Good day, ladies and gentlemen, and welcome to our Fourth Quarter 2018 Tenaris Earnings Conference Call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to turn the call over to Giovanni Sardagna, Investor Relations Officer. You may begin.

Thank you, Victor, and welcome to Tenaris 2018 fourth quarter and annual results conference call. Before we start, I would like to remind you that we will be discussing forward-looking information on the call and that our actual results may vary from those expressed or implied during this call. With me on the call today are Paolo Rocca, our Chairman and CEO; Edgardo Carlos, our Chief Financial Officer; Guillermo Vogel, Vice Chairman and member of our Board of Directors; German Cura, Vice Chairman and member of our Board of Directors; Gabriel Podskubka, President of our Eastern Hemisphere Operations; and Luca Zanotti, President of our U.S. 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 2018, sales reached $2.1 billion, up 32% compared with those of the corresponding quarter of the previous year and 11% sequentially mainly as a result of higher sales throughout North America and a completion of delivery for the second Zohr pipeline in Eastern Mediterranean. Our quarterly EBITDA at $426 million was 33% higher than the corresponding quarter of 2017 and 8% higher sequentially with our EBITDA margin stabilizing at around 20%. Our operating income for the quarter was negatively affected by the accelerated amortization of residual value of the customer relationship of the Maverick acquisition for $109 million. Our average selling prices in our Tubes operating segments were up 8% compared to the corresponding quarter of 2017, but down 1% sequentially. During the quarter, cash flow from operation was $239 million, our net cash position rose by $77 million to $485 million following the payment of an interim dividend for $153 million in November last year and capital expenditure of $76 million. The board of directors has decided to propose for the approval of the annual general shareholders’ meeting to be held on May 6, 2019, the payment of an annual dividend of $0.41 per share, or $0.82 per ADR, which includes the interim dividend of $0.13 per share or $0.26 per ADR, that we paid at the end of November. If approved, a dividend of $0.28 per share, or $0.56 per ADR, will be paid at the end of May. Now, I will ask Paolo to say a few words before we open the call to questions.

Thank you very much Giovanni and good morning to all of you. This was a good quarter to end the year when Tenaris has demonstrated very good results of global and competitive position. The market was increasing and global oil and gas rig count have been relatively more than 9%, largely concentrated in the U.S. sales. Tenaris has increased sales by 45% over the years. All of our region as well as our non-Tubular business have contributed to this achievement. Our margin has also increased. Our EBITDA margin is consolidated around 20%. And our net income margin reached 11.4% of sales, a level which few oil service companies have achieved. This performance also compared favorably against any of our competitor and in the past years we have established a clear leadership in our sector, reflecting the efforts we have made over many years; industrial excellence in product development, in our Rig Direct service and in our global reach and financial strength. Central to our performance this year has been the extraordinary achievement of completing the delivery of pipes with a highly complex specification for the three offshore gas pipelines in the Eastern Mediterranean, which will change the balance of gas supply and demand in the region. This correspondent to a specific conference of opportunities created by the fast track development of this new gas province, which contributed 8% to our revenues for the year and is unlikely to be repeated on the same scale for some time ahead. We continue to make progress in extending the deployment of our Rig Direct service strategy around the world. During the year, around 60% of our OCTG sales by volume were supplied under Rig Direct condition. We have a fully consolidated the service in the U.S. and Canadian markets and are working to…

[Operator Instructions] Our first question comes from the line of Igor Levi from BTIG. You may begin.

Hey guys. My first question is on offshore. Offshore FIDs in the past few years have seen a big resurgence and since we’ve been patiently waiting for this to translate into drilling activity and demand for OCTG. And in the previous quarters, your commentary generally highlighted that offshore remains subdued, and it looks like in the latest press release the tone seems more optimistic where you talk about the offshore driving more of your premium sales. So I was hoping to get some more color on what you’re seeing offshore. And what has changed from the past few quarters to now?

Thank you, Igor for the question. In fact we are perceiving gradual change in the mood of the operator concerning project. But really, we see attention and action concentrated relatively is initiative, not very big. I would ask Gabriel to comment because most of the project we are following occurs in the eastern hemisphere, to a large extent. And then we’ll comment maybe on South America and Gulf of Mexico.

Yes thank you Paolo. Good morning Igor. It’s true there is a positive trend in a number of FIDs in the significant international markets, that this entails offshore clearly as well, and this particular [indiscernible] oil and gas. The number of FIDs has been growing, continues to grow, but it’s important to note that the size of this project is not like it in the past. So what I think is even more relevant than the number of FIDs is underlying CapEx that this project will yield. And in our estimates, our market intelligence and discussion with our customers, we see that the CapEx associated with these FIDs in the offshore growing in the range of 5% to 10%. So there is a positive trend, there is dynamism, but this is not, by no means, going back to the CapEx and drilling activity that we had at present-crisis level. Gas continues to be an area of focus. We mentioned, Paolo I think, mentioned about the LNGs, we see companies prepare for greenfields in Mozambique, some infill drilling and replenishment in Australia, and expansion that is being discussed and hopefully will be FID during 2019. This is a segment that we are particularly well positioned. Other areas that has picked up in the last few months has been China and India. These are offshore gas developments and we see a change of phase in these two countries pursuing domestic gas drilling activities. And we have been particularly successful in capturing the majority of this growth and this is something that you will see during the numbers during 2019. So there is a positive trend. We are well positioned, but by no means, we’re going back to the drilling activity in offshore that we use to have.

In the other region, in South America, in Brazil, clearly, with the new government, there is renewed commitment to investing in exploration development offshore by Petrobras and by the private company. There is one concession in the offshore. Still, I think that this will materialize later on between 2020, 2021. And we’ll, by the way, be, to some extent, conditioned by the evolution of the government initiative, the new government from Bolsonaro in readdressing the macroeconomic situation in – to solve some of the macro issue that needs to be solved in Brazil to set the country on a steady recovery. There will be also favorable environment for investment in the oil and gas industry. In Mexico, something similar is happening because in the end, there will be project offered by the private company, they will materialize gradually, probably in 2020, beginning in 2019. But also there are issues in the political environment that needs to be fixed to create the condition for activity by private’s and by Pemex in the offshore area. By the way, we are confident on this. Again in South America, projects like Liza in Guyana and associated project are very important development. Possibly one of the major that we have seen in recent time and this will go on. In Gulf of Mexico, again, there are project but some of them are related to tie back into integration of existing field into new discovery and new development. We are following very closely some of this, I mean, some that require very complex and new technology for development in very deep water and in country that has complex condition on the ground.

Great, thank you for that. And shifting gears to your EBITDA guidance, which looks like implies just above $1.6 billion for 2019. Could you go over some of the key variables that could realistically drive this figure lower or higher?

Well, what we are seeing is that we perceive that we are now moving around the 20% EBITDA margin. As you’re aware, we anticipated and we expect this to be the level, at least in the first part of this year. But when we look in the second half of 2018 there are different element of volatility and uncertainty, in my view. So there are upside and there are downside that depends from the level of activity. Drilling in the United States is very important. And this probably is one of the factors that could be relevant for us. Second important is that the materialization of the expansion project in Mexico, but also something that is relevant for us. But in general, my perception is that we have issue around the world on the macro and political situation that could have an impact and are creating an environment of high uncertainty. You see this in Europe, you see this on the trade issue concerning relation with Indonesia and China but also concerning the relation between U.S., Canada and Mexico for the negotiation for the next USMCA. These are important factors that could be affecting the level of growth in the world indirectly the price of oil. And in the price of oil in itself, there are clearly uncertainty concern in the situation of different country, including Venezuela, Iran and their ability to supply and to participate in the global supply. These things are important. If the price of oil remained sustained, the level of drilling, especially in the U.S. that are fast reacting to this may have present upside during 2019. So we are doing an overall forecast in the term as I mentioned, we expect margin to the short-term to be around the numbers that I mentioned. Looking ahead, we see this as a base, but we may perceive upside depending on the evolution of some of the variable that I mentioned.

Great, thank you. Very helpful. I’ll turn it back.

And our next question comes from the line of Frank McGann from Bank of America. You may begin.

Okay, thank you very much. I was just wondering, perhaps you can go into a little bit more how you’re viewing the U.S. right now, you mentioned it briefly. But I’m just wondering how you’re seeing the potential for more drilling activity later in the year when you have more takeaway capacity? And then secondly, in terms of Colombia, what are the overall trends there? That’s been a good market for you in recent years. I was just wondering how you’re seeing the potential for upside there.

Thank you, Frank. I would ask Luca to give a view of how we see the drilling and demand activity in the U.S., and I will comment on Colombia.

Thank you, Paolo. Good morning, everybody. Good morning, Frank. Again, I need to go back to the volatility concept that you brought about before, and there are different factors playing to create volatility. Generally, in the market we see different partners, depending on the operators. We see the major offshore moving forward. We see there are independents, they are maintaining more or less the activity, and we see a good number of small players that are very susceptible to the oil prices and take very fast decision. So again, overall, we see the first quarter as lightly more than the last quarter of 2018. But going forward, it very much goes back to what you said before, Paolo, on the oil prices and how this will be – how much of this will be credible to these operators.

Yes. Thank you, Luca. As far as the Colombia, let’s say, and related region operation, we do not expect, let’s say, substantial change of the level of operation compared to what we see today. We have a long-term agreement with Ecopetrol, we are supplying very large part of the region. We are present with our Dopeless technology in Liza with Exxon, and we have contract with major oil company in different part of the region. But the level of activity in Colombia, amortization should remain more or less in line with what we have seen in this quarter, maintaining the level of today.

Okay. If I could just follow-up a little bit. In terms of Canada, you also mentioned in the release that and you’ve said this previously, Canada is expected to be fairly weak for 2019, I was just wondering if you could give a little bit more detail on how you’re seeing the decisions being made and what – how weak it should be?

Well, Canada, let’s say, in some moment we are being surprised by how fast the disruption in the transportation of oil has affected the price of the West Canadian crude. And this has clearly impacted on the level of drilling. The level of drilling went down substantially. Then the government intervention on the level of production, then on the transportation may contribute to a recovery. But, frankly, we do not have a very positive view of the Canadian activity during 2019. And there is also something unpredictable because it depends around the government support to transportation and to the level of pricing in the region. German, you’re also close to the region, maybe you can add something on what we can expect.

Thank you, Paolo.

All because this season has been…

Yes. Thank you, Paolo. Good morning, Frank. I think it’s been one of, I’ll call it, the early part of the year disappointment, Frank. This season in Canada, we have seen levels of operation which are about 30% lower when you look at rig count than what we saw last year, given the details or explanation which has occurred and the ultimate impact on the price of oil. Now we need to see what’s going to happen during the rest of the year. I think the season is "severely affected." Given the seasonality aspects of Canada, we don’t expect a major change going forward. And we somehow remain confident, the infrastructure, the bottlenecks would be resolved and we should see something a lot better towards the end of this year, early next.

Okay, thank you very much.

Thank you. And our next question comes from the line of Ian MacPherson from Simmons. You may begin.

Yes. Hi, good morning, everyone. Thank you.

Good morning.

I wanted to ask a couple of questions on the investment side. I think the press release suggested that capital spending would be lower in 2019. I went to see if you might quantify that for us at this point, the sort of range. But then also with respect to your investment in Russia, if you could shed some light on the facing of the $240 million investment over the next couple of years. And then fundamentally, it looks like you – we would agree you are throwing off significant free cash flow in 2019, and you already have a significant cash surplus, so really what – where your mind is with regard to capital allocation given the cash surplus that we see in front of us for this year. That’s it for me, I’ll listen. Thank you.

Thank you, Ian. As far as the investment – that’s an investment is concerned, we expected to invest this year in the range between $320 million, $350 million. We have some major intervention event in that’s in our facility in January, February in Argentina. We have intervention in Mexico during the months of May in different line. This is a relevant intervention. We will also, to some extent, stop the plant for a while, while we invest in maintenance and introduce innovation in some of the part of the mill. And we have also another stoppage in Romania in September. So in this, let’s say, extraordinary stoppages, we will invest to figure in this range. As far as the joint venture with Severstal between Tenaris and Severstal is concerned, I will ask Gabriel to comment on this. We are very confident in the future of this and very satisfied with the relation, but Gabriel, you may comment on the reason behind it.

Yes. Thank you, Paolo. Thanks for your question, Ian. In fact, we are very excited about the new Tenaris Severstal joint venture opportunity. We believe that this will offer a lot of opportunity for us to grow. Russia is a very relevant market, representing about 13% of the global OCTG demand. And up to now, we are being present lately in the niches of high-end technology. But with this investment that we will deploy during the next couple of years, we will be a relevant player in this market. The plant will be located in Sugud, which is very important because within a radius of 500-kilometer. We believe that more than 50% this OCTG demand is located. This gives a substantial competitive advantage versus the majority of competitors there are at least 1,000 kilometers far from this area. Regarding the CapEx, we believe that this – the construction of this plant will take about two years, $240 million that we will contribute 50% pro rata our equity. And we start mid-2019 until mid-2021, where the plant will start operation.

Thank you, Gabriel. So this is, as far as the issues with Russia, we are very excited. And also, Italy is a very strong partner. They will be supplying the hard road coils from their plant in Russia. They will support us in the startup in the mill. This will be a joint venture among two strong companies. Tenaris Severstal will be a good brand also for new introducing, new competitor in the Russian environment. As far as cash flow is concerned, maybe Edgardo, you can comment on the perspective of cash flow generation during 2019 after this build up a inventor now.

Sure, Paolo. Thank you very much for the question. Yes, as you said, we pointed out in our press release and in the opening remarks of Paolo, we will continue to generate strong cash flow now that we basically stabilized our working capital. We have been consistently reducing the days of networking capital, reaching 160-day today back from the 190 that we have in 2017. And clearly, we are always looking for opportunities in the potential acquisitions that we may have in the future, and also we will continue looking into paying back to our shareholders with the dividend that we just decided.

Thank you, Edgardo.

Thank you very much, gentlemen.

And our next question comes from the line of Michael Rae from Redburn. You may begin.

Yes. Hi there, thanks for taking my three questions. And just firstly on the Saudi acquisition, is it realistic to expect that you can establish a Rig Direct relationship with Aramco on the other end of the seas, in the Middle East. Is it that a goal? And can you give us a bit of steer on a revenue contribution for this year, is $200 million a reasonable assumption? And then the second question, can you give an update on the Section 232 raw material exclusion. I think you’ve applied for, if we just forget USMCA for now, what’s happening with the exception you’ve applied for? And then finally, I mean, I appreciate this is a Tenaris call, but hope I mentioned we just ask about though – was you response to these charges that are potentially being leveled against you and Argentina and can you give us a steer on the titan table for any kind of new developments on that. Thank you.

Thank you, Michael. On the first question, the acquisition and the relation with Aramco. Maybe Gabriel, you can give a comment on what we expect. We established directing the region, and we are hopeful that in time, we will be able to use our bass and more than 1,000 people there to leverage our position.

Yes, thank you, Paolo. Yes indeed, we’re also very excited about concluding this controlling state NSFP during the quarter. This is – I think, will be another very important platform of growth for us in the Middle East in general. There’s a good complementation of SSP broad range, largely V, aligned with our core and traditionally premium products that we have been selling in the kingdom. So we have complete product range. You can start imagining and proposing a building value proposition for Rig Direct. So this is something that is a necessary condition to be able to offer something of this nature. We are making progress with Rig Direct in UAE, for example, now we see an interest in general in the region of looking for some efficient. So this is something that will not be immediate, but thinking of Rig Direct in Saudi Arabia and to a larger extent in Middle East is something that we are trying to pursue and then we’re hopeful that we will overtime succeed.

SSP is public related company, I would refrain from making forward-looking statements, but again, cellular last year revenues were in the range of $170 million. And we know that this is a base for us. The company has been working at about 50% of capacity registration, and we are confident on the ability to develop commercial opportunities in the Saudi and in the region to make this a growth area.

Thank you, Edgardo. Well on the question of the 232 for sure, we ask for exclusion of the board that we need to supply production, to support the production from a city. And we are very confident that we should be receiving this. It will take time. The stoppage of the U.S. government doesn’t help, but we are very confident that we will get. As far as the 232 relation is concern, let me tell you that everybody may depend and we’ll depend from the negotiation of the U.S., but maybe German, you can give us a view of these negotiation and the related negotiation of 232 consider negotiation with Mexico and U.S.

Sure. Thank you, Paolo. Well, Michael, the perspective on the exclusion is exactly that. During the last call, we were expecting a positive position towards the end of the year – early this year, the government shutdown has no helped. But we continue on how received clear indications from the VIST agency, part of the DOC, that’s managed this, you should come. So we continue to be confident about the fact of confirming this in the near future. Now with respect to the USMCA and 232, the current discussions and negotiations. We believe that there should be, in a way, an agreement built around 232 as in a way a condition for USMCA to move forward. Discussions are presently going on, and they have taken time, but reduced indications in Mexico, in Canada and particularly in the U.S., particularly coming from both houses, Senate and the House of Representatives, are clearly indicating that in the context of a definition of the U.S. stratification of the USMCA, the three countries will also find solution to the exist in 232 restrictions.

Thank you, German. On the last point, well, first of all, let me tell you, Tenaris is nothing in the case that has been raised in Argentina. But I would ask the German Cura as a Vice Chairman that guided the decision of the board, should comment.

Yes, thank you, Paolo. Hello, Michael. Hello, everybody. Well, on that point, I would like to comment that just preliminary statement that as you know the Argentinian judiciary is investing a case of corruption and cartel practice. As evidenced by notebooks kept by a formal government driver and leniency agreements by some of the participants businesspeople and public officials. Also that many formal government officials and businesspeople have been questioned in subject to further investigations and proceedings. On November 27, Judge Bonadio issued a preliminary decision which in the Spanish is called an auto de procesamiento, by which it included Mr. Rocca, in the investigation proceeding. I would like here to clarify something. Under Argentina Law our procesamiento is not a final, can be revolved by the same judge that ordered it and does not constitute an indictment. Instead, it really constitute a preliminary decision to include Mr. Rocca in the investigation proceedings. In addition, the standard of evidence required for the decision to include an individual in an investigation through an auto de procesamiento is quite low. It is important also to understand that procesamiento constitutes a preliminary decision. Only one investigation is complete, then the judge consider the evidence collected as well as Mr. Rocca’s defense before deciding whether there is enough cause to proceed to a trial, which is where we are today. The Board of Directors has been monitoring this situation in concentration with the legal advisors. And after a review of the decision adopted by the judge, on November 27, 2018, it unanimously confirmed Mr. Rocca as Chairman and Chief Operating Officer of the company. And the Board also instructed at the time Mr. Rocca to continue discharging his responsibilities with the full support of the board.

Thank you, German Cura.

Thank you. And our next question comes from the line of Amy Wang from UBS. You may begin.

Hi, good afternoon. It’s Amy Wang here from UBS. A couple of questions from me, please. The first one, Paolo, just it relates to your comment earlier about oil prices are – in terms of, you answering question on upside and downside uptick in the guidance, and you mentioned oil prices meaning to be quite sustained. Could you give us insight into the conversation with some of the international oil companies? Whether you feel that their CapEx approach is a bit more through cycle or is it still their CapEx levels are still quite dependent on oil price levels, please. And then my second question is, I really want to revisit the capital allocation question in terms of just kind of looking – you made a couple of acquisitions and investment just this recently. Thinking about whether you would be looking to fill some more holes geographically or some products in your line up. Just thinking about that investment number on a medium-term basis? Thank you.

Thank you, Amy. In terms of, let’s say, the consideration that we hear from the other company. In my view, your company have considered in the repricing the range of a brand between 60, 65, is something that could be consider reasonable, and probably they are forecasting this as a price. And they are projecting their product with a lower level in the range of 50. Having said this, if you look at before five year dynamics of investment in the defense segment, there is not really a strong recovery yet. I mean, the number of investment in the different region offshore, conventional onshore, unconventional, are not showing extraordinary changes. I mean, they were much higher in the period 2012, 2014. They went down by something in the range of 30% in terms of money terms. And now they are recovering slightly, but they are recovering to very low pace in all of these regions. Offshore went down by almost 50% and recovered probably by 5% or 6% or 10%, like I would say. And even unconventional, from what we hear from the oil company, we’ll basically remain in the range or even slightly lower on what it is in 2018. This is what it is today. Now volatility is also affecting their decision. So the change in politics, in the environment are influencing this, and this may change especially in area that are faster reacting like United States. In our view, this is the area in which we couldn’t have upside and changes in the second part of 2019 over the base that we see today that were affected in the level of drilling and operation that we will see in the fourth quarter or in the first quarter of 2019. Now as well as capital location, well, in the last two year, when we mentioned that Tenaris have the big acquisition realized in the United States and elsewhere in between 2005-2010 has entered into a stage of the organic growth. We grow through the investment in the two substantial mills and many other installations during the period of 2010-2018. And we invested a lot in working capital for supporting the Rig Direct model. I mean, this has been a substantial allocation of our – but now we plan and we need two at this stage. One, open up a new phase of a positioning, that may lead to expand our presence in some of the key market or consolidating some other. And second, reap the benefit of decent fees of organic grow by bring in the potential, the use of this facility to the potential and by also optimizing the use of working capital. Edgardo was referring to this when he mentioned the 2019 should be year of good and strong free cash flow generation. This is coming exactly from this – from optimization in the use of our working capital, after the stage of expansion in Rig Direct.

All right. That’s helpful. I’ll take that as probably not too many big investments on the horizon then. Thank you, I’ll turn it over.

And our next question comes from the line of David Anderson from Barclays. You may begin.

Great. Thanks and good morning. Just a question on pricing in OCTG in North America, we didn’t really get the pricing we were expecting last year with the Section 232. Just like to know in your base case guidance that you’d highlighted before. What type of pricing increases do you have in there for North America? Maybe just like from now to year end, is it up 10, is up 15 or is it flat? How are you looking at that this year?

On this, I will ask Luca Zanotti to give us a reference on how we see that – at least, I don’t think we have view, obviously for the long run. But if we have it for the – we anticipate short.

I believe that is very – with all the variables in play that can add volatility, it’s very difficult for us to take long term forecast on the pricing in the United States. I would say that, currently maybe next first quarter and second quarter, we are seeing flattish place, which is more or less mimicking the evolution of the Pipe Logix. That’s a short story – long story short, flattish to slightly lower.

We will have – and we will try to recover something of the increasing costs. As you know, the dramatic accident in Brazil is raise – is raising the price, overall price worldwide of the iron ore. This is having an impact on scrap. This is having an impact also and will have an impact on hot rolled coil. We expect that this aspect could be…

Yes. This would be one of the volatility aspects I was mentioning.

Yes, I think with these will be recover, but basically, we do not expect much stronger pricing power in the close timeframe.

Looking forward, it may depends again, on how different factors we will play out in the second half of 2019.

And my follow-up question is Paolo, in your remarks, you talked about kind of Saudi and Russia investments as a new phase of international expansion. These are big established markets that you haven’t had a big presence in previously. I guess, I’m wondering about why now, why does this make the sense right now, what is Tenaris bringing into the market that gives you the confidence that you can grow share in these markets? Is it Rig Direct? Is it a lower cost operation? I guess, I’m just kind of wondering, why now? Why does this make the most sense for you to move in these markets today?

Well, I would say, there are different reasons. In the case of Saudi, Saudi is in process of modernization that includes also the system of oil and service company. There is a drive for local content, then we know we need to understand, accommodate. And on the other side, Saudi is also having an important leadership in the region – in this moment. It looks to us very important to expand our position and not only to be focus and limited to OCTG to be able to cover the entire range of products that are required. But the development of the industry, Saudi is investing a lot, not only for production of oil but also for gas and for investing in the value-added chain related to oil. It looks to us that this was the right moment to strengthen our position. In the case of Russia, probably the reason is different. This is a question of opportunity. We see, in this moment, the opportunity to take position. We have a strong partner. These are opportunities that come sometimes around the quality of partner, the joint venture that we can build and the ability to work together in this. We also perceive that Russia is a challenging in complex product and that the local vehicle will be supporting our positioning in complex projects like the project in the Amala and Sakhalin and Kashagan, these are area in which also combining our technology, our product development, our ability to arrive to the client with the presence in the center of Surgut in West Siberia is creating, let’s say, is changing our profile in the country in a way there is – that fit with the need of the region. Also there’s a lot that could be done in reducing working capital, arriving to the really good -- transforming the supply chain. And this is something we’re doing in the different region. We think that we identify opportunity in doing this also in Russia. It will take time, but we’re very confident that it will be an interesting attempt.

Thank you.

And our next question comes from the line of Nick Green from Bernstein. You may begin.

Hello, thanks for taking my questions. Most of them have been answered, so we can just keep it fairly brief. So firstly, just a bit of thoughts around your dividend, please. Can you talk about your thought process behind why you didn’t choose to increase it this year, particularly given the cash outflows 2019, when expect free cash flow to be fairly strong. Secondly, in terms of your overall returns on capital employed and those kind of metrics. I just wanted your perspective on considering closing some of your oldest, and maybe least utilized facilities. How do you weigh that decision against the investments that we are talking about here, investments in Russia, and obviously, recently, you have investments in Bay City as well. And then the final question is on net working capital. It is good to see the improvements you made in our data point. Can you give a better sense if we are now at the optimal level of working capital? Or do you think, with this cycle, you can be a bit leaner and you still have some improvement in net working capital days ahead.

Well, on the first, the dividend is not a decision, it’s a proposal that the board will do through the general assembly. The discussion into the board went around, one, the concept of relative stability in over a period of time. We were likely higher in the past. In the middle of the crisis, we reduced very slightly. And we look at the dynamic over time, we look also at the payout ratio. Payout ratio, if you look at the payout ratio, we think the dividend is relatively high. In a cycle in which we see opportunity for investment. So the payout ratio is the second consideration, that is important for the determination. And also, the free cash flow generation will be very good but still have to be realized. So let’s realize free cash flow, and then we will reconsider when we arrive in November for the proposal of advanced dividend in the next year for [indiscernible] what we can do. This has been the argument, it has been treated, discussed within the board to arrive to this proposal to general assembly. As far as the return on capital invested, I think you’re right on the fact that we will like, in the past, we had the higher return of capital invested. Today, we have important capital invested in working capital. I think we need to focus very much on this because in the end, when you invest in the plan, you’re investing for over a long time. When investing working capital, we’re doing this to support Rig Direct, we’re doing this to assure that we are serving with the market. Now the effort on information technology, digitalization, reduction of lead time, improvement in demand planning, I mean, should allow us to be, in my view, much more efficient in terms of working capital use. Also, on the point of collection, I think I will let Edgardo, maybe you can add.

Good morning. Thank you, for the question. I will say that we reached the best level of net working capital. We will continue facing now that we, as I’ve said in the last conference call, now we have Bay City operating. We can reduce, to some extent, the lead time to reach our customers. And the DSO well the ones we are focused on, mainly we will use that for June, we are trying to convert it to reduce approximately between seven to 10 days of the working capital, and I’m very confident that we’re going to reaching this year.

Yes. But anyway, this is a very important area of action to improve efficiency in the delivery of the Rig Direct. Even considering the Rig Direct is inherently at high working capital demanding with the model. Now, the last point I think is addressed by the – now the question of the optimal level of working capital, I think we did – I mentioned it.

That’s addressed. Maybe just one very short follow-up is, I think last conference call you had said the Bay City mill, you hope to have more or less full capacity. I think somewhere between Q1 and Q2, maybe just give us an update on the run rate capacity utilization at the mill?

I think in the last call, we were mentioning that we were reaching a run rate of around 300,000 tons in the second half of 2018. And we are there and now, I would say that my target this final would be to reach a run rate of around the 450,000 tons by the end of 2019. The process of developing the full potential of Bay City is something that is taking a loss of investment in training, preparation of them. The people look and is the process that will go – will you go on, I don’t know which area we are focused during this year.

Okay. That’s great. Thank you very much. I’ll turn it over.

Thank you. And our next question comes from the line of Vlad Sergievskiy from Bank of America. You may begin.

Gentlemen, thank you for taking my questions. Two of them please. First one on your international expansion state is to follow-up, do you see opportunities comparable to those you pursuit in Russia and Saudi anywhere else, any as a big local markets, which you are not fully present in the moment you could be targeting in the medium term. And second one in light of some improvement in demand for offshore projects, et cetera. How you would describe pricing environment offshore and competitive for wide environment. Historically it has been a very profitable market. Price is moderate to the large during the recent downturn, any trends you’re seeing there? Thanks very much.

On the first question we move on with the joint venture in Saudi and deposition in Saudi? The generation in Russian deposition and Saudi. We are considering always the specific of different geography, you know Tenaris is a global company and we want to be present and have a global approach. I also personally think that the world is going into a less globally interconnected and there are we need to be in many different places. So we are considering different geography, because in the end this is also a long-term drive, developing a local content to some extent, the surging of region in which oil and gas activity maybe growing and that you have to be position also to have, it’s a most table reaction to macroeconomic and trade variability [indiscernible] nothing that we can – we won’t comment now. The other point on the point of pricing in this segment, Gabriel may you comment on this

Yes. Pricing in general in the international market remains competitive given the dynamics that we explained before. But nevertheless you mentioned particularly offshore segment, that’s where typically, technology, premium connections are required. And there we have a full portfolio of different options that allows for the pricing competitiveness to be let’s in other international. During last year we have the majority of our long-term agreements following the cost and price indexes that translated to increases. So, we would see that during 2019, we were talking about the increasing gas and premium in our international mix as the pipelines are not repeated to this year. So the mix is becoming richer, more premium. So is not really to expect that average pricing in international market will be higher in 2019 versus 2018.

That’s good. Thanks very much.

Thank you. And our next question comes the line of Rob Pulleyn from Morgan Stanley. You may begin.

Hi. Just one question gentlemen, because a lot of things covered, and apologies if this was mentioned earlier, but perhaps I missed it. And just regarding your Russian investment with Severstal, how do you think about that in the context of these potential enhanced sanctions regarding – from U.S. Congress versus Russian energy projects, if you could provide a bit of color around the thinking there? Thank you very much.

Thank you, rob. Frankly, this is eventual that is taking into consideration all the limitation that we are respecting fully, establish up to now by the Congress, by the rules and regulation of the U.S. There are many American companies that are operating in Russia that are international company, and also many oil service company like [indiscernible] and other that are operating in Russia today. We will follow – say, all the rules of the game and we see no problem in doing this. I think that also our partner, Severstal is fully conscious of this, say is very well aware and where it goes on this, and has a good track record and the sense. So, we see no problem these guys.

Okay. Thank you. I’ll turn it over.

Thank you. And our next question comes from the line of Sahar Islam from Goldman Sachs. You may begin.

Thank you. Just one question for me please. We’ve heard from some of your competitors how they’ve been taking cost out through the cycle and you’ve had a very efficient cost based relative to the industry, but how do we think about how your relative advantage position changes as the rest of the industry takes cost out and how that impacts your competitive positioning please?

Thank you, Sahar. Well, I think the Tenaris is a very competitive company. You’ll see this from our financial, know the margin, the margin we mentioned in my opening remark, the net income on sales of 11.4 is a very relevant indicator, not many company, are showing results in this range. In this, we’ve been able to maintain a – say a very differential financial performance even during the worst of the crisis. This is to very large extent to the effectiveness of our commercial positioning, but also to the product development and to the industrial management. Industrial excellence allow us to be very cost effective. The fact that we are deployed globally, we go from plant in Japan to plant in Argentina, Romania, in Argentina, in the United States, and in many other countries allow us to create synergies in the industrial system. There are turnouts into a very effective business model from the point of view of the costs. Having said this, it is also true that we are continuously looking to unity of improvement and this is one of the characteristic of the company, discipline and cost, and permanent detection on opportunity of improvement coming from technology, from supply chain for integration upstream. One case in question is putting sensor, the investment in a production of power in Mexico. This is something that are giving absolute competitiveness to our operation in Mexico, because of this flow of energy. And we are doing the same in, for instance, in Italy and other area. They’re focused on these and with best on cost-effective message.

Great. Thank you.

Thank you. And I’m seeing no further questions at this time. I’d like to turn the call back to Giovanni Sardagna for closing remarks.

Yes. Thank you Victor and thank you all for joining us today in our conference call, and to see you soon. Thanks.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may now disconnect. everyone, have a great day.