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TMK 9M 2010 Production Results and Trading Update

The following contains forward looking statements concerning future events. These forward looking statements are based on current information and assumptions of TMK management concerning known and unknown risks and uncertainties.

OAO TMK (“TMK” or “the Company”), one of the world’s leading oil and gas steel pipe producers, today announces its production results for the period ending September 30, 2010.

For the first nine months of 2010, TMK shipped a total of 2,860 thousand tonnes of pipes to customers, a 49.1% increase on the amount shipped over the same period in 2009.

Volume of shipped pipe products

(thousand tonnes)

In the third quarter of 2010, market conditions for TMK products maintained the positive trends established in previous periods as shipment volumes grew by 7.0% over the previous quarter. The slight decrease in sales of seamless pipes, including OCTG, corresponded to traditional seasonal factors in Russia coupled with the commissioning of additional capacity at Volzhsky’s main seamless rolling mill, begun in the second quarter of this year, and planned maintenance at Volzhsky’s pipe-rolling mill #1 and at the Seversky mill in September.

In the third quarter of 2010, although consumption fell by 3.6% quarter-on-quarter, the Russian seamless OCTG market registered a slight growth as compared to the same period last year. Since the beginning of 2010, shipments of TMK seamless OCTG increased by 4.1%. During the same period, the Company’s share of the Russian drill pipe market grew from 65.9% to 72.1%. A growth in the share of imports on the Russian OCTG market was also observed, due to increased volumes of pipe shipments from Ukraine, Azerbaijan, Kazakhstan, Japan.

Large-diameter pipe demand remained strong and the implementation of large-scale pipeline projects by Gazprom and Transneft ensured the full utilization of Volzhsky’s longitudinal welded mill. Third quarter shipment volumes of large-diameter pipe increased by 23.7% quarter-on-quarter. When compared to the same period the previous year, large-diameter shipments volumes increased by 181.5% in the first nine months of 2010.

As expected, growth was observed in the Russian industrial pipe market in the third quarter. This increase in demand was driven by the gradual recovery in the machine-building and automotive industries, as well as in the chemical and nuclear sectors. Shipments of industrial pipe increased by 11.1% as compared to the previous quarter.

As a result of increased demand for line pipe, connected with the technical peculiarities of oil and gas field development, TMK increased shipment volumes for this product in the third quarter by 13.5% as compared to the second quarter of 2010.

Shipments of tubular products by TMK IPSCO increased by 1.7% over the previous quarter.

Despite low natural gas prices, shale gas operators continued to increase their activity as many successfully adjusted to the situation by moving to fields with higher levels of natural gas liquids. Advancements in horizontal drilling and completion technologies coupled with the ability to extract more liquids have lowered break-even costs and kept unconventional activity going strong.

A growth in import shipment volumes in the US resulted in a slight increase in pipe inventories. However, TMK IPSCO’s positioning on the US market remains stable as a large part of imported pipes are of standard grade and unsuitable for unconventional oil and gas fields.

Along with the development of shale gas, the US market witnessed significant activity growth in land-based oil drilling, on the back of high crude oil prices, the development of oil shales and limited activity in the Gulf of Mexico. This trend had a positive effect on TMK IPSCO’s business as it specializes in the supply of tubular products used in onshore operations.

Demand for premium threaded connections continued to increase in both the US and Russia. During the first nine months of 2010, TMK shipped approximately 310,000 premium connections, which is 50.5% more than in the same period in 2009.

In the US, the main driver behind premium connection consumption remains the active development of unconventional gas fields. In Russia, the emphasis is on the development of East Siberian and offshore fields. Until August 2010, only imported pipes were used in Russian offshore oil and gas production. Late in the second quarter of 2010, premium threaded TMK-GF casing of API Spec 5CT was successfully run in the Yury Korchagin field in the Caspian Sea. This gas-tight casing connection is designed for horizontal and directional wells in oil, gas and gas-condensate fields

As previously announced, in August 2010, TMK IPSCO opened a sales office in Calgary, Alberta, Canada. This new office functions as a head office for sales in Canada and supports conventional and unconventional hydrocarbon exploration and development programs in Canada. The success of ULTRA premium connections will serve as a platform for the supply of tubular goods to Canadian oil sands development.

In response to increased demand for ULTRA products, TMK IPSCO began building a second threading line for premium connections at its Brookfield ULTRA site. This new line, scheduled to be operational by late 2010, will double the mill’s current annual ULTRA threading capacity.

The continued high capacity utilization and the effect of higher pipe prices seen in the second quarter of 2010 allowed TMK to slightly increase profitability and EBITDA.

The Company expects to maintain its current level of capacity utilization until the end of the year, which will allow for an increase in pipe production in the fourth quarter in comparison with the third quarter.

TMK 9M 2010 Production Results and Trading Update (131.32 KB,pdf)