Tenaris S.A. (TS) Q2 2023 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to Q2 2023 Tenaris S.A. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Giovanni Sardagna. Please go ahead.

Thank you, Gigi, and welcome to Tenaris 2023 Second Quarter Conference Call. Before we start, I would like to remind you that we will be discussing forward-looking information in 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; Alicia Mondolo, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; 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. Our second quarter sales reached €4.1 billion, up 46% year-on-year but down 2% sequentially, mainly due to lower OCTG sales in Colombia and Canada and lower pipeline sales in Argentina, partially offset by higher offshore sales and higher sales in the Middle East. Average selling prices in our Tubes operating segment increased 21% compared to the corresponding quarter of last year and 1% sequentially. Our EBITDA for the quarter was down 5% sequentially to $1.4 billion due to lower sales and higher SG&A expenses. Our EBITDA margin for the quarter was 34.6%. On the other hand, our net income for the quarter increased 1% sequentially to $1.1 billion as it benefited from an improvement in finance results and higher income from nonconsolidated companies. With operating cash flow of over €1.3 billion and capital expenditure of €165 million, our free cash flow for the quarter reached a record level of €1.2 billion. After a dividend payment of €401 million in May, our net cash position increased to €2.3 billion at the end of the quarter. Now I will ask Paolo to say a few words before we open the call to questions.

Thank you, Giovanni, and good morning to all of you. In our second quarter, we almost mentioned the record results of our first quarter, and the combined results of the first half amplexceede our previous record for a semester. This performance was driven by a high level of sales in both the U.S. onshore market and in offshore markets as well as a solid contribution from our sales in the other region. It was also a quarter when our net income and free cash flow each exceeded $1 billion. Our industrial and supply chain system are operating at record levels in many plants and production line as well as in logistics movements. In the U.S., we sold a record level of wage 400 series connections, which have been specifically designed for drilling operation in shale environment. Large operators, in particular, appreciate the value we can bring to their operation with our Rig Direct service, which now include the delivery of pipes in run-rate condition. This service involves taking care of the supply of pipes from their production until they are running the well using our pipe trace system that provided technical specification for each pipe supplied and the running dope applied in the factory by avoiding the need for rig site prechecking processes, and making digital sales with all the data needed for installation. The service reduces cost and enhances safety and environmental performance at the RIG. For offshore operations, we again sold record levels of blue door connector and dopeless connections. In Brazil, we have developed a radon customer value proposition, focused on reducing manual operation on the rig floor and thus enhancing safety. We were also awarded the supply of 95,000 tons for an offshore pipeline and seamless risers for the BMC33 deepwater development in Brazil Campos Basin as well as a contract for the supply of 46,000 tons of seamless pipe for an offshore pipeline for the Sakari development in the exit. In Saudi Arabia, we began consolidating the operation of global pipe company from May 17 after increasing our indirect shareholding in the company from 35% to 57%. This company produces large-diameter pipes for gas pipeline in structures and conductor casing application. The sale of GPC contributed $20 million to this quarter. With increase in Aramco's Garrin operation, both in conventional and unconventional operation, and this master gas development plan, the demand for OCTG and line pipe in Saudi Ariba is expected to increase strongly over the coming years. OCTG stocks are at a relatively low level and around seeking to replenish them rapidly. Tenaris, with a wide range of product manufactured in Kingdom, where we employ over 800 per person and extensive global capabilities worldwide is well positioned to supply around core requirement. In July, the Argentine government inaugurated the first stage of the Netease pipeline that was built with our pipes in record time. The pipeline opened the road to develop the prolific Vaca Morta shale resources to transform the country's energy balance. There are further projects for pipeline infrastructure development, aiming to expand evacuation capacity of oil and gas from Vaca Malta, which will attract additional investment in drilling. But this will depend on political development following the election in the coming plan. We are well positioned to serve this expansion with our integrated range of local production and service capabilities from OCTG, pipelines, and Saccaro to fracking and coiled tubing services. We are nearing the completion of some investments that we contributed to our target of reducing the carbon emission intensity of our operation by 30% by 2030 compared to 2018. This month in Italy, we are completing the installation of a heat treatment furnace, which is designed to work with hydrogen and natural gas and will improve the energy efficiency of our Italian operation. In Argentina, we have installed 23 out of the 24 wind turbines for the windsurf, which will supply close to 50% of our electric power requirement for our operation in the country. We expect to start operating the wind farm in October. In our release, we mentioned that our sales and margin in the second half would be significantly lower than our record results in the first half. Our EBITDA will be lower than $1 billion in the third quarter due to market pricing conditions and specific activity declines in onshore activities in the Americas. On the other hand, our operating cash flow will again exceed $1 billion as we continue to reduce working capital. Looking ahead, we expect that the specific factors that are affecting drilling activity in the second half of this year will fade away. The structural differentiation that Tenaris has established with is a unique global reach, competitive in the data system and position it with leading oil and gas producers around the world will support our financial performance over time. We are ready now for any questions you may have.

Thank you. [Operator Instructions]. Our first question comes from the line of Arun Jayaram from JPMorgan Securities, LLC.

I wanted to get your thoughts on how, call it, the pullback in market fundamentals for OCTG impacts the company's thoughts on establishing a return of capital framework beyond the base dividend. And if you do move in that direction, where the Board stocks are on buybacks versus variable dividends, just given the presence of a controlling shareholder at the company?

Well, thank you, Arun. I think the Board will evaluate the medium-term perspective, as you say, of our market and of our positioning in this market. We'll also evaluate the capital investment that may be required for different kind of operation. And keeping this in mind, we will then look at the situation, the available liquidity for the company, and the decision on dividend or other options. I think all options are open for the Board meeting in November to take a decision on this ground.

Great. And Paolo, my follow-up. I was wondering if you could give us more detail on some of the import trends, which have been, call it, impacting your thoughts on the second half outlook. Have you seen any change in the pace of imports? And any thoughts on when you think we could reach, call it, a bottom in North America for OCTG?

Well, thank you. Well, we were expecting a reduction in our EBITDA in the second half of the year because of the decline in pricing in North America, Pipe Logix went down up to now in July by around 27% from the peak of the late last year. So this was something that we were expecting. But on top of this, we had to consider there are some additional considerations. One, we have been able to advance shipment and production because the performance of the mall has been has been very good in the last quarter. We have been able to advance some of the material and the order and to ship material that is contributing to the extraordinary very good performance, I would say, of the second quarter, but is, to some extent, reducing volume in the next. The other factor is the situation in Argentina is not easy to predict. There are projects that we completed like Pipeline and Strokes, there are other projects that are pending. But there is a situation of uncertainty due to the economic instability of the country, the high inflation, and the restriction to import of necessary materials for the oil and gas industry. This is impacting activity to some extent. And I think that it will not be really addressed until the election cycle is completed by the fourth Q of this year. This, to some extent, slowed down the level of consumption and some of the project in Argentina. Other factor has been some reduction in expectation in Colombia and Ecuador compared to what we were considering maybe 3 months ago. On these specifics, let me ask Gabriel to add some color on it because things are moving in these countries.

Yes. Thank you, Paolo. Certainly, Colombia has been a country that has been affected by uncertainty on political changes. Also, we have in some areas of the country, social and rest, so this have diminished our outlook for the region, at least in the third and fourth quarter. To give you an idea, in Colombia, we were serving 50 operating rigs in 2022. To date, the level of activity is around 28 rigs, is the bottom, but we are forecasting this level to continue for the next 2 quarters at least. There are some early signs for recovery into 2024, but it's a bit early for that. So this has been one of the markets that have been softer than originally anticipated in the second half of the year.

These are the, let's say, some of the factors that are guiding our forecast in the third Q and in the second half. But the medium-term perspective that we see didn't change substantially on this. We think that the oil sector is pretty firm. The level of investment of the oil company, solid the price of oil in the '80s is supporting a recovery of activity even in the United States later on during maybe the fourth quarter of or in 2024. In the rest of the world, offshore and the Middle East, and the Eastern Hemisphere, the level of activity is gradually increasing. So in this sense, I think the environment for oil and gas is solid. But from the exceptional results of the first semester, let's say, we will reduce our EBITDA. And that's the reason why we call this a significant reduction, but still will be a very solid results. And the operative cash flow will be higher than €1 billion in Q3.

Thank you. One moment for our next question. Our next question comes from the line of Marc Bianchi from TD Cowen.

So I wanted to ask a little bit more on the progression in the back half here. If third quarter EBITDA is below $1 billion, as I think you said, curious what margin that would mean. And then as we go to fourth quarter, I know there's probably some less visibility, but just there's probably some seasonal factors at play. If you could give us any kind of steer on how fourth quarter looks versus third. That would be helpful as well.

Thank you, Marc. Well, for the third quarter, we expect margin close to 30%, maybe slightly below 30%, but in that range. And then I think that for looking to the fourth quarter, we had to take to more clear view on the dynamic factor, especially in the United States. On this, I will ask Luca because in the United States, North America is important, but United States at the core of our North America operation. So I will let Luca to give us some element to evaluate the perspective in the medium term.

Yes, sure. Now I believe that a little bit to describe a little bit what our view is on the U.S. We should look at 2 aspects. The demand on the one side and the supply on the other side. When we look at the demand what we see, and this is very much in line with what of the big drillers have established in previous earnings call, that we're going to see some rigs coming off maybe during the third quarter of 2023. This is mainly due to gas, maybe some gas rigs will come out, and mainly due to the fact that there are still some M&A going on. And usually, when they combine entities, the rig count or the combined entity is lower than the 2 separate companies. But overall, we see the trend downward to decelerate during Q3. And then we see this stabilizing moving into Q4 and maybe we can have some surprises on the upside, given the fact that the new oil price in the '80s has changed a little bit the horizon for the operators. When we look at the demand, sorry, when we look at the supply, then we go back to the imports that was asked before. And what we see on the imports is that imports have come down as we were expecting. If you look at Q1 compared to Q2, imports have come down by about 150,000 tons. But more specifically, when you look at the first month of the quarter, which is usually where the quarter is set and the imports are a little bit higher. And if you see, for example, July, which obviously are still not imported by licenses and compared to April. Well, you see that the trend is even more steeper. We saw this coming off by 100,000. So we expect with some delays, obviously, linked to the lead times of the decision. Import will have come down and will continue to come down through the year. Also, the domestic will adjust. We've seen some already stating that they're going to adjust production down. So overall, a reduced offer, especially on the side of the imports and an activity that is still slowing down but at a lower pace, with help somewhat consume the overhanging inventory that we still have on the ground. I don't know if this is...

So I think it's clear, but is, let's say, these are the factors that will basically drive the medium-term dynamics of this market that is very important. And will also influence price over time.

Do you think the stabilization and all the factors that Luca mentioned, is that enough to result in an EBITDA that's from the U.S. that's flat in the fourth quarter versus the third quarter? Or is it still likely lower. It's just a matter that it's more stabilizing and maybe it starts to increase as we get into 4...

Well, the decline in the Pipe Logix, to some extent, is affecting our contract with some delay. I expect that we will still have some price reduction, maybe not the Pipe Logix reduction, but some price reduction in our contract in the fourth quarter. But at that time, there will be also some positive factor driving from the rest of the world. But these are the factors that are affecting, let's say, the medium term.

Okay. That's helpful. The other question I had was just on these uncertainties in Colombia, Ecuador, and Argentina that you mentioned. Is there any way to help us understand the magnitude of that maybe collectively on an EBITDA basis? Is that $50 million EBITDA hit in the back half? Or just any way to help us understand how significant that is? And if it goes away, how much we could be adding back to the level of profit?

Well, for sure, Argentina is the most important of this because in the end, in Argentina, we have an invoice in tires in the range of €2 billion per I mean, as if we consider pipeline, the entire sales of OCTG, line pipe but also the service. In Argentina, we are performing coil tube service fracking service we have units for fracking that are working for different clients. So the extent of our presence in Argentina is very substantial. If there is some difficulties of the operator in maintaining their performance of drilling because of lack of key imported material or difficulties in managing the operation in a volatile macroeconomic environment, this has an impact. Now let me tell you that the perspective of Argentina over time once this election cycle is completed is pretty impressive because Argentina needs to build an ether is, I would say, overall consensus on the need of strengthening infrastructure to build a vacation channel for Vaca Muerta for gas, for oil, there are projects from different companies that will enhance this and allow the country to start exporting oil and integrating gas with the surrounding countries. And this will also drive additional drilling and additional production. All this is, in my view, very positive for a company like Tenaris, that has a very large prices in Argentina. The perspective is good, but the election here is creating turmoil. So when we look at the Canada and the size, let's say, of Canada operation and Colombian operation, these are not so relevant, but still maybe Gabriel, this could also be, you can give an idea of the size of our operation there and the impact that this could have. A perspective of it.

Yes, considering also the changing perspective in Canada, we didn't comment before. Canada had a very strong first half of the year, but we see some of our key customers adjusting the level of investments, focusing a policy of preservation of cash. We believe that this will be reverted in 2024, but this is our expectation for the second half of the year. So this contributes as well to the onshore decrease in the second half versus the first half in addition to Argentina, Colombia and Ecuador. But I would say that within this market, the drop of invoices considering the second half versus the first half is in the range of $200 million to $250 million approximately.

And that’s revenue, $200 million to $250 million Yes, correct.

Thank you. One moment for our next question. Our next question comes from the line of Alessandro Pozzi from Mediobanca.

Thank you for taking the questions. I have a couple of them on South America. You mentioned, of course, the weakness in Colombia, Argentina as well. But at the same time, I believe Mexico is having a really strong year. And I was wondering whether the strength of Mexico, where we see the rig count going back to, I think, the highest level since 2014 is not offsetting some of the weaknesses that you see in other regions as well? The second question is on raw material costs, I believe they are coming down in your COGS. And I was wondering whether there is a reflection of scrap coming down? Or what are the main components of that reduction? Finally, back to Argentina and Exxon, I believe, is been room potentially to exit the country. And I was wondering whether how you see that if that is confirmed but it could create additional uncertainty there. That's all for me. Thank you.

Well, on the first point on Mexico, basically, I would say, is gradually increasing level of operation. Also some of the private operator in Mexico are advancing in the project. So there is a gradual, let’s say, increase in the activity. But this is not, let’s say, a sudden and relevant increase. What we expect is a very gradual increase constrained to some extent by some financial situation, financial situation in Pemex. And also, Mexico is facing next year election for precedent. So also, to some extent, some of the product companies are moving on, but maybe this is a trend that may or could be stronger in the second part of next year once the space has been cleared and the new government will take here. In the second point, well, on the other side, let me add. You know that in Mexico, in the nature of our contract is that the tie dilation with the Pipe Logix strong. And so any change in fiberlogic is reflected in our pricing. Now the long-term contract. With Pemex has this component, and this component is also applied to other country and countries. So you will see volume increasing, but sales reflected this factor. When you look at the cost, basically, I think that there is a slight reduction of cost. But due to the IFRS and the level of inventory in our system, this will be reflected in our profit and loss in our cost of goods sold, basically starting from the first quarter of 2024. It is going down but will be reflected over time. And on the other side, there is no major change. I mean the movement in scrap in hot-roll coil in energy and Ferraiare relatively limited. I mean we do not see sudden changes like the one we saw in gas last year as a consequence of the vision of Ukrainia. This year, what we see some reduction in cost. But as I say, we’ll turn out in our cost of goods sold later on in the first quarter of 2004, mainly. The last point is about Exxon. Exxon announced the dismissal of areas in Vaca Muerta, but mainly I think the reason the Exxon has an extraordinary opportunity in Guyana is concentrating investment in the very big projects. Guyana strong opportunity. And by the way, we are supporting Exxon and Guyana for all the OCTG in the long-term contract. So they are concentrating on, let’s say, the opportunity that they have I don’t see that this is reducing activity in Azedra because in this area, there has been very limited activity going on up until now, we will see what will happen later. But Bacourt is a very large play. This is just one player.

Thank you. [Operator Instructions]. Our next question comes from the line of Stephen Gengaro from Stifel.

Thank you, and good morning, everybody. The -- I guess 2 questions for me. What I'd start with is, when we think about consumption of pipe per rig work, and I'm thinking about this kind of from a U.S. land perspective. Are you seeing any change? Has it stabilized as far as kind of consumption per rig, the type of OCTG in the well? I mean, are there any trends underlying consumption that are positive? Or have they sort of stabilized that at current levels?

Well, we are serving rigs operating in deep offshore in a very different environment. Also, the consumption per rig is very different depending for the play. But the most, let's say, homogeneous play is U.S. and the shales. So I will ask to Luca to give you some view productivity increase very much over time. But to give you an idea of where this could go in the coming quarters.

Now to answer your question on trends, specifically as far as the consumption is concerned, we see specific consumption increasing. This has been increasing a lot since the inception of the shales, but still keeps on creeping up and will continue going up. Just to give you a color, if you take the largest operator, while you see that in some cases, they drop down 1 or 2 rigs, obviously, the big drop and the market in the Lower 48 comes from all operators. But even the one that took some rigs off, they are not reducing the number of wells that we are drilling. So our customer, even in some cases, they reduce a little bit activity in terms of rigs. They are still drilling the same number of wells. And this means that the specific consumption went up. This will continue because as they move on, let's say, out of the sweet spots, the number of wells that they're going to have to drill to maintain production or to increase production is going to increase. So overall, under this aspect, we see a nice future ahead of us. And the second trend that we see establishing the more we go ahead is more and more, let's say, larger use of seamless semi-premium in the production casing, which obviously is 45% of the total market in the United States. So I overall believe that these 2 trends that are well established will favor our positioning in the United States. Obviously, I'm always referring to the lower 48.

I think where we just in terms of data, we were assuming in 2019 some slightly less than 5,000 tonnes per year in per rig. And today, we are in the range of 6.3 million. So the increase from 5% to 6.3 is part of what Lucas describing. And is coming from different reasons. But also, I think the length of the laterals is increasing, and we see today more wells in the 3.5 kilometer or 3,500 meters of laterals and even more Yes, it is good for us because it's requiring more complex product, more seamless premium or semipremium to stand the demand of the longer lateral. So in a sense, this is a trend that we are making the market a little more selective.

And then the other question, and this is maybe a little -- I'm trying to give a worry, but in detail. But when we think about your Rig Direct model has obviously done a phenomenal job over the last 5, 6, 7 years, however long you find it a place, I forget. So when we think about like looking at U.S. inventories and looking at kind of months of supply on the ground, like I think that's calibrated based on the market and what inventories are in the system. But because you're serving a pretty sizable part of the market with a Rig Direct model, does looking at inventories on the ground, give me a false picture of what the real supply/demand is? Because it feels like the inventory underground is still pretty low on a kind of a per rig on a month supply basis. So I'm trying to sort of triangulate those 2 were months of supply looks pretty healthy, but prices have been down year-to-date. And I'm wondering if that's partially because your Rig Direct model doesn't show up in those numbers.

Well, if you see the numbers that are reported into the, let’s say, main trade publications, we are reporting our inventory on the ground. But obviously, I mean, our management of inventory is still, in my opinion, more efficient than the average of the industry. So this is one kind of correction that you need to introduce. But when you take out our inventory from this one, well, then the remainder of the market is serviced by a level of inventory, which is not dissimilar to the ones that used to be in place before we introduced the redirect. So it is a kind of a mixed answer to what you’re saying. And in our calculation, when we look forward, the inventory estimation is in the range of 8.5, 9 months, which is a number which is not as high as we saw 12, 13, 14 back in the past. But still high enough to determine some inventory overhang, which obviously reflects into the prices.

Thank you. One moment for our next question. Our next question comes from the line of Marc Bianchi from TD Cowen.

I had a couple of follow-ups. The first one was on if we look out a few years here, I'm wondering if you're going to need to build some new seamless capacity. I think you're probably in the high 3 million tons of seamless volumes on a run rate basis now, I think you're almost 5 million tons of capacity, but all that capacity might not be able to serve the whole world, right? So you might need some capacity in certain parts that are growing. Can you talk about that and how that might relate to your decisions around capital return here later in this year?

Thank you, Marc. Well, I think that we still have available capacity of seamless rolling in our system. If we have bottlenecks in our production system, this is more in specific value-added areas. In some cases, we need to enhance our coating capability. In some case, we need to strengthen ability to produce the couplings of premium because we have I mean our bottling are more below the line of -- because below the rolling mill and on one side. On the side, remember, we have important capacity of welded product. And to some extent, there are products that we may bring to the market with all technical sophistication that could compete maybe not in the more demanding application, but can, to some extent, substitute some of the seamless in different parts of the call. So by a combination of investment in value-added heat treatment, premium dopes or coating or areas in which we may have demand an exceed capacity and using our capacity of welded and in this area, also increasing spending heat treatment capability. I think we are able to, let's say, to cover the need of our clients to support a very relevant market share worldwide and a substantial market share in areas like North America. Remember, we invested in a new mill in Canada for welded product is going on. Investments like GPC in Saudi, to some extent, are covering the market with material produced locally. This is welded but still has an impact in our ability to satisfy demand from this. We also have to take in mind that we expect some demand of complex products for the energy transition. We are looking ahead and we plan a function of this.

Okay. The other question I had was probably for Luca. I think in the past few quarters, we've kind of talked about maybe Pipe Logix stabilizing at around $2,500 a ton. Is that still how you see it? And what sort of timeline do you think it would take to get there? You made the comments earlier about some of the supply-demand dynamics in the market. It seems like maybe that could be happening fairly soon.

What I'm saying is that there are structural factors here there is change this pricing level comparing to the historical level. And we have to take this in mind. But anyway, Luca...

I was going along the line that you introduced. I mean I believe that the demand-supply balance, which in the end drives the Pipe logix, I was -- I mean I already introduced this in my previous answer. Now here, there are on top of what I was saying, where we see slowly going into, let's say, the end of 2024, balancing the demand-supply, and this has clearly an effect on the Pipe Logix. I believe that it is worth noticing that there have been changes structurally in the demand and in the supply. And so even if the Pipe Logix will evolve in a certain way within the Pipe Logix, we want to see differences among different categories. I was mentioning before that for a number of reasons, we see seamless consumption, semi-premium consumption, high toxin premium consumption being more demanded for the application 48. And so I believe that in there, we're going to have a differentiation that will drive prices differently than the overall Pipe Logix. We have to take into consideration increasing cost in general inflation that is going to stay there. And so I believe that the base is going to be different and higher than the ones that we saw in the past.

Yes. I think this is there are, Lucas saying there are structural factors that are supporting the level of bipologic, very different from the past. One, two, there are positioning factor in our product offering and in the demand of the industry today, they are differentiating our price. It is true that in our contract, typologic is used as a reference the factors for adjustment in many cases. Our prices are then driven by the specific of the service, the product and the differentiation that Tenaris is able to establish in the market.

Thank you. One moment for our next question. Our next question comes from the line of Arun Jayaram from JPMorgan Securities, LLC.

I wanted to see if you could maybe give us some more details on trends you're seeing in international offshore markets in the Middle East. I know SLB in their latest presentation did highlight the fact that the deepwater rig count could grow in double digits this year and next year. So I want to get some thoughts on what you're seeing on the pipe side, tubular side.

Indeed positive perspective on the offshore market. drilling continues to increase, as you said, the expectations of growth. Let me tell you that the offshore rigs have been consecutively increasing for the last 10 quarters. So this is a cycle that we see very strong. There is quite some census in the industry that it is going to be a multiyear cycle. We saw a lot of CapEx decisions and FAD decisions in the last quarter. And we see this already in our results. I think the second quarter was very high on offshore shales for Tenaris, and we expect the second half of this year to be higher than the first half as we ramp up shipments of the deliveries associated with the Qatar NFE pipeline project. We are building our backlog. As Paolo commented in the opening remarks about the 2, the water pipelines that we secured last quarter. 100,000 tons on the Brazilian BMC 33. This will transport gas and condensate 200 kilometers from the shore to water depth of 3,000 meters in Brazil. This is a complicated, sophisticated bispecification requiring coating as well. Also, we have been entrusted after the delivery of Phase 1 of Scaria project. We have been awarded the second phase which will also come into 2024. So these are signs that FIDs are happening, awards are happening and this is going to be an area of strength. This is not only pipeline, this is also CTG. We have had several awards in the last few months related to OCTG projects. For example, 1 FID that was concluding this quarter related to Romania, Blacks, Neptun Deep. We have been awarded 100% of the OCG campaign there. And we have our award in the Northeast, Saharan Africa, Gulf of Mexico, the Mediterranean North Africa as well. So we are building a backlog into 2024 and beyond as typically the lead time for the type of products takes typically 9 to 12 months to deliver. So this is an opportunity for Veneto to enrich its mix of products as typically in these patients on the deepwater, top of the line technologies are required. So we are pretty confident of the strength of the offshore cycle going forward.

Thank you, Gabriel. This is very important. Even if the share of, let’s say, offshore in our overall invoicing is the range between 18% and 20%. But this is also an area in which Pipe Logix is basically relevant. Apart from the offshore of Pemex, there is fenced by this. The rest, prices are following a different dynamic. So... Indeed, the demand of offshore and Middle East, as we said, is high. And the supply is becoming tighter. So the pricing trends in the international market is completely different. It's on a growing path. So this is important, and we are taking advantage of the favorable market conditions and new opportunities, new contracts. We are booking at higher prices, expanding margins versus the past. So this would be a favorable for next year.

Thank you. At this time, I would now like to turn the conference back over to Giovanni Sardagna for closing remarks.

Thank you, Gigi. Well, thank you all for joining us on our quarterly results conference call. Thanks. Bye.

This concludes today's conference call. Thank you for participating. You may now disconnect.