Vallourec : Half Year Report 2022

2022

Interim

Financial

Report

Half-year ended June 30, 2022

Summary

1.	STATEMENT BY THE PERSON RESPONSIBLE FOR THE INTERIM FINANCIAL REPORT	3
2.	HALF-YEAR ACTIVITY REPORT	4
3.	CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS OF THE VALLOUREC GROUP AS AT JUNE 30, 2022	14
4.	STATUTORY AUDITORS' REVIEW REPORT ON THE HALF-YEARLY FINANCIAL INFORMATION	43

STATEMENT BY THE PERSON RESPONSIBLE 1

FOR THE INTERIM FINANCIAL REPORT

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Statement by the person responsible for the interim financial report

To the best of my knowledge, I certify that the condensed half-year financial statements have been prepared in accordance with applicable accounting standards and give a true and fair view of the assets, financial position and profits or loss of Vallourec and all consolidated companies, and that the half-year activity report attached presents a true and fair view of the significant events that occurred during the first six months of the financial year and of their impact on the half-year financial statements, of the main transactions between related parties and that it describes the main risks and uncertainties for the remaining six months of the financial year.

Meudon, 27 July 2022

Philippe Guillemot

Chairman of the Board of Directors & Chief Executive Officer

2022 Interim Financial Report

Vallourec

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2HALF-YEAR ACTIVITY REPORT

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Half-year activity report

Vallourec Market environment

1. Oil & Gas

Oil & Gas demand and supply balance: the main driver for capital expenditure growth

Global oil demand recovered steadily in 2021 to an average of 97.6 mb/d, following the sharp decrease in 2020 due to the Covid-19 pandemic (a fall of 8.6 mb/d versus 2019). According to IEA estimates1, global oil demand reached an average of 98.8 mb/d over the first half of 2022, led mainly by OECD countries.

Over the first half of 2022, total oil supply reached an average of 98.7 mb/d (versus an average of 95.2 mb/d in 2021). The increase in output was driven by higher oil production, mainly from the Middle East, North America and Latin America. On the supply side, the European Union's decision to ban 90% of Russian crude and oil imports has to be partially offset by supply from non-OPEC+producers, led by the United States. Additionally, on June 2, 2022, OPEC+ announced that it was increasing output by 648 kb/d in both July and August. The previous agreement had provided for a monthly production increase of 432 kb/d.

Oil prices

In first-half 2022, the average WTI price2 was USD 101/b (versus USD 62/b in first-half 2021, a year-on-year increase of around 63%), reflecting a recovery in demand since the beginning of 2021 in the wake of the Covid-19-pandemic induced global economic crisis in 2020.

Following the same trend, the average Brent price3 in first-half 2022 was USD 104/b (versus USD 65/b in first-half 2021, a year-on-year increase of around 60%).

The average gas price4 in first-half 2022 was USD 5.99/Mbtu (versus USD 2.85/Mbtu in first-half 2021, a year-on-year increase of around 110%).

Oil & Gas market in the United States

In the United States, the rig count has gradually recovered from the trough in August 2020 (monthly average of 250 rigs) to reach an average of 739 active rigs in June 2022, implying 138 additional rigs since the beginning of the year.

OCTG prices5 have recovered continuously since bottoming out at USD 1,290/t in August 2020, increasing significantly to reach USD 3,585/t in June 2022, representing an increase of 31% since January 2022.

The US OCTG consumption6 per rig has gradually increased since 2016, reaching an average of 501 tons per rig and per month in first- half 2022.

Oil & Gas market in Brazil

According to the IEA June 2022 Oil Market Report, Brazilian oil production stabilized above 3 mb/d in first-half 2022. With oil production of

3.09 mb/d during the first quarter and around 3.01 mb/d during the second, Brazilian oil output in first-half 2022 as a whole exceeded first-half 2021 by 160 kb/d.

Oil & Gas market in the EA-MEA regions

The international rig count bottomed out in December 2020 (average of 665 units) before gradually starting to recover. In June 2022, the average international rig count was 824 units, representing 159 additional units since December 2020, albeit still below pre-Covid levels.

In the MEA region, OCTG prices7 remained stable since July 2019 at around USD 1,550-1,600/t before starting to decrease in line with the worldwide pandemic, hitting a trough of USD 1,312/t in August 2020. MEA OCTG prices recovered slowly in 2021 before accelerating in 2022 to USD 2,100/t in June.

1. IEA Oil Market Report - June 2022
2. Price of WTI: Nasdaq - data collected in July 2022
3. Price of Brent: Nasdaq - data collected in July 2022
4. Price of Gas (Henry Hub): Nasdaq - data collected in July 2022
5. Pipe Logix (average Seamless pipes) - June 2022
6. Preston Pipe & Tubes Report - June 2022
7. Rystad (OCTG casing L80 premium connection) - June 2022

4 Vallourec 2022 Interim Financial Report

HALF-YEAR ACTIVITY REPORT 2

In Western Europe, OCTG prices8 reached a low of USD 1,350/t in May 2020, before gradually starting to recover. At end of June 2022, OCTG prices stood at USD 2,500/t, up 44% since the beginning of the year.

2. Industry and other markets

Demand for industrial applications is dependent upon growth in sectors such as automotive, agriculture, construction and industrial manufacturing. Growth may be driven by numerous factors, but broadly correlates with GDP trends.

Europe (Germany)

The ifo Business Climate index declined to a low point of 75.5 in April 2020, reflecting the impact of Covid-19 on the German economy before gradually recovering, peaking at 101.4 in June 2021. Since the beginning of 2022, the index has been declining, standing at 92.3 in June 2022, reflecting business concerns over higher energy and raw material prices.

Brazil

For 2021, GDP increased by 4.6%9. Growth was driven by services and industrial sectors, with a positive impact on Vallourec's Industry business in Brazil. The industrial tubes market has followed this steep rebound, driven by higher demand and restocking by customers.

Significant events

Governance changes

• Vallourec's Board of Directors met on March 20, 2022 and appointed Philippe Guillemot for a four-year term, effective immediately. Further to the completion of an external selection process by a special committee of the Board of Directors, the Nomination and Governance Committee decided to select Philippe Guillemot to succeed Edouard Guinotte as Chairman and Chief Executive Officer of Vallourec.
• On April 15, 2022, Vallourec announced the appointment of Sascha Bibert as Group Chief Financial Officer. He took up his position on April 19, 2022 and joined the Group's Executive Committee.
• On May 2, 2022, Vallourec announced the appointment of Ulrika Wising as Senior Vice President Energy Transition. She joined the Group's Executive Committee.
• On June 1, 2022, the Group announced the appointment of Enrico Schiappacasse as Senior Vice President Group Strategy and Development. He took up his position on June 1, 2022 and joined the Group's Executive Committee.
• On July 1, 2022, Vallourec announced the appointment of Nathalie Joannes as General Counsel for the Group. She took up her position on July 4, 2022 and joined the Executive Committee.
• On July 4, 2022, the Group Vallourec announced the appointment of Ludovic Oster as Chief Human Resources Officer. He took up his position on July 4, 2022 and joined the Executive Committee.
• On July 8, 2022, the Group announced the appointment of Pierre d'Archemont as Senior Vice President South America. He took up his position on July 14, 2022 and joined the Executive Committee.

These appointments complete the team that will drive 'New Vallourec' transformation plan.

Mine

• On January 8, 2022, following exceptionally heavy rainfall in Minas Gerais State (Brazil), some material from the waste pile associated with the operations of Vallourec's Pau Branco mine slid into a rainwater dam (the Lisa Dam) causing it to overflow, and resulting in the interruption of traffic on a nearby highway. There were no casualties and the structure of the dam was not affected. As a result of this incident, however, the operations of the mine were temporarily suspended.
• On May 4, 2022, Vallourec partially restarted operations, using an alternative waste pile. Under these conditions, volumes extracted in H1 2022 amounted to approximately 1.1 million tonnes.
• In the Full Year 2022, Vallourec now assumes an annual production of 2.6 million tonnes.
• Meanwhile, Vallourec continues discussions with the authorities regarding the use of other alternative waste piles to continue production. The group is also working as fast as possible on additional safeguarding measures including drainage system reinforcement and the stabilization of the soft soil layers, in order to resume normal operations using the original waste pile, subject to the validation by the state mining and environmental authorities. Those normal operations are expected not before Q2 2023 following the full release of the Cachoeirinha Pile.

1. Rystad (OCTG casing L80 premium connection) - June 2022
2. Official results published by IBGE - Brazilian Agency of Statistics

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Vallourec

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