Tenaris SA

MIL:TEN

Earnings Call Analysis

Strong cash flow despite declining sales and provisions

Tenaris reported Q2 2024 sales of $3.3 billion, down 18% year-on-year, attributed to lower volumes and selling prices. EBITDA dropped 34% sequentially to $650 million due to reduced prices and litigation provisions, though it would have been $821 million without the provision. Despite these challenges, Tenaris generated a strong free cash flow of $774 million, bolstered by a $285 million reduction in working capital, maintaining a net cash position of $3.8 billion. Sales volumes are expected to decline by 10%-15% in H2 2024, influenced by reduced U.S. drilling activity, high imports affecting prices, and regional destocking trends.

Overview of the Q2 2024 Performance

Tenaris showcased resilience in Q2 2024 despite facing challenges such as declining drilling activity and price drops in the U.S. The company's sales stood at $3.3 billion, witnessing an 18% decrease year-on-year and a 3% drop compared to the previous quarter. This decline was attributed to reduced volumes and lower average selling prices. The Tubes operating segment, a significant contributor, saw a 17% year-on-year decrease in average selling prices. Amid these challenges, Tenaris maintained a strong EBITDA of $650 million, though this represented a 34% sequential decline. The drop was largely due to lower selling prices and an extraordinary provision linked to a legal issue from a 2012 acquisition. However, without this provision, EBITDA would have been $821 million.

Cash Flow and Financial Health

Tenaris highlighted its robust financial health by generating $935 million in operating cash flow and achieving a free cash flow of $774 million for the quarter. With capital expenditures amounting to $161 million, the company still managed a strong net cash position of $3.8 billion at the end of the quarter. Shareholders benefited significantly as Tenaris paid out $950 million in dividends and share buybacks combined.

Regional Performance and Market Dynamics

The company emphasized its differential market positioning in North America and offshore projects globally. Despite reduced drilling activity, Tenaris's strong presence in the Middle East and the success of its TenarisShawcor coating business played a crucial role in maintaining sales levels. The company also noted a substantial $285 million reduction in working capital, contributing to its robust free cash flow.

Outlook for the Second Half of 2024

Looking ahead, Tenaris expects a challenging second half of 2024. Sales are anticipated to decline by 10% to 15% compared to the first half, driven by several factors: reduced drilling activity in the U.S. due to high oil and gas production levels and increased OCTG imports from Asia, which command 40% of the demand. Additionally, the Middle East is experiencing a destocking trend, and political uncertainties in Mexico and Argentina are limiting drilling investments. These factors are projected to further adjust prices downward in the Americas.

Strategic Investments and Operational Adjustments

Amid the anticipated slowdown in sales, Tenaris plans to undertake significant investments and maintenance stoppages to enhance operational efficiency. These investments include overhauling the medium diameter rolling mill in Mexico, installing a new electric arc furnace in Argentina, and revamping the Koppel steel shop in the U.S. Additionally, the company is advancing its sustainability goals by constructing its second wind farm in Argentina, which will fulfill 100% of the country's renewable energy needs.

Long-Term Outlook and Market Positioning

Despite the immediate challenges, Tenaris remains optimistic about its long-term prospects. The company's global reach, product and service differentiation, and long-term agreements with established customers position it well to capitalize on the growing energy demand worldwide. Specific projects like the Equinor Raia project in Brazil and the Trion project in Mexico underscore the extensive backlog of orders extending into 2025.

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and thank you for standing by. Welcome to Quarter 2 2024 Tenaris S.A. Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your speaker today, Giovanni Sardagna. Please go ahead.

[Giovanni Sardagna, executive]

Thank you, Gigi, and welcome to Tenaris 2024 second quarter conference call. Before we start, I would like to remind you that we will be discussing forward-looking information in the call and that our actual results may vary from those expressed or implied during this call.

With me on the call today are Paolo Rocca, our Chairman & CEO; Alicia Mondolo, our Chief Financial Officer; Gabriel Podskubka, our Chief Operating Officer; and Luca Zanotti, President of our U.S. Operations.

I would like to start by mentioning that we will host an Investor Presentation in London on September 24, and we hope to see many of you there. Before passing over the call to Paolo for his opening remarks, I would like to briefly comment on our quarterly results.

Our second quarter sales reached $3.3 billion, down 18% year-on-year and 3% sequentially, mainly due to slightly lower volumes and average selling prices during the quarter. Average selling prices in our tubes operating segment decreased 17% compared to the corresponding quarter of last year and 1% sequentially as lower prices have been greatly offset by favorable sales mix.

Our EBITDA for the quarter was down 34% sequentially to $650 million due to lower selling prices and an extraordinary provision recorded for an ongoing litigation related to the acquisition of a participation in Usiminas in 2012. Our EBITDA margin for the quarter was close to 20%. Without this extraordinary provision, our EBITDA would've been $821 million and our EBITDA margin would've been 25%.

With operating cash flow of $935 million and capital expenditure of $161 million, our free cash flow for the quarter was $774 million. After a dividend payment of $459 million in May and share buybacks of $492 million, our net cash position amounted to $3.8 billion at the end of the quarter.

Now, I will ask Paolo to say a few words before we open the call to questions.

[Paolo Rocca, executive]

Thank you, Giovanni, and good morning to all of you. During the first 2 quarters, our sales have remained remarkably resilient considering a market environment in which drilling activity has reduced and OCTG prices have been falling in the United States. This reflected the differential market positioning we have built up in North America with our redirect service model as well as in offshore project around the world, the particularly high level of shipment we have been making in the Middle East and the contribution for our newly acquired TenarisShawcor coating business.

I would also like to highlight our strong free cash flow of $774 million during the second quarter when we were able to achieve a $285 million reduction in working capital. Thus, we were able to maintain our excellent net cash position of $3.8 billion while we distributed $950 million to our shareholders.

In the spending on offshore projects, particularly in complex deepwater operation, has increased since 2023 and it's set to increase further in the year ahead. For these projects, we are a preferred supplier for the majors with a full integrated offer of pipes and services. This includes large diameter conductor and surface casing with connectors, intermediate and production casing, tubing and accessories, stainless high-chrome alloy steels, Dopeless connection tested for use in the new extreme application required by the Gulf of Mexico development. We are also supplying the 3D mapping services for high collapse application as well as offshore line pipe delivered with a full range of TenarisShawcor coatings and advanced project management services.

In this quarter, we renewed our long-term contract for shale operation in the Gulf of Mexico and have been selected by ExxonMobil for their upcoming operation in Angola. We were also awarded the supply of casing and offshore line pipe and coatings by Woodside for the Trion project in Mexico. In the second half, we will begin deliveries of coated line pipe for Equinor Raia project in Brazil, and we have an extensive backlog of order for offshore project going into 2025.

Today, however, as we look toward the second half, we see that our sale will be lower than the sale in the first semester, affected mainly by 3 factors. In the United States, a record level of oil and gas production are being sustained even as drilling activity has decreased and reduced the overall demand for pipes. At the same time, OCTG imports, particularly from Asian countries, remain high, accounting for 40% of demand, which compares with the 20% for other steel product produced in the USA. This level of import is affecting pipe prices and is causing damage to the domestic industry.

In the Middle East, activity and consumption from the region remain at a good level. But in the main countries, we see a destocking trend beyond our regional expectation. This combined with the completion of deliveries for the NFE offshore pipeline in Qatar will affect our sales in the region in the second half.

The change in the government in Mexico and the uncertainties surrounding the policy for the energy sector are limiting drilling investment in the country. In Argentina, the necessary stabilization of the macroeconomic environment is delaying investment in drilling and the development of infrastructure in Vaca Muerta. This factor will affect our sales and results in the second half when we expected our sales volume will be 10% to 15% below those of the first half, and there will be further adjustment to our prices in the Americas reflecting market condition.

In this quarter, as anticipated, we are carrying out important investment and maintenance stoppages in many areas of our industrial system aimed at recovering full operational capacity, improving efficiency and reducing our carbon footprint. This investment includes a major overhaul of our medium diameter rolling mill in Mexico, the installation of a new electric arc furnace in our Argentine steel shop, the revamping of our Koppel steel shop in the United States to increase capacity and reduce environmental impact, and the finishing line of our Italian mill.

We are also starting the construction of our second wind farm in Argentina, which will have a capacity for 92 megawatt and will allow us to supply 100% of the need of Argentina from renewable resources. The [ actual ] level of demand is requiring an adjustment in our industrial operations, concentration of production in the more efficient facilities and the reduction of logistic and operational cost.

Looking further ahead, we expected all the regions in which we have a strong competitive position will drive an increase in our activity over time. Our global reach, competitive product and service differentiation and unique portfolio of long-term agreements with established customers position us favorably for serving the growing demand of energy across the world.

I will leave now to any question you may have. Thank you.

[Operator]

[Operator Instructions] Our first question comes from the line of Marc Bianchi from TD Cowen.

[Marc Bianchi, analyst]

I was hoping you could talk a little bit more about the progression of margin in the back half here. So now, we've got volume, I heard you, down 10% to 15% in the back half with some weaker pricing. Maybe you could talk about the margin progression. But perhaps, first, before you say that or along with that, talk to us about your expectation for the progression of pipe logics from here, just so we can understand the context.

[Paolo Rocca, executive]

As I mentioned in the remark in the last conference, we are expecting the pipe logic to destabilize somewhat. But the level of import is being relatively high than what was our expectation. And so the pipe logic is -- registered a minus 3% that appears here today on comparable set of data. And we expect that this will continue to maybe remain stabilized, but probably after one month more, in which there could be some further reduction. We think it should stabilize and also we think that the import to some extent should recede, as I mentioned in the opening remark. It's an important variable.

Maybe Luca, you may add, which is your perception of pricing in the U.S. market. That is important also for other region for us because it's part of the formula that we have in some of the countries, especially in the Americas.

[Luca Zanotti, executive]

I believe that -- I will go back to what I said or what we said already in the last earnings call. And here, Marc, the problem is the following. The industry -- the OCTG industry was somewhat tricked by some expectation of increased activity at the beginning of 2024. And for this reason, distributors placed impulse order that has been flowing in during the first quarter and the second quarter of 2024.

Now, as we all know, this expectation of increased demand did not materialize, and so these imports ended up remaining in the inventory. Now, imports are expected to go down. Actually, they already went down a bit in the second quarter. And we expect this to go down thanks also to some trade enforcement action that we've been able to successfully implement as a domestic industry. And to a certain extent, even Section 232, with the decrease in prices, will start to bite. Also, we do expect a reduction in the domestic side of the supply.

And so as Paolo was -- to conclude, as Paolo was mentioning before, the advancement is going to take a little bit more than what originally we expected, but we see no reason why this should not happen going forward.

[Paolo Rocca, executive]

The second question was about the margin. We were guiding in the last conference call for our margin to be between 20%-25%. We ended up with this quarter close to the high part of this range. I think that in the second semester, we should be around the lower end of this range.

[Marc Bianchi, analyst]

And may I just confirm? When you said that second half down 10% to 15%, was that a comment about volume or a comment about revenue?

[Paolo Rocca, executive]

No, it is a comment about volume. This is what we see today. We see volume going down for the reason that we mentioned in the prepared remark. And this is due to the factor that we mentioned, basically. There is something that we also -- just to recap briefly with what we mentioned, the uncertainty in Mexico and in Argentina, just waiting for decision of the energy policy in Mexico and how Argentina could finance a development of a converter that we frankly see as inevitable.

So we are convinced that there is ample scope for expansion and for demand in Argentina in line pipe, in OCTG. But the point is that the macroeconomic environment is postponing the moment in which this project could be reliably financed. So we are optimistic in this sense on the development, and is an area in which we are very strong. But we need to register the fact that in this month -- in the second semester, there will be not so much movement on this.

[Operator]

Our next question comes from the line of Alessandro Pozzi from Mediobanca.

[Alessandro Pozzi, analyst]

The first one is on the U.S. market. You mentioned record level of production and yet drilling activity remains quite muted as a number of operators focus more on efficiencies and productivity. I was wondering are we in a paradigm change where we are going to see even lower, let's say, drilling operations, and for fuel rigs, basically, we could see even higher production. And is that a concern for you for OCTG demand going forward in the U.S?

And last thing, in U.S., there has been a change, as you mentioned, in the pipe logics. Is the new basket more reflective better of your mix? And I was wondering if you can give us maybe your thoughts on how the basket has changed and whether it can capture better, basically, your average selling price?

That's the first question. The second question is on the working capital -- oh, sorry, on the share buyback. And the share buyback is going to terminate quite soon, over the next -- maybe in the next few days or within weeks certainly. Are we going to have a new share buyback, a new announcement with the November results? Because I believe there is still some room in the share buyback as the mandate is about 10% of the shares outstanding, and potentially there could be another maybe $700 million to go before the next AGM or before the next EGM takes place.

[Paolo Rocca, executive]

On the first one on demand in the U.S., frankly, I don't think there are structural reasons that discourage investment. We mentioned last conference call the role that interest rate has -- clearly, a reduction in the interest rate will support the financing of projects by the smaller companies, and this could help. But the price of oil in the range of $75, $80 is a good ground for investing in shale development. But it is also true that consolidation has led to some stop and reflection by some of the operators. So probably the time we have now, the 6 months we have ahead with election in the United States, interest rate still relatively high compared to what we could expect in a long-term. And consolidation, on its way, is maintaining a level of drilling activity at this point.

It is clear that the efficiency and productivity of the wells realized is, let's say, gradually improving. So the production is at a very high level. But I think that the overall scenario is positive in this. There should be recovery in the line and also associated level of demand and recount over time.

The problem here, as Luca was mentioning, is more on the side of the import. 40% of the market is very high share of the market. And I think the issue is here, how to contain the pressure of import on the domestic industry?

Now, on the second point, pipe logic, as I mentioned, we continue to expect the stabilization of pipe logic after, let's say, the impact also of this 3% on this months and the next one. But the mix has changed. Luca, you can give comment on the change in the basket?

[Luca Zanotti, executive]

Yes. One point before we move into the basket specifics. I believe that this change of -- even if the pipe logic reading is directionally correct, I believe that this change in basket may have introduced some, let's say, perturbations of the reading. So we need to see going forward.

But to answer specifically to your question, yes the change in basket is more reflective of one. The product range that is being sold in the United States in general, and specifically the ones that we are selling in particular, one of the, let's say, major changes that pipe logics introduced is a split between in the semi-premium let's say space where we differentiate between batteries like or battery compatible connections and high tall connections like our Wedge 400 series, 441 and 461, which are our best seller over the last let's say many quarters. So the answer is yes.

[Alessandro Pozzi, analyst]

I was asking because I mean, if we look at the old one is down 3% and the new one gives a completely different picture up month and month. So I'm not sure, I mean, is it going down or up based on what you see based on your old basket?

[Paolo Rocca, executive]

Sorry, can you repeat it? Because I'm not sure if we understood the question.

[Alessandro Pozzi, analyst]

Yes, because there is a big difference between the 2 indices. The old one is pointing to a meaningful decline, 3%, but the new one is I think it's small up month and month. So did the new one, are you saying is more reflective of your business and therefore price are starting to go up a little bit?

[Paolo Rocca, executive]

Yes, I mean, in the end, what they did, they took out some items and they put in other items, and the items they took out were coming in at an absolute lower price than the one they put in. And so overall, you see this is increasing.

[Luca Zanotti, executive]

But responding to your question, I think that the new basket is probably more in line with our mix.

[Alessandro Pozzi, analyst]

For sure.

[Paolo Rocca, executive]

So we should be able probably to have a lower reduction in our basket, in our sales compare let's say to the original basket that is going down 3%, we should be able to have a lower reduction in this. This is let's say the analysis of the basket. By the way it comes out yesterday. I think we need to compare. Remember, in some formula, we're not using the index as a whole, but we're using specific part of the basket, adjusting to the need of the client. So there are different formula internationally or locally, and I would say that the impact is different in different client because the client are selecting indicator that best reflect their demand.

Now, the other point you made on the share buyback. We are still doing buyback of the program that we launched last year. And we will continue to complete this program. And then I think it's up to the Board in November to decide what to do and how to take it into consideration, the environment, the situation and everything, how to proceed or not on this. I will leave this to the decision for the next Board. The next Board have the ability to continue using the delegation from the general assembly or having a stronger assembly to deliver further expansion of the program. I mean, there are no limitation in this, but the point is they will evaluate circumstances for the decision.

[Operator]

Our next question comes on the line of Arun Jayaram from JP Morgan Securities, LLC.

[Arun Jayaram, analyst]

Paolo, I was wondering if you could elaborate on some of the destocking trends that you mentioned in the Middle East, and then, as you think about reducing your prior expectations for second half volumes. Do you see this more as just lower demand or do you expect some of this volume perhaps in Argentina and Mexico to shift into 2025?

[Paolo Rocca, executive]

Well, on the second point, as I told you before, I'm very confident that Argentina has relevant plans for developing Vaca Muerta by different operator. And there will be activity in the infrastructure and drilling. And so in gas, you have seen there are announcement of the decision taken in the new NNG plant. It'll take time to formalize finance, get all the clearance for the project, but this will go on over time and then also the export foil will go on. So I'm very positive on the Muerta but is a new government 6 months in charge or 7 months in charge, difficult situation to put under control from the point of view of inflation and fiscal equilibrium. So Argentina will recover credibility and access to the market, but it will take a little more time. We were all probably over optimistic in thinking that this could be done in a shorter term, but it will happen.

In the case of Mexico, changing government implied changes also in the Secretary of Energy and the appointment in the key energy company Pemex and CFE has not been done yet. So it's more difficult to understand, which is the policy of the new government and Claudia Sheinbaum looking in the future.

Pemex needs action by the government in refinancing part of this debt, but is clear that Mexican needs energy. This last month, we had shortages of electric power. We had disruption and is clear that there is need of investment. So I'm also positive, but the assumption that new government will assume in October something of this that we were expecting maybe in the second half will materialize later on. There will be, let's say any policy action will have impact later.So we are positive on this, but we expect the postponement of some of the demand.

As far as the Middle East and [ volume ] aspect is concerned, I would ask Gabriel to give an overview of how we see the situation and the demand in the 6 months.

[Gabriel Podskubka, executive]

Regarding the Middle East, as Paolo anticipated in opening remarks, the drilling activity remain strong with NOCs operating at the high levels. For example, Saudi Aramco still at the 300 rigs increasing on the unconventional, reducing on the offshore oil, keeping that level. U.A.E. as well, operating at healthy levels of 120 rigs. So I would say that we see stability in the consumption of OCTG in the region in the main operators. At the same time, we see some of these NOCs in the region rebalancing their inventories and entering into a destocking mode the next semester. So this is something that is important to mention and will affect our shipments in the second half of the year.

In addition to that, we have the competition of the delivery of the NFE pipeline in Qatar. There are some other large projects in the regions that are still not defined that we will see more into 2025. So this will also affect second half comparison versus first half. So overall there's going to be a reduction still at high level of shipments in the second half of the region in Middle East in the second half, but lower than the record shipments that we had in the first half of the year.

[Arun Jayaram, analyst]

Just my follow up is on the buyback. Paolo, the company at the end of the quarter had $3.8 billion of net cash. I assume you don't want to turn Tenaris into a bank, but just some thoughts on capital allocation or what you think is the most prudent use of excess cash on the balance sheet?

[Paolo Rocca, executive]

Well, last year, we open the door for a share buyback. This is combined with our dividend policy.

At the same time, we are looking for potential opportunity for investing the capital with high return in our business. If we don't identify opportunity within our sector, there has potential impact. Well, it'll be up to the shareholder and to the Board to decide what to do. In the meantime, we manage prudently our cash. We are not a bank, but we try to protect the best we can, the liquidity and to have return on it that you can see in our financial statement.

[Operator]

Our next question comes from the line of Christopher Copeland from Bank of America.

[Christopher Copeland, analyst]

A lot of my questions have been answered but maybe I can try again and ask you what you're hoping to present that'll be new in September without obviously expecting you to tell us the details and the content. But I'm intrigued by the timing. Do you expect to be through maintenance by then? Do expect that we will have a better outlook on pricing progression in the U.S. by then? Or do you expect to have more visibility on exactly what you've just highlighted? Opportunities for M&A or not i.e. in other words, the capacity to deploy your balance sheet for future buybacks et cetera? And if I can sneak in one more on the litigation provision that you've taken what kind of timelines are you attaching to that if we're looking for a resolution anytime soon?

[Christopher Copeland, analyst]

Well, I think it passed some time since the last time we did an Investor Day. The company has changed in its perimeter. There are a new region and new business. The profile of the company has changed, and also our market and our competitive environment has changed.

I think would be useful to meet with our world of investor and to present where we are and where we see the key market in which we have a very relevant presence. Also, our industrial profile is changing because we are introducing technological change. We are modifying this, and we think that we will be prepared to increase efficiency and productivity and to reposition also our industrial structure from the point of view of decarbonization and environmental footprint.

I think will be important to after some years in which we didn't have this opportunity to have an overview of where we are. And also on the point that you mentioned, how is our capital allocation and what we see in the medium run is, let's say the path that the company could follow, including the aspect concerning capital allocation. This is the first point.

On the second point, the case for that we have in Brazil and in which we are registering a provision, let me tell you that we have been required to make provision as a result of this adverse decision by the Superior Court of Justice in Brazil in a litigation against CSN for the acquisition 12 years ago of Usiminas.

Let me tell you, at Tenaris, I believe that such a decision is contrary, is really contrary to the applicable substantive and procedural law. We cannot comment so much on it. This is not something that will end in very quickly. We expect there will be additional space for litigation and we will pursue this as much as we can in all areas. We plan to defend our position because, remember, this is a position that has been conferred in long lying of decision by the administrative authority and also by all the level of court decision before.

So we will file all the motion and appeals that are available to us. This motion and appeal will need to be resolved before the case become final. And there will be also included that the determination of the actual payout amount, if any, that should be made. This should be made by a lower court in a separate proceeding. So it'll take time to get the definition on this. And we will do all we can to defend our position and establish, let's say our right to operate as we operate in 2012.

[Operator]

Our next question comes from the line of Luigi De Bellis from Equita SIM.

[Luigi De Bellis, analyst]

Just 3 questions for me. The first one is on the cost. You mentioned it that you are acting to reduce cost. Can you elaborate on the size of the cost reduction expected and when do you expect the rate impact of this action? The second question on working capital. So excellent reduction in second quarter, how do you expect this to evolve during the second half of the year? And the last question on the outlook. So can you elaborate on the exit speed in Q4 in terms of sales and profitability? And if you expect a better quarter entering 2025, if you have visibility on this, consider its cost. So the end of the stocking in Middle East, your visibility on the U.S. direct clients.

[Paolo Rocca, executive]

This on the first point. As we mentioned in our press release and in our open remark, we see this lower volume in the second semester. And we take advantage of this situation for doing all the extraordinary maintenance and investment using this time also to address some of the extraordinary maintenance work that are needed because we were working at almost full capacity for a long period of time.

During this, we will expand the level of automation, renew the process and the technology in some of the core area of our business. We have been successful also in this in the last year and the previous year in developing the full potential of our strong facility. So facility like Bay City today are operating at record level.

So we have efficient facility, core facility that are operating even above the level that we were originally planned. So we need to restructure, reorganize also this closing or reducing operation in some of the facility, particularly the United States, but not only the United States. This will allow us to reduce our overall cost. At the same time, we think we can address some specification in which we can reduce cost. We have a plan of action for this. We think we can reach savings in the range of $200 million per year over let's say that could materialize between now and June, 2025. This is a broad number. There are issue like valuation or exchange in appreciation of the exchange rate that are relevant for our labor cost all around the world. Some of this is unpredictable. Something is something that is more under our control.

As a whole, this adjustment plan is justified by the slowdown that we have seen in the sales in the second semester of the year. But we will not affect our capability to enter in 2025 and respond to let's say the opportunity that I mentioned that we see going on. The second point this was the related to the U.S?

[Luigi De Bellis, analyst]

No working capital.

[Paolo Rocca, executive]

Working capital exclusively all over the working capital. Well, working capital has been giving us a positive contribution to our cash flow in the second queue. Extraordinary positive contribution. We continue to support our cash flow in the coming quarter because we are reducing our inventory. We have good progress in our collection, so we expect this to continue to contribute, but probably not in the same volume and same amount as in the second queue.

The third question is what we see and the visibility that we have for the next year. I think that this point in time, we really do not have full visibility of this. The different region I mentioned, the Latin America, and as I tell you, I am positive on it. As far as U.S., over time election are important in the U.S. but maybe Luca, you can add to the extent to which you think we have visibility?

[Luca Zanotti, executive]

Yes, Paolo. Obviously election and the result of election are going to be a factor together with a cost of capital. And so there are a number of variables that are obviously beyond our control. And depending on the combination of these variable play out, we might see a different scenario in terms of overall activity.

Now, when we get to our sales, probably the point that is worth mentioning is that there are still 2 big let's say consolidation that have not been yet cleared by the anti-trust being a Diamondback with Endeavor and the ConocoPhillips with Marathon. And obviously, should this transaction go through as we all expect, this will be an important upside on our sales being Diamondback and Conoco, 2 very important customers within our portfolio,

[Paolo Rocca, executive]

And for the Middle East and let's say the rest of the market, including the offshore, Gabriel your sense, we know that there is no so much visibility, but still.

[Gabriel Podskubka, executive]

Yes. Luigi, in terms of the international markets, including Middle East and the offshore in general the outlook is quite positive. The fundamentals are there. The NOCs in the Middle East continue to invest. There are infrastructure projects as well going on.

And in the offshore space, the level of FIDs that have been announced and that in the pipeline, we expect that that will sustain a multi-year cycle of high-level of CapEx. But as Paolo said, we have partial visibility into the 2025. We already have some contracts that go into '25, but this does not pertain to all segments and countries and regions involved. So overall, I would say positive outlook in the mid-term, but this is a bit far down the timeline.

[Operator]

At this time, I'm showing no further questions. I would like to turn the conference back over to Giovanni Sardagna for closing remarks.

[Giovanni Sardagna, executive]

Thank you, Gigi. And thank you all for joining us, and we hope to see you in London at the end of next month.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.