PJSC Chelyabinsk Pipe-Rolling Plant

INVESTOR PRESENTATION

February 2017

Strictly Private and Confidential

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MANAGEMENT TEAM

Dmitry Muz, Director, Finance and Investor Relations, PJSC Chelyabinsk Pipe-Rolling Plant (ChelPipe)

Joined ChelPipe in 2016.

Has successful track record in corporate finance, including bond market as well as Russian and international markets for

syndicated loans. Previously held management positions in Uralkali, UniCredit Bank, Nordea Bank and MDM bank.

Among successful projects are over 4 syndicated loans transactions (PXF) with total size of ca. US$3bn; equity financing

and ECA covered financing; domestic bonds and Eurobonds issue of Uralkali.

Graduated from Moscow State University of Railway Engineering with the degree in Economics.

Alexander Grubman, Chief Executive Officer, PJSC Chelyabinsk Pipe-Rolling Plant (ChelPipe)

Joined ChelPipe in 2014 as the First Deputy of CEO of the Company.

Since 2015 – CEO of ChelPipe.

Has solid experience in business processes optimization, maximizing operational efficiency and minimizing costs.

Previously held top executive positions with Severstal, Severstal Russian Steel, Severstal Resources, Cherepovets

Steel Mill.

Graduated from Moscow Technological Institute of Food Industry with degree in Engineering, received an Executive

MBA from INSEAD.

Valery Borisov, Deputy CEO for Finance and Economics, PJSC Chelyabinsk Pipe-Rolling Plant (ChelPipe)

Joined ChelPipe in 2015.

Previously held Director of Finance and Economics position of Cherepovets Steel Mill, Chief Financial Officer position

with Severstal Russian Steel, Director of Operations with LLC Evraz Holdings’ South-African assets.

Among successful projects are implementation SAP, development and implementation of certain KPIs and system of

setting goals and monitoring the performance by subsidiaries and departments; implementation of G&A cost

minimization project.

Graduated from Omsk State University with the degree in Management.

2

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SLIDE NO

SECTION I CHELPIPE AT A GLANCE 5

SECTION II INVESTMENT HIGHLIGHTS 11

SECTION III FINANCIAL INDICATORS 19

SECTION IV REFINANCING OF SYNDICATED LOANS 25

SECTION V APPENDIX 28

SECTION VI CONTACT INFO FOR INVESTORS 34

3

CONTENTS

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SECTION I

COMPANY OVERVIEW

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• Chelpipe is group of industrial companies in the Russian metallurgical

sector. The company is one of the largest domestic pipe making

companies

• Key product segments of the Company are large diameter pipes (LDP),

seamless OCTG pipes, seamless industrial pipes, pipeline equipment,

and services for oil and gas industry companies

• The company secured long-term contracts with Russian Oil & Gas

majors

• High degree of end-product diversification ensuring earnings resilience

• Diversified customer base

KEY OPERATIONAL INDICATORS KEY FINANCIAL INDICATORS

thou.tons 2013 2014 2015 6M’ 15 6M’ 16

Capacity2 2 401 2 533 2 594 1 297 1 260

Operating rate, % 70% 86% 78% 84% 72%

Production 1 680 2 167 2 036 1 083 901

LDP 709 1016 886 512 351

Seamless pipes 931 1104 1094 546 516

Other welded pipes 40 47 56 25 34

RUB mln 2013 2014 2015 6М’ 15 6М’ 16

Revenue 112 428 128 123 148 367 75 958 68 624

Pre-tax profit 27 392 36 008 42 441 21 613 21 945

Profitability3, % 24,4 28,1 28,6 28,5 32,0

EBITDA 18 173 22 741 28 901 14 458 16 961

Profitability3, % 16,2 17,7 19,5 19,0 24,7

Net profit/loss -1 868 -1 216 6 041 4 211 5 810

Net debt 97 445 93 964 86 069 84 704 79 820

Net debt / EBITDA 5,4x 4,1x 3,0x 3,2x 2,5x

5

(1) Company assessment, 2015

(2) For 6M’15 and 6M’16 periods capacity value for 6 months is used

(3) Profitability is rated for revenue

• Main operational assets are located in Chelyabinsk (Chelpipe)

and Pervourlask (Pervouralsk New Pipe Plant – JSC PNTZ)

• Annual production of steel pipes exceeds 2 million t per annum

• Market share in Russia: ca. 17%1

• Andrey Komarov and Aleksandr Federov jointly own more than

80% of Chelpipe shares

• Credit ratings: Moody’s: Ba3, stable

Fitch: BB-, stable

CHELPIPE AT A GLANCE

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CORPORATE STRUCTURE

Public Joint-Stock Company “Chelyabinsk Pipe –

Rolling Plant”

Credit Ratings (Moody’s/Fitch): Ba3/BB-

LLC “ETERNO”1

“MSA a.s.”

JSC “SOT” JSC “PNTZ” LLC “МЕТА” LLC

“Мeta-Invest” JSC “RIMERA”

PJSC “ALNAS”

JSC “Izhneftemash”

- Scrap processing division

- Pipe division

- Oilfield service division

LLC

“RIMERA-Service”

JSC “Uraltrubostal”

Trade House»

6

(1) ETERNO is a joint venture with JSC RUSNANO

JSC “RUSNANO”

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Oilfield services

Manufacturing of pipes

Oil & Gas equipment

Large diameter pipes

(LDP)

Pipes for oil and gas

production

Industrial pipes

Steel pipes production Chelyabinsk

Scrap collection and processing Ural and Povolzhsky Region

Chain of scrap processing

sites

Development of complex

solutions

Engineering Moscow

Round and square billet

Seamless pipe production

Steel melting and seamless pipes Pervouralsk

Trade branched in Russia

and Kazakhstan

16 storage facilities

Distribution network Russia, Kazakhstan

Hot bends

Cold bends

Short-radius bends

Pipeline equipment Chelyabinsk

Pumping units and

aggregates

Oil production – equipment Almetievsk

Czech Republic

K a z a k s t a n

Almaty

Magnitogorsk Chelyabinsk

Pervouralsk

Moscow R U S S I A

Almetievsk Strezhevoy

Nefteyougansk

Dudinka

7

Nanoenabled stainless

steel pipes

Stamped-welded pipeline

joints (SWPJ)

Pipes and stamp welds Chelyabinsk

Industrial valves Czech Republic

Stop valves

Ball valves

Check valves

Special valves

KEY ASSETS AND GEOGRAPHICAL

PRESENCE

Izhevsk

Buguruslan

Repair services of pumping

equipment

Pipe services

Oilfield services Tatarstan, Udmurtia, Khanty-Mansiyskiy

Region., Orenburg Region

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Products

Production

output1,

thou.tons

Revenue1,

% of total

Domestic

market

share2, %

Description Key customers

Large diameter

pipes (LDP) 351

• PJSC Chelyabinsk Pipe – Rolling Plant

• Product range: single-joint longitudinally welded pipes Ø

508÷1422 mm, wall thickness up to 50,0 mm, groups of

strength up to X100. Production process: JCO forming, UOE

forming

Seamless (OCTG) 169

• PJSC Chelyabinsk Pipe – Rolling Plant , JSC Pervouralsk

New-Pipe Plant

• Product range:Ø 60÷426 mm, wall thickness 5,0÷16,5 mm,

groups of strength J55÷P110

Other seamless

pipes 381

• PJSC Chelyabinsk Pipe – Rolling Plant , JSC Pervouralsk

New-Pipe Plant

• Product range:Ø 0,3÷650 mm, wall thickness 0,1÷90 mm.

Production process: seamless hot-rolled and cold deformed

pipes

Pipeline fittings3 704

• Metallurgical plant ETERNO for production of stamp-welded

components using nano-structured aterials for oil and gas

industry, product size range: 530÷1 422 mm, wall thickness

up to 100 mm

• SOT produces hot-bended elbows Ø 219-1420 mm. Products

produced at SOT are aimed for pipeline bends, for oil

satiations piping systems, and for other oil and gas facilities

Oil

field

serv

ices

ESP 2 314

pcs • ALNAS - Products: electric submersible pump units (ESP),

gas separators, pump protectors, submersible electric motors,

alternative products (brake rotors)

• Izhneftemash - Products: installation of sucker-rod pumps

(SRP), special equipment for oil production, spinning

wrenches and pumps, wrenches for wells repair. SRP 2 192

pcs

38% 25%

18% 20%

29% 42%

7% 18%

8%

14%

45%

INTEGRATED SOLUTIONS FOR OIL AND

GAS INDUSTRY

(1) As of 6 months of 2016, Company assessment

(2) As of the end of 2015г., Company assessment

8

(3) Total revenue from sales of stamp-welded components and connecting parts of pipelines

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SECTION II

Investment highlights

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INVESTMENT HIGHLIGHTS

Efficient cost control

Best-in-Class Producer of

Steel Pipe Products in the world

Diversified sales channels,

product and service ranges

Strong supplier base Strong pipeline of LDP projects

1

3 4

5 2

10

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3,9

3,1

2,6 2,4

2,0 1,7 1,6

1,4 1,3

0,6

0,0

0,5

1,0

1,5

2,0

2,5

3,0

3,5

4,0

4,5

ТМК (B+/B1/-)*

TPCO(-/-/-)

Tenaris(-/-/A-)

ОМК (-/-/-)

Chelpipe(-/Ba3/BB-)

ArcelorMittal(-/Ba2/-)

Baosteel(-/Baa1/A-)

V&M(B+/-/-)

Sumitomo(-/Baa1/-)

US Steel(-/B3/B+)

Mln

.to

ns

ТОП-10 производителей стальных труб в мире (2015)

I – BEST-IN-CLASS PRODUCER OF

STEEL PIPE PRODUCTS IN THE WORLD

• The company is constantly a top 10 world producer of steel pipes (by output)

• Within the last 2 years ChelPipe attained the number 5 position in global production output

Source: companies’ data and assessment

11

22%

20% 18%

15%

10% 08%

06%

02%

-02%

n/a

-0,1

0,0

0,1

0,1

0,2

0,2

0,3

ОМК (-/-/-)

Chelpipe(-/Ba3/BB-)

Tenaris(-/-/A-)

ТМК (B+/B1/-)

Sumitomo(-/Baa1/-)

ArcelorMittal(-/Ba2/-)

Baosteel(-/Baa1/A-)

US Steel(-/B3/B+)

V&M(B+/-/-)

TPCO(-/-/-)

EB

ITD

A i

nte

rest

marg

in, %

* S&P/Moody’s/Fitch ratings

TOP 10 world steel producers (2015)

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102%

92% 92%

85%

Tenaris Vallourec TMK ЧТПЗ

% о

т вы

ручки

II – EFFICIENT COST CONTROL

Operational costs *

Себестоимость реализации* General and administrative expenses**

• Chelpipe is successfully implementing the expenditures optimization

program maintaining however high quality of products manufactured and

services rendered

• Expenses control allows Chelpipe to be ahead of its competition in

terms of expenditures efficiency factors:

– Aggregate operational costs in percentage from 2015 revenue was

85%, which is the lowest value among analogue companies in the

sector

– TMK is the only company prevailing over Chelpipe in terms of

general and administrative costs as percentage of revenue

• The Company keeps searching for additional ways of expenditures

optimization.

Source: Company data

12

* Only data for public companies is available

88% 80%

71% 69%

Vallourec ТМК ЧТПЗ Tenaris

% o

f re

venue

18%

11%

7% 6%

Tenaris Vallourec ЧТПЗ ТМК

% o

f re

venue

Comparison of operational costs within the industry (2015)

Overview

Cost of sales*

Chelpipe Chelpipe

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69% 60% 55%

53%

15%

28% 30%

40%

13%

7% 9%

7%

2013 2014 2015 9 months 2016

ММК Ural Steel

Severstal Alchevsk Iron&Steel Works

Azovstal Import and other

70% 70% 76%

82%

2013 2014 2015 9 months 2016

UralSteel ОЭМК

Evraz NТМК MZ Serov

ChMK Other

Steelmelt plant Zhelezny Ozon 32

III – STRONG SUPPLIER BASE

Flat rolled product BILLETS

13

Purchasing structure Purchasing structure

Scrap processing

META Group

Pipe billet production

Zhelezny Ozon 32

Seamless pipes production

ChelPipe/PNTZ

ТМК

ММК

ChelPipe

1600 km vs 400 km

R U S S I A

High level of vertical integration in the process of seamless pipe

production

Advantageous location near steel slab suppliers for LDP

division

Source: Company data

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III – STRONG PIPELINE OF LDP PROJECTS (1/2)

Client Overview of Key Projects ChelPipe’s Potential Sales Volume (thou. t)

Gazprom

• Ukhta-Torzhok 2: ø1420 mm, К60, pipeline length – 970 km, capacity – 45 BCM

• Power of Siberia: ø1420 mm, K60, pipeline length – 2,960 km, capacity – 60 BCM

• Power of Siberia 2: ø1420 mm, К60, total pipeline length – 6,700 km; including 2,622 km

in Russia, capacity – 30 BCM

• SEG (Gryazovets – Vyborg): ø1420 mm, К60, pipeline length – 2 pipeline strings of 917

km each, capacity – 55 BCM

Transneft • A wide range of pipes for repair and operational needs – reconstruction and section

replacement of oil pipelines: ø 530-1420 mm, К38-К60, with / without coating

Rosneft

• Gathering gas pipeline Kynsko-Chaselskaya group of fields – USGS (Unified Gas

Supply System): ø 1020-1220 mm, К60

• Pipes for repair and operational needs and other construction: ø 530-820 mm, К52-К60

Lukoil

• Gathering gas pipeline Pyakyakhinskoye field – Yuzhno-Messoyakhskoye field: ø1020

mm, К52

• Pipes for repair and operational needs and other construction: ø 530-820 mm, К52-К60

Other (incl.

Surgutneftegas,

Gazprom neft, etc.)

• Pipes for repair and operational needs and other construction: ø 530-820 mm, К52-К60

DOMESTIC MARKET

275 205

345 532 418

2016F 2017F 2018F 2019F 2020F

101 71 78 96 111

2016F 2017F 2018F 2019F 2020F

18 11 14 16 18

2016F 2017F 2018F 2019F 2020F

4 3 4 5 5

2016F 2017F 2018F 2019F 2020F

14

5 6 8 8 8

2016F 2017F 2018F 2019F 2020F

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III – STRONG PIPELINE OF LDP PROJECTS (2/2)

Country Overview of Key Projects ChelPipe’s Potential Sales Volume (thou. t)

CIS

• Middle Asia – China 4:

− The 4th pipeline string will start at Turkmenistan, will pass through Uzbekistan and

Kazakhstan to China, ø1220 mm, total pipeline length - 1,000 km, capaсity of the

string – 30 BCM, total capacity of the pipeline will reach 85 BCM

• Kazakhstan – Gasification of Astana:

− Kaztransgas’s Investment program of gasification: ø530-1220 mm

• Turkmenistan – Galkynysh-Kelif:

− Gas supply from Galkynysh field on Caspian Sea to TAPI pipeline: ø1420 mm, X70

• Republic of Belarus – Reconstruction of Beltransgas:

− Expansion of Yamal-Europe pipeline capacity, from 33 to 48 BCM, ø1220-1420 mm,

К55

International

• Nord Stream 2:

− Two pipeline strings from Russia to Europe through Baltic sea: ø1153mm (internal

diameter), pipeline length 1,200 km, capaсity – 55 BCM

• EUGAL:

− Gas outlet pipeline from Nord Stream (from Germany to Czech Republic), pipeline

length: 865 km, ø1420 mm, capacity – 51 BCM

• Pipe delivery (risers, connectors) for offshore projects

• Other consumption – piles, general construction needs

56 40

155

212

88

2016F 2017F 2018F 2019F 2020F

83

352

243

60 25

2016F 2017F 2018F 2019F 2020F

15

CIS AND INTERNATIONAL MARKET

Speaker: Grubman A. November 2016

Source: Company data

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4%

96%

TOP-7 Customers

Other

2015

V – DIVERSIFIED SALES CHANNELS,

PRODUCT AND SERVICE RANGES

REVENUE MIX IN THE SECTORS

OIL AND GAS SECTOR REVENUE MIX INDUSTRIAL SECTOR REVENUE MIX

16

• Despite 70% of revenue comes from oil and gas sector, other significant

30% of stable income comes from diversified industrial sector

• In oil and gas sector ca. 75% comes from 8 largest clients, including

Gazprom, Rosneft, Transneft, Lukoil and others

• Absence of concentration on certain clients and big number of buyers

creates stable presence on this market

• Other industrial segments is quite client diversified:

− Top 7 customers with revenue exceeding RUB100m (2015) comprise

less than 5% of total sales volume

*

* Including CJSC Kurganstalmost, LLC Belenergomash- BZEM, GAZ Group, TKZ, Kamaz, Rostselmash, AvtoVAZ

67%

33%

Oil and gas sector Industrial sector, power generation sector, etc.

37%

14% 10%

7%

5%

5%

3%

3% 16%

Gazprom

Rosneft

Transneft

Gazpromneft

LUKOIL

Surgutneftegaz

Irkutsk Oil Company

Tatneft

Other

2015

2015

Source: Company data

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SECTION III

FINANCIAL INDICATORS

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Debt

• Conservative debt policy which presumes focus to deleverage and keep Net Debt /EBTIDA level below 3,0x

• Diversification of funding sources with reasonable balance between public and bank debt

• Extension of maturities in line with cash flow projections

Liquidity

• ChelPipe takes all measures to prevent any liquidity risks related to refinancing of its debt at earlier stages

• Maintenance of minimum cash balances to prevent liquidity shortage

• Using excess of cash for earlier debt repayments and minimization of interest expense

• Limitation of dividend pay-outs in accordance with cash flow projections

Investment

program

• Conservative approach to new projects

• Maintenance CAPEX of 1,1 bln RUR per year (or less than 1% of revenues)

Interest/

exchange rate

risk

• Over 90% of debt outstanding has a fixed interest rate and is ruble denominated

Credit reputation • Commitment to the principals of transparency and open communication with investors

18

CONSERVATIVE FINANCIAL POLICY

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KEY FINANCIAL INDICATORS

mln RUR 2013 2014 2015 1H 20164

Key Metrics

Revenue 112 428 128 123 148 367 68 624

Margin, % - 14,0% 15,8% (9,7%)

Gross profit 27 392 36 008 42 441 21 945

Margin, % 24,4% 28,1% 28,6% 32,0%

EBITDA (1) 18 173 22 741 28 901 16 961

Margin, % 16,2% 17,7% 19,5% 24,7%

Cash flow from operations (CFO) (2) 5 381 12 458 11 289 7 147

Free cash flow (FCF)(3) 1 014 5 871 4 348 4 963

Gross debt 100 470 99 429 94 104 88 080

Net debt 97 445 93 964 86 069 79 820

Key ratios

Gross debt / EBITDA 5,5x 4,4x 3,3x 2,8x

Net debt / EBITDA 5,4x 4,1x 3,0x 2,5x

EBITDA / interest expense 1,5x 1,8x 2,3x 2,7x

19

(1) EBITDA = pre-tax profit – general and administrative costs + depreciation and amortization+/- other adjustments. Other adjustments may include creation/recovery of provisions for impairment, profit/loss from assets sales,

share in profits of associated companies

(2) Cash flow from operations (CFO) = EBITDA – net interest paid – income tax +/- change of working capital + dividend received

(3) Free cash flow (FFC) = CFO – capital investments

(4) Ration for 1П 2016 are calculated based on EBITDA for the last 12 months Source: IFRS reports, Company data

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7 372

9 499 10 003

5 164 4 293

2013

2014

2015

6M

'15

6M

'16

мл

н.р

уб

.

6,6% 7,4% 6,7% 6,3% 6,8%

% of revenue

Mln

RU

R

101 159 111 840

126 544

64 353 55 280

2013

2014

2015

6M

'15

6M

'16

мл

н.р

уб

.

90,0% 87,3% 85,3% 80,6% 84,7%

% of revenue

Mln

RU

R 85 036 92 116

105 926

54 345 46 680

2013

2014

2015

6M

'15

6M

'16

мл

н.р

уб

.

75,6% 71,9% 71,4% 68,0% 71,5%

% of revenue

Mln

RU

R

STRONG COST OPTIMIZATION

COGS

Selling expenses General and administrative expenses

Total costs

Source: Company IFRS reports

20

START OF PERFORMANCE IMPROVEMENT PROGRAM IN 2015

8 751 10 226 10 615

4 844 4 308

2013

2014

2015

6M

'15

6M

'16

мл

н.р

уб

.

7,8% 8,0% 7,2% 6,3% 6,4%

% of revenue

Mln

RU

R

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5 248

12 839 12 023

10 286

7 611

4 281

6 587 6 940

3 348 2 183

2013 2014 2015 6М 2015 6М 2016

Cash flow from operations CAPEX

mln

RU

R

CAPEX PROGRAM

CASH FLOW FROM OPERATIONS VS CAPEX

PROJECTS

21

Source: Company data

Entity Project type Completion CAPEX (mln RUR) Description

Iron Ozone 32 billet mill

Development

2012 23,853 Mastered own production of billet for manufacturing seamless pipes supplied

exclusively from own-produced steel

Vysota 239 2010 21,655 Developed new product type (single-joint welded LDP)

LDP production capacity increased

Finishing center in Pervouralsk 2011 6,248 Production capacity for oil and gas pipes (oil well tubes and other oil and gas

pipes) increased

Ceramic flux 2012 763

Developed own production of bonded ceramic flux

Absence of need for external ceramic flux as well as development of sales

channels

Polyurethane coating 2013 461 Mastered new product type which allowed the company to enter LDP market

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STABLE TREND ON REDUCING THE DEBT

BURDEN

DEBT/ EBITDA DYNAMICS

22

5,5х

4,4х

3,3х

2,8х

5,4х

4,1х

3,0х

2,5х

2013 2014 2015 6М 2016

Debt / EBITDA Net debt / EBITDA

Source: IFRS reports, Company data

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SECTION IV

REFINANCING OF SYNDICATED LOANS

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COMPLETION OF REFINANCING OF

SYNDICATED LOANS

24

25%

22%

19%

12%

5%

4%

13%

Syndicated loans

Sberbank

VTB Bank

Gazprombank

Alfa Bank

FK Otkritie

Raiffeisen Bank

Other banks (7 banks)

42%

42%

16%

New loans

Gazprombank

Bank VTB

Sberbank

8,5 11,0

56,2

3,5 5,8 9,7 10,8 12,9 12,0

24,1

2017 2018 2019 2020 2021 2022 2023

New loans

Syndicated loans

78,9

bln RUR

The Company mitigated the possible

liquidity risk in 2019 +46,5

CHANGES IN THE STRUCTURE OF LONG-TERM LOAN PORTFOLIO

OPTIMIZED DEBT PAYMENT SCHEDULE

78,3

bln RUR1

(1) Incl. principal debt and capitalized interest

bln RUR

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THANK YOU FOR YOUR

ATTENTION!

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SECTION V

Appendix

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OPERATING SEGMENTS

STEEL PIPE PRODUCTS

• LDP (Large diameter pipes)

• OCTG (Tubing, Casing)

• Seamless hot- & cold-formed (incl. boiler,

stainless pipes)

• Welded small ODS (incl. shaped pipes)

TRUNK PIPELINE EQUIPMENT

• Hot bends

• Cold bends

• Short-radius bends

• SWPJ (Stamp-welded pipe joints)

OILFIELD SERVICES

• Artificial lift solutions:

• Electric submersible pumping systems

(ESPs)

• Sucker-rod pump unit (SRP)

• Special-purpose oilfield equipment: spinning

wrenches, drill pumps, oilfield vehicles

• Services: oilfield equipment (ESPs and SRP)

and OCTG inspection and maintenance

27

40%

20%

37%

3%

Production structure, 2015-2016

LDP

OCTG pipes

Other seamlesspipes

Other welded pipes

41%

15%

37%

7%

Production structure, 2015-2016

Hot bends

Cold bends

Short-radius bends

Stamp-weldedcomponents

53% 29%

18%

Sales structure, 2015-2016

Services

ESP

Other equipment

Source: Company data

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INFRASTRUCTURE PROJECTS WITH LDP

ВОСТОЧНАЯ СИБИРЬ ИДАЛЬНИЙ ВОСТОК

ХМАОУРАЛО-ПОВОЛЖЬЕ

ЮГ ЗАПАДНОЙСИБИРИ

ТИМАНО-ПЕЧОРА

ЯНАО И СЕВЕРКРАСНОЯРСКОГО КРАЯ

ПРИКАСПИЙСКИЙ РЕГИОН

ШЕЛЬФ МО РЯ ЛАПТЕВЫ Х

ШЕЛЬФ ВОСТОЧНО-СИБИ РСКОГО МОРЯ

ШЕЛЬФ БЕРИН ГОВА МОРЯ

ШЕЛЬФ ЯПОНС КОГО МОРЯ

ШЕЛЬФ

БАРЕНЦЕ ВА

МОРЯ ШЕЛЬ Ф

КАРСКОГО

МОРЯ

ОСТРОВ САХАЛИН

И ШЕЛЬФ КАСПИЙСКОГО МОРЯ

И ШЕЛЬФ ОХОТСКОГО МОРЯ

Geography of pipelines in the Russian Federation

Bovanenkovskoye oilfield

Kamennomysskoye-Sea and North-Kamennomysskoye

oilfields

South-Russian field

Chayandinskoye oilfield

Kovytkinskoye oilfield

Irkutsk gas production

center

Zapolyarnoye oilfield

Bovanenkovo-Ukhta 2,3

Ukhta-Torzhok 2,3

Gryazovets-Vyborg

North-Kamennomysskoye-Sea oilfield

Power of Siberia

Altay Kamennomysskoye-Sea oilfield

Gas transmission network from Obskaya and Tazovskaya bays of the

Karskoye sea

Khabarovsk-Vladivistok

КС7а Gas pipeline

Bologorskaya-Blagoveschensk

Nord Stream-2

Nord Stream

Source: Company data

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54%

20%

15%

11% TMK

ChelPipe

OMK

Other RF

OVERVIEW • In 2015 production volume of steel pipes in Russia was 11.4 mt. Russia

manufacturers are primarily focused on domestic market which achieved 10.8mt

in 2015

• ChelPipe focuses on the following main segments:

− LDP pipes – market focused on manufacturing and repair of main pipelines

(75-80% of the market)

− OCTG – market for oil and gas production market

− Other Seamless Pipe – highly diversified market. The pipes are utilized in

majority of industries, including oil and gas, chemical and petrochemical,

machinery, construction, energy and other industrial sectors

BENCHMARKING BY LDP • There are 4 leading LDP manufacturers in Russia ensuring 97% of total sales

• As of 2015 ChelPipe takes the second place by sales volume

• ChelPipe’s market share in Russia is 25-35% depending on the utilization sector.

• All main producers of LDP pipes (VMZ, ChelPipe,

ITZ, VTZ) share similar product mix (pipes with

508-1420 mm) and similar in composition of

equipment and welding technology – longitudinally

submerged arc welded pipes (LSAW)

• Less expensive in manufacturing; however, have

limitations in product range and use: Volzhsky Pipe

Plant (helical welded LDP) and smaller

manufacturers STW, TEM-PO, UTP (ERW, size

530-630 mm).

BENCHMARKING BY OCTG

• Number of OCTG manufacturers is constantly increasing in Russia. Currently,

there are 3 largest producers which constitute ca. 80% Russian market

• As of 2015, ChelPipe takes 2nd place by sales volumes

• ChelPipe’s market share in Russia is ca. 17%.

• ChelPipe manufacturer all OCTG pipe

products except for drill pipes

BENCHMARKING BY OTHER SEAMLESS PIPES

• In Russia there are 2 main manufacturers of seamless pipes (TMK and ChelPIpe)

– combined market share of 88% in Russia – and 1 smaller manufacturer (ITZ)

• In total Russian manufacturers accounts for over 90% of the market; the rest is

imported

• ChelPipe focuses on 3 main sectors for seamless pipes: oil and gas, machinery

and for general purpose

• Historically ChelPipe’s share in oil and gas line

pipes is ca. 25% while in machinery sector –

50%, in general use – 54%. In more

specialized segment, including pipes used in

energy and petrochemical sectors ChelPipe’s

market share is ca. 60%.

• ChelPipe’s client base is highly diversified

compared to its main competitor TMK, whose

70% supply to the oil and gas sector Source: Company data

3,479

ths t

55% 42%

3% TMK

ChelPipe

Other RF

1,972

ths t 1,601

ths t

29

38%

25%

18%

16% 3% OMK

ChelPipe

TMK

ITZ

Other RF

MARKET REVIEW (1/3) Chelpipe is ranked No 2 domestically in all types of pipe products

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RUSSIAN OIL & GAS MARKET

REMAINS ROBUST

CAPEX OF RUSSIAN OIL & GAS MAJORS (2013-2016E) OVERVIEW

Company Capex Dynamics (RUBbn)

H

H

H

Transneft

1 475 1 423 1 693

800

2013 2014 2015 2016E

491 611 607 550

2013 2014 2015 2016E

217 271 349 360

2013 2014 2015 2016E

243 325 333 320

2013 2014 2015 2016E

560 533 595 780

2013 2014 2015 2016E

Source: Сompany data

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* incl. South Stream (2014), Nord Stream -2 (2016-2017) - Russian producers

** expected

*** forecast

New Pipeline

construction*

Large-diameter pipes (LDP), ths tons

Renewal of

existing

pipelines

Large-diameter pipes (LDP), ths tons

Total

utilization in

oil and gas

industry

LDP, OCTG & line pipes, ths tons

Meters drilled

(ths m)

Development drilling, ths m

492 1 182 1 598 902 1 344

2013 2014 2015 2016E 2017F

738 1 052 1 171 700 439

2013 2014 2015 2016E 2017F

3 389 3 370 3 342 3 134 3 160

2013 2014 2015 2016E 2017F

20 839 19 778 22 065 24 002 24 291

2013 2014 2015 2016E 2017F

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STRONG DRILLING ACTIVITY IN RUSSIA

Source: Oil and Gas Vertical 2016

DRILLING ACTIVITY IN RUSSIA HORIZONTAL DRILLING IN RUSSIA

31

1 819 2 051

2 687

4 355

5 557

6 954

2010

2011

2012

2013

2014

2015

km

17 233 18 742

20 564 21 656

20 772

22 883

2010

2011

2012

2013

2014

2015

km

NUMBER OF TOTAL WELLS IN RUSSIA NEW WELLS COMPLETION IN RUSSIA

5 802 6 146 6 131

6 556 6 065 6 261

2010

2011

2012

2013

2014

2015

pcs

136 905 139 198 143 835 146 282 148 658

2011

2012

2013

2014

2015

pcs

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INVESTMENT PROJECTS IMPLEMENTED

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Ceramic flux • Unique environmentally friendly production facility

• Capacity up to 14 000 tons

Project Overview

Vysota 239

• Modern facility for production of single-seam welded LDP ø508-1420 mm,

wall thicknesses up to 48 mm and length up to 18 m.

• Capacity: 900,000 metric tons

Finishing center

in Pervouralsk

• OCTG finishing center for casing (114.3 mm to 177.8), tubing (60.3 mm to

114.3 mm) and line pipes (60.3 mm to 114.3 mm). Provides products with

corrosion resistant coating, threading (including premium connections) and

heat treatment

• Capacity: threading – 132,000 metric tons,heat-treatment – 110,000 metric

tons.

Iron Ozone

32 billet mill

• An electric arc furnace mini-mill at the Pervouralsk Plant that provides

ChelPipe with billets (ø140-550 mm) for seamless pipe production.

• Planned Capacity:950,000 metric tons

SOT

• A plant for the production of pipe bends ø50-1420 mm using or cold

bending. There are two production sites in Chelyabinsk and Magnitogorsk.

• Capacity: 24,700 metric tons

ETERNO plant

• Joint project of ChelPipe and RUSNANO, a plant for the production of pipe

connectors using nanostructured materials. ETERNO plant produces

pressed-and-welded pipe joints: pipe bends and T-joints for pipe branching,

as well as pipe seal fittings and pipe adapters

• Capacity:10,000 metric tons

Educational

Centers

• Pervouralsk Metallurgical College offers dual education system (40% -

theory, 60% - practicum). The College is equipped with modern facilities –

analogues of existing Pervouralsk plant units.

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CONTACT INFO FOR INVESTORS For more details please contact the Department for Finance and

Investor Relations

Dmitry Muz

Director, Finance and Investor Relations

+7 (495) 933-2780

IR@chelpipe.ru

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