Tenaris benefiting from increased Venezuelan oil, gas drilling

Increased investment in oil and gas exploration and production in Venezuela and the Middle East has boosted demand for Luxembourg-based steel tube manufacturer Tenaris' products (NYSE: TS), the company announced. The company this week reported a 488% increase in first quarter 2005 net income to US$280mn compared to 1Q04, while net sales rose 69% to US$1.45bn. Tenaris said greater drilling activity in the oil and gas industry has led to an increase in global demand for seamless pipes. "The international count of active drilling rigs averaged 876 during the first quarter of 2005, an increase of 10% compared to the same quarter of the previous year, with significant increases shown in the Middle East and Venezuela," Tenaris said. The company added that due to strong market demand and limited available capacity, particularly for the high-end pipes in which Tenaris increasingly specializes, its average selling price for seamless pipe products has been rising. "We expect that it will increase further during 2005 but at a slower rate than in the previous two quarters," Tenaris said. Meanwhile, company inventories have also risen, mainly due to the hot-briquetted iron its new Venezuelan plant began producing in October 2004, increased business activity and higher welded pipe inventories, the company added. Argentine-Italian group Techint owns 60% of Tenaris, which in turn has 50.6% of Mexican steel tube maker Tamsa, 99% of Argentine steel tube maker Siderca and 39% of Brazilian steel tube maker Confab.