Paolo Rocca: Well, I think that there has been a structural change both on the side of the market and on the positioning of Tenaris in this market. Today, I think the relevance of the activity and investment in the US is much more accessible for Tenaris. We have deployed our asset in the last five years, especially, but even we started with our investment in the States in 2007 on a substantial way, and this is positioning Tenaris very differently in a very important area of oil and gas market. So, we are, in this sense, structurally different. We are also structurally different because of the expansion of the differentiated product and services. The Rig Direct is giving us additional margin in my view and in my view, we can defend the differentiation coming from the Rig Direct and the level of service that we are adding to our product delivery.
This was not the situation five years ago. We progressed over time. Also, our positioning in the Gulf, Middle East, is substantially different today with the investment in Saudi Arabia, the new plant in Emirates, let’s say, the positioning of Tenaris has changed. So the combination of the change in the market, because the concentration will also help the concentration of oil producers and the international oil company, to some extent is favoring producers like Tenaris that have an established global footprint. And there are, let’s say, having standards from quality to safety to environment that fit with the demand of international oil company. Also, this has introduced, in my view, a structural change that justify a level of margin higher than the level of margin that is the average of the last 10 years.
Marc Bianchi: Thank you very much.
Operator: Thank you. One moment for our next question, please. All right. And it comes from the line of Luke Lemoine with Piper Sandler.
Luke Lemoine: Good morning. Just one question. With your Rig Direct program in the US, you have pretty good insight into some of the larger operators’ programs. I just wanted to see if you could comment on how you see future activity unfolding over the next three to six months.
Paolo Rocca: Thank you, Luke. I think Luca, you can…
Luca Zanotti: Yeah, sure. As I was saying before, we see activity increasing from the current levels. And when we look at, let’s say, a large portion of either our direct customers or customers’ prospects or that we are in a relationship, we see this going up. And our, let’s say, estimation of this activity increase is very much in line with what the drillers that already hold our — sorry, their earnings call have said. We see activity moving up 5%, 6% from our current levels into first quarter of 2024. This is what we’re seeing.
Luke Lemoine: Okay. That’s perfect. Thanks so much.
Operator: Thank you. [Operator Instructions] One moment for our last question, please. It comes from the line of David Anderson with Barclays.
David Anderson: Hi, good morning. So, if we assume the rig count — US rig count bottoms here in the next month or so, can you talk about how you see volumes trending over the next 12 months? Middle East continues to ramp up, as you highlighted, Saudi and UAE. Offshore should be close to speed by midyear. I would think volumes in the second half of ’24 should be up quite a bit compared to the second half of this year, perhaps even up double digits. Am I thinking about kind of that trajectory, right, in terms of how you’re seeing the market developing for volumes?
Paolo Rocca: Thank you, David. I think it’s difficult to guide expectation for such a long, distant future, because the world is moving on, let’s say, faster on different aspects. There are conflicts around, and there are issues that are really out of our control. We can perceive and we can see our horizon in the next couple of quarters. That is the one that we are trying to represent. But it is difficult to understand for us where we could be in the second part of 2024. Probably the area on which we can have a medium term is the area of offshore projects that are, let’s say, possibly more stable over time. Once they are decided, they go. Gabriel, maybe in this sense you can add some comment on what you see for the second part or medium term, let’s say, 2024.
Gabriel Podskubka: Sure, Paolo. Good morning, David. Indeed, offshore drilling continues to increase. The number of rigs that we have operating today globally in the offshore are even increasing the pre-pandemic levels, both in shallow water and deep water. So every discussion that we have with our customers, FID projections, cap projections, indicate that this is a multi-year cycle. The activity is robust and will continue to grow. There is traction virtually in all offshore basins around the world. And as a matter of fact, Tenaris has already benefited from this growing trend, if you consider, as we are closing November and December shipments, but our sales revenues in 2023 will be at least 50% higher year-on-year than 2022.
So this is already a trend that is embedded in our sales in 2023. And we see this continuously increasing. We have seen during the quarter also some signs of increased activity in exploration. This is an important niche for us. And we had some awards on exploration campaigns in Egypt, Angola, offshore Colombia as well. So we have a strong backlog in offshore mainly on the development, OCTG and pipeline with deliveries into 2024 and some of these projects will even arrive to deliveries into 2025. We see this as a — at the early part of a multi-year cycle and I think our acquisition of the coating facility in Italy and the announcement of the Shawcor coating division is a sign of our confidence on this segment where we already have a differentiated portfolio and have an established position.
So we see that this will be an ongoing contribution within the portfolio.
Paolo Rocca: Thank you, Gabriel. Still, let me add. We have some caveats. The situation in the world is exposed to very different issues that could come out, disruption I would say that would come out. The price of LNG globally continues to be influenced by the situation in Europe. Price of oil may be influenced also by the situation in Middle East. Our operation also, for instance, in the eastern Mediterranean sand oil project has been cancelled. In general, also in Latin America election year in Mexico, now in Argentina. So the overall view is the one that we expressed, but we need to take into consideration the potential for disruption that is for sure something that exists in 2024.
