(Reuters) - The U.S. subsidiary of TMK, Russia’s largest maker of steel pipes for the oil and gas industry, sees shipments next year returning to the levels of before the recent slump in oil prices, its chief executive told Reuters.
TMK, controlled by businessman Dmitry Pumpyansky, has said it expects the financial results of U.S division TMK IPSCO to significantly improve in the second half 2017 as drilling activity in the United States remains high.
“In 2018, the U.S. division will return to the pre-crisis shipments and may even increase the profit,” Piotr Galitzine said in a phone interview during TMK’s investor day in London on Monday, referring to the plunge in oil prices that started in mid 2014.
He added TMK was likely to be running at full production capacity in the United States next year, compared with between 50 percent and 95 percent at some of the divisions currently.
The International Energy Agency expects U.S. crude output to grow by 470,000 barrels per day (bpd) in 2017 and by 1.1 million bpd in 2018. The United States is seen as the largest contributor to a rise in non-OPEC oil supply in 2017-2018.
TMK’s U.S. business began contributing to core earnings - earnings before interest, tax, depreciation and amortization (EBITDA) - in the first quarter of this year after seven quarters in the red, helped by a strong recovery in U.S. drilling rig activity, analysts at Citi have said.
The recovery has been one of the key drivers in a reduction of TMK’s debt. TMK’s total debt was $3 billion at June 30.
TMK IPSCO plans to produce over one million tonnes of pipes this year, compared with its all-time record of 1.3 million tonnes, Galitzine said.
“The increase in (pipe) prices at the end of 2016 and in 2017 has already impressed us. We believe that the prices will be growing in the first quarter as well,” he said.
TMK has previously said it was considering different strategic opportunities for TMK IPSCO, without elaborating.
TMK has not been affected by Western sanctions imposed against some Russian companies and individuals in 2014 over Moscow’s annexation of Crimea from Ukraine.
Reporting by Natalia Shurmina; Writing by Polina Devitt; Editing by Katya Golubkova and Mark Potter