Tenaris SA (NYSE: TS) reported Q1 EPS of $0.41, $0.03 better than the analyst estimate of $0.38. Revenue for the quarter came in at $1.87 billion versus the consensus estimate of $1.95 billion.

Market Background and Outlook

In the USA, there has been a limited slowdown in drilling activity in the year to date following the oil price downturn in the fourth quarter of last year and a more disciplined approach to capital expenditure by shale operators. In Canada, the slowdown has been more pronounced with a lack of pipeline takeaway capacity and government-mandated production cuts. Although oil prices have recovered in the year to date, capital discipline by shale operators is likely to persist through the year, which may limit any increase in drilling activity.

In Latin America, the recovery in drilling activity in Mexico may be tempered by financial constraints, while, in the rest of the region, drilling activity is expected to remain relatively stable, with shale drilling activity in Argentina switching from gas to oil.

In the eastern Hemisphere, drilling activity is expected to continue its gradual recovery with a focus on gas developments.

Following a solid performance in the first quarter, we expect to consolidate our sales around this level in the next quarter and hold margins at a similar level to last year. With a stable level of sales, and limited capital investment requirements, we should continue to generate a strong free cash flow during the year.

For earnings history and earnings-related data on Tenaris SA (TS) click here.