Vallourec Extraordinary EGM today at 11am (UK time)

All,

Press reports this morning leads with the news that Vallourec are to reduce workforce in the US by a third (900 employees) but the main news today will be the results of the EGM in which approval for the rights issue will be granted to the Company.  

The reduction in workforce is not unexpected given the current environment, given the current oil price and significant drop in demand for oil products from the US shale producers.  This follows on from the reduction in employment at their competitor, Tenaris, in mid March.  Tenaris has gone further than Vallourec, with specific plants in the US shutting down.  It would not be a surprise if Vallourec follows.

However, more importantly, the approval for the rights issue hits another milestone today, with shareholder approval due at the EGM, starting at 10am French time.  Nippon Steel and BpiFrance, the French state vehicle, both of which own c.15%, have indicated that they support the rights issue.  

The layoffs in the US are confirmation, if any is required, of the impact of low oil price on US shale producers, and in turn Vallourec. Bondholders will be pinning their hopes that the €800m rights issue gets approval and the new banking facilities (which are to be undrawn) will remain in place.

Any questions, please do call

Tomas