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Tenaris S.A. 2015 Fourth Quarter and Annual Results Summary

Business Context and Reporting Period

This Form 6-K filing, dated February 24, 2016, reports the audited consolidated financial results for Tenaris S.A. for the fourth quarter and full year ended December 31, 2015. Tenaris is a global manufacturer of tubular products and services for the oil and gas industry. The results reflect a severe downturn in the energy sector, characterized by collapsing oil prices, reduced drilling activity, and intense competitive pricing pressures.

Key Financial Metrics

Note: Net Cash Position is defined as cash, other current investments, and fixed income investments held to maturity less total borrowings.

Material Changes vs. Prior Period

• Revenue Decline: Full-year 2015 net sales fell 31% to $7.1 billion, driven by a 28% drop in sales volumes and a 6% decrease in average selling prices. Q4 2015 sales dropped 47% year-over-year.
• Profitability Collapse: Operating income for the full year plummeted 90% to $195 million. Net income swung from a $1.18 billion profit in 2014 to a $74 million loss in 2015.
• Impairment Charges: The company recorded a significant non-cash impairment charge of $400 million on welded pipe assets in the USA in 2015, reflecting the decline in oil prices and demand outlook. An additional $29 million impairment was recorded on the investment in Usiminas.
• Restructuring Costs: Total severance charges for 2015 amounted to $177 million to adjust the workforce to market conditions.
• Tax Impact: A non-cash deferred income tax charge of $131 million in 2015 resulted from currency depreciations in Argentina and Mexico.

Guidance, Outlook, and Risks

Outlook: Management expects global demand for Oil Country Tubular Goods (OCTG) to fall approximately 20% in 2016 compared to 2015 levels. The outlook is driven by continued low oil prices, further capital expenditure reductions by oil and gas companies, and high inventory levels, particularly in North America. Despite these conditions, Tenaris expects to maintain its EBITDA margin around the Q4 2015 level (approximately 18% excluding restructuring charges) through cost reductions and operational adjustments.

Risks and Contingencies:

• Market Volatility: Continued uncertainty regarding future oil and gas prices and their impact on customer investment programs.
• Competition: Intense competitive environment leading to lower selling prices.
• Currency Risk: Significant exposure to currency devaluation in Argentina and Mexico, impacting tax bases and financial results.
• Inventory Levels: High inventory levels in key markets (US, Canada) suppressing near-term demand.

Dividends: The Board proposes an annual dividend of $0.45 per share ($0.90 per ADS), totaling approximately $531 million. This includes an interim dividend of $177 million paid in November 2015. The remaining balance is proposed for payment in May 2016.

Investor Verification Checklist

• Impairment Validity: Verify the assumptions used for the $400 million impairment charge on US welded pipe assets and the $29 million Usiminas impairment.
• Currency Exposure: Assess the ongoing impact of Argentine and Mexican currency devaluation on future deferred tax charges and working capital.
• Liquidity Position: Confirm the sustainability of the $1.8 billion net cash position given the proposed $531 million annual dividend and continued capital expenditures.
• Cost Reduction Efficacy: Monitor whether the company can maintain the ~18% EBITDA margin (excluding restructuring) as sales volumes decline further in 2016.
• Dividend Sustainability: Evaluate the risk to future dividend payments if the 2016 demand decline exceeds the projected 20%.