Tubemaker Tenaris is not very optimistic about a recovery in demand for its steel tubular products from the oil and gas industries in the near future, its CEO Paolo Rocca said during a conference call on Thursday.
The executive stressed that oil and gas companies worldwide have been reducing drilling activity and capital expenditure as they further revise their costs in the lower oil and gas price environment, the same trend expected in the company's South American operations.
Discussing the outlook in Argentina, Rocca said, "The government's policy of holding oil prices in the domestic market, which are higher than the international average, is unclear for Tenaris."
While expecting less drilling activity in oil operations in Argentina, Rocca said there is a good prospect for the gas industry in the next quarters. "Domestic [gas] production may increase with investments in the state-owned drilling activity in Vaca Muerta deposits. The country currently imports most of its gas, and domestic production may increase in the next year with foreign investments," he said.
In Colombia, Tenaris expects less demand in first-quarter 2016, "but then a potential recovery in the following quarters."
Rocca also expressed no optimism regarding steel tubes demand in Mexico related to drilling activities for at least the next two years.
During the third quarter this year, Tenaris' net sales in South America increased 4% to $465 million, from $445 million in the same period in 2014, and were in line with second-quarter 2015, according to its latest financial statements.
"In South America, [net] sales remained flat sequentially as an increase in shipments for pipeline projects in Argentina was offset by lower prices and less favorable product mix on OCTG products," Tenaris said the document.
In January-September, the tubemaker's net sales in South America grew 6% year on year to $1.418 billion against $1.340 billion in 2014.
