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Tenaris S.A. Form 6-K Summary

Business Context and Reporting Period

This Form 6-K, filed on April 1, 2016, serves as a notice of the Annual General Meeting of Shareholders scheduled for May 4, 2016. The filing includes the Company's 2015 Annual Report and restated 2014 financial statements. Tenaris S.A. is a leading global manufacturer of steel pipe products and related services, primarily for the energy industry (Oil Country Tubular Goods or OCTG). The reporting period covers the fiscal year ended December 31, 2015.

Key Financial Metrics (2015 vs. 2014)

Per Share Data: Net loss attributable to owners of the parent was $0.07 per share (2015) compared to earnings of $0.98 per share (2014). Proposed dividend is $0.45 per share.

Material Changes and Drivers

• Market Downturn: Sales volumes declined 28% and average selling prices dropped 6% due to a collapse in oil prices and a 35% decline in global drilling activity. North American sales fell 45%.
• Impairment Charges: The Company recorded a $400 million goodwill impairment charge related to welded pipe operations in the United States and a $29 million impairment on its investment in Usiminas.
• Restatement of 2014 Results: Following discussions with the SEC, the Company restated its 2014 financial statements. This included a $161.2 million impairment charge on the Usiminas investment as of September 30, 2014, based on revised value-in-use calculations.
• Cost Reductions: Despite lower volumes, the Company reduced SG&A expenses by 17% and generated strong operating cash flow ($2.2 billion) driven by a $1.4 billion reduction in working capital.

Guidance, Outlook, and Risks

• 2016 Outlook: Management expects global OCTG demand to fall approximately 20% in 2016 compared to 2015 levels. Oil and gas prices remain low, leading to further capital expenditure cuts by customers. The Company anticipates lower selling prices and reduced shipments for South American pipeline projects.
• Strategic Investments: The Company is maintaining strategic investments, including the Bay City, Texas seamless mill (expected operational in 2017), and product development.
• Dividend Proposal: 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 $0.15 paid in November 2015. The remaining $0.30 per share is proposed for payment on May 25, 2016, funded by retained earnings despite the 2015 net loss.
• Key Risks:
  • Continued decline in oil prices and drilling activity.
  • Unfairly traded steel pipe imports affecting market share and pricing.
  • Foreign exchange rate fluctuations (functional currency is USD).
  • Legal proceedings regarding the nationalization of Venezuelan subsidiaries (Tenaris received a $173 million award for Matesi expropriation in January 2016, but collection remains uncertain).

Investor Verification Checklist

• Dividend Sustainability: Verify the Company's ability to maintain the $0.45/share dividend given the $74 million consolidated net loss and the reliance on retained earnings reserves.
• Restatement Impact: Review the details of the 2014 restatement regarding the Usiminas investment valuation and its effect on historical comparability.
• Impairment Sensitivity: Assess the risk of further goodwill impairments, particularly for the US welded pipe assets, if oil prices or rig counts decline further in 2016.
• Venezuela Arbitration: Monitor the status of the $173 million ICSID award for Matesi and the ongoing proceedings for Tavsa and Comsigua, noting the risk of non-payment by the Venezuelan government.
• Bay City Project: Track the progress and capital requirements of the Bay City mill, which represents a significant portion of current capital expenditures.