2015.

Our sales to Aramco include a particularly rich mix of product reflecting the complex sour high-pressure environment in which it operates. This year growth in North American sales will support our results and we confirm our previous guidance that our full year results will be in line with those for 2013.

Our extensive investment plan to support our future growth and respond to increasing complexity of the operations of our customers is proceeding on schedule on all fronts and in every region. With our strong cash flow from operations, which in the first half of 2013 amounted to $1.2 billion US, we continue to strengthen our financial position, fund our capital expenditures, and meet dividend payments.

We can open the floor for questions now.

(Operator Instructions). Igor Levi, Morgan Stanley.

Good morning. It looks like 2014 is shaping up, consistent with what you guys have guided all along. Looking to 2015, looks like you could see a large uplift in Latin America with the new Brazil contract starting up and US trade case ruling pushing your prices higher.

So could you give us a glimpse into 2015 and what headwinds or tailwinds you may expect?

Thank you, Igor. The -- if I should say where we see that the -- let's say the issue that will affect 2015 for Tenaris, for sure, the dynamics of US market is a major factor. If the ITC confirms the determination of injury, there will be changes that will be underway in the US market, reduction of the level of imports increase in shipments from the domestic producer changes in price level for these product.

I mean, 2015 will be marked by dynamics of an increasing demand for shale oil. In our view, we cannot anticipate today increase in shales for gas, but for sure, the trend of draining for shales and oil will continue.

On one side dynamics of the demand, on the other side repositioning of the different producer on the market. I think this will be a major factor for Tenaris.

The second one is Mexico. After following the approval of the secondary laws, gradually the reform in Mexico should drive increased activity in Mexico by Pemex, by venture between Pemex and private and by private initiative maybe later. This will be a second factor that could affect dynamics of Tenaris there.

Third point is Argentina. In spite of everything, I think that on the medium run, the Vaca Muerta worth of development when it gets in will kick in so we may have -- this will also be, in my view, a factor affecting Tenaris in the medium run in 2015.

The fourth point is deepwater. Activity in deep deepwater is increasing year by year. We estimate in the range of something between 10% and 12% every year. We are strong in that segment and we expect that in different parts of the world, activity in this will drive some of our high-value-added product demand.

On the other side, as I mentioned, Brazil, we will increase -- we will be shipping our Rota 3 project, but activity, destocking will be underway in Brazil and will be underway also in Saudi Arabia. Saudi Arabia, we do not expect so much movement especially in the first part of 2015. There will be a reduction of inventory going on, we expect, until the end of 2015. So this will be not so much dynamics on that market. This will be the main factors, in my view, that will affect the medium-term perspective for Tenaris.

Great. That's very helpful. And how do you envision this having an effect on your mix with the US is pretty strong, but you have more semi-premium and commoditized type API pipe there. On the other hand you see offshore growing quite strongly. Also Argentina, I am not sure exactly the type of mix that you are -- effect you are seeing there, given more shale driven drilling. So could you touch on that?

Well, what we can expect in the United States provided that -- that they confirm the determination for dumping and the injury, is that the domestic supplier should be prepared, including Tenaris, for sure, should be prepared to supply a large range of products, API products, bailing the lower end of the value-added chain, but also product like a semi premium that the market is increasingly demanding.

Increase in the API demand, especially in the US, may shift our mix slightly into higher low-end components. But still, I expect the demand for premium in the world will continue to grow gradually once especially that the Saudi Arabia destocking phase out gradually. Because the real activity in Saudi Arabia, the consumption is strong and is growing. Inventory absorption will go on for a while, but gradually the premium demand worldwide will increase and Tenaris will be there.

But as a whole if we compound the two effects, I would say that probably the percentage of our high-end may be slightly lower in 2015.

Great. Thank you very much. I will turn it back.

Bill Sanchez, Howard Weil.

Thank you. Paolo, I wanted to ask you with regard to Sub-Saharan Africa, once again noted in yesterday's release that significant growth there. And I know you have talked on past calls I think last quarter year-over-year growth of 74%. You called out it will be down in 3Q.

I am just trying to get a sense is this really just a one-quarter lull you expect in term of order rates for that region? Or has there been some pre-buying going on that now may be similar to where Saudi is is that there is going be some inventory adjustments perhaps going forward that would make this more than a one-quarter lull, if you will, in your order rates from that region?

Thank you, Bill. Well, in general, I think that our sales activity and our sales to Sub-Saharan Africa is increasing year after year. But quarter by quarter, there could be a shift. But let -- I will ask Gabriel Podskubka to comment more precisely on the reason and impact of this fluctuation in the demand.

Yes, thank you, Paolo. Good morning, Bill. Yes, in fact we posted record revenues in Sub-Saharan Africa this quarter. We were driven by strong demand of deep water in exploration activities in Angola, and also in East Africa. We expect, in fact, the next quarter to be lower in shipments given this concentration of shipments that we had in the present quarter. But we also expect to resume a higher level and end up of the year with a good quarter, given development campaigns that we are preparing in the Congo and in Ghana.

So overall, as Paolo was saying, 2014 will be again, and as you commented from last quarter, will be again a year-over-year growth probably in the two digits. So still, this continues to be a growth area for Tenaris.

Great. My follow-up, any thoughts as it relates to Argentina, specifically the default here? How should we think about it in terms of any kind of balance sheet impact? Or any thoughts you could give us in terms of, does this actually provide maybe a bit of a reset to see Argentina ultimately get a little bit busier here as we think about going into 2015. Any thoughts would be appreciated.

Well, I think it is too early. First to understand exactly which will be the outcome of this. I think discussions are underway. I don't think this is something that means that no negotiation underway would not be underway in the coming weeks. There would be, I think, discussion, I imagine.

Second is also, I think, difficult to anticipate the impact that any solution or non-solution could be on the economy or on the possibility of developing the oil sector in Argentina.

In general, I think that there are very strong fundamentals for investing and developing oil resources and gas resources, especially from Vaca Muerta wells in Argentina. The country is importing expensive gas. The areas of Vaca Muerta is prone for shale development for environmental and other reasons, condition both for this, it needs a lot of delineation analysis and, probably, technology needs to be developed for this specific place.

But in the end, fundamentals are there. So it could be in the medium run, but I think this development of this area will happen. It is difficult today to understand the real impact of negotiation or default in this moment.

All right. Fair enough. I appreciate the time. I will turn it back.

Stephen Gengaro, Sterne, Agee.

Good morning, good afternoon. I wanted to follow up on the US market and you talked about the trade case and the possible impact. And I want it to see if you could go into maybe a little more detail, but specifically I think you mentioned import volumes dropping.

And I was curious if you thought that volumes from South Korea would affect drop significantly or if it would simply be more of a positive pricing impact and how we should think about that.

Thank you, Stephen. I will ask German to get deep on this and to answer your question.

Thank you, Paolo. Good morning, Stephen. And just briefly, Stephen, the view we have is, a, the trade case has not concluded yet. We have a DOC final determination that found 10%, 15% margins on Korean imports. But we still need to wait until August 14 for the final ITC determination.

Now, three things are true. Number one, Korea did about 925,000 tons of imports during 2013 and about 750,000 in the first six months of 2014. It is our understanding that the Pipe Logix result that we saw yesterday there is, I think, directly related to the notion of this 15%, 10%, finally you will see the determination that was found in Korea.

Now, going forward, we need to ultimately understand what the final determination is -- ITC final determination is. But we frankly believe that and we're confident the elements will reconfirm that the industry, domestic industry has been injured. And when and if that is confirmed, we sense at this level of imports, particularly from Korea, are simply just not sustainable.

Okay, that's helpful. And then as a follow up, have you -- I think you have lost -- I think the average price in the US is down, I don't know, 13% to 15% over the last 12 months. Would you expect to recapture that? Is that a good kind of guesstimate as you go through 2015 or would you think about it a different way?

Well, this is an excellent point because while we have talked about strong demand in the US associated to rig count increase, absolute rig count increase and drilling efficiencies increases over the course of the last year, year and a half. At the same time, we have seen Pipe Logix coming down to a level of about 14%, which is totally opposite to what it should have been.

Now we believe that we should see some gradual recovery. And I think yesterday, Pipe Logix is, I think, the first material indication of that.

Thank you, German.

Michael LaMotte, Guggenheim.

Thank you and good morning. German, I would like to follow up on the determination, in particular the injury element of it. Because I think there is a view in the investor community that 10% to 15% is not punitive enough to stem the tide of Korean pipe, particularly given that Korea doesn't have an alternative outlet other than the US.

So, can you speak specifically to what gives the injury determination teeth in your view?

Well, Michael, it is Paolo speaking. I think you're right. For sure, the industry, the United States has been severely injured by the level of import.

And if the ITC determine in the sense the injury will -- the industry will recover from this injury. From my point of view, with some additional volume and some additional price, which are the teeth of the determination.

Well, you know for the -- according to the law in the United States, once the case has been established, the importer of pipes from the country that are subject of this decision will have not only an additional cost for paying the duty, but also the contingent risk offers success determination than -- later on, that reconsider during the period the real level of dumping that could be imposed retroactively on this.

So in the end, it will not be without risk for any importer to import pipes from these regions because they could be subjected to a successive determination that could apply to the entire period in a retroactive way. This has been always so and is something that impose additional attention -- caution by the importer in managing very high level of important material in their condition.

This is something that, too, could contribute to raise the overall price and cost of importing this material into the United States.

That's very helpful, thank you. And if I could follow up on the volume side for Tenaris. At 199,000 tons of welded pipe in the quarter, that is the lowest level that we have seen since the recession in about 45% of recent highs. And yet even at 450,000 tons, Tenaris would be roughly 5% of the overall market demand as it stands today.

So, there's quite a bit of leverage in getting your volume back. Could we actually see a volume recovery of 30%, 50% next year in your welded volumes?

Well, I don't know if we can let's say recover so much as you are indicating. But I would ask German, how is your feeling on the medium term? I mean, how this would -- could turn into our position and into the dynamic of the market and the imports.

Thank you, Paolo. Good morning, Michael. Well, I think first observation on the quarter, the volumes, I think, Michael, it is fair to say that the numbers reflect both the Canadians early spring break together with some naturally Brazilian welded sales that given the overall Brazilian situation we have not.

Now going forward, I will lead back to the point that we were making before. If injury is finally confirmed, I think domestic industry in general and we, Tenaris, in particular are prepared to ultimately source the existing demands of the US industry. And with that, I believe that US mills, welded US mills would be in a position to expand the present utilization there as we cut it out.

Thank you, German.

Paula Kovarsky, Itau BVA.

I would like to ask a question about Mexico and just to get a little bit more of a sense on how fast do you guys expect demand to pick up in that country. There's a few steps to go. You have Round Zero. We need to understand whether Pemex will be able to farm down from Round Zero, then you have Round One. So how exact -- how fast do you expect demand to pick up in that country?

And the second question relates to local content there. Which is still -- and you are sure that it is being discussed. And to be honest, I would like to understand what exactly local content means in Mexico in the context of the NAFTA, if US shipments will be considered local or not in our view in that country.

Thank you, Paula. I think on this I would ask Guillermo Vogel to answer on the two questions. One on the impact of the changes, the other one on the local content in the development of the energy industry.

Yes. Thank you, Paolo. Hello, Paula. In terms of the demand for Pemex, I would say that what you have to consider is that we are starting to go from a low level because it has been a difficult year for Pemex. Since they had this uncertainty about what they were going to be granted to operate in, I think that has limited somehow the operation of this year. Together with some operational problems that Pemex faced in terms of at the beginning of the year, problems with one subcontractor that was having a big operation for Pemex and was on fraud. And that limited their operation and affected some of the sea activities.

Right now, we are seeing there has been some problems in some communities in Tabasco. And so what we are seeing is within the normal operation of Pemex, we see a second half which is going to be better than the first half, for example, in double digits. And then also in during 2013 and 2014 there were some bids that were granted by Pemex, which we are going to start to see in 2015. So before the effects of the actual energy reform, we are seeing still at 2015 a double-digit growth for Pemex.

As you know the laws are right now being closed in Congress. We expect the laws to be fully approved within the first two weeks of August. And with that, then we are going to see the Round Zero which is going to be finally determined by September 17. And from there we will go -- I think we are going to start to see the process opening forbids both farming out and in terms of contracts which probably, we are going to start to see in 2016 and then 2017. So we will see growth in Mexico for the next year, not related directly to the energy reform, but then we see a consistent growth which is going to be derived by the energy reform.

In terms of the national content, the President granted or proposed a national -- a minimum national content of 25% which has been increased to 35% by Congress. So this 25%, the way it is being proposed today and I think the way it is going to be accepted is that by 2015 there has to be a national content of 25%, and that is going to be growing to 35%.

And in terms of NAFTA, I think that the way the law is drafted that is basically going to be limited to Mexican content. And I think this is it.

Okay. And if I could follow up quickly on Brazil. I mean, we have seen one of your competitors having to recognize losses in the region and we hear slowdown in demand from the side of Petrobras, huge concentration on production as opposed to exploration. I know this is not your direct market for seamless, but how do you sense demand in Brazil?

Well, we perceive that Petrobras had a problem of cash flow negative cash flow for a while. It has been reducing to some extent its investment and is also asking to the supplier to contribute to the reduction of working capital.

This is affecting the producer and the region is affecting us also. It affected us starting with the line pipe project. Line pipe project has been stopped for a while. This year, we will be shipping very, very low volume of line pipe project and we will start back with Rota 3.

In the case of drilling and casing and tubing, we are supplying something like 20%, 25% of this market from our facility. And we also perceive the slowdown, especially in the reduction in inventory by Petrobras. The reduction in actual drilling has been not so big, but the reduction of inventory is important. So, this is affecting this component of our business.

Line pipe anticipate the trend, but what we can expect is that during 2015, we will perceive still the impact of the destocking in Petrobras for casing and pipe. By the way, just in these days, we successfully tested and ran one of our products that is very important for Petrobras is, a connector that has been run in the Roncador field just in these days. This is important for us because on connector is part of our market share, let's say, in the demand of Petrobras and we expect it to with this product to be able to have increase our sales due in 2015.

Okay. Thank you.

Caio Carvalhal, JPMorgan.

Good morning. I think many of my questions on geographical details was already approached and met by my colleagues. So I will jump into -- I had one specific question on the results and one on the forecast for 2015. Specifically on the results, I noted that the costs in general, but particularly the SG&A increased, not significantly but increased a little higher than I was expecting this quarter. So let's understand where this increase came from and if there is anything that we could consider in our projection related to SG&A going forward?

And the second question is when I look to -- when we looked at 2015, I understand that you were not or you are not comfortable, or not willing to provide any more specific guidance as of now. But, I just wanted to understand.

The expected level of growth for year over year in 2015 should be something -- I mean, it is very, very hard to be something comparable to what we saw in 2011 when we had the boom in the shale demand in US. But could we see -- could this 2015 growth could be something similar to what we saw in 2012? So, or -- we are talking about some more mild in let's say low single digits.

Again, I am sorry if you are not willing to provide not even the level of detail, but I was just trying to get the sense on what type of growth are we looking to. Those are my questions. Thank you very much.

Thank you, Caio. The first question of SG&A, I will ask Edgardo Carlos to answer on the reason for this increase and perspective that we see looking ahead.

Okay. Good morning, Paolo. This quarter, we have some logistic mix effect. And also we have some increased -- not representing increase and some expense related to services basically in this quarter. Looking forward for the whole year, we maintain our guidelines that we will be basically on the 19% on sales for the SG&A.

The second question considering where we can be in 2015, I think I tried to answer this question previously. In the casing, which are the driver of our business, I think it is too difficult to be much more precise in this there are clear uncertainties on the different front on the trade case, the situation in Mexico and Argentina. But I hope you get from this driver an idea of where we want to be.

We do not expect a major change from our cost structure. On the contrary, I think, in normal situation also our SG&A, our target is to reduce from 19% to something lower over time. But we do not anticipate major change in our cost structure. As far as revenues and margin, I think I gave some of the indication of the driver that will be relevant for 2015.

Okay. Thank you very much.

Raphael Veverka, Exane.

The first one is on US, just to understand what would be the upside for Tenaris if the DOC decision is confirmed by the ITC and if prices start to recover? What is approximately the share of your contract which is either directly or indirectly indexed to Pipe Logix prices. So I am thinking about the US, but also other markets? Thank you.

Thank you, Raphael. For sure, the dynamics of the Pipe Logix is very important for us. It is important for the large part of our sales in the United States because even if they are not directly tied into the formula, but this is something that would be considered in any negotiation. So it is very important for the United States, for sure.

The Pipe Logix is also part of formulas of the long-term agreement in very -- with major oil companies, a nationwide companies would provide so that it would be also in that added impact. But this is not -- you cannot estimate direct impact because, usually, this index is combined with other index concerning the costs, raw materials or other factors development for this. But for sure will be a relevant impact for this operation.

Okay, thank you. And my second question was on the Middle East. Could you quantify a little bit the magnitude of the expected decline and how do you see 2015 shaping up for yourself in the region? You said in the past that you expected growth in the rest of the region to broadly offset Saudi Arabia. Is that still something you think you can do?

I will let Gabriel Podskubka to answer to this question and where we see the perspective of 2015 not only for Saudi, but for the entire region considering that there will be margin of uncertainty in some areas like Iraq, clearly there are areas in which it is not easy to trace today a path of where we could be in 2015.

Thank you, Paolo. Good morning, Raphael. In fact, talking about Middle East, is important to start on Saudi. As Paolo anticipated the level of drilling activity there is very strong in the second quarter of the year. Saudi Aramco operated with 185 rigs, 10 rigs more than the previous quarter, so there is a clear, and we have been mentioning before, a clear increase on operative consumption.

On the other hand, it is clear that Saudi Aramco is trying to reduce its purchases, to balance their inventories and it is something that we will see the effect of this during the second half of 2014 and, most likely, also through the first half of 2015. So we expect to have some recovery maybe in Saudi in the shipments in the second half of 2015, not earlier than that.

The rest of Middle East present a mixed scenario. On one hand you have Iraq, given the internal unrest in the country will -- it will impact some delays in projects and contracts in which we participate there. So it is something we are closely monitoring. And in terms of UAE, there is also an increased level of drilling activity. We expect a major in tendering that we have in the next few quarters which will have an impact on 2015 and beyond.

And the other important market that is really one for us in the Middle East is Kuwait where, in the last quarter, we have booked relevant orders. Sour service material is very important that would give us also some strength for our P&L there in the Middle East. So, this is an overall summary of what we expect for 2015 in the Middle East.

This is very helpful. Thank you very much.

Amy Wong, UBS.

Good morning. I had a question relating to your new mill that is currently under construction. Can you give us an update on the progress and the ramp-up there? And secondly, related to that mill. When you made the investment decision in 2012, the drilling market is quite different now. How do you see the outlook of that mill in terms of the mix and how does that support your investment there? Thanks.

I will ask German to comment on this, but in general we are on schedule and on budget and frankly, I think, the definition that we had taken two years ago on the positioning of the plants and the integration of industrial system in the US, are up to now fully confirmed by the dynamics of the market. The combination of products looks to me the right one for the market we will be facing in 2015 and 2016 and beyond. But, anyway, German, additional.

Thank you, Paolo. Good morning, Amy. Briefly, Bay City construction continues to go on on time as per the schedule. Very close to complete the earth work, the piling work and the industrial building is progressing as planned. The major contracts are all in place. So we are very happy with the way the deployment is being managed so far.

Now, with respect to the positioning, I think, based upon what we have said, this is a plant which will have a production range that would be centered around the shale's requirement, 4 1/2, 5 1/2 casings. And then also, Amy, remember that today both the Permian and Eagle Ford account by we would say 40%, 45% of the total US apparent demand. DC said about it would take 350 miles from the location. So, it allows us to also, we believe, deploy some service schemes as we have done in many other countries around the world -- Mexico, among others -- to naturally optimize some important logistics supply chain service aspects of it.

How do you see the product mix, going forward? Does the product mix that you see coming in the next few years still support how you initially planned -- what you initially planned for this mill?

Yes. I think, again, back to the notion of shales deployment. Today they account by give or take 50% of the total apparent demand, north of 50%. We typically, Amy, are not awfully specific for competitive reasons. But yet shales do account and will continue to account by a large majority of the US market apparent demand.

And then also importantly, our users have established a very important number of existing drilling locations. By and large, most of our users are deploying today drilling programs which only account by a very small fraction of the completely identified drilling locations. So we don't see that changing as long as pricing fundamentals remain in place.

Great. Thank you very much.

(Operator Instructions). Andrea Scauri, Mediobanca.

Good morning, everyone. I have a couple of questions. The first one is on the CapEx.

Could you detail as what are your expectations of investments in 2014, 2015, and 2016? And second point, if I am not wrong, you should have a net cash position in the region of $4 billion by 2016. I was wondering what are your plans for this cash, if you are thinking about potential distribution of this cash or you wanted to maintain this -- you wanted to keep on accumulating this cash in order to benefit from potential opportunities on the market for expanded growth? Thank you.

Thank you, Andrea. On the first question, we are in this moment committed to an investment plan in the United States, but not only the United States, many other different regions. This will require, the year 2015, around $1 billion investment. This is, we will increase in the coming quarters what we are doing today probably in the range of $300 million per quarter, in this range.

Then in 2015, we will maintain the pace which we are requiring investments in the range of $1.2 billion. This is what we can see today. This could be changes anticipation of delay or some other program, but basically these are the main figures for our CapEx program.

Then, what we can see today would be a reduction over time for our investment. Because the Bay City mill is obviously a very large investment for Tenaris. This is, as far as the first question.

Second question, how we will manage our financial position. Well, I think the -- really the energy sector and the world is into a stage of transformation in many different regions and this transformation has been driven by regional equilibrium shift. It is driven by change of nature of explotation of oil and gas, shales, deep water and so on. And I think that we should also consider all our options as Tenaris to position Tenaris in this changing world.

So we think that it is a plus in this moment to defend our strong financial position and consider all the options we may have looking into the future. Up to now, this is how we are seeing, let's say, our financial management.

Okay. Thank you.

And at this time we have no further questions.

Well, okay then. Thank you, all of you, for participating and we hope to see you in October in New York for our Investor Presentation. Thanks.

Ladies and gentlemen, that concludes today's conference. Thank you for your participation. You may now disconnect and have a great day.