Tenaris SA (TS) 2025 Q4 法說會逐字稿

Good day and thank you for standing by. Welcome to the fourth-quarter Tenaris S.A. earnings conference call.

(Operator Instructions)

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, Investor Relations Officer. Please go ahead.

Thank you, Gigi, and welcome to Tenaris 2025 fourth quarter and annual results conference call. Before we start, I would like to remind you that we will be discussing forward-looking information during the call and that our actual results may vary from those expressed or implied during the call.

With me on the call today are Paolo Rocca, our Chairman and CEO; Carlos Gómez Álzaga, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Guillermo Moreno, President of our US Operations.

Before passing over the call to Paolo for his opening remarks, I would like to briefly comment our quarterly results.

During the fourth quarter of 2025, sales reached $3 billion, up 5% compared with those of the corresponding quarter of the previous year and 1% sequentially as our sales to Rig Direct customers in the United States and Canada continued to show resilience and in Argentina, we resumed our fracking and coil tubing services. Our EBITDA for the quarter was down 5% sequentially to $717 million or 24% of sales. These results include the full impact of the 50% Section 232 tariffs in the US.

Average selling prices in our Tube operating segment decreased by 1% compared to the corresponding quarter of last year and were flat sequentially.

During the quarter, cash flow from operations was $787 million. Our net cash position at the end of the quarter decreased to $3.3 billion, following the payment of an interim dividend of $300 million in November last year, $537 million spent on share buybacks, and capital expenditure of $123 million during the quarter.

The Board of Directors have decided to propose for the approval of the general -- Annual General Shareholders' Meeting to be held at the beginning of May, the payment of an annual dividend of $0.89 per share or $1.78 per ADR, which includes the interim dividend of $0.29 per share or $0.58 per ADR that we paid at the end of November of last year.

If approved, a dividend of $0.60 per share or $1.20 per ADR will be paid on May 20, up 7% compared to the dividend per share of the corresponding period of the previous year. Thanks to the benefit of our buyback program.

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.

2025 was a year in which Tenaris demonstrated the resilience of its operation in the face of a disruptive geopolitical environment and lower activity in key markets. Thanks to our extensive geographical presence, the depth of the service we offer to our customers and the commitment of our employees, we were able to respond rapidly to the various situations we faced.

Our results remained remarkably stable through the year, which we completed with an EBITDA of $2.9 billion and a net income of $2 billion on net sales of $12 billion. Free cash flow amounted to $2 billion, all of which were distributed to shareholders through dividend and share buybacks. We are proposing a further increase of the annual dividend per share of 7% over debt for the previous year. At the same time, we maintained a net cash position of $3.3 billion.

In the US and Canada, the US was marked by further oil and gas industry consolidation and productivity improvement. A lower rig count and the extension of Section 232 tariff to the import of all steel products, including the steel bars we require for our seamless pipe operation by city, and their subsequent increase to 50%.

In this environment, Tenaris raised the performance of its US production and supply chain system, which is coupled steel shop main pipe production plants at Bay City, Hickman, and Enbridge and various pipe processing facilities acting in concert to achieve a record level of production and supply, 90% of our USA. In both the US and Canada, we strengthened our market position and extended the differentiation we offer under our Rig Direct service model.

As customers targeted operational efficiency, we continue to develop and roll out our run ready and well integrity services that support them by increasing safety and reliability at the wells. Major oil and gas companies are seeking new production reserves to meet a more resilient long-term demand outlook. And they're looking beyond the shale with their faster decline curves, to deepwater development and exploration in frontier region.

Tenaris with its capacity to develop product for complex operation and to support fast track development with service and the supply of advanced coated line pipe solution at scale is working with most of these companies as they develop such projects. A new offshore projects are sanctioned around the world, we see many opportunities to renew our order backlog, while we execute on existing commitments.

Currently, we are delivering casing for Shell's Sparta 20K project in the US deep water extending our services for ExxonMobil operation in Guyana and preparing a service base for total energy GranMorgu development in Suriname, while planning the production of seamless and welded line pipe and coating for the third phase of TPAO, Sakarya gas development in the Black Sea.

In Latin America, the Mexican government is taking steps to address the financial difficulties PEMEX, which took a toll on oil and gathering activity in the country last year. While in Argentina, domestic companies been able to raise more than $4 billion in financing to develop infrastructure and expand production operation in the back of oilfields. We supplied the Vaca Muerta Sur pipeline and are currently supplying the Duplicar Norte pipeline.

We are also investing to expand our new fracking and coil tubing service business and expect to put a third set of equipment to work before the end of the year. In Venezuela, following the intervention of the US government, we are resuming our service to shave on operation and building up our service capability in the country to support an increase in drilling.

In the Middle East, we continue to consolidate our presence with the award of a long-term agreement for the supplier of OCTG to the Northwest field development in Qatar. While in the Emirates, we enhance our Rig Direct service to ADNOC, delivering a record amount of OCTG. Saudi Arabia, also conventional drilling activity was reduced during the year. We completed an expansion at our local large diameter facility, from which we are supplying line pipe for the development of gas infrastructure.

In addition to the OCTG, we supply for Aramco drilling operations. Our global integrated industrial and supply chain operations have been key to our ability to respond effectively to the different events we faced during the year. We continue to invest in enhancing the efficiency and digital integration of these operations as well as reducing their environmental impact.

We made further progress towards our midterm target of reducing the carbon emission intensity of our operations as we brought our second wind farm in Argentina into operation. The two wind farms now supply essentially all of the energy requirements for our electric steel shop and operation in Canada.

As an industrial company, our commitment to the safety of our employees and to the environment sustainability in our communities is absolute. Also, our indicators have improved this year, we continue to reinforce our preventive actions and monitor our performance in this aspect. Tenaris, with its presence across the world, competitive differentiation in product service, the quality and compliance of its operation and the financial strength to support this strategy remains well placed to confront and unpredictable and volatile for future.

I would like to thank all our employees and the communities to sustain our operation for their constant commitment and engagement that have made possible our results and achievement this year. I would also like to thank our customers and our suppliers for their ongoing trust and support.

Thank you very much, and we are open to any questions you may have.

(Operator Instructions)

Marc Bianchi, TD Cowen.

I want to start by asking about the outlook here in first quarter and -- maybe you could talk about, to the extent you're comfortable how things progress beyond first quarter. When you talked about being close to current levels in fourth quarter, is that -- should we interpret that as meaning flat -- and are there any nuances with volume and price that we should be thinking about as we build that out? And then any comments sort of beyond first quarter would be great.

Well, thank you, Marc. Well, within our visibility today and considering many parts moving in the energy market and also being buying general geopolitical environment, I think is not easy to have a medium-term forecast. Now what we see is a relative stability of our performance and our position in the market during the first quarter and is not so easy. We do not see today a point that should disrupt our operation even in the second quarter.

But for the time being, as we say, we feel comfortable in forecasting the first quarter in which the level of margin and in general, the results we can get are more or less in line with 4Q. But it's difficult to have a more long-term forecast considering the volatility of the environment, in which we are moving.

Yes. Makes sense. And then the other one maybe somewhat related, the margin resilience in the fourth quarter was quite good. And I'm curious how much of that benefited from some of the actions that you're taking, I think you mentioned Koppel in the press release to try to offset some of the tariff headwind that you've experienced. I think previously, we talked about that being something like $140 million a quarter of tariff costs that you're having to deal with. So I'm curious how much progress did you make on that in 4Q? And what is the opportunity going forward?

Well, we are, let's say, continuously operating in the efficiency of our operation, including our capacity to produce more steel in the US. So we expect for the first quarter of next year, that a lower level of tariff we get into our IFRS because in the end, we are operating on this even in the past few months. And we think that what is getting into our results in the first Q will be relatively slightly lower of what we have in the fourth Q.

But on the other side, the indicator of prices in North America, I mean, in spite of the impact on the hot roll coil and other products of the steel industry are moving relatively slow in the pipe business and especially in a welded pipe. So considering the impact of slightly lower tariff and where we are in terms of Pipe Logix and so I think what is moving around in the world, I think that this is the component that justify our vision of a relatively stable top line and margin data for the first quarter.

Matt Smith, Bank of America.

My first question was around the international business and on pricing. Just whether you have seen any signs at all of pricing pressure given how the international benchmarks have traded down, I guess, since summer 2025. Any color you could give on different regions could be useful.

Thank you, Matt. I would say that, as you know, our business globally is composed of many different niche high demanding product, different region, different level of service. So I would say, to some extent, the price impact is more easy to understand project in North America than internationally. But by the way, I will ask Gabriel to give you a vision of what we see in front of us on the ground.

Yeah. Thank you, Paulo. On the pricing on the international markets, we see, in general, some stability, a balanced demand and supply, especially on the premium products, where we are mainly focused. So premium, our service, high technical qualified pipelines. This demand is quite strong, driven by offshore, by Middle East, in South gas and sour service development. So we see the demand on these segments quite stable. We have, in many cases, long-term agreements that have some formulas related to raw materials.

So I would say that the majority of our backlog in our business in international markets are driven by stability in the pricing. It is true that there are some spot tendering where we're seeing a slight deterioration in environment, especially when we are talking about lower end applications, but this is not -- the most important part of our business, and this is something that we monitor.

So I would say, given all the moving pieces and the increasing component of our offshore in 2026 our international mix, I would say that pricing in the international markets are quite stable for Tenaris.

Thank you, Gabriel. Let me just add one point on which maybe that is the European. In Europe, maybe it's early to perceive the impact, but the CBAM and the safeguard that is supposed to raise the quota -- to raise the tariff to 50% and reduce the quarter by almost 50% may have a favorable impact on relatively important segment of our international business that is all supported by the industrial power gen activity into Europe.

To some extent, I think in the view of the overall say, future of our operation, maybe not immediately, but we should be able to maybe improve our situation in pricing in Europe. And also this reflect with the present exchange rate gets into our -- to our top line relatively well.

Perfect. I wanted to ask the second question around the buyback, if I could. So I appreciate the current tranche of $600 million is still ongoing, and we'll have to sort of await the next announcement later in the year. So I just wanted to ask, check whether your philosophy around the buyback has changed at all since last year? Or should we very much expect this to be continue to be a material component of shareholder returns in the near future?

Yes. Thank you, as you are saying, the General Assembly and the Board decided for a program of share buyback of $1.2 billion from May 205 until May in 2026, dividing in two tranches, the second tranche has been approved again in October. Now the decision obviously is to the assembly and the Board for the decision on this ground.

But let's say, the factors that were relevant for the decision on the shareholder didn't change so much. So we will see if in the assembly in May, and the Board after this should decide on this, when the second tranche of 600 will be closed. They will consider the different factor level of cash availability company, the perspective of this. And on this basis, they will consider a possibility to continue the program of share buyback.

Arun Jayaram, JPMorgan.

I was wondering if we could talk about your expectations around potentially getting to an inflection point in the Pipe Logix pricing indices, just given your thoughts on import trends and where -- when and where could do you expect us to see that pricing inflection point? Because it continues to trend down, call it, in low percentage points at this point, looking at the most recent pricing data?

Yes. Thank you, Arun. Well, the factors that are, let's say, having an impact on the Pipe Logix are different. But you should also consider that there is a Pipe Logix for seamless and the Pipe Logix for weather. What we see is that, to some extent, the Pipe Logix for weather is having a drag down on the overall impact, something that maybe we're not estimating -- fully estimating before. Why?

When we saw the hot-rolled coil index going up as it is going up today, we were considering that this should have driven an increase in the weather pipe. But the import of welded pipe coming in based on the Chinese or Southeast Asia or other sources flat product is, let's say, containing movement in the Pipe Logix for weld. And this is to some extent, having also an impact on the Pipe Logix for seamless product.

Now the hot coil went up so much there is clearing the way for some import in the welded product and putting under stress the producer of welding product based on hot rolled coils coming from the US. In my view, this is kind of temporary because antidumping action against importation or import of welded will contribute to the gradual alignment of the Pipe Logix to the higher level of the hot roll. But this is not something that we can anticipate immediately for the first quarter. But over time, should be acting -- should be a factor.

Great. And my follow-up, Paul, I was wondering if you could just provide us your thoughts on how Argentina could play out in 2026 versus 2025? I know that you're adding a third frac fleet in Argentina, but give us a sense of how you see things progressing in the ground because we have seen some IOCs adding rigs in that market.

Well, let me tell you that as I was saying in the previous conference, or after the election in Argentina, remember, the confidence on the vessel mobility is increasing in Argentina. And even the oil and gas companies been able to finance more than $4 billion collect financing from different tools. They will be used to, let's say, promote and carry on investment plan during 2026. These losses has been relatively gradual.

But I think that over the second part of '26 and also following the biggest investment in the infrastructure, we will see this collection of financial capability. We will transfer into a higher level of drilling in the country. This has been slower than probably we were expecting one year ago. Because opportunity are there, but also the level of country risk stayed a little higher after the election that we may be we're estimating, and this is -- maybe is slowing down or at least is making more gradual, the pickup increase.

Also, some of these resources have been used for consolidation in the industry, especially by local player. And after this consolidation, the investment will go in operation in the development. First, some of the acquisition has been completed and gradually in this field, drilling will increase. I would expect in the second half of 2026, we will see something moving in this.

You remember part of the drilling containment has been coming by the reduction of the operation in the south part of the country. This is obvious. There has been a closure of operation in the south. So the key and the core of it of everything will be back.

Sebastian Erskine, Rothschild & Co Redburn.

I'd like to just start on the margin trajectory for Tenaris in 2026. And I think, Paolo, you mentioned earlier about the impact of kind of hot rolled quill on ERW margins. I mean looking at that, I think in the US, those have compressed about sort of $350 a tonne since August. So I guess that would equate to something like a sort of $35 million, $40 million quarterly cost headwind, but that will take a wilder show up. So when does that flow through into COGS? Or is it something we shouldn't really be thinking about as a meaningful impact? Any color there would be helpful.

And then I guess on top of that, and more positively, when we look into the second half of the year, you've obviously got a lot of offshore work to materialize. So you mentioned Sagaria, Surinam and presumably, obviously, that's a high margin. So could we expect you to operate at the top end of your kind of 20% to 25% EBITDA margin going? Is that realistic going forward through the rest of the year and kind of second half weighting.

Maybe Gabriel, you can give an overview part of the question. And then eventually, we will ask Guillermo on the other part of it.

Sure, Sebastian. Going to the part of your question related to offshore and how they will play out during 2026, I would say that the market in the offshore is quite operating at high levels. We have a strong backlog that we need to execute as Paolo commented in the opening remarks, we are getting ready to deliver this impact of execution. These are complex projects that require local deployments. You mentioned the Suriname project.

We are building the new service base in Suriname, the new -- the first shipments we are arriving in June. So we are ready to deploy the OCTG and Rig Direct services there into the second half of the year. We are also, for example, producing today thermal insulation coating in Nigeria to support the Shell Bonga North deepwater development. So these are an important part of our focus and attention is on delivering the high backlog of orders, and we expect revenues in the offshore in the first half of 2026 to be higher than the second half of 2025.

We will talk about the second half. It's true. We have an important backlog of Sakarya, and other projects. Some of these awards, additional awards require FIDs. We see some of the FIDs being announced towards the end of this year or even in 2027. So this will depend. So we don't have fully confirmed the backlog over second half of 2026, but we are confident that it will be at least as positive as the first half of 2026.

So overall, I would say the offshore contribution will be important for Tenaris and if you look at the industry projections, the level of FIDs of deepwater that we are seeing for 2027 are pretty strong, higher than the average of 25% and 26%, and we are engaging with our customers early on in those projects much earlier than the FID. So we believe that we're in an offshore cycle, that is going to be sustained for a multiyear period.

This is very important. When we look at the estimate of the investment in deep of '27 and '28. The number apparent re-estimation are showing a level of investment in the range of $120 million in 2018. There are almost 3 times some of the low end years in the past two, three years. So long term, look promising. Now Guillermo maybe you can add on the US operation vision.

Yeah. Thank you, Pablo, and Sebastian. Well, regarding your question about the trajectory of margins in the US and particularly for our ERW pipes. Clearly, the recent increase of prices of the core oil and still the reduction of prices for the same product is putting a lot of pressure on our margins. And that is going -- that are going to be reflected mainly in the second quarter.

For the following quarters with all the volatility that we are seeing, it's more difficult to forecast, as Paolo explained before, but and will depend mainly on the ability of Pipe Logix to recover that we think that eventually will based on the push of the cost. Hot roll coil and the scrap and also because of the expectation that the imports will continue to go down in the future.

Stephen Gengaro, Stifel.

So two things for me really. One is, can you talk a little bit about your expectations in 2026 for any material changes in working capital as we sort of try to think about free cash flow generation? And then maybe aligned with that, what level of cash do you feel like you need on the balance sheet to run the business? Like what level excess versus what's sort of normal necessary operational cash?

Thank you, Stephen. Well, in general, remember, it's not only a question of the capital we need to run the business, but we also need to have always in mind the capital we need to have available for any expansion or opportunity that may come in front of us.

This is an important consideration for the Board, for everybody when we consider the financial strategy in the flows to the shareholder. But as far as the working capital is concerned, I would ask Carlos an overall view because there are some area the receivable from some of the clients that is improving. And so you can give us a view of how we see this.

Sure. Thanks, Paolo. Okay. For the 2026, we expect to be quite neutral in working capital, but we will have some swings over the year, especially in the first quarter, we're expecting an increase in working capital, mainly driven by our accounts receivable as you saw during the fourth quarter, we have a big reduction in receivables, mainly driven by collections in some big collections from PEMEX. I think with Pemex, we have arrived to a level that from now on, will maintain or increase a little bit -- so we won't be seeing a working capital reduction coming from there.

And then we are seeing also some terms of renegotiations with customers in the best that might impact a little bit our working capital needs. And also, we are seeing some slight increase in sales for the first quarter that will also imply an increase in accounts receivables.

In terms of inventory, maybe for managing our -- in our balance sheet, the service component of the company is very visible. We have the fixed capital that is slightly higher than the -- our working capital because in the end, we have a lot of inventory to support our service strategy and our Rig Direct strategy. You think, Gabriel, we can imagine some reduction of this streamlining inventory or visually, you imagine a stable situation here.

In general, Paolo, we are always looking for opportunities to improve. This is the case in all our direct programs, we are managing and balancing the ability to supply and have the right stock at the right moment and have efficient working capital. So this is a constant work. We have done an improvement during the year that we will continue this year on the working process. material. So this is something related to our industrial efficiency where we have been improving, and we have more room to improve.

And then there is a part of steel, as we have this important LSAW pipelines that we need to buy the steel in anticipation. So typically, there is a longer lead time on these large pipelines that are also reflected throughout the year. But this is an area of attention and we always think there is room for improvement.

It is important for projects like Sakarya.

For example.

Long term, a long period of time.

Yes.

And also our operation may demand working capital for ADNOC serving with a long operation and stock demand.

We are serving every month 550 rigs worldwide. So this requires to have the raw material close to the...

Serving 550 rigs every day imply to keep all the inventory even in a remote region or at least the life in the Gulf. But still, we're working every day to understand how we can optimize, but by the way,.

No, that's very helpful.

Alessandro Pozzi, Mediobanca.

The first one is really going back to the Q2 guidance. You mentioned a bit of an impact from higher raw material costs I was wondering if you could perhaps quantify or give a sense of what that could be in Q2? And also as we look throughout the year, I was wondering if there is any quarter where we could see an impact from mix, for example, more line pipe versus seamless and having an idea of the cadence of line pipe volumes, I think, could be quite interesting and also on maintenance, whether you have any big maintenance quarters.

Second question on Argentina. Can you comment on the level of competition you've seen there -- we've seen an Indian company getting a contract for a pipeline -- and I was wondering your thoughts about the competition there as volumes, as you pointed out, are going up possibly from second half.

Thank you, Alexandra. Well, on the first point, there is, let's say, the impact of the (inaudible). When we look at the medium term, in term of this, we always keep -- follow basically four points. The Pipe Logix for seamless, the Pipe Logix for welded, the cost of hot-roll coil and the cost of scrap.

So on these four variables that are moving are acting on our, let's say, the indicator in the form of our contract many times, and also the costs that are underlying. Up to now, I mean what we see is an increase in the hot roll coils, that is not followed by the Pipe Logix in welded because there is import from companies that could stay below line price even paying 50%.

This is sitting in our -- to some extent, on our margin. But we think that this would be a reaction by the Pipe Logix some antidumping action to contain import. And I will ask Guillermo, if you see this happening in medium term, I mean when we can recover the increased cost of the of the hot roll coils in our top line.

Yeah. I think that following what I said before, I mean, remember, there is always a lag between the Pipe Logix and how they reflect in our prices. So now normally, we have a one quarter delay. And while the impact of the hot roll coils comes sooner than that. Our expectation would be that we should start to see some reduction in Q3, but particularly in Q4.

Yeah, thank you, Guillermo. Now on the line pipe seamless after the acquisition of Shawcor, the line for us is very relevant, and we are, I think, very competitive. But maybe Gabriel, Yes, you see some changes in the balance between two.

Yeah, Paolo, Alessandro, regarding your question about the cadence of the pipeline projects, I would say that it's quite stable during the four quarters of this year. This is the visibility that we have today. I'm pretty much in line in volumes on what we had on 2025, where we had important projects like Sakarya. I mean, like ARIA in 2025 in Brazil.

This year, we are concluding some pipelines in Argentina in the first quarter and second quarter. Then we will have Sakarya in the third and fourth quarter. We have a, I would say, a relatively stable plan of pipelines in Saudi Arabia as well. And then the deepwater pipelines that we have in different parts of the world. So I would say there is not significant imbalance in our shipments of line pipes.

Thank you, Gabriel. On the last point on the tender energy. Well, this was a tender for a large project for producing LNG in Argentina. The project is carried on by a private company. There is some, let's say, include different shareholders, but is a private company.

They made a tender, a very open tender to everybody. And basically, we lose the tender because we were higher than the lowest bidder. The bidder as you were saying, was an Indian company, things like this happens, obviously.

Now what we are doing, we are analyzing the offer to see if this is an offer that is following the trade practice or is exposed to potentially an antidumping case raised by us. For the time being, we didn't take the decision here. We are just studying the condition, the condition of the local market for the company, the condition of the pricing of this because we think this is important.

We also remember that Argentina had signed an agreement with the United States in which both parties are committing themselves to address the unfair trade practices in both countries is logical for US to advance or introduce close of this in the relation with different regions, different areas. And this is part of the agreement, the reciprocal trade investment agreement between Argentina. So we think there should be a good environment to analyze the specific situation of this and this standard.

All right. I don't know if I can squeeze in a last one on Venezuela. In your opening remarks, you mentioned that Chevron is ramping up, drilling activities. Could you quantify the Venezuela opportunities short term, longer term for Tenaris?

Yeah. On this, Gabriel, you follow closely this.

Yeah. Alessandro on Venezuela. Clearly, the situation is evolving. It's a dynamic environment. But clearly, there are signs that things are going to move positively with the hydrocarbons law and the recent of licenses, I think there are clear signs that some resumption of activity will occur. Today, Tenaris is in a unique position. We are fully serving the Chevron, the only major that is operating in Venezuela. They have a plan to accelerate rigs and demand for tubulars and we are ramping up for that.

This is today something limited, but we expect to expand into 2026. So we are also following the licenses of the other majors that might be coming back to Venezuela soon. So this is, I would say, still in the $50 million for 2026, but with a clear perspective of higher potential in 2027 and when maybe more clear plans about the other majors are materialized. But overall, a big upside potential in the midterm, depending on how things evolve.

So remember, the Chevron will not be alone. The way other company moving. I think that our position in Venezuela is unique. Remember, we in Venezuela, we're operating the only seamless pipe plant until the plant was expatriated in 2008 by the government by Charles. And at that time, where the company serving the oil industry in Venezuela.

So we also have human resources of people, they are familiar with the operation of Venezuela service, the complexity of this, the product demand and so even if a lot of time pass, but we still -- I think we have a very competitive and differentiated position.

Right. Sorry, did you say $15 million EBITDA?

$50 million of revenue.

Luigi De Bellis, Equita SIM.

Just one for me. On the Middle East and Mexico, could you share your view on the evolution for the coming quarter for both Middle East and Mexico.

Thank you, Luigi. Well, starting, let's say, from Mexico. Mexico, there has been a number of positive advance in supporting PEMEX, the government capitalize payments with a program of $20 billion that is important. And now Pemex is also issuing bonds and getting access into the market for important some like $1.7 billion, I mean relevant taxes with government guarantee. Now what we do not see yet is the definition of the plans that the Pemex will execute during 2026.

We do not have clear indication of this. And the private company are moving slowly. And some of the group is moving. Obviously, Woodside in the Trion is moving on. But some of the, let's say, the contract may have enabled private company to come and developing the resources.

In my view, this is moving relatively slowly today. Maybe by the end, the middle of 2026, we will have a better understanding of how they will organize, let's say, the development of the clearly huge resources that Mexico has. Now the question on Middle East, medium-term vision, I think, Gabriel may comment on this.

Yes, sure. Luigi, for the question on Middle East, I would say there's not much change on what we have been reporting in the last couple of quarters. Activity remains high all the main key countries are investing. We have a strong position there with our long-term agreements in Saudi, UAE, Qatar and part of the market in Iraq as well. So I would expect our revenues and shipment in the next two quarters, first and second quarter of '26 to be pretty much in line with the first quarter of 2025.

The only noticeable news is a probable uptick of drilling activity in Saudi. This is still to be confirmed, but probably during the second quarter of '26. And maybe later in the year, we will see comeback of rigs in Saudi, which reduced rigs during 2025. So we'll monitor that and there could be a potential upside, but for the second half of this year on the CP side.

Marco Cristofori, Intesa.

Question, which relate on shale oil, shale industry in the US let's say, that since the end of 2023, we have seen declining rig count, but a growing crude output. So -- and also breakeven are going strongly down according to oil measure. So do you think that this plan could allow a further increase of your volumes in the US. And secondly, there are several insights that the Shell in the US could reach a plateau in the second half of 2027. So how do you see the evolution of the shale industry in the US.

Yeah. Thank you, Marco. I would ask to Guillermo to give a view on the evolution of this. In the question of plateau, frankly, I wouldn't -- I don't think we are able to predict plateau. It will depend on the overall price of oil around and there are many issues that are unpredictable, concerning the major production region and so on and so forth.

So US, the plateau has been forecasted in the past at a lower level, and it's continuously surprising us with higher. And so I wouldn't bet on where this number would be in '27. Guillermo, on the question of the....

Yeah. I mean, as you said, I mean, the operators in the US have been increasing the efficiency and productivity, big time in the last two years. So with a much less number of rigs, they are not only producing more, but they are drilling almost the same amount of wells, and they are even going longer. So we are seeing much less rigs, but more production and slightly reduction in the consumption of OCTG compared to what we used -- I mean so there is no such a correlation that we used to have with Arica.

Now looking forward, we still see kind of a stable market for 2026 compared to 2025. We may see some reduction of activity slight reduction in oil, offset by an increase of activity in gas. And as Paolo said, difficult to predict about production. Everybody is talking about plateauing, but's at the same time, we see them becoming more creative and producing more oil from each well with the new technologies in terms of fracking, but also in terms of the level of chemicals they use.

So we need to see up to where the innovation of the industry can go. But clearly, if we are not at the peak, we are not far from it with this level of activity and rate count -- the other variable that we need to take into account is that in the last two years, there has been a reduction of drilled by uncomplete wells. So some of the increase of the activity was also coming from wells that were previously drilled but not completed. The level of inventories of those wells has gone -- has come to kind of a bottom, so we don't expect much more of this in the coming quarters.

Kevin Roger, Kepler Cheuvreux.

I just have 1 question to follow on the US and all those stories on the tariffs implemented by the Trump administration. And notably on the recent news flow that the Trump administration could reduce the tariff on steel and aluminum. I was wondering if you comment a bit more on what should be the implication on your side from a potential reduction on the tariff for example, we come back to a 50% steel tariff to 25% or something like that. Just to understand the potential impact from the US OCTG market if we move in that direction, please?

Thank you, Kevin. Well, we don't know, which is -- I mean we only have an article on the newspaper, we do not have a written definition. If I should say the issue may come from the impact of the US economy of the extension of the 232 to the derivative of steel. There are many products derivative or steel, which means that they contain steel there are vertically affect price level in the States, but are not having a beneficial impact of industry in the state that is not producing this.

Now this universe of derivatives increased so much that I think the comment of Trump maybe are just indicating a willingness to reshape what is considered derivative and what is not. Remember, there has been stages of expansion of the definition of derivative 12. And before going to the third, is considering worry would be, let's say, not creating undue distress in the pricing system.

So this is what I understood. I will reconsider the derivatives more than reconsidering the level of $50 million because this is a key component of the 232. I don't see this to change.

Jamie Franklin, Jefferies.

So firstly, and apologies if I missed answer to this one. But I just wanted to focus on your other business segments. Obviously, a big revenue and margin recovery in 1Q driven by your fracking and coiled tubing services in Argentina.

Can you just talk about how you expect that to trend through 2026 and whether we can expect a similar contribution in the first and second quarter and beyond that? And then the second question, just if you could give us an update on your CapEx expectations for 2026 and kind of an outline of where you expect to be spending.

Thank you, Jamie. On the oil and gas, as I was saying during the second part of 2026, we are considering that the activity of oil and gas fracking should go up. The drilling activity will also pick up later on. There will be more need to frac. We are just bringing in one additional set of fracking because we are anticipating some increase by the end of the year.

And this should drive some increase on our activity in the second half of '26. This is basically the position on this. The other point, CapEx -- I mean, CapEx will be more or less in line with the -- what we have been spending in 2025.

Looking at the forecast, we see even something lower -- but I imagine that during the year, new need may come out. Usually, there is something that is coming out from specific intervention. So there will be something lower when we look at this from a planning point of view today. But maybe in the end, we will be close to the level of today.

Thank you. At this time, I'm showing no further questions. I would now like to turn the conference back over to Giovanni Sardagna for closing remarks.

Well, thank you, Gigi, and thank you all for joining us today. Bye.

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