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Operator: Good day, and welcome to Vallourec's 2025 Full Year Results Presentation hosted by Philippe Guillemot, Chairman of the Board and Chief Executive Officer; and Nathalie Delbreuve, Chief Financial Officer. [Operator Instructions] And now I would like to hand the call over to Daniel Thomson, Director of Investor Relations. Please go ahead, sir.
Daniel Thomson: Thank you. Good morning, ladies and gentlemen, and thank you for joining us for Vallourec's Fourth Quarter 2025 Results Presentation. I'm Daniel Thomson, Director of Investor Relations at Vallourec. I'm joined today by Vallourec's Chairman and Chief Executive Officer, Philippe Guillemot and Vallourec's Chief Financial Officer, Nathalie Delbreuve. Before we begin our presentation, I would like to note that this conference call will be recorded. A replay will be available following the call. You can find the audio webcast on our Investor Relations website. The presentation slides referred to during this call are also available for download here. Today's call will contain forward-looking statements. Future results may differ materially from statements or projections made on today's call. The forward-looking statements and risk factors that could affect those statements are referenced on Slide 2 of today's presentation. They are also included in our Universal Registration Document filed with the French Financial Markets regulator, the AMF. This presentation will be followed by a Q&A session. I'll now turn the call over to Philippe Guillemot.
Philippe Guillemot: Thank you, Dan. Welcome, ladies and gentlemen, and thank you for joining us to discuss Vallourec's fourth quarter and full year 2025 results. You can see today's agenda on Slide 3. I will move directly to Slide 5, where I will start by discussing the highlights of 2025. 2025 was another transformative year for Vallourec. We progressed several major strategic initiatives and achieved key financial milestones. We continue to drive operational excellence through the organization, including the execution of our cost reduction program in Brazil completed in Q2 ahead of schedule. We significantly narrowed the profitability gap with our primary peers, demonstrating the effectiveness of our strategy and execution. We stayed true to our value-over-volume operating model, securing a new and enhanced long-term agreement with Petrobras, winning major high-value tenders across the Middle East and driving market share and margin growth in the U.S. through our domestic footprint. We continue to streamline our sources and uses of capital, executing the sale of our non-core Serimax welding operations and redeeming 10% of our long-term notes. Importantly, we also positioned the company for profitable growth. We successfully acquired and integrated Thermotite do Brasil, adding to our line pipe coating capabilities. These are increasingly serving as a key differentiator in deepwater projects. In the U.S., we broke ground on a USD 48 million premium threading line investment in Youngstown to increase capacity to thread VAM high-torque connections, which are increasingly used in onshore wells with long laterals. We made further progress on the Phase 2 extension of the mine ahead of expected completion in 2027. As Nathalie will discuss, we built on our growing track record of consistent cash generation with over EUR 400 million of total cash generated in 2025 for the third straight year. These improvements in our profitability and financial resilience were recognized with investment-grade credit ratings across all 3 rating agencies, setting the stage for further optimization of our balance sheet on more favorable terms. Finally, in May, we paid a substantial dividend to shareholders for the first time in a decade, executed a minor buyback and work to enable our much more significant 2026 share buyback. Let's turn to Slide 6 to discuss our results and outlook. In the fourth quarter, we delivered solid results once again with group EBITDA of EUR 214 million, above the midpoint of our guidance. This came with a robust 21% margin. We delivered excellent total cash generation of EUR 177 million, thanks to robust collection and inventory management. In the first quarter, we expect tubes EBITDA per tonne to remain stable sequentially, while volumes will be below the Q4 2025 level due to slower international bookings in H2 2025. In Mine & Forest, production sold is expected to be around 1.4 million tonnes. As a result, we expect Q1 EBITDA to range between EUR 165 million and EUR 195 million. In the U.S., our assets remain highly utilized and recent booking activity remains strong. Industry pricing has softened slightly, but we are encouraged by the downward trend in imports and the resilience of our customers' activity. In international markets, commercial activity remains somehow subdued in H2 2025. But in the Middle East, we are now seeing clear signs of acceleration, especially in markets with higher level of unconventional activity. We see potential for activity to increase in the second semester and beyond as the oil market rebalances, gas-related activity increases and our customers face accelerating decline rates. Turning to capital allocation. We are making good progress with our EUR 200 million buyback announced in January with EUR 150 million remaining under the current program. We have purchased 3 million shares year-to-date. Now let me provide you with an update on 2026 shareholder return on Slide 7. Today, I am pleased to announce Vallourec's expectation to propose in addition to the EUR 200 million share buyback, an interim dividend of approximately EUR 450 million to be distributed in the third quarter this year. This would take the total return to shareholders to approximately EUR 650 million between January and August 2026, representing a year-on-year increase of around EUR 280 million. This distribution represents approximately 90% of our 2025 total cash generation and 100% of the proceeds of the warrants, which are expected to be exercised before the end of June. We have adopted a balanced distribution framework, limiting warrant dilution through buybacks, growing our dividend and maintaining a defensive balance sheet. Based on our current share price, this distribution represents a potential interim dividend of EUR 1.75 per share including the anticipated dilution from the exercise of warrants. This is a healthy increase of EUR 0.25 compared to last year's EUR 1.5 per share. Turning to Slide 8. We show the usual comparison versus our primary public peer. The trend is clearly positive over the past year, and we remain focused on eliminating the gap entirely. We continue to outperform in terms of return on capital, which is a key focus of our medium-term road map. And on that note, let's turn to Slide 10 for an update on our strategic priorities. We have made substantial efforts to streamline our core asset base over the past several years, but there is still work to be done. Our key strategic priorities in 2026 are directed at unlocking this potential. First, we will continue to drive operational excellence throughout the group. This is not a passive process. We are actively implementing a new management system, which is firmly results-driven and embedded in daily operations across all business functions. Bertrand Frischmann, our Chief Operations Officer, is responsible for its implementation. We look forward on sharing more about this program with you in the coming months. Secondly, we will continue to optimize our asset base to drive improved return on capital. And third, we are actively investing to position ourselves for profitable growth. Let me talk about a few examples on the later 2 initiatives now. Let's turn to Slide 11. Here, you can see the targeted set of high-return projects we have executed since the launch of the new Vallourec plan in 2022. You will recall we began with a major downsizing of our rolling capacity in Germany and rightsizing in China and ultimately Brazil. We made the strategic decision to close loss-making capacity and exit low-margin business. More recently, our focus has turned to the upstream and downstream elements of our value chain and is more about enabling profitable growth than shrinking our assets. In our upstream process, we have invested to expand capacity for high-quality iron ore production at our mine in Brazil. Production from the Phase 1 extension started at the end of 2024. We are now working on Phase 2 with completion still scheduled for sometime in 2027. We are now undertaking projects to reconfigure our steelmaking assets in Brazil to reduce complexity and maximize operational flexibility, including the ability to run our steelmaking operations without the use of our blast furnace. In our downstream operations, we are investing heavily in our flaring and coating capabilities where technology barriers and returns on capital are higher. We are adding to our threading line capability in the U.S., adding both large diameter and high torque capabilities. Meanwhile, we see significant opportunities in advanced coating solutions and we'll be investing in both line pipe and OCTG coating line this year. All of these projects will be executed within our expected CapEx envelope of EUR 150 million to EUR 200 million on top of significantly increased spending on safety initiatives as laid out in our capital allocation framework. Let's turn to Slide 12. to discuss one way in which we are positioning for profitable growth. At our Capital Market Day in 2023, we highlighted our favorable positioning in the conventional geothermal market and the upside that could materialize in more advanced technologies. We are now seeing clear signs that these next-generation technologies are moving towards widespread adoption. The momentum is driven by rising demand for low carbon baseload and dispatchable power with AI hyperscalers investing heavily to secure supply. The IEA has recently highlighted a fivefold surge in next-generation geothermal financing over the past 3 years to $2.2 billion in 2025. The increase in financing has been underpinned by rapid technological progress, much of which relates to learnings from the shale industry. With drilling and well costs representing up to 80% of total cost, significant improvements in drilling speeds are dramatically improving geothermal project economics. You can see the high potential of this market in the chart on the right, which comes on top of expected growth in conventional geothermal. We are already experiencing a significant increase in our geothermal bookings as our customers begin to execute on development pipelines that are orders of magnitude above today's installed capacity. We are uniquely positioned to benefit from this growth, thanks to our domestic footprint in the 2 largest markets for geothermal today, the U.S and Indonesia. Our cutting-edge research and development expertise has allowed us to continuously improve our product offering to meet the high demand of geothermal wells placed on tubular products. And we can pair these products with our world-class service offering. Let's look more closely at the next-generation geothermal opportunity. I am on Slide 13. You can see the elements that differentiate traditional geothermal from next-generation applications. On the left, you have conventional geothermal, which has seen steady growth over time but is restricted by the requirements for hot water reservoirs and sufficient subsurface permeability. In the middle, enhanced geothermal mitigates the permeability constraint by using Shell like technology to add subsurface fractures into deeper conventional geothermal systems. In closed loops or advanced geothermal, the only requirement is hot rock with no need for an external water source or permeable rock. Naturally, this opens up the resource potential exponentially. Turning to Slide 14. You can see the typical characteristics for each geothermal development type. Much like the oil and gas industry use rapidly advancing technology to tap into unconventional and ultra-deepwater fields in the early 2000s, the geothermal industry is pushing technological boundaries that open new markets. Vallourec is ideally positioned from its expertise in shale development to serve enhanced geothermal market. Similarly, our unique vacuum insulated tubing solution is ideal for closed-loop system. This is not a fantastic. We are already serving customers across all of these product categories. Clearly, though the growth potential in next-generation solution, coupled with Vallourec's higher revenue opportunity per megawatt makes the growth in advanced and enhanced applications quite compelling. As you may have seen, in January, we announced an exclusive partnership with XGS Energy to support their delivery of a 3 gigawatt pipeline of commercial advanced geothermal projects across the Western U.S. We hope this will be the first of many such fruitful relationships in this industry. Now let's turn to our usual discussion on the OCTG market. I am on Slide 16, where we focus on the U.S. market. On the demand front, the horizontal oil rig count has been stable since mid-2025. Gas-directed drilling activity has increased through 2025 and into 2026. A wave of LNG project start-ups and growing domestic gas demand is supporting market expectations. Rigs drilling for gas now account for 1/4 of the total count, up from 17% a year ago. Looking at the supply side, imports continued to decline for the fourth quarter following the administration's increase in Section 232 steel tariffs in June. Notably, we can see from the chart that the tariff has been more effective in curbing seamless imports compared to welded imports. On the right, seamless spot pricing has moderated slightly since the third quarter, though prices increased in both January and February alongside improving sentiment. Overall, we are encouraged by the improving supply side dynamics and the resilience of our customers' activity. Let's move to the international OCTG market on Slide 17. Demand remained stable in international markets, but was somewhat subdued in 2025 compared to the beginning of 2024. We saw slower tender activity in the second half of 2025 that will cause us to start 2026 at a slower shipment cadence. In most of our core regions in the Middle East, Africa and Latin America, we have continued to perform well, in part due to our strong positions in high-value markets like unconventional gas and deepwater. Looking ahead, in the Middle East, we are seeing some signs of an activity acceleration, especially in markets with higher levels of unconventional activity for which we are supporting customers today with our high top premium connections. Our premium portfolio often allows us to outperform the price indicators we show on the right side of this slide. That said, the latest outlook from Rystad does show an improvement in market pricing in January. I confirm that our average booking prices for international markets have remained at healthy levels due to our ongoing focus on value over volume. I will now hand the call over to Nathalie to comment on our financial results.
Nathalie Delbreuve: Thank you, Philippe, and good morning, everyone. So let me now lead you through our key figures and results for Q4 and the full year 2025. So let's turn to Slide 19 to discuss our full year results and the key figures. As you can see, tube volumes were 1,244 kilotons for the full year 2025, so down slightly year-over-year with lower tubes volumes in South America and Eastern Hemisphere, not fully offset by stronger volumes in the U.S. The full year EBITDA was EUR 819 million versus EUR 832 million for the full year 2024. This slight decline includes a significant adverse foreign exchange impact of EUR 47 million. Tubes volume decline was more than offset by positive price/mix effect in tubes, stronger contribution from mine and forest and continued cost reduction initiatives, maintaining a strong 21% margin. Net income was EUR 355 million versus EUR 452 million in 2024. Let's remember that 2024 was impacted by positive one-offs with the sale of the Rath site in Germany, generating a gain of sale of EUR 139 million and with our refinancing last year. Overall, we continue to build on our track record of generating consistent net income. Net cash ended the year at EUR 39 million, slightly higher than end of 2024 and after EUR 370 million having been returned to shareholders. So moving to Slide 20, we can see that we continue to build on our track record in Q4. It has now been 13 quarters that the EBITDA margin has been around 20%, showing the strong resilience of the group, its ability to adjust costs and maintain a strong margin. Since 2022, we have been reducing our working capital requirements in number of days, as you can see on the top right. In Q4 2025, we further improved our working capital requirement with robust collections and inventory management. You can see on the bottom left that we have a track record of healthy positive total cash generation with EUR 177 million total cash generated in Q4 2025, which leads to positive cash at the end of the year, as you can see on the right. Let's turn now to Slide 21 to start discussing our Q4 results and key figures. So revenues were EUR 1.043 billion, down 2% year-over-year, but again, impacted by negative currency effect of minus 6%. So revenues at constant foreign exchange rates are up 4%. Reduction in volumes sold were more than offset by improvement in price/mix and minor positive effect in Mine and Forest. EBITDA was EUR 214 million or 20.5% of revenues, stable compared to Q4 2024. Foreign exchange impact quarter-over-quarter is negative by EUR 10 million. So like for the full year, the positive price/mix effect in tubes across all regions as well as lower costs and cost savings did offset the impact of lower volumes, which I will comment in the next slide. Adjusted free cash flow in Q4 2025 was EUR 204 million to be compared to EUR 178 million in Q4 '24, which I will comment in more details later. And this led, as we saw to a net cash position, it's EUR 39 million achieved at the year-end. We will now look at Tube performance in Q4 on Slide 22 and also 23. So looking at volumes, Page 22, you can see that volumes were stronger quarter-over-quarter as we guided. They were lower year-over-year, mainly due to our U.S. import business in the Gulf of America as expected and certain regions in Eastern Hemisphere. Average selling price was higher year-over-year as mix shifted more to international in Q4. Overall, Q4 Tubes revenue was 2% higher year-over-year and even 8% higher at constant foreign exchange. Revenue mix by geography that you see in the bottom left shows a reduction in North America contribution due to the decrease in imports versus Q4 2024, but also to a strong contribution from Middle East. Slide 23, we can see the Tubes profitability. So Tubes EBITDA was EUR 183 million and 18% of revenue. So as you can see, our margin is very stable and resilient. Tubes EBITDA per tonne at EUR 548 increased by EUR 37 per tonne year-over-year and even EUR 65 if you consider constant foreign exchange rate, confirming again, the positive impact of our value over volume strategy. The decrease versus Q3 2024 EBITDA per tonne is due to a less favorable mix this quarter and a lower proportion of services. So let's move now and look at the Mine and Forest performance on Slide 24. The production sold in Q4 '25 was close to 1.5 million tonnes, outperforming our expectations voiced during our Q3 call, leading to full year volume of 6.2 million tonnes. Mine and Forest EBITDA, as you can see on the right bottom, reached EUR 38 million and 48% of total revenue, increasing sequentially by 10%. This reflects higher iron ore market prices, partially offset by seasonally lower volumes. For the full year, EBITDA reached EUR 171 million, up significantly year-over-year, reflecting higher quality in ore after the start-up of the Phase 1 extension in late 2024. So let's look now on Slide 25 at our net income key drivers and evolution. We continue to deliver a solid bottom line, as you can see on the right. In Q4, net income was EUR 96 million, that is 9% of total revenue, net income group share. You can see that Q4 2024 net result was higher at EUR 163 million. Again, as already explained, in 2024, the group net results had benefited from the one-off book gain on sale of the Rath site in Germany for EUR 139 million. Looking on the left at Q4, you can see that -- and the bridge from EBITDA to net income group share, you can see that depreciation and amortization amount to minus EUR 52 million, very much in line with previous quarters and Q4. Financial result is minus EUR 16 million. In the other pillar of the bridge includes restructuring and some one-off impacts such as in the quarter, a positive reversal of impairment of assets in China for plus EUR 38 million, reflecting the good operational performance and evolution of China. Income tax is minus EUR 35 million. Effective tax rate was 26% in Q4 2025. Let's look now at cash flow analysis on Slide 26. We can see how we convert EBITDA into cash flow for the quarter and for the full year. We had excellent total cash generation in Q4 of EUR 177 million, resulting in over 80% conversion of EBITDA to cash, thanks to robust collection and inventory management, driving the change in working capital that you see on the left. CapEx was minus EUR 55 million, a bit elevated versus prior quarters as work continues on our growth projects. And as you can see on the right, we did remain within the EUR 150 million to EUR 200 million range as disclosed in our CMD in the full year 2025 with total CapEx for the year of EUR 176 million. So for the full year '25, we delivered over EUR 400 million of total cash generation for the third straight year with restructuring costs halving year-over-year and continued structural improvement in our working capital as we optimize our operations. And in the last slide, let's look at our debt and liquidity. So thanks to the excellent net cash generation I just commented, we turned net cash positive in Q4 with plus EUR 39 million on the balance sheet -- of cash on the balance sheet at the end of the year. As you can see on the right, we have significant liquidity above EUR 1.6 billion, of which nearly EUR 1 billion in cash.
Philippe Guillemot: Thank you, Nathalie. Let's turn to Slide 29 to discuss our outlook. Starting with our tubes business. In the first quarter, we expect volumes to decrease sequentially. EBITDA per tonne should remain similar to the fourth quarter level. For the full year, we expect our North America tubes business to see sustained strength in volume, thanks to market share gains during 2025. We expect a slight near-term decrease in U.S. market prices with improving industry supply-demand conditions, setting the stage for potential improvement later in the year. In our international tubes business, we expect lower sales volume in H1 2026 due to slower booking in H2 2025. We see activity recovery in the key Middle Eastern markets, setting the stage for higher second half volumes. We expect market pricing to remain broadly stable versus the second half of 2025 with discrete customer contracts driving selective price upside. For Mine and Forest, we expect production sold to be around 1.4 million tonnes in the first quarter. We expect full year production of around 5.5 million tonnes, slightly lower year-over-year due to an improved production process focusing on value over volume. At the group level, we expect our first quarter EBITDA to range between EUR 165 million and EUR 195 million. Let's conclude on Slide 30. We are driving further improvement in return on capital through a relentless push towards operational excellence and asset streamlining. We are positioning for future profitable growth through targeted research and development and capital investments to solve the energy challenges of today and tomorrow. Finally, we are delivering on our commitments to shareholders, targeting a substantial EUR 650 million in shareholder returns in the first 8 months of 2026 while maintaining our crisis-proof balance sheet. Thank you again for your attention. Nathalie and I are now ready to take your questions.
Operator: [Operator Instructions] We have a question from Paul Redman from BNP Paribas.
Paul Redman: I just wanted to ask 2 questions. Firstly, was about the buyback and the distributions. And you've guided EUR 650 million of payout to shareholder in 2026. I just wanted to ask about the allocation and why you've allocated the -- well, additional cash to dividend rather than to buyback to kind of offset some of the dilution impact of the warrants in 2026? And then my second question was on working capital. You've had a big release this quarter. I want to go into a little bit more detail on what the drivers of that is. And also, how do we think about working capital into 2026?
Philippe Guillemot: Okay. First, I will take your first question. As you know, we have launched a share buyback plan for EUR 200 million to be executed by end of June. But given the daily volume credit and obviously, how we can execute share buyback, I think we were a bit capped -- and that's why we only allocated EUR 200 million out of the EUR 650 million to share buyback. Remaining being, as you have seen, the sum of the proceeds of the share buyback -- of the warrants and what was not used for the share buyback from the total cash generation of '25. Second, on the return on capital employed and working cap, you clearly understood that since I joined, my main focus was on deleveraging the balance sheet of Vallourec, and we reached the zero net debt end of '24. And again, end of '25, we have a positive net cash of EUR 39 million but the levers we have used to achieve such performance was obviously to work on every aspect of our capital employed, starting with the working cap. And by the way, there is a nice slide in Nathalie's presentation, where you can see that our working cap in days of sales continue to decrease, and we still see further room for further improvement. And on our asset base, as I have mentioned in my presentation, we continue to question and challenge any asset we have in Vallourec, which is not absolutely needed to generate, obviously, the performance we are contemplating.
Operator: We have a question from Matt Smith from BofA.
Matthew Smith: I wanted to start on the mine, if I could. You talked to a new strategy, sort of value over volume there. I wonder if you could give us any update in terms of where you might put new guidance perhaps for annual EBITDA for that business versus what you've presented in the past? What is the net-net of that strategy? And I suppose a follow-up would be, does that have any implications for future mine expansion plans that you've talked to before, please? That would be the first one. And then the second one would be -- thank you for the updates as ever around the U.S. sort of OCTG market. I can see those seamless imports coming down. I think the one sort of topic that scratch my head out a bit is domestic supply in the U.S. There was actually a source of a lot of supply growth in 2025, which doesn't seem to get much airtime. And I just wondered if you could talk to the drivers of increased supply, domestic production in '25. And if you saw the picture any differently for '26, your insights there would be really appreciated.
Philippe Guillemot: Okay. Thank you. So let's start with the mine. First, we are very consistent with what we said in September 2023 about what we expect from the mine. You remember, Phase 1, now fully executed around EUR 100 million EBITDA. Phase 2 completed EUR 125 million. So there is no deviation versus what we said in 2023. What has changed in the meantime is that we have applied our recipe for success, value over volume to the mine too. So today, we extract less [ ROM, ] but we are able to generate -- to produce more iron ore, more high-quality iron ore and obviously, the EBITDA we are looking for. So that's the logic behind this. So again, I insist no change versus what we said in September '23 about what we expect from the mine. As far as the U.S. -- OCTG U.S. market is concerned, several -- yes, first, imports have declined since the implementation of the 232 import tariff, which obviously led customers to buy more from domestic capacity. So in fact, First effect is a better use of existing domestic capacity, starting with ours. And as I said, we have nice volumes, and we are well loaded with our capacity today. On top, what we see is a better sentiment and as you have seen, Pipe Logic slightly going up in Jan, in Feb again, which obviously give us confidence that at some point, the balance between supply and demand will translate into upward pressure on prices. And this is likely to obviously happen in '26. On top, as we mentioned, we have invested in additional capacity to produce high-torque connection for unconventional drilling. That's a change in the market. And the market is becoming more premium. As you have seen, our customers are able to produce as much oil with less rigs, less wells, thanks to this technology. Obviously, there is a real appetite for this technology that we have developed and for which we have gained market share. And obviously, we intend to continue to gain market share.
Operator: [Operator Instructions] We have a question from Kevin Roger from Kepler Cheuvreux.
Kevin Roger: I have 2, if I may. The first one is maybe to understand a bit more the Q1 guidance because at the time of the Q3 earnings, we were mentioning some shift in volumes from Q4 '25 to H1 '26. So I was wondering if the lower volumes that you mentioned for Q1 means that those volume has been shifting to Q2 and maybe to understand a bit more the implication that we saw between the 2 quarters. And the second one, you talked about the geothermal activities during the presentation quite a lot. And recently, you signed a deal with XGS. When we make some math with the elements that you shared with us, this framework agreement could represent quite a lot of revenue, maybe something like EUR 1.5 billion. So I was wondering if you can share a bit with us how you do see this XGS partnership impacting the revenue for Vallourec in '26, '27 and '28, please?
Philippe Guillemot: Yes. Going back to Q1 volume being lower than Q4, I remind you that our volume in Q4 were much higher than Q3. So obviously, this has to be put in perspective. When oil price started to go down, we have seen last year in H2 customers not canceling investment plans, but taking more time to decide on their investment and placing orders. And that's what's reflected in our bookings and will translate in H1 in our invoicing. But again, as I said, we see clear pickup since the beginning of the year as, by the way, oil price went up $10 since. So that's why I think the profile of this year volume-wise is likely to be similar to the one of '25. As far as geothermal is concerned, thank you for noticing, obviously, to bouncing back on what we said on geothermal. It's a new market which is opening. And again, 3 years ago, obviously, we had -- we decided to obviously invest time and money on research and development on new application for our know-how. And this geothermal and advanced technology was the right bet. And yes, today, and again thanks to the data centers, which are popping everywhere and the huge need for baseload electricity, this technology now have obviously a good prospect. And as I said, there is more project in the pipeline than the existing installed base, and we are positioned on it. We mentioned about XGS for which we provide unique technology with -- we are the only one able to provide the famous VIT technology, vacuum insulated tubes. And when you do the math, yes, I think your conclusion is the right one. I think these wells because geothermal is based on wells require technologies, premium technology we have. And obviously, this will come on top of our technologies to support our customers on unconventional, more gas-directed production.
Kevin Roger: But sorry, if I may follow up, how would you, in a way, see the phasing? Would you consider that those opportunities will mostly materialize in '28 because those guys needs to get a lot of financing? Or you do see already a lot of stuff in '27, for example, or even sooner?
Philippe Guillemot: Data centers need electricity now and in the next few years. So there is no time to wait and geothermal project can be executed as fast as they can drill. So it's already today. And obviously, it will ramp up nicely over the next years, but it's not something for the future. It's already something for projects which are currently in execution phase.
Operator: [Operator Instructions] We have a question from Baptiste Lebacq from ODDO BHF.
Baptiste Lebacq: Two questions from my side. First one is, if I look at your slide, Page 11, I see you still have, let's say, a quite tense investment program for 2026. Does it mean that in terms of CapEx, we should be in the upper range of your, let's say, CapEx guidance that you gave into 2025? And second question is on the geothermal market versus hydrogen market. It seems that you are more bullish right now on geothermal than, let's say, on hydrogen market. What is your view on the hydrogen market? Is it, let's say, the next wave after geothermal in terms of sequence for you?
Philippe Guillemot: Yes. As far as CapEx is concerned, yes, we gave you on Page 11, a sense of what we have been doing since 2022. Many projects, obviously, are in execution phase in '26. But nevertheless, we will be within the envelope we shared with you between EUR 150 million to EUR 200 million. So no risk to go beyond what we said. So we stay obviously very disciplined on our capital allocation. The good news is that, obviously, the return on investment of all these projects is fairly consistent with our will to increase over time our return on capital employed. As far as hydrogen and geothermal is concerned, it's true that 3 years ago, nobody was talking about Gen AI. Nobody was talking about data centers, hyperscale. Today, that's a fact. There is a lot of investment. There is need for basal electricity and geothermal is one of the solution to provide these huge quantities of basal electricity. So it's clear that it's come now faster than hydrogen and green hydrogen. Nevertheless, on green hydrogen, we are in talks with many customers whose projects are in the FEED phase, so engineering phase, which sooner or later will reach the FID stage, investment decision stage. So that's something to come that will come on top. And as you remember, our Delphy storage solution is the only one available today to store between 1 and 100 tonnes of hydrogen. So more to come. And as you remember, we have decided to manage this business as a turnkey business. So obviously, it could be a nice addition to our revenue and profitability in the future, and it's fully part of our 5-year plan.
Operator: Now we have a question from Julien Thomas from TPICAP.
Julien Thomas: I have 2, please. The first one would be about maybe your take on your German partners' agreement regarding HKM JVs. Do you have something to share with us or something like that? And the second question about your improvement in EBITDA per tonne. Could you give us what come from downstream investment versus, let's say, historical restructuring of existing capacities?
Philippe Guillemot: Well, first on HKM, yes, yes, the agreement between thyssenkrupp and Salzgitter opened the door for us as thyssenkrupp will do to sell our shares to Salzgitter and terminate our shareholding of HKM. Obviously, there will be -- we'll have to provision for all the work Salzgitter will have to do when they will be. But this is fully already covered by our balance sheet provision. So I think we are -- there is -- I think it's -- for us, it's a good news. I think thyssenkrupp and Salzgitter have reached this agreement and that now we can execute this transaction. As far as the EBITDA per tonne is concerned, EBITDA is a result of obviously, average selling price, which is driven by our value over volume strategy. You remember, when I joined Vallourec volume were 1.850 million tonnes. We are now slightly above 1.2 million tonnes. So drastic change with the past, but average selling price has significantly increased. And EBITDA per tonne is a consequence of cost. And we have worked a lot in the last few years, and we continue to do so to continue to lower our cost structure and ensure it's a very highly flexible industrial footprint. So whatever the volume, we protect our margin, thanks to our ability to flex cost whenever we need it to adapt to the sequence of bookings and the cycle of this industry. So that's why we are able to -- we have been able to close the gap with our primary peer on EBITDA per tonne. And you've seen the data on the slide showed earlier. And we will obviously continue to do so, and we have projects in order to continue to improve on that front.
Operator: We have a question from Mike Pickup from Barclays Capital.
Mick Pickup: It's Mike here from Barclays. Just a quick one. You talked about the international business improving in the second half. Is there anything significant that we should be keeping an eye on something like the big Kuwait orders? Or is it just a general pickup across the regions?
Philippe Guillemot: Well, first, 2 things. One, when barrel of Brent is going up USD 10, it's clear that there is an incentive for our customers to go a bit faster on executing their plans. Second, what we see is that there are major unconventional oil field opening, which require many wells using our technologies, starting with iDRAC. So that's something which seems to pick up significantly since the beginning of the year. And we may -- yes, you -- we may communicate more widely in the future.
Operator: We have a question from Paul Redman from BNP Paribas.
Paul Redman: Am I able to ask one more?
Philippe Guillemot: Yes.
Paul Redman: I just want to touch on Venezuela quickly. One of your peers spoke in length about opportunity in Venezuela. I kind of wanted to ask about your position in the country and whether this is a market you think you'll be able to sell volumes into in the relatively near future.
Philippe Guillemot: So we used to sell to Venezuela years ago. What has changed in the meantime is now thanks to all the investment we did in Brazil, we are able to make the pipe which are needed for Venezuela in Brazil. So obviously, much closer than it was in the past coming from Germany. The onshore oilfield in Brazil are sour. So you need sour service pipes, which we make and which are obviously very premium pipes. So from a product standpoint, I think we are uniquely positioned. And on top, as you know, given our strong presence in the U.S., we are the #2 player on onshore business in the U.S. We have close relationship with the U.S. customers. So today, we have a task force, which is a mix of our U.S. sales team and Brazilian production team in order to seize any opportunities that may come in Venezuela. So more to come, will depend, obviously, how fast our customers go forward with their project.
Operator: We have a question from Jean-Luc Romain from CIC CIB.
Jean-Luc Romain: My question also relates to geothermal. You mentioned rightfully that the product you will deliver is very specific with kind of pipe in pipe also. What's the limiting -- do you have a limiting factor which will be the capacity to produce those pipes in terms of your growth in sales? Or do you have a strong capacity to do this?
Philippe Guillemot: We have available capacity. VIT is a process in itself because we need to weld pipe inside another pipe. So that's a specific industrial setup that we have and for which we have capacity available. So no, obviously, it's clear that if we double our volume, thanks to this new market, at some point, we will reach our capacity limit, but it's not yet the case. And anyway, it's good to know that whatever to be on more than one market and obviously, to mitigate any up and downs on any market, there is the one oil and gas.
Jean-Luc Romain: Understood. And from what you said, the EBITDA associated to the growth in geothermal could rapidly become in the tens of millions? Or could it be maybe at a later stage in the hundreds of millions.
Philippe Guillemot: In 2022, I said that we were expecting between -- maybe in 2023, that we were expecting between 10% and 15% of our group EBITDA coming from this new energy applications. So it's fully part of it. It's fully part of it. And obviously, we are very strict with our value over volume strategy, and I can guarantee you that it will not be dilutive to our EBITDA per tonne.
Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.
Philippe Guillemot: Thank you. Thank you all. I'm very pleased to be in the position we are today. Vallourec is a fully transformed company, evidenced clearly by our investment-grade balance sheet and the robust returns we are delivering to our shareholders again in 2026. Meanwhile, we continue to see opportunities as we drive operational excellence across our organization and position for profitable growth. We are well positioned to serve the energy challenges of today and tomorrow. Operator, you may end the call.