# Dear Shareholders

_Source: `DeepSeekOCR_Ardian_pruned_1k/energy-oil-gas-equipment-services/NYSE_TS_2018/NYSE_TS_2018.mmd` · pages 5-11_

---

Dear Shareholders,

2018 has been a year when Tenaris has demonstrated with its results the strength of its global and competitive positioning. In a market, where the increase in global oil and gas rig count has been a relatively modest 9%, largely concentrated in the U.S. shales, Tenaris has increased sales by 45% over the year. All our regions, as well as our non-tubular businesses, have contributed to this achievement. Our margins have also increased with our EBITDA margin consolidating around 20%, and our net income margin rising to 11% of sales.

Our financial position is solid with a net cash position at year end of $485 million and our Board of Directors is proposing to maintain our annual dividend payment at the same level as last year.

This performance compares favorably against any of our competitors and, in the past years, we have established a clear leadership in our sector, reflecting the efforts we have made over many years: in industrial excellence, product development, in our Rig Direct \( ^{®} \)  service and in our global reach and financial strength.

Central to our performance this year has been the extraordinary achievement of completing the delivery of pipes with highly complex specifications for three offshore gas pipelines in the Eastern Mediterranean, which will change the balance of gas supply and demand in the region.

During the year, around 60% of our OCTG sales by volume was supplied under Rig Direct \( ^{®} \)  conditions. We have fully consolidated the service in the U.S. and Canadian markets and are working to increase differentiation through improving service quality and extending integration with customer operations. Elsewhere, we have successfully introduced the service in Indonesia, United Arab Emirates, Guyana and Brazil. No other company in our sector is capable of deploying on a global scale such a strategy of deep integration with customers, with its benefits for reducing costs and simplifying operations.

We also positioned ourselves favorably for major gas development projects around the world. In Argentina, Tenaris supported the rapid development of gas production in the Vaca Muerta shale, while we also won awards for the supply to major gas developments in Australia, Qatar, Indonesia, Mozambique and, most recently, India.

In a year when Section 232 tariffs and quotas were introduced in the United States, we expanded our production in all of our plants in the country. In particular, we have been focusing on the ramp up of our new greenfield mill at Bay City and, in 2019, we will continue working to bring the mill to its full potential.

During the years, we have been researching the application of digital, automation and machine learning technologies in our industrial processes and we incorporated many of these new developments into our Bay City mill. Now, we are beginning to introduce these new technologies and transform the rest of our industrial system. This work will be strengthened in the years ahead.

Sustainability principles are deeply embedded in our values and management processes, as we position Tenaris to grow and prosper over the long-term. First and foremost is an absolute commitment to the

<--- Page Split --->

safety of our employees, contractors and users of our products and services. While we are encouraged to be making progress on improving our safety indicators, we realize that further cultural change is still needed to achieve our safety objectives. We have decided to change the role of shift leaders in our industrial system to give them more responsibility to lead the change.

The ramp up in production at our modern Bay City mill is having an impact on our environment indicators, which are showing a gradual improvement. At the same time, we are investing in our older facilities to improve air quality and material recycling performance indicators. Over 10% of our capital expenditure budget during 2018 was dedicated to projects whose primary aim is to improve our safety and environmental performance.

We continue to work on transforming our human relations processes to strengthen the role and opportunity for employees to control their own development and career choices and encourage flexible working programs. We are pleased to note that, in our internal surveys, employee engagement has been improving. We are now extending the use of these surveys to our factory-floor employees, which is providing us additional insight into opportunities for improving working conditions.

The cornerstone of our programs to strengthen the communities where we operate is our investment in technical education and providing opportunities for promising young students from all backgrounds. As our Roberto Rocca Technical School in Campana completed its fifth anniversary, PISA and College Board tests show that its pupils are performing appreciably better in mathematics and language than their peers within Argentina and the OECD average.

Over the past decade, we have focused our expansion strategy on organic growth with the construction of new rolling mills at Tamsa and Bay City and the expansion of heat treatment, threading and service facilities around the world. Now, with the acquisition of a welded pipe mill in Saudi Arabia, the launch of the Tenaris Severstal joint venture project in Russia and our prospective acquisition of IPSCO Tubulars in the U.S., we are starting a new phase of industrial expansion in key markets for the oil and gas industry.

We have completed an important year of expansion in sales and results but if I should look ahead let me stress that we are faced with high levels of uncertainty in the political and economic environment of many of the countries where we operate. I feel, however, that Tenaris, with its global positioning, its diverse and highly motivated team of professionals and its financial flexibility remains better placed than any of its competitors to take advantage of new opportunities and respond to the different scenarios that could unfold.

I would like to thank our employees for their efforts and achievements over the past year. I would also like to thank our customers, suppliers and shareholders for their continuing support and confidence in our company.

April 1, 2019

/s/ Paolo Rocca

Paolo Rocca