tmk capital markets day - tmk :: tmk

TMK CAPITAL MARKETS DAY

LondonOctober 17, 2016

Disclaimer

No representation or warranty (express or implied) is made as to, and no reliance should be placed on,

the fairness, accuracy or completeness of the information contained herein and, accordingly, none of the

Company, or any of its shareholders or subsidiaries or any of such person's officers or employees accepts

any liability whatsoever arising directly or indirectly from the use of this presentation.

This presentation contains certain forward-looking statements that involve known and unknown risks,

uncertainties and other factors which may cause the Company's actual results, performance or

achievements to be materially different from any future results, performance or achievements expressed

or implied by such forward-looking statements. PAO TMK does not undertake any responsibility to

update these forward-looking statements, whether as a result of new information, future events or

otherwise.

This presentation contains statistics and other data on PAO TMK’s industry, including market share

information, that have been derived from both third party sources and from internal sources. Market

statistics and industry data are subject to uncertainty and are not necessarily reflective of market

conditions. Market statistics and industry data that are derived from third party sources have not been

independently verified by PAO TMK. Market statistics and industry data that have been derived in whole

or in part from internal sources have not been verified by third party sources and PAO TMK cannot

guarantee that a third party would obtain or generate the same results.

2

Russian Market Update –Sustainable Demand and Complex Opportunities

Sergey Alekseev Director for Marketing

Executive Summary

Russian oil production is increasing, up 1.9% YoY in Sep 2016, with brokers predicting continued growth

Field-level activity is strong and growing. Drilling is up by 16% YoY in 1H 2016, led by Rosneft (+50% YoY) – total drilling in Russia may grow by 12% YoY in 2016

In 2015 and 2016 Russia was the only region globally to maintain healthy drilling activity and stable OCTG demand

Russian tubular market is becoming more and more self-sufficient, dominated by local integrated producers

Russian seamless OCTG market increased by 3% YoY in 9M 2016, with TMK remaining a leader in production

Increased share of the Russian domestic market as a result of import substitution program

Mid-term forecast for Russian OCTG demand is stable

4

10.2

10.3

10.4

10.5

10.6

10.7

10.8

10.9

11.0

11.1

11.2

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec

2014 2015 2016

Russian Oil Production Hits Record High…Russian total oil output, mmbpd

Source: CDU TEK

1H2016 Russian oil production growth broken down, mmbpd

Source: Interfax, Info TEK

10.6510.83

+8.2% +10.3% +5.4% +4.3% (0.3%) (1.0%) (4.2%)

1H2015 Others Bashneft Gazprom Neft Tatneft SurgutNG Rosneft LUKoil 1H2016

+4% y/y

On 5 September 2016, Russian production set new record breaking 11 mmbpd

5

30

35

40

45

50

55

60

65

70

2010 2011 2012 2013 2014 2015 1H2016

827

932

+71% +44%+33%

+24% +9% (14%)(38%)

1H2

015

Ta

tnef

t

Ba

shn

eft

Ro

snef

t

Ga

zpro

m

Ga

zpro

mN

eft

Lu

ko

il

No

vate

k

1H2

016

10,696

12,450+50%+22% +5% +47% +10% (4%) (20%)

1H2

015

Ro

snef

t

Oth

er

Su

rgu

tNG

Ba

shn

eft

Ta

tnef

t

Ga

zpro

mN

eft

LU

Ko

il

1H2

016

… Supported by Strong Drilling Activity

Source: CDU TEK

Russian drilling activity is strong and growing, km/d

Source: Companies’ data

Upstream CAPEX budgets respond to profit resilience, RUB bn

+13%

1H2016 Russian drilling growth broken down, km

Source: CDU TEK

Horizontal drilling keeps growing in absolute, km/d

Source: CDU TEK

+16%

0

5

10

15

20

25

2010 2011 2012 2013 2014 2015 1H2016

6

22.115.2 15.1 18.4 13.6 10.6 7.5 12.8

52.1

42.9

17.817.9

17.612.6

7.59.2

74.2

58.1

32.936.3

31.3

23.2

15.022.0

102.0

72.7

55.0

62.5

49.643.1

35.3

47.7

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

MET Export Duty Brent Price

… Underpinned by Flexible Fiscal Regime…

Historical MET and export duty, US$/bbl

The main factor supporting upstream margins is the flexible tax regime which absorbs the significant part of oil price drop

The two major Upstream taxes in Russia – Mineral Extraction Tax (MET) and Export Duty – are directly linked to oil price and provide amortizing effect when crude price goes down

Source: Public Information, companies data

7

And Floating Exchange RateRouble devaluation with oil price drop, US$/bbl

Average upstream Opex and Capex of Russian oil companies, US$/boe

Source: FactSet as of 28 September 2016

Source: Public Information, companies dataNote: Opex and Capex were calculated based on Rosneft, Lukoil, Tatneft, Gazprom Neft and Bashneft figures weighted by their hydrocarbon production.

8

0.000

0.005

0.010

0.015

0.020

0.025

0.030

0.035

0

30

60

90

120

150

Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16

US

D/R

UB

Bre

nt,

US

$/b

bl

Brent USD/RUB

8.98.0

5.6

7.1

5.9 6.15.1

6.1

4.94.0

2.93.5

3.1 3.22.6

3.0

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Capex Opex

Broker Consensus Predicts Brent Price Recovery to US$70-80/bbl levels in 2018-2020

Brent historical and forecasted prices, US$/bbl

Oil price started to rebound in January 2016 and is currently stabilized at US$40-50/bbl with declines in supply from US, China, Colombia and Mexico being countered by improving prospects in Russia and Kazakhstan

Brokers estimate oil price to recover to US$70-80/bbl levels in 2018-2020

Source: Brokers consensus as of September 2016. Brokers include Citi, BAML, JPM, Credit Suisse, MS, Barclays, DB, UBS, Goldman Sachs, Wood Mackenzie

9

111 112109

100

54

45

55

6975

45

70

9085

42

50

5258

0

20

40

60

80

100

120

2011 2012 2013 2014 2015 2016E 2017E 2018E 2019E

Brent price (Historical) Brent price - Median (Brokers Consensus)

Brent price - High (Brokers Consensus) Brent price - Low (Brokers Consensus)

Russian Oil & Gas Market OverviewGrowing drilling activity (footage) in selected regions 2016E/2015

Source: CDU TEK, Spears & Associates, ТМК

Russia is expected to be the only region with footage growth this year

Russian oil companies are among the lowest cost producers

Ruble depreciation offers TMK’s Russian division new opportunities in export and domestic markets

Enhanced oil recovery from conventional fields

-48%

-0.3%

-19%

12%

-60% -50% -40% -30% -20% -10% 0% 10% 20%

Russia

SEA

Middle East

NAFTA

10

TMK32%

TMK26%

Russian Tube & Pipe Market

Source: TMK estimates

Source: TMK estimates, based on 9M2016 numbers

#1 on the Russian tube & pipe market 37% market share of energy pipe demand (+5% YoY)

Source: TMK estimates, based on 9M 2015-2016 numbers

Non-Energy

Energy

0

1

2

3

4

5

6

7

8

9

10

11

12

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016E 2017F

Mln

to

nn

es

9M 2015 9M 2016

TMK37%

11

Russian Market Share Positions

Source: TMK estimates, based on 9M2016 numbers

Premium

Premium connections are proprietary value-added products used to connect OCTG pipes and are used in sour, deep well, off-shore, low temperature and other high-pressure applications.

Premium Connections

(TMK UP)

81%(+9% YoY)

Welded

The short-distance transportation of crude oil, oil products and natural gas.

Line Pipe 20% (-2% YoY)

Construction of trunk pipeline systems for the long distance transportation of natural gas, crude oil and petroleum products.

Large-Diameter

21% (+4% YoY)

Wide array of applications and industries, including utilities and agriculture.

Industrial 8% (-2% YoY)

Seamless

Threaded pipes for the oil and gas industry including drill pipe, casing and tubing.

OCTG 68% (+2% YoY)

The short-distance transportation of crude oil, oil products and natural gas.

Line Pipe 63% (+1% YoY)

Automotive, machine building, and power generation sectors.

Industrial 38% (0% YoY)

12

61% 65% 68%

23% 9%10%

17%27% 23%

0%

25%

50%

75%

100%

2014 2015 9M2016TMK Import Other local producers

8.4 9.3 11

.6

13.3

14.3

14.4

16.5 18

.7

20

.5

22

.2

20

.8

22

.0 25

.3

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

0

5

10

15

20

25

30

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16E

Un

its

Mln

met

ers

Annual development drilling volume

Total new wells drilled (rhs)

Strengthening Position on the Domestic Market


TMK share of seamless OCTG is growing

Seamless OCTG market shares, %

Growing oil drilling market in Russia

Development of conventional andunconventional reserves will require the useof non-conventional drilling techniques andreliable OCTG products

Russian seamless OCTG market is up by 3%YoY in 9M2016

TMK is a leader in production of seamlessOCTG on the Russian market with around68% market share in 9M 2016

13

Source: CDU TEK

Development of fields with hard-to-recover reserves

Directional drilling

Drilling with liner in tough conditions

Drilling with casing in tough conditions

TMK UP Connections for all Conditions

Extreme torsional resistance for high operational torque

Ability to

withstand high tension, compression and bending loads

Easy and reliable make-up

Higher resistance to torque for casing while drilling and rotating

Lite Series Classic Series

Pro Series Torq Series

TMK’s share on the premium market


Key premium supplier for the Russian independent and state owned oil & gas companies

Leader in the production of premium tubular products on the Russian market with around 81% market share in 9M 2016

In 2016, we expect TMK premium shipments to grow by 8%

65%73%

81%

35%27%

19%

0%

20%

40%

60%

80%

100%

2014 2015 9M2016

%

TMK Others

14

Current market challenges

55%44%

54%

65%

66%

60% 61% 60%

14%26%

26%

20%

13%

16%18%

17%

31% 30%

20%

15%

21%

24% 22%23%

0

400

800

1,200

1,600

2,000

2,400

2,800

3,200

2012 2013 2014 2015 2016E 2017E 2018E 2019E

Th

ou

san

d t

on

nes

Gazprom Transneft Others

Normal market

LDP Demand in Russia


Annual LDP demand for the next three years could amount to approximately 1.9 million tonnes

Major projects planned: Power of Siberia (GAZP), Power of Siberia-2 (GAZP), Nord Stream-2,maintenance needs of Transneft and Gazprom

Booming market

LDP demand in Russia, 2012-2019E

15

The Way to Strategic Cooperation

Newly signed long-term agreements with key customers to develop and supply innovative premium products with related services will strengthen TMK’s position

Import substitution programs guarantee purchase of tubular products and related services

TMK is a provider of steel pipes and efficient solutions, focused on innovations and oilfield services

TMK’s innovative products are able to improve the energy efficiency of wells considerably, as well as safety and environmental impact

Partnership memorandum

Scientific and technological cooperation

Technology partnership program

Strategic cooperation withkey Customers

16

Conclusion

Russian oil production and drilling activity growing due to favorable tax regime andsharp ruble depreciation

TMK is the leader in OCTG and premium connections markets and is growing itsmarket share

TMK predominately focuses on products for the oil & gas industry. OCTG is a keyproduct along with seamless line pipe and other mechanical seamless pipes

TMK is moving down-stream and developing its own oil & gas services to supporttubular products with after sales services

Gazprom and Transneft pipeline projects will be the main drivers of the Russian LDpipe market for the next three years. TMK is well positioned to participate in theseprojects

In the mid-term, premium connection market growth will be mostly driven by naturalgas field development and growth of directional and horizontal drilling

Premium solutions, oilfield services and high-value added products are an integralpart of the Company’s Russian operations. TMK is able to improve profitability of itsRussian division, particularly through its focus on import substitution

17

Executive Summary

19

The longest and deepest drop ever in the sector…

…beginning to give way to a slow, but sustainable, recovery in oil pricing and rig

count

Inventory still high, but benefiting from well string design standardization in

USA

Invigorating sales through new go-to-market model…

…and invigorating production through continuous improvement in yield, costs,

Right First Time and make-to-order

TMK Integrated Well Solutions continues to win new customers

0

20

40

60

80

100

120

0 3 6 9 12 15 18 21 24

US

Rig

Co

un

t In

dex

Ba

se 1

00

= L

ast

pee

k b

efo

re d

ecli

ne

Months after last peak

1986-1988 2008-2010 2014-2016

2016 Industry Performance Review: a Challenging Year

20

Rig count reached bottom in May at 404 units, but grew by more than 100 rigs since then

Average number of rigs in 3Q2016 increased by 14% QoQ, following the recovery in oil prices

Low-breakeven Permian basin has concentrated most of the rigs added since the trough

U.S. domestic crude production continues declining and averaged 8.5 mb/d in September, down 1.1 mb/d from the peak reached in April 2015

Henry Hub Natural Gas prices experienced a strong rally during the summer 2016 rising from a 17-year low of $1.64/MMBtu in early March to a high of $3.07 in mid-September

This downturn has been longer and tougher…

…but the rig count has started recovering

Source: Baker Hughes

0

20

40

60

80

100

120

-

400

800

1,200

1,600

2,000

2,400

Oct-09 Dec-10 Feb-12 Mar-13 May-14 Jul-15 Sep-16

Cru

de

Oil

Pri

ce (

$/B

bl)

US

rig

co

un

t

Oil Gas Crude Oil WTI Spot

Source: Baker Hughes, Bloomberg

0

100

200

300

400

500

600

Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16

Mo

nth

ly U

S O

CT

G c

on

sum

pti

on

, kt

TMK Operates in Regions with Low-cost Oil Production

21

OCTG consumption dropped sharply but has already reached bottom and started recovering

Inventory levels showed a steep decline but the market is still oversupplied

US consumption of OCTG is expected to decline to 2.2 million tonnes in 2016, 43% lower than in 2015

US OCTG inventories not yet back to normalized level but down from 11.6 months to 9 months in 3Q

Following the rig count evolution, a gradual recovery of the North American pipe market started in 2Q 2016 and is expected to continue, subject to oil and gas price stabilization and growth

Source: Preston Pipe & Tube ReportSource: Preston Pipe & Tube Report

0

3

6

9

12

15

1.0

1.4

1.8

2.2

2.6

3.0

3.4

Jan-10 Dec-10 Nov-11 Nov-12 Oct-13 Sep-14 Aug-15 Aug-16

Mo

nth

s o

f in

ven

tory

Ab

solu

te in

ven

tory

, mln

to

nn

es

Monthly absolute inventory Months of inventory

OCTG Prices also Reached Bottom during 2Q and Stabilized

22

US distributor welded OCTG vs. HRC prices(monthly average)

Source: Pipe Logix, HRC Midwest CRU Prices

US distributor seamless OCTG vs. scrap prices(monthly average)

Source: Pipel Logix, AMM

According to Pipe Logix, OCTG seamless and welded prices have been stable since they reached bottom in April 2016

In 3Q 2016, HRC prices weakened and reached $557 per tonne by the end of September (19% lower than at the end of June 2016). Scrap prices followed a similar trend and decreased 11% during the quarter ending on average at $271 per tonne

0

400

800

1,200

1,600

2,000

0

400

800

1,200

1,600

2,000

Jul-12 Mar-13 Dec-13 Aug-14 Apr-15 Jan-16 Sep-16

HR

C $

/ t

on

ne

Wel

ded

OC

TG

$ /

to

nn

e

Welded OCTG price, US$/tonne HRC price, US$/tonne

0

480

960

1,440

1,920

2,400

0

480

960

1,440

1,920

2,400

Jul-12 Mar-13 Dec-13 Aug-14 Apr-15 Dec-15 Sep-16

Scr

ap

$ /

to

nn

e

Sea

mle

ss O

CT

G $

/ t

on

ne

Seamless OCTG price, US$/tonne Scrap price, US$/tonne

US Natural Gas Consumption and Price Outlook

23

US natural gas consumption by sector, 2014 –2040E (quadrillion Btu)

Consensus points to higher Henry Hub natural gas prices in 2017

Industrial and electric power sectors are driving demand for natural gas

In early 2000, electricity was generated by 16% by natural gas and by 52% - coal, while in 2016 it is expected that electricity will be generated by already 28% by natural gas and 37% - coal

Henry Hub Natural Gas prices expected to gradually rise in 2017 with falling supply and rising export demand

Major players in the Marcellus are expecting an average of $3.25/MMBtu in 2017 and $4.50/MMBtu in 2018, which would lead to higher drilling activity and stronger OCTG demand

2.0

2.5

3.0

3.5

1Q-1

5

2Q

-15

3Q

-15

4Q

-15

1Q-1

6

2Q

-16

3Q

-16

4Q

-16

1Q-1

7

2Q

-17

3Q

-17

4Q

-17

2015 2016 2017

US

na

tura

l ga

s ($

/MM

Btu

)

Source: EIA

0

2

4

6

8

10

12

14

2010 2015 2020 2025 2030 2035 2040

qu

ad

rill

ion

Btu

Industrial

Electric Power

Residential

Commercial

Transportation

Source: EIA

U.S. Exploration & Production CAPEX Recovery in 2017

24

North American E&P CAPEX

Rig Count outlook

Driven by higher crude oil and gas prices, NAM E&P CAPEX expected to grow in 2017 and beyond

Consensus forecast indicates that rig count will average in the mid-600s during 2017

Rig count recovery forecast to be moderate until mid-2017 as a consequence of price volatility and an abnormally high level of drilled but uncompleted (DUC) wells inventory

Starting in 2H 2017, rig additions should accelerate, driven by higher crude oil and natural gas prices

Low break-even Permian and Marcellus in a better position to benefit from higher E&P spending

Source: Baker Hughes

Source: Citi Research and Corporate reports

0

50

100

150

200

250

3002

00

0

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16E

20

18E

20

20

E

N.A

mer

ica

n E

&P

CA

PE

X (

US

$b

n)

0

500

1,000

1,500

2,000

2010 2011 2012 2013 2014 2015 2016E 2017E 2018E

US

Rig

co

un

t

0

10

20

30

40

50

60

70

80

90

100

0 2 4 6 8 10 12 14 16

Bre

ake

ve

n,

(Bre

nt

US

$/b

oe)

2022E Production, mmboed

Shale Assets on Cost-curve

25

Source: Company Reports, Citi Research Estimates

Despite a wide variation between plays, US shale producers require the oil price to remain at US$50/bbllong-term for sustainable growth

At the same time, some shale plays like Eagle Ford and Permian are profitable at below or around US$40/bbl

Miss Lime

Vaca Muerta

Strategy 2020

26

Profitably grow share in core seamless, Premium connections and import business, while operating welded business at the more efficient mills

─ Go-to-market model:

• Sales focus on providing broader technical solutions to reduce E&Ps costs, increasing the American division’s market share

• Work closely with end users and distribution partners, while increasing technical sales efforts

─ Overall production philosophy:

• Modify production to a make-to-order approach, with planned tonnage linked to actual purchase orders

• Manage operations on a regional basis and reduce time and expense of shipping product between plants.

Last nine months: broad-based, structured approach to make major reductions in spending and employment levels, while continuing cost-cutting programs and developing new approaches to the market

Integrated Well Solutions: TMK IPSCO and TMK Completions

27

Provide customers with creative solutions by leveraging the strengths of TMK IPSCO and TMK Completions

Develop proposals to meet the unique requirements of each customer by linking products and services with innovative technology to ensure customer satisfaction

Bundling pipe, Premium Connections and Completions

TMK OCTG Tubulars: Casing and tubing API and Proprietary Sizes 2-3/8” to 16” Seamless and welded

TMK UP ULTRA™:Some of the strongest and most efficient premium connections available on the market

TMK Completions:Innovative multi-stage fracturing systems and tools for cemented and uncemented designs

New customers

28%

Established customers

72%

OCTG Sales in 2016E (tonnes)

Results of New Go-to-Market Model in 2016

28

Source: Company results

Shipments growing since February in the context of weakening market, with other competitors seeing lower volumes in general

Successful implementation of new go-to-market model in most U.S. regions driving recovery in sales and growth in market share: new customers account for 28% of overall OCTG volumes in 2016

Source: Company results

New go-to-market model is driving growth… …increasing customer base and market share

0

5

10

15

20

25

30

Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16

Am

eric

an

Div

isio

n s

ale

s, '0

00

to

nn

es

Cost Reduction in Operations

29

Majority of welded mills are temporarily idled, awaiting repositioning/upturn

Downward trend of conversion cost per ton produced, - 34% during 2016

Contributing factors: matching labor, aggressive performance targets, lean manufacturing techniques, campus mentality (production consolidation) and “make to order” approach

─ Matching labor to the utilization of operating facilities, this allows us to control labor cost in

both low and recovering scenarios – total employment costs reduced by 46%

─ Variable cost is improving: -26% in 2016. Fixed cost downward trend: -16% in 2016

─ Process Engineering function installed at each operating facility to ensure implementation of Lean Manufacturing. Lean manufacturing techniques support variable cost and capacity improvements

─ Campus mentality: consolidation of the South Production Campus. Moving Houston Ultra lines to Baytown

Conclusion

30

Making progress amid the chaos

─ New go-to-market model:

• Growing customer count significantly

• Growing market share sustainably

─ Continuous improvement in:

• Ongoing yield/Overall Equipment Efficiencies (O.E.E.) improvements

• Will manage operations on a regional basis and reduce the time and expense of shipping product between plants

─ Started down-sizing early on, now growing production employee count again

─ Make-to-order approach on both seamless and welded

─ Continue R&D in both premium and semi-premium connections and completions

"Lower for longer" becoming “recovery and ramping up"

Sustainable Performance in Turbulent Times

Vladimir ShmatovichVice President for Strategy and Business Development

Fundamentals

GLOBAL COMMITMENT

32

DOMINATING RUSSIA

OIL PRICE

Company’s assets located in some of the largest oil&gas regions in the world –Russia and the US

The US remains the largest OCTG market in the world, and starting to show signs of improvement

Prominent market leader in seamless OCTG in Russia with 68% market share in 9m 2016

Import substitution program drives further development: TMK’s Russian enterprises offer solutions for complex oil&gas projects

Russian division EBITDA margin remains at a level of more than 20% for the third consecutive quarter

Regions with low- and mid-level production costs to account for the majority of global drilling

At the current oil price Russian oil production remains profitable, supporting growing drilling activity in Russia

Key factors behind the resilient upstream profitability in Russia are an automatically-adjusting tax regime and a freely floating RUB, which cut OPEX of Russian oil companies by almost 40% since 3Q 2014

Fundamentals – Oil Price

GLOBAL COMMITMENT



33

DOMINATING RUSSIA




OIL PRICE




TMK Operates in Regions with Low-cost Oil Production

34

4020 60 80

Eu

rop

e

Asia Conv.

Asia DW

GTL

CTL

NA conv.

Aus. and Pacific

EO

R

Arc

tic

Global oil production supply curve

August 2014 Brent price

Ca

na

dia

n

Oil

Sa

nd

s

VZ

ex

tra

hea

vy

NA

DW

Ea

gle

Fo

rd

Permian tight

Bakken

SA

DW

(pri

ma

rily

Bra

zil)

Production (MBD)

Note: Breakeven price assumes a 10% return, and NPV of 0; *includes Azerbaijan, Kazakhstan, Turkmenistan and UzbekistanSource: IEA World Energy Outlook; EIA International Energy Outlook; EIA Annual Energy Outlook; Morgan Stanley; Bain

September 2016 Brent price

Low-cost supply completely in the money at current Brent price

Afr

ica

Off

sho

re

OPEC, Middle East and AfricaRussia

Caspian region S.

Am

eric

a

(No

n-

OP

EC

) Asiaconv.

Robust Upstream Economics in Russia

35

Despite 50% drop in oil price since 3Q 2014, Russian upstream remains profitable with stable EBITDA margin per bbl and significantly increasing EBITDA margin (to 20-25% range)

Strong upstream EBITDA margin despite oil price collapse

Source: Public Information, companies data.Note: EBITDA was calculated based on Rosneft, Lukoil, Gazprom Neft and Bashneft figures weighted by their hydrocarbon production.

102

73

5562

5043

35

48

157 10 13 10 9 8

11

14%10%

19%21% 21% 20%

22%25%

3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Brent price (US$/bbl) EBITDA (US$/boe) EBITDA margin

Fundamentals – Dominating Russia

GLOBAL COMMITMENT



36

DOMINATING RUSSIA




OIL PRICE




Others; 19%

Others; 32%

Dominating Russia

37

TMK solutions for complex projects Prominent market leader

68% of seamless OCTG market

81% of premium OCTG market

TMK

TMK

Source: TMK estimates, based on 9m2016 numbers

Long-term agreement to supply premiumproducts to Gazprom

Supplies to Prirazlomnoe oil field (GAZP) andSouth-Tambeyskoye gas field (Yamal LNG)

Premium solutions, oilfield services and highvalue added products allow TMK to improveprofitability of the Russian division

Solid EBITDA margin

Source: TMK data

15.6%

14.3%

14.9%

17.1%

19.4%18.7%

18.3%

22.7%

22.2%

22.1%

10%

14%

18%

22%

26%

1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16

Fundamentals – Global Commitment

GLOBAL COMMITMENT



38

DOMINATING RUSSIA




OIL PRICE




Focus to Remain a Global Company

39

Source: Spears & Associates

2016E global drilling activity by geography(number of wells drilled)

Note: Excluding China and Central Asia. Onshore and offshore drilling

US + Russia & CIS + Middle East + Canada= 81%

US40%

Russia & CIS19%

Canada11%

Middle East11%

South America

7%

Far East6%

Africa4%

Europe2%

Responding to Challenges

HIGH LEVERAGE

Strong commitment to deleverage through: working capital improvement cost cutting limiting CAPEX

T0 get to below 3.0x Net Debt/EBITDA in 3 years period, while 2.5x Net Debt/EBITDA remains a longer-term target

40

AMERICAN DIVISION

Cost cutting program implemented


Losses are getting several times lower

SANCTIONS AGAINST RUSSIAN OIL&GAS

Import substitution programs by Russian oil & gas companies

Drives development of premium products and oilfield services

sale of non-key assets potential SPO

Responding to Challenges –Sanctions against Russian Oil & Gas

HIGH LEVERAGE



41

AMERICAN DIVISION








Premium Products and Services

42

TMK to maintain its share of premium connections market with greater focus on sales of 2nd and 3rd generation premium connections to improve sales efficiency and enhance competitive advantage

TMK is actively developing HI-TECH products (high-tech pipes for unconventional reserves, including offshore deposits):

OCTG: with Premium threading, Cr13, GreenWelltechnology, alloy OCTG (L80, С90, Т95, Р110) mostly with Premium threading

Stainless steel pipe Pipe with increased corrosion resistance Vacuum insulated tubing LDP

Currently, HI-TECH products comprise around 50% of Russian division’s total revenue*. By 2020 the Company plans to increase HI-TECH product sales to 70% of Russian division’s revenue

Annual revenue from sales of newly developed products amounts to c. US$100 mln

* TMK estimates for 8 months 2016

Development of HI-TECH Products

43

Import substitution program: 8-years contract with GAZP for a total amount of more than RUB 50 bn and pipe volumes of more than 100 thousand tonnes.

In 2016, TMK developed and started shipments of stainless steel and hi-alloy pipe with specially designed premium connections for operations in areas with extreme conditions (high hydrogen sulphide, low temperatures, helium content) at Chayanda, Astrakhan and Urengoy gas fields

Premium connections for all applications including SAGD technology

Shipments of premium connections to South Kirinskoye, Prirazlomnoe, Filanovsky and Yurkharovskoye

TMK’s HI-TECH products are fully compliant with strict requirements for Lukoil’s offshore projects in the North Caspian, Gazpromneft projects in the Arctic and Gazprom projects on Sakhalin Island, bringing share of the Russian products to 100%

Responding to Challenges – American Division

HIGH LEVERAGE



44

AMERICAN DIVISION



Losses are getting sequentially smaller





Responding to Challenges – High Leverage

HIGH LEVERAGE



45

AMERICAN DIVISION








Net Debt Dynamics

46

Net debt decreased by more than US$1 bn since 2012

High visibility for the leverage - till the year end 2016 it will stay at the current level or lower

Compliant with current covenants

Net debt decreased by more than US$1 bn since 2012

Source: TMK data and estimates

3.66 3.60

2.97

2.50 2.50

3.5x

3.8x3.7x

3.9x

4.6x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

31 Dec 2012 31 Dec 2013 31 Dec 2014 31 Dec 2015 30 Jun 2016

US

$ b

n

Net Debt Net Debt/EBITDA

0.0x

1.2x

2.4x

3.6x

4.8x

1,500

2,000

2,500

US

$ m

ln

Net Debt Debt reduction Net Debt/EBITDA

Pro-forma Example of TMK Deleveraging

47


Deleveraging schedule* EBITDA growth in 2017E-

2019E

Target to get to below

3.0x Net Debt/EBITDA

in 3 years – focus on cash

generation:

Limited capex and

improved working

capital

Disposal of non-key

assets

Potential SPO

2.5x Net Debt/EBITDA

remains a longer-term

target

Key assumption –

reasonably stable macros,

including gradual US

recovery

Op

era

tin

g C

F 2

017

E

CA

PE

X

Inte

rest

pa

id

Div

iden

ts

De

bt

re

du

cti

on

Op

era

tin

g C

F 2

018

E

CA

PE

X

Inte

rest

pa

id

Div

iden

ts

De

bt

re

du

cti

on

Op

era

tin

g C

F 2

019

E

CA

PE

X

Inte

rest

pa

id

Div

iden

ts

De

bt

re

du

cti

on

0

150

300

450

600

750

US

$ m

ln

2017 2018 2019

2018E 2019E2017E2016E

Below 3.0x

* DOES NOT REPRESENT A GUIDANCE

3412 3 3 3

235

84

4 4

154

59 65

500

400

50

13 3571

23

23

23 23

165

165

23

79

269

237 237

13

24 11

1

14

333

50

50

76

40

235

106

26 26

319

224

88

79

500

400

269

400

0

100

200

300

400

500

600

4Q2016

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2020 2021 2025

US

$ m

ln

USD RUB RUB to be refinanced EUR USD refinanced in 3Q16

USD55%

RUB43%

EUR2%

Comfortable Maturity Profile with Ongoing Refinancing

48

Source: TMK management accounts (figures based on non-IFRS measures), TMK estimates

Debt maturity profile as at September 30, 2016 As at September 30, 2016,

net debt amounted to US$2,564* mln

Weighted average nominal interest rate decreased by 9 bps compared to June 30, 2016 to 9.00% as at Sep 30, 2016

Credit Ratings:

− S&P: B+, Negative;− Moody’s: B1, Negative

Debt currency structure

Source: TMK management accounts

US$ 237 mln of RUB loans to be refinanced in November 2016

2017 2018 2019

US$ 400 mln loans has already been refinanced in September 2016

*TMK estimate

Strict Control over CAPEX

49

Limited CAPEX for 2016E-2018E

Upper limit of US$200 mlnannual CAPEX (growth & maintenance) for 2016E-2018E reconfirmed

Strategic investment program completed in Autumn 2014

Strict control over maintenance costs

No M&A’s planned


208

170190 190

2015 2016E 2017E 2018E

EBITDA effect c. US$121 mln2014

EBITDA effect c. US$115 mln2015

EBITDA effect c. US$140 mln2016E

Ongoing Cost Cutting Program

50

Cost cutting program breakdown


Salaries13%

Maintenance12%

Production yields22%Spare

parts11%Volumes

6%

Logistics6%

Energy7%

Other23%

Salaries25%

Maintenance23%

Production yields14%

Spare parts13%

Volumes 5%

Logistics4%

Energy3% Other

13%Salaries18%

Maintenance26%

Production yields20%

Spare parts15%

Volumes 2%

Logistics8%

Energy6%

Other5%

Goals

51

DELEVERAGING Target to get to below 3.0x Net Debt/EBITDA in 3 years

2.5x remains a longer-term goal

FOCUS ON CASH GENERATION

Continue optimizing working capital

Ongoing cost cutting

Limited CAPEX

No M&A activity planned

Disposal of non-key assets and potential SPO

MAINTAIN LEADERSHIP

Continue dominating Russian market

Remain among top 3 US OCTG producers

Increase HI-TECH product sales to 70% of Russian division’s revenue by 2020 and maintain our share of total premium connections market in Russia

US$100 mln revenue from newly developed products annually

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