Etienne Bertrand - Head of IR Philippe Crouzet - CEO Jean-Pierre Michel - COO Olivier Mallet - CFO Didier Hornet - SVP, Eastern Hemisphere Nicolas de Coignac - SVP, North America

Raphael Veverka - Exane Michael Shillaker - Credit Suisse Alessandro Abate - Berenberg Amy Wong - UBS Bob Pulleyn - Morgan Stanley Guillaume Delaby - Société Générale Kevin Roger - Kepler Cheuvreux

Thank you, Keith and good evening to all. Thank for joining us tonight.

With me to comment the Q3 and first nine months 2016 results are Philippe Crouzet, CEO; ​Jean-Pierre Michel, COO; Olivier Mallet, CFO; Didier Hornet, Senior Vice President, Eastern Hemisphere; Nicolas de Coignac, Senior Vice President, North America and Philippe Carlier, Europe Senior Vice President. I would like to inform you that this conference is also available by conference call, which will be recorded and a replay will be available.

It is right now audio webcasted on our Investor Relations website and the slides will be commented by the management during this presentations are also available for download on our website, both on the home page and on the Investor Relations section, in the financial results page. Before I hand over to Philippe, I must warn you that today’s conference call contains forward-looking statements and that future results may differ materially from statements or projections made on today’s call.

For your convenience, the forward-looking statements and risk factors that could affect those statements are referenced at the beginning of our slide presentation and are included in our annual registration document filed with the AMF. This presentation will be followed by a Q&A session and I would like now to leave the floor to Philippe.

Thank you, Etienne. Good evening, everyone and thank you for attending our presentation.

I will start by giving you an overview of the financial highlights and Olivier will then come and give you more details. As far as Q3 is concerned, of course the challenging market conditions we've been facing since the beginning of the downturn continued to weigh on our financial performance.

And in spite of a slight volume increase which we recorded year-on-year and sequentially, our revenues were affected by a significantly negative price mix effect. And as a result, our consolidated revenues were down 20.5%, compared with Q3 2015.

EBITDA stood at minus - negative EUR52 million, which is as expected lower than Q2 2016, but also a slight improvement compared with Q3 of 2015, which was at minus EUR66 million. Free cash flow was negative at minus EUR75 million, similar to Q2.

Let's now turn on to slide 5 to get a wider view of the first nine months of the year in a nutshell the very tough market conditions continuing to wait on our performance. As you can see, revenues were significantly impacted, showing a 17% year-on-year drop in volumes.

Combined with adverse pricing conditions and combining the two, revenues were down 27.7% or minus 23% at constant exchange rates. We are clearly not yet out of the downturn.

And so our focus on the transformation plan of Vallourec, which I would like now to update for you. During the last quarter, we've taken important steps forward in our transformation plan.

We have now completely finalized the merger of our Brazilian operations into Vallourec Soluções Tubulares do Brasil, which allows us for significant industrial and administrative synergies. In China, we've now been granted all necessary authorizations from both local and national authorities to acquire the control of Tianda Oil Pipe.

The closing should occur in the coming weeks. As a reminder, this acquisition is a key component of our plan, the plan we unveiled in February.

It will put us in a position to develop a highly competitive our VAM technologies and a very competitive production operation. And we’ve crossed as well significant milestones in Europe.

In France, the last production campaign at the Déville-Lès-Rouen rolling mill took place beginning of September. De facto of the mill is closed.

In Saint-Saulve, the rolling mill is planned to be closed at the beginning of 2017. In Scotland, the heat treatment line located in Bellshill is planned to be closed as well by the end of this year.

And lastly as far as French steel mill is concerned, you will remember that we are in exclusive negotiations with Ascometal to sell a majority stake in that mill and these negotiations are progressing well according to plan and we expect to sign the final agreement by the end of this year of 2016. Lastly, in terms of commercial and technological developments, we’ve finalized a few days ago the strategic partnership that we had announced last January between Serimax, our subsidiary and a world leader in welding technologies and Technip, the leading EPC company, which is a long lasting customer of Serimax.

This partnership is of course focused in the field of pipeline welding solutions. And in this respect, Technip has acquired 20% stake in Serimax.

This partnership will enable us to better address the ongoing challenges of the offshore E&P and will position Serimax as the exclusive supplier of Technip for their spoolbases and their vessels. At the same time, we’ve continued to demonstrate our relentless focus on adapting our costs and we’ve showed a successful track record on cost reductions.

Over the first nine months of the year, cost and cash effort. So first, cash on the first nine month is capital expenditure amounted to EUR100 million and we estimate the total CapEx for the year will be below EUR200 million.

In terms of costs, we’ve again reduced our SG&A cost this quarter or third consecutive quarter. SG&A costs over the first nine months are down 14% compared to the first nine months of 2015.

And finally, we are continuing to adapt our headcount to the lower level of activity. At the end of September, our total headcount is down 22% compared to December 2014 when we started implementing our adaptation pattern.

I’ll now hand over to Olivier for more details regarding our financial results.

Thank you, Philippe. Let’s start on slide 9 about our Q3 revenues.

As mentioned by Philippe, our sales performance in Q3 ‘16 was characterized by two key factors, looking at volumes, we have experienced a slight positive effect year-on-year, plus 5%, mainly thanks to the start of recovery of OCTG demand in the USA, resulting from the increased rig and the beginning of inventory replenishment. However this positive volume impact was more than offset by a very significant negative price and mix effect of minus 25.6%.

This is due firstly to orders to measure oil companies in the EAMEA region [indiscernible]. Moving to the revenue breakdown by activity, it was in Q3 more stable compared to Q3 last year.

By geography, we can notice that revenues in North America in Q3 represented 18.5% of total group revenues to be compared with 25.8% in Q3 ‘15, impacted of course by the price decrease. A few words on next page on our P&L from revenues to EBITDA.

EBITDA in Q3 stood at minus EUR52 million, an improvement of EUR14 million year-on-year. First because despite consolidated revenues down 20.5%, our industrial margin was only slightly lower mainly as a result of lower industrial cost, thanks to our cost reduction initiatives and as well of the positive impact of deliveries to Petrobras, which are concentrated in Q3 ahead of the merger of our operations in volume.

Our SG&A were as well reduced by 11.3% compared with Q3 2015. Next slide from EBITDA to net income.

The operating result in Q3 was a loss of EUR143 million compared to EUR165 million in Q3 15. This improvement resulting mostly from slightly better EBITDA and as well from slightly depreciation of industrial assets.

Net income group share was a loss of EUR160 million, broadly comparable to Q3 last year at 164 million. Moving now to free cash flow, overall nine months 2016, Vallourec generated a negative free cash flow of minus EUR392 million compared to positive one of plus EUR35 million in nine months 2015.

This is mainly explained by the negative cash flow from operating activities at minus EUR275 million and mostly resulting with the decrease in EBITDA, a slight increase in operating working capital requirements of EUR17 million to be compared with very strong reduction of 475 million over nine months 15 and finally by lower capital expenditure at minus EUR100 million compared to EUR159 million over nine months of 15, we continue to be extremely stricter in terms of CapEx. As far as net debt is concerned, on the next slide, at the end of September, group net debt was up EUR1,020 million, down EUR500 million compared to the beginning of the year.

This reduction or this level of net debt amounting or leading to a gearing ratio of 29% compared to 50% at the end of ‘15. The decrease in net debt during the first nine months of 2016 results mostly from the EUR959 million net proceeds of the capital increase to place in H1, partly offset by the negative free cash flow over the period.

Finally, on the liquidity, and financing, at the end of September, our liquidity position is consisting of EUR2.3 billion of undrawn medium and long term committed facilities, including 0.2 billion facilities maturing in July 17. And EUR1.3 billion of cash.

At the same date, our short-term debt amounted to EUR1.2 billion, including the EUR650 million bond maturing in February 17. As a reminder, we successfully extended in July the maturity of around EUR1.5 billion over medium and long term credit lines.

And I will now hand over to Philippe for the outlook.

Thank you, Olivier, In conclusion, let me give you [indiscernible] we currently stand. We expect our oil and gas deliveries and results to be still impacted by mixed market conditions in the next quarters.

Mixed and contrasted. In the USA, the rebound in deliveries that we experienced in Q3 resulted from both re-stocking at Vallourec’s distributors and a progressive market recovery.

This should continue in Q4. Over the next quarters, OCTG trends should be similar, while restocking will progressively slow down and end demand will continue to grow, of course depending on the price of oil.

Prices have been under pressure on the OCTG markets since a while. They have stabilized to low level in H2.

In the EAMEA region, our current backlog is mostly made of tenders awarded by national oil companies in the past quarters and as you know, prices of those standards were continually trending down. As far as the IOCs are concerned, we see still very, very low orders coming from them.

They've not yet started to sanction new offshore projects and they remain very much focused on CapEx control. As a result, the low volumes and low margins recorded in Q3 2016 should not materially improve in the next quarters in the EAMEA region.

As far as Brazil is concerned, our H2 deliveries were concentrated in Q3 and this will result in lower level of deliveries in Q42016. Looking further, according to Petrobras’ strategic and business management plan which was released on last September 20, their consumption of OCTG 2 should remain approximately stable over the next quarters compared to the level of H2, second half of this year.

Moving to other markets, power generation revenues are overall expected to be down in 2016 compared to 2015, mostly due to the nuclear power generation activity, which is currently experiencing slowdown and no significant evolution is expected in the next quarters. More or less same situation with industry and others where revenues are expected to be down in 16 compared to 15, since the 15 in Europe remains affected by weakness of global investments and significant pricing pressure.

Whereas in Brazil, our operations are expected to be broadly stable. So no change expected, no significant change expected next quarters for those two markets.

In this context, we confirm our full-year guidance for 2016, as we published it in our 2015 with our 2015 financial results. I.E.

EBITDA lower than in 2015, negative cash flow of approximately minus EUR600 million, assuming a stable working cap and net debt not exceeding EUR1.5 billion at the end of 2016, after and including the acquisition of Tianda and the full consideration of VSB in Brazil. Looking beyond, the conditions in which we’ll operate in the coming quarters should stay broadly comparable to the current ones and group results should gradually improve from mid-2017, thanks to the benefit of course of the transformation plan, the cost cutting related to the transformation plan and to the so far expected rebalancing of the oil and gas market.

Thank you for your attention. We will now answer your questions.

Yes. Good evening.

Thank you for taking my question. Three on my side.

First, if you could give a bit more color on the Q4 outlook? Are you expecting Q4 EBITDA to be lower than Q3 because of lower shipments in Brazil or could that be offset by your other factors such as maybe further improvement in the US.

My second question is on the comments you make regarding the expected stable deliveries in the US over the next quarter, which I find a little surprising as the rig count has continued to grow and the de-stocking impact should be less and less pronounced. So can you maybe explain a bit why we shouldn't expect more improvement going into early 2017?

And my last question would be regarding the refinancing of the 2017 bonds, are you planning to pay it from your existing cash position at this stage. Thanks very much.

Olivier, on Q4?

Yes, on Q4, definitely, the Q4 EBITDA will be lower than in Q3 to a large extent for the reason you’re mentioning or we anticipated the raise to Petrobras over Q3 that we made in order to ensure very smooth transition in terms of supply chain, who will be administrative formalities. There are the creation of the newer legal entity in Brazil.

And this is a reason for which although Q3 results are probably above expectations, we did a concern on our guidance for full 2016.

As far as North American market is concerned, obviously, demand is growing. We see the rig count increasing week after week.

And we expect this to continue in the coming months. This being said, part of the rebound that we are experiencing so far is due to re-stocking and of course as you are well aware, we suffered from a very significant de-stocking effect by our distributors when the market was going down, not that end demand is growing.

They are rebuilding inventories but this will not last over whole the first half of 2017. So we have to discount this when we look at H1 in view of H2 of 2016.

Now I would tend to say that the key element on the North American markets, apart from the volumes is the pricing situations or until we do not experience a change in the pricing situation and we've not seen it happening so far. Of course, the impact of the volume will be positive on our topline, but not as much as we would expect and more important don't underestimate the slowdown of the other markets in the world.

So if I take a broader look at the first half of 2017, we’ll experience Q4 in US to be higher than Q3 and definitely in volume, but then Q1 and Q2 of 2017 should be consistent with this level of activity. So I hope that clarifies the point.

As far as your last question, Raphael, so yes, we have the maturity of EUR650 million in February 17 and we have various means at our disposal that we have cash on our balance sheet as of today, EUR1.3 billion. We have EUR2.3 billion of unused bank lines and we’ll of course over the next weeks and months, continue to maintain the bond markets or we’ll see overtime.

Yes. Thanks very much for taking my questions.

I think the first question I guess is, as we've gone through the last couple of years, I think every quarter, there's been something in the following quarters that's not gone quite right and on the back of that, the underlying cycle has just continued to remain very weak. And if I get this right, I mean you're going to be doing negative 100 at least of EBITDA in H1 next year on the sort of current guidance and with CapEx and interest, that's something close to 250 million of cash burn in the first half of the year.

I know liquidity is absolutely no problem, but I think does it get to a stage where you think, look, we just can't carry on burning cash like this and we really need a Plan B. And what would plan B actually be if there was one I guess is the first question.

The second question is, there's been a lot of focus on your competitor, Tenaris of rig direct. What do you think they're seeing that you'll not in terms of one element of the value chain, that they think they can capture that you don't - are they thinking, what does that do in terms of customer loyalty to them?

There's a lot of focus on the type of customers they're picking up. How do you think distributors will react to what they're trying to do because often you find competition actually creates competition and is this - now that you've looked at, is something that you potentially consider adopting or is this still something you really don’t think is worth looking at?

And the final question, just on the US market and you alluded to volume recovering, but no pricing. How much excess capacity do you think truly now exists in the US and when do you think or what do you think is the inflection point, either are you going to see capacity closure or what level does demand actually have to return to when you actually start to get some degree of pricing power back in the US market?

Thanks a lot.

Many questions, Michael. Maybe I’ll start with the personal note, I don't think every quarter brings anything in terms of bad news on our side.

We’ve been keeping the same guidance since the beginning of the year. We are continuously delivering on our transformation plan and on the cost reduction plan as well.

The market environment is another story. But as we've heard, not all news is bad, because North America at least since a couple of months, we've seen a change in trend.

Now, Olivier, I don’t know if you want to add anything on the forecast over the next two quarters, but I just wanted to make that point, we are delivering on what we had said at the beginning of the year.

Sorry. It was much more a comment about the underlying cycle and what you and I are talking about EAMEA being weak as the U.S.

recovers, this clearly wasn’t a comment on what you're doing internally. I think you're doing everything you can, but the comment was very much geared towards the ongoing weakness of the backdrop of the cycle?

I think my comment is more to make everybody aware that, yes, the volumes are picking up in North America. Yes, we take full advantage of that, but I want to insist on the fact that the pricing situation remains tough there and very tough on many markets and we've not addressed that so far.

But I mentioned that in my comments that the offshore market has clearly not restarted yet. So I just want to make those points clear.

Now this being said, as far as the North American market is concerned, I would really say that there is no value that we don't capture in North America. I mean our system, which is based on combination of our expertise and the experiences of our distributors is delivering a high value to our customers and they are well aware of that.

And this is something, which is very important. Our customers do like distribution and I remind to those who would not be aware that our distributors are managing all the inventories of our customers and they already provide a lot of additional services, which require specific skills and this is the core of the distributions skills and this is why we're partnering with them.

They have a value and our customers are perfectly capable of striking the right balance between their needs and what the distribution can bring to them. And our distributors are capable of striking the right balance between the customer needs and mill’s constraints and they always be the priority to the customers of course.

So, this is the life of our customers on the North American market and this is why they like our model. And just let me add you something.

I mean in terms of service due to our close partnership with the best distributors in North America, we are supporting each of our customers’ within two hours everywhere in North America and this is the value of the solution. So I am absolutely confident that this model, which is going through the crisis very efficiently and probably because our distributors are probably amongst the best distributors in North America, will show its value when the market, now that the market starts to recover.

Nicolas, who is head of our North American business, I think you're on the phone. Anything, you want to add to my comments.

No. I think you've said it, all of it, Philippe, the only thing I would like to say is that I think our model proved to be very successful as Philippe described, we’re servicing already all of those rigs with a huge proximity and carrying all of the inventory of our customers.

So I can tell you that in recent meetings we've had together with Philippe, they told us that this was really great, because they're not supporting any kind of inventories, thanks to our partnership with those specific distributors. And I think as a proof of success, we considered over the last 12 months, we have gained probably more than 20 new accounts in new or in different regions in North America that are coming to us, because they are very satisfied or very interested in the kind of model that we're supplying them with.

And the last point is that our model is not a static one. We are permanently and permanently having things that are working together with distribution and with the end users, the operators in order to constantly improve what are, let's say, the potential weights or overlapping costs that exist through the whole value chain.

And we have a current team that is spending three days with a very significant customer on their premises to see what more can we do together with distribution. And I can tell you that this is very much appreciated today even more than ever.

Nicolas, I think Michael had a number of sub-questions, some are regarding pricing trend in North America.

It is really, I’m sorry, in relation to the level of excess capacity, Nicolas, that actually think exists now in the US, available capacity that’s utilizable and what do we actually need are the capacity closure or demand recovery to get a pricing power back because I think you talked about the volume recovery being a priceless one but what do we actually need to see to get pricing power back?

I think several things there, Michael, the first one about capacity closure. You’re right, I think that first of all just on the purely competitive point of view you are seeing a lot of new capacity with brand new technologies, we have ours that is already up and running for a couple of years, which is the latest technology you can find which proved to be very competitive.

And so some of the oldest assets will eventually have to just say that they cannot follow the kind of pricing that is way too low today on the market. We're seeing this, it’s not impacting as directly as of today but a few days ago, one small ERW company has announced that it was - they were withdrawing some of the OCTG business, so this is starting to happen.

How much impact would this have globally in terms of capacity coming down it’s still to be assessed over the coming weeks and months. I still think also that the new capacity that will eventually be up and running will for a large extend also offset a big part of the imports that are coming today.

And that's at least I think that among the different earnings calls that we all have listening to, everybody agrees and in the business that really prices where they are, are not sustainable and I think that another push from the iron ore or as scrap will factor in at a point in time and we expect to be able to translate this at a point in time in the prices. But this will be a big fight over the next quarters I'm afraid today.

Last follow-up from me I promise, Bay City the ramp up next year, at the time when the US market looks like it's starting to recover. How nervous are you about the Bay City ramp up and what that could do to destabilize the market?

I don't think that's a question for us.

Yeah, but you know I think you know the volume that is intended to come on, does that make you…

Michael, from what I read the volume moves between 600 kilotonnes and 150 kilotonnes, so hard to answer.

Next question please.

I just have three questions. The first one, you basically mentioning that the time that in the Middle East going through very, very tough pressure from the bidders, if you can give a little bit color because from what I'm hearing the market it seems that one of the toughest competitor in the region is exactly Sumitomo.

If you can actually share this view, always relate to the Middle East what do you see any kind of sign of potential recording in terms of delivery due to the Iran activity. In the US, if you can give me a little bit some more color DDIS related to the use of usable inventory [indiscernible] distributors and also if you can actually give a view on the utilization rates across your assets.

And the last question is related to the blast furnace in Brazil now that you have idled, I was wondering what you're going to do with those assets. Whether you might actually be considering the potential sale of these assets even in the case that the potential be there might be one of your competitors.

Thank you.

Your other comments was Iran. So let's say we are restarting many quotes, I should say to Iran these days and like many of us I'm sure we quoted many 10,000 metric tons to the regions, booking orders - booking actual orders still needs that we can secure legally some contracts and we can get the financing of these contracts.

There is no doubt that Iran will start to get at some point in 2017.

Just an addition for your modeling exercise, Alessandro. When Didier is commenting that the low prices in Middle East will translate in ‘17, he is referring to the backlog.

And the fact that the average return for this kind of product is between six and nine months so the current backlog will translate into deliveries in H1 ‘17 at the current low prices. We have the feeling that the prices have bottomed out in this part of the world as well.

But any potential increase in new orders would have been an impact in terms of a raise, but only in roughly two quarters from now. But maybe I can take on the question on the utilization rate in Q3.

On average, group wide it's about 50%. It's moving fast in the US, where not that many weeks ago or months ago we are at 25% to 30% due to utilization rate.

We are now moving up of course quite quickly, Q3 was at about 40%, is going up again in Q4, which is leading now us to higher hire back some blue-collars in our operations. Brazil is much more stable because there is no recovery in the global macro economy in Brazil.

So that utilization rate is nearly below 50% in Brazil. In Europe, things are changing quickly as well.

Because as Philippe said, the last production campaign at Deville took place in September, Les-Rouen rolling mill will be closed in Q1 ‘17. And the disposal process of a majority stake in Saint-Sauve steel mill will be finalized by year end as well.

So that also in the last quarters, we were probably below 50% in Europe. The new capacity cut by 50% should allow us in the coming years to be at the leverage load of about 80% which for our kind of business is what we’re looking for because it allows us to manage peaks and downs in our activity.

I think there were a few questions regarding North America, inventories on the yard, Nicolas, any comment?

Yes, quickly. So Alessandro, on this one, first if you look at the trend using the data from question report our equivalent you see that definitely trending down both because the inventories are significantly down but also by the fact that of course consumption is increasing.

So, our estimates that was slightly above eight months of inventory in the ground today in North America, however a couple of comments there. Several studies or surveys were made in the industry of the distribution showing that there is a very significant percentage of this inventory that is very slow moving to say the least.

And so if you take this part of the inventory out, probably in average the distribution is getting closer to a normal level of inventory between four and five months. And actually what we're seeing today is some of the biggest fishes because I think the onshore industry is already pretty much standardized which again reinforces our distribution model how relevant it is but on those big fishes, but they are turning much faster than this.

And again more specifically, our distribution are doing a very good job on this and are probably at less than two months of inventory for those specific largest items.

And what's the last question on Brazil, about the blast furnace in Brazil. This is a really long term plan that we had in mind for a long, when we started VSB we built a complete steel mill including blast furnace and EAF by the way, so we managed in Jeceaba, on the Jeceaba outside the two routes to produce steel.

And we knew that at some point in time we would close this steel mill in the old mill of Barreiro which is our traditional operations. But of course this is facilitated by the merger between the two companies which of course eliminate all the difficulties of being billets from one operation to the other where we did not have the same state in terms of our percentage.

So we are implementing these long-term plan and we will on that adding and this will effective to ‘18 one single source of steel covering both our various rolling mills in Brazil and this also still will be state of the art since it is the one we've invested in Jeceaba. So that's the point Alessandro.

Yes, just basically a follow-up, thank you very much. But would you consider to sell these two blast furnaces that you idled at the moment they are closing?

No, they are very old equipments and we just closed them.

I have two questions please. The first one relates to the various frame agreements you have with Petrobras.

Can you please remind, if I believe you had two signed in 2012 and two more that were signed 2014 and if my math is correct the two in 2012 probably would roll in next year. So I'd like to get some understanding if that's correct.

And secondly, how should we think about the pricing evolution when you have to extend those frame agreements. And I'll ask my follow up question after that.

You’re right Amy that this - the end of those frame agreements is due end of 2017. So we’ll start renegotiating them in the coming months and I have of course no cue as I speak on what's going to be the outcome of that discussion.

Let me just comment that so far the various pricing formulas that we've been using with Petrobras over now quite a while have worked very well across the cycles, ups and downs and the customer. I think was pleased by the formula that we been using over again various cycles.

So at least as a starting point the present formulas are probably pretty relevant but that's all I can say for the moment.

And do those pricing formulas make reference to the pipe logic index?

They make reference to various formulas including prices and currencies and it takes into consideration both prices and currencies which is an elegant way of stabilizing the cost for the customer basically sells its products in dollar terms.

My second question is unrelated it's relating to the comments earlier about the higher input prices and the cost push we should expect to see. If you're really not able to push these costs through and to realize pricing, are these higher coking coal prices, are they - and iron ore, are they going to have an impact your margins as well.

I mean it's always very ambiguous when the cost of raw materials are going up, it creates an environment where we are in a better position to push prices up. To some extent we've suffered I may say from the - not the fall, but the collapse in the case of iron ore price and the coking coal as well that took place over the last two years.

So some firming up of the prices of raw materials is not necessarily bad. We already see, and for example now in China, the price of the steel billets going up quite significantly as a consequence of all of the increase in the price of the coking coal.

And this of course pushing some of the Chinese players to increase their prices. So I would say short term there is always the risk of squeeze, but it's not necessarily bad to have a firmer pricing environment in terms of the raw materials.

And don't completely forget Amy, if we speak raw materials that we are big net seller of iron ore, we produce 4 million tons of iron ore per year in Brazil and we sell between 2 million and 3 million tons. So when iron ore is rebounding which has been the case for the last few months, it’s a plus for us.

Couple of questions if I may. Firstly, can I just clarify something for the remainder of the year, you'd previously said that 3Q and 4Q ‘16 would average the same as the first quarter which was minus 72 million in EBITDA, with 3Q at 52 million, does that mean 4Q is going to be about 92 million, just want to sort of sense check whether that's correct and of course to make up the difference to 600 million of negative free cash flow, we should expect just over 200 in the fourth quarter.

So the second question is given you're close to finalizing the Tianda deal and you've actually closed the consolidation of VSB. Could you give us some steer on the on the moving parts of this consolidation, how much PP&E you’re going to recognize, how much minority interest you're going to recognize, how much debt, how much working capital, just so we can understand the lie of the land as we go into 2017.

Thank you.

So, some element I’ve answered to you Rob. I won’t give you the forecast for Q4 with a level of detail you are requesting.

But more or less, you’re right we confirm our guidance. So we sort of confirm the average result by quarter that we mentioned for H2.

On the moving parts linked to the acquisition of Tianda and the merger of VSB what I can tell you as of today, first of all Tianda is concerned, we confirmed the acquisition price which is EUR160 million for the 80% that we have as look today. And these are 80% are made of two blocks, 50% that are belonging to the current majority owner.

We got all the clearances from the Chinese authorities to acquire the 50% so that the closing will take place in the next few weeks or days. And then there is a remaining 30% of minority shares listed on the Hong Kong Stock Exchange and this we would make an offer, mandatory offer that will take place before year end.

From a casual point of view, out of this EUR160 million, we have already putting in H1 EUR57 million in escrow account belonging to the NGO in Hong Kong so that the cash out will disburse in Q4 should be about EUR100 million. as far the merger is concerned in Brazil, there will be a PPA exercise of purchase price acquisitions to be done by year end it’s not fully finalized.

It's a very technical, what I can tell you so far is that it is adding some debts by consolidating that of VSB but we are not consolidating and here is as well we are fully aligned with the guidance we gave earlier this year so the additional debt to VSB will be a slightly less than EUR200 million. From a working capital point, the addition of Tianda and VSB or VSB actually will bring [indiscernible] something around EUR100 million in working capital by year-end.

I think this is what I can tell you at this time.

Look forward to sort of hearing the details of that probably at full year results. And just lastly, if I may working capital for the first nine months really hasn’t moved very much as you sort of indicated, so for the fourth quarter, I mean any reasons to believe that working capital may move significantly in the remainder of the year or we sort of on track for a relatively flat year on year move?

It will go up slightly, because what I was telling you about the VSB consolidation that will add about EUR100 million working cap. On the other hand we are making savings, we better manage our working cap.

So we will not fully find that or you should not at the end of the year. It should be lower that this EUR100 million.

Small question if I may, could you comment a little bit more about Serimax deal, because Serimax is one of your dual, so should we conclude that it's going to add some increasing revenues for Serimax as part of this deal. And my second question is, don't you feel that it might in the long term jeopardize your relationships with Subsea 7.

Didier?

Maybe a quick reminder, let's say we decided to strengthen our alliance with Technip which was already significant customer of Serimax through an exclusive agreement to supply welding services on all their spoolbase worldwide. So on the first part of question, yes, this corresponds to an increase of activity for Serimax.

And Technip to let’s say secured this alliance just decided to take some shares of Serimax, this is why we closed few weeks ago the deal for the acquisition of 20%. Now if we have an exclusive agreement with Technip on the spoolbase, it doesn’t mean that Serimax will only work for Technip and we have also some strong relationships with the Subsea 7 with other EPCs and we are planning to continue to do business with them on ships, so outside of the spoolbased activity.

I would add also that Serimax is a player in the oil and gas business but Serimax is also diversifying in other activities, in other welding activities such as let’s say onshore line-of-sight or nuclear and for example we are starting some talks to provide some services with the some partners on Hinkley Point project in the UK. So, as a conclusion, this deal is positive for Serimax because it secure additional business but it's not closing opportunities on other activity than the spoolbase.

Some from my side, please. The first one is related to the EBITDA on Q4.

I understand that it will be lower in Q4 than Q3. But if you look at the consensus for the full year it suggests that the EBITDA should be close to minus EUR100 million.

So what is your position regarding the consensus right now for the full year? And the second one is related to the US.

You mentioned that your client base evolved with more than 20 new accounts recently. Just wondering: Is it distributors or final clients your total of distributors meaning that in terms of final clients it's more than 20 that you won this quarter?

I answer directly to you on the second point. Yes, of course it is end customers, its operators that we consider as our own customers even if they are supplied through our distributors.

Yeah that's correct. Olivier on the first question?

Again, I won't give a very precise figure for Q4, there are always uncertainties that can take place on one quarter or the next one from cut off elements. But you are probably slightly conservative on your EUR100 million figure.

Well, thank you, thank you all for participating in the call. In a nutshell, as you have understood, we are experiencing positive trends in North America but to be honest so far that the only regional world where we see market recovering, offshore remains completely subdued.

And so for us more than ever been focused on our transformation plan is the name of the game, as we are delivering nicely so far and I want to insist on the fact that we are done cost reduction initiatives, first because a number of initiatives that we are implementing will deliver cost reductions further in the future and of course off of 2017 and I'm referring specifically to what we're doing in Europe. Things always take more time in Europe then elsewhere in the world in that area of reorganizing and we will of course be depending on market evolution and the necessary initiatives to balance such a market.

Now this being said, we remain optimistic that not only North America but at some point in time in the Middle East and in Brazil the need for our customers to restart on a larger scale investing in exploration and production is what's ahead of us. Thank you.