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NASPD June 12, 2004

NASPD June 12, 2004. Jim Cowan. Maverick EVP/COO. Maverick Overview. Market capitalization $1.0 billion Sales Revenue $1.3 billion Headquarters St. Louis, MO Company founded 1977 Employees 2,500

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NASPD June 12, 2004

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  1. NASPD June 12, 2004 Jim Cowan Maverick EVP/COO

  2. Maverick Overview • Market capitalization $1.0 billion • Sales Revenue $1.3 billion • Headquarters St. Louis, MO • Company founded 1977 • Employees 2,500 • Largest oil country tubular goods (OCTG) producer and one of the largest conduit producers in North America • 1.7 million tons of tubular products capacity • Largest buyer of hot rolled steel in North America • Geographically diverse production facilities • 24 mills in 10 North American locations • Maverick’s operations are segmented into energy and industrial products * Based on closing stock price on April 16, 2004 2

  3. Summary of Products Energy Products Used in completions of newly drilled wells Used to gather, transmit and disperse oil and natural gas Used in well servicing, flowline and umbilical applications • OCTG • Line pipe • Coiled tubing 67% of 1Q2004 Revenues 65% of 1Q2004 EBITDA Industrial Products Structural tubing used in construction and other applications Sheathing for wiring in non-residential construction • HSS • Conduit 33% of 1Q2004Revenues 35% of 1Q2004 EBITDA 3

  4. Calgary Ferndale Conduit Elyria Conduit Hickman4 facilities Counce Conroe Cedar Springs Conduit Houston3 facilities Coiled TubingCoupling Manufacturer Maverick Locations First Quarter 2004 REVENUES Industrial 33% Energy 67% 4

  5. CHINA Riding the Dragon’s Tail

  6. CHINAis a major player • Bright spot of the global economy • GDP grew more than 9% in 2003 • Averaging 9.7% in past 24 years • World’s largest recipient of foreign direct investment • $53.7 billion in 2002 • World’s 2nd largest economy measured by purchasing power • Second largest foreign currency reserves • $400 billion by end of 2003 • World’s 4th largest trading nation • over $700 billion in 2003 • Full integration of China into WTO provides further stimulus to internationalize industry and markets. 6

  7. CHINA GDP Growth Source: U.S. Commerce

  8. CHINAgrowth everywhere • China’s economy is between 8-10 times the size that it was at the beginning of reform in 1978. • Domestic demand as growth engine – exports are less than 30% of overall production. • Less than 50% of GDP now state-controlled and only an extremely small number of goods are price controlled. • Dramatic expansion in the private sector – aggressive entrepreneurialism has produced 2.5 million firms, providing bulk of employment, tax and overall national growth. • China’s growth has been powered by latent demand, the entrepreneurial energy unleashed by the country’s unprecedented reforms, and inherent inefficiencies • Emerging large and consuming middle class - growing fast • +300 million with significant discretionary spending power by 2010 8

  9. CHINAa hungry dragon • China has become the world’s largest consumer of copper, consuming 22,000 tons and importing more than 7,000 tons every day • China has become the world’s largest producer of steel, outpacing both Japan and the USA, importing 408,000 tons of iron ore every day • China is now importing 1,750,000 barrels of oil every day • signing up LNG deals with Australia, Indonesia, and Iran • pipelines being built from Kazakhstan and planned from Siberia 9

  10. CHINAcapital flow continues • China is attracting external capital as the global epicenter for manufacturing, largely because of its’ low labor costs. • Investment exceeds $50 billion US annually • Investments in processing, assembly, redistribution and value added businesses in China continue to increase relative to Southeast Asia, India and Latin America. • Foreign and Chinese manufacturers are building out global supply channels from China. • Chinese consumers and raw material users are influencing global pricing in many industries. 10

  11. CHINA Export and Import Growth Source: U.S. Commerce

  12. OIL Consumption Source: U.S. EIA

  13. CHINA Oil Consumption Source: U.S. EIA

  14. China Steel Consumption Source: Steel Dynamics

  15. China vs USA Steel Consumption Source: Steel Dynamics

  16. STEEL COSTS • Steel costs have risen sharply • Rise in the cost of scrap metal, coke, pig iron & other raw materials are pushing steel costs higher • Base price has risen $180 to $240 per ton since the first of the year • Base prices are set to rise • Unprecedented steel surcharges • $125 per ton April 2004 • Anticipate steel cost to be volatile throughout 2004 16

  17. Steel Source: Steel Dynamics

  18. Oil

  19. Natural Gas

  20. SUMMARY • Tight steel supplies and higher prices will be prevalent for the foreseeable future • Anticipate drilling activity to increase 7% for 2004 in U.S., 5% in Canada • Energy prices will stabilize but remain elevated • The 21st century is the “Chinese” century • Figure out how this impacts your business! 20

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