Good day, ladies and gentlemen and welcome to the Q1 2015 Tenaris SA Earnings Conference Call. My name is Alex, and I will be your operator for today. At this time, all participants are in a listen-only mode and we will conduct the question-and-answer session towards the end of this conference. [Operator Instructions] As a reminder this call is being recorded for replay purposes. I would now like to turn the conference over to you for today Mr. Giovanni Sardagna, Director of Investor Relations. Please proceed.

Thank you, Alex and welcome to Tenaris 2015 first quarter conference call. Before we start, I would like to remind you that during this conference call, we will be discussing forward-looking information and actual results may vary from those expressed or implied during this call. With me on the call today are Paolo Rocca, our Chairman and CEO; Guillermo Vogel, Vice President of Finance and member of our Board of Directors; Edgardo Carlos, our Chief Financial Officer; German Cura, Managing Director of our North American Operations; and Gabriel Podskubka, the Managing Director of our Eastern Hemisphere Operation. Before passing over the call Paolo for his opening remarks, I would like to briefly comment our results. During the first quarter of 2015 sales declined 13% compared to the corresponding quarter of the last year, and 16% sequentially as they were affected by the rapid decline in the drilling activity North America and the strong reductions in exploration and product spending that are taking place around the world. Aside North America sales declined significantly in Iraq, Ecuador and Australia while sales in South America was supported by shipments for pipeline projects in Argentina and Brazil. Our EBITDA for the quarter reached 527 million which was 27% lower year on year and 26% lower sequentially. Our EBITDA margin of 23% has been affected by inefficiencies associated with low utilization of production capacity and will decline further in the comings quarters. Average selling prices in our tubes operating segment were down 4% compared to the corresponding quarter of last year that lasts sequentially. During the quarter our sales of high end seamless product were up 58% of our total seamless volumes. During the quarter cash provided by the rating activity was $878 million allowing us to reach for net cash position of 1.9 billion at the end of this quarter. Now I will ask Paolo to say a few words before we open the call to questions.

Thank you Giovanni and good morning to all of you. Our first quarter results [indiscernible] in our industry. However from my point of view we also saw a credit [indiscernible] performance considering the severity of the challenge that we are seeing. Our shipment particular in Seamless Pipes held up reasonably well. Seamless shipments declined 12% quarter-on-quarter but went down only 2% year-on-year. We also reacted quickly to reduce working capital and our free cash flow of more than $600 million further strengthen our financial position. Over the next two quarter however we will confront to the full impact of the activity reduction that have taken place in North America together with [indiscernible] of the progress delayed and reduction in exploration activity that are taking place in the rest of the world. These effects will be amplified by the steps that our customer have taken to reduce ventures. This will result in significant reduction in shipment volumes particularly in Seamless Pipes and premium products, before the start of broader recovery by the end of the year. Beyond the immediate impact on our results this project represents an opportunity for Tenaris to deploy differentiated customer value proposition. Oil and gas companies are looking for sustainable cost of reduction. They do not compromise the security or reliability of their operation and allow them to confront the expended period of low commodity price. We are offering projects and service - that combine a reliable product technology, full technical support and integrated material management services which reduced the total cost of the operation. As an example we are recently awarded a multi-year contract to supply the complex [indiscernible] HBST product, a major [indiscernible] gas development which will supply 5% of the United Kingdom gas requirement starting from 2020. The supply package of [indiscernible] includes our newly developed Blue Max and Blue Heavy World connection fully tested under the ETI [indiscernible] vertical. Our duplex technology and the good scope of tightened management service and also supported by local trading and repair capacity. Meanwhile in the US and in Canada our direct rig service model is winning our customer and in the last few months we have been awarded significant contracts for operation in the Eagle Ford and the Monterey shales. Today customer increasingly appreciate the financial strength that allow us to continue investing in our industrial system and product development and testing and extending our service capability and provide the assurance of continuing reliability. This strategy will be longer and more severe than that of 2009 for our industry. That’s why we are working hard to support our customer to [indiscernible] prepared for the recovery. We can now take any questions you may have.

[Operator Instructions]. Your first question comes from the line of Al Sawyer [ph] with Morgan Stanley. Please proceed.

Thank you and congratulations with some phenomenal cash generation this quarter. I think you must be generating more than the rest of my [indiscernible] combined by lots of things. My first question is on Middle East, Africa, why were the volumes so weak because the rig count and the drilling activity for that region appears to have been sequentially quite robust I would say?

Thank you Al. On this on the situation on Middle East and Africa I would Gabriel Podskubka to give us a view on the - that’s driving force of the demand and higher demand is relatively weak in this period.

Thank you. Paolo good morning Al. Yeah regarding Middle East as you say there is an important drilling activity but I think Tenaris need to go through the main countries to hit some color from [indiscernible] in Saudi for example we have still today the 210 rigs that we have the previous quarter so drilling activity there is very strong. Some marginal movement from rigs to from oil to gas which plays our advantage but there we see a strong drilling activity. On the other hand as we commented before there is an important stock of [indiscernible] in Saudi there are not a lot of tender going on we expect new tenders before the end of the year so this fall in a better demand and shipment in 2016. If you consider the Kuwait and Abu Dhabi we also see they are ramping up our rigs there are tenders ongoing these are long purchasing cycles which will have translate into increased shipments again in 2016. And it’s also necessary to comment on Iraq because Iraq has been a soft spot in the Middle East today we have about 55 rigs operate Iraq while we had about 90 rigs less than a year ago in Iraq. So Iraq has been deeply impacted by new situation of price, lower capital security issues in some geographies, so Iraq is of course soft area in the Middle East. So overall we expect to continue to have low level of shipment of OCTG in the Middle East, until this bounce back in 2016.

Okay. Thank you for that clarification. My second question is really more on the U.S. market I can see that the rig count is coming another maybe 30% or so sequentially from the first quarter to the second quarter and I would imagine that it’s going to have a disproportionate impact on the demand for welded products and therefore actually we think about your average revenue per ton in one sense you are losing a lot of low priced product and on the other hand you highlighted that overall prices are now going to becoming lower for high quality product maybe as well could you just help a little bit how to think about that?

Thank you Al. On this second well in general you have seen the prices reflected also in [indiscernible] logic prices are going down since the beginning of the year by around 30% evenly distributed between welded and seamless I mean the two component are going down you are right that stock reduction is probably more skewed in the sense of using the welded component there is a lot of welded material coming from import that build up overtime inventory that now is being used in getting to the rigs but the price went down for welded and for seamless and this is also for us to some extent also this will reflecting into our revenues. But I will let German to see if we can imagine a different -but in the end will reduce the impact to some extent in the current on price our revenues.

Thank you Al, thank you Paola, good morning Al. Well only a few details to add I think volume of welded would be perhaps [indiscernible] more effected as a result of what we just indicated impressive amount of import welded imports coming from Korea there were 450,000 tons during the first quarter this is affected by logics and it’s naturally affecting both seamless and welded. Now I think what the key is whether we could use the environment to - in the way OCTG is servicing the rigs and we are making good progress on that.

Okay thank you very much, there is also my two questions so I will go back in the queue again thanks.

Your next question comes from the line of Bill Sanchez with Howard Well. Please proceed.

Thank you. I was hoping perhaps you could update us as you did in the 4Q call you did offered an expectation of 30% decline in OCTG consumption globally for the industry and I think Paolo your expectation time was as to also do a little bit better than that in terms of potential declines here I guess on the revenue line and certainly your first quarter looks like you're off to a good quarter. Could you just maybe update us on how you're seeing the global market right now in terms of consumption declines here and also just relative to Tenaris?

Thank you. We today we see the market reduction more or less in the term the same term that we indicated in the last conference call. And overall reduction in 2015 of around 30% for CPG, 20% of which is related to actual reduction consumption and 10% is due to stock reduction. Now in this environment there is a lot of stock on the ground and in the market that goes down. We are very active in different markets and I think that our proposal this the strength of the product portfolio and the financial strength of the company put in a very good position to gain market share in different environment in the US, in Latin America or international. But I think that this will be reflected more overtime not immediately because this is not a market that move by demands as there are contracts in place that have long-term agreement and in some cases when our capability I recognized and selected by our customer, this will be reflected I think overtime we will see an increase in market share in 2016. Because we are on a large level we have a solid factors of product and services and not to move enough to discuss so much [indiscernible] in the coming quarters. We see a little more of it.

Fair enough. My follow up would be can you update us perhaps on the steps of the industry and Tenaris can take from here to slowdown the level of imports still coming into the US.

Yes on this we are acting on different direction. [Indiscernible] maybe you can summarize where do we spend and which are the actions that we will take.

Good morning Bill. Thank you Paolo. A few updates that we have indicated in the past together with the rest of industry [indiscernible] review petition [indiscernible] which will start somewhere around the 3Q and given the level of imports that we've seen basically from [indiscernible] industry believe have a strong case. Then also I think important in the last week [indiscernible] has introduced [indiscernible] change in the important components [indiscernible] that issues the deal where convention [indiscernible] restoration associated to the terminations made by the ITC. And now the deal will move through the house and I believe we're going to have [indiscernible] month or so. Also additionally in the last three weeks we want an important trade case in Canada against nine countries particular in Korea. The Canadian [indiscernible] against Korea, the range from 10% to 37.5%. And as you remember the aspects or facts [indiscernible] upcoming review petition so we continue to move as an important element and becoming drop to be ready for.

Thank you German. In that wave we are seeing a reduction now compared. We expect a reduction in the import in the coming quarter compared to what we have seen in the last one.

The next quarter so no wailing all the imports to get to the stage by - we have seen already in April a reduction rate in first quarter.

Also there is not so much room to import to continue to get and we have such a high stock and impairments of stock reduction like the one we see today.

I appreciate the time. I'll turn it back.

Thank you.

And your next question comes from the line of Frank McGann with Bank of America Merrill Lynch. Please proceed.

Okay, good morning. Just two questions one on cost cutting efforts. I understand during significant making significant efforts to cut cost to help to soften the impact on margins I was wondering if you could go some details on that and how that would affect your margin outlook going through this year and into the beginning of next year and then secondly in terms of inventory it is just how do you see inventories trending over the next three to four quarters will be easy to get them to come back to normalized level or is this something that is going to take a more extended period of time and potentially affect prices for extended period also?

Yeah, thank you Frank. Well on the cost we are working very hard internally. The first line is to renegotiate and discuss with our supplier because we are aware the industry is ease to adjust to a lower level of price point, we have to adjust of the lower level of price but loss of need to translate this export to make this into viable sustainable time and profitable to our supplier. Clearly in our area like iron ore or scrap or coal in which [indiscernible] expenses are favorable and we are getting substantial reduction. We are also discussing with our supplier on our accounts from the corporate investment to the cost of different supply the mix energy. The mix the core of our variable cost. You will see these of course gradually reflected into our balance sheet into our net income because of higher rates and delays. We will probably see the full impact of some of these reduction in the third and fourth quarter. Gradually it gets into the numbers. And the second point is personnel human resources. On this we are acting with all the different tools and trying to minimize the impact of our people but at the same time to review as much as we can and make variable the cost of our people in the organization. In the United States we had no alternative but to stop some of the plans in other area it was a world also we are using temporary or medium term substantial agreement that allow us to get variable on the cost of labor. The currency is also helping because in the end you can see the currency of our major operating which we had our major industrial operation as evaluating against the dollar so we are incorporate from…

Okay, that’s great thank you very much. Very helpful.

Your next question comes from the line of Michael Lamotte with Guggenheim, please proceed.

Thank you, if I could just follow up on frank’s question on cost and price it seems like from a volume standpoint guidance really hasn’t changed from 90 days ago but perhaps the price outlook is a little weaker and your cost efforts are perhaps a little stronger I am really wondering what net - to in terms of EBITDA margin expectations over the next couple of quarters and then under the impression that we were going to bottom out Q2, Q3 timeframe around 20% and I was wondering if that number was still reasonable baseline for this year?

Thank you Michael. I think that the prices going down especially in United States because of the pressure of important and this is getting into - grab volume and we think that this is ____ so that we to make this profit of sustainable in the United States and worldwide then will be a chance on perhaps on cost and we have part of this. We need to act in our price but on every aspect of the supply chain to chase - to take advantage of seeing and --opportunity not from only frank, but you are right, there is a reduction price. Our expertise cost is very affected so I think from this point of view we are also getting very important result in term of cost reduction, in term of volume of cost. This has gone the volume of sales and production is going down and we go down in next quarter substantially and these volumes efficient despite of our - to get volume of label everywhere. We still have a number of - sequentially difficult to - and reduction volume affecting our margin to the significant also in the coming quarter we will have restructuring cost. We will have to reconsider in especially in the next quarter. And we prevent I would imagine our EBITDA. We expected the lower point in the throughput and product with our EBITDA margin we will low 20% at the point. You can see that more the asset that I mentioned.

Okay. And then just excluding the restructuring charges. So if just look at the straight operating factors, 20% or modestly below 20% is a reasonable Q2 range 18% to 20%.

I would say that our lowest point will be all reach in - in the --. So we will next affected by the cash on cost. But still our EBITDA margin will be below 20% because we have to expect. We believe there is not - you will have talking about the world which is changing fast and you know this. And the price well it is volatile and indeed there is a lack of visibility on many factors. So when we talk about the - I mean we have still have a wide range of our products things that will happening --

Understood, thank you. That’s very helpful. I know there are a lot of moving pieces that helping it helps us to narrow it down like so thank you Paolo. German if I could follow up it my second very quickly just on the services business in North America. If you could walk through some of the efficiency and cost of pipe ownership benefits that the alliances provide and how Tenaris expects to get pay for adding that value.

Yes we can give a review on where we are working meant through. Looking for the one point with that --. If you spend by the way growth in United States requires and this momentum very high level of event that even it dependent on the excess events as we generated by production increase. We have a feelings like things we are in Mexico and way check that we supply directly to - we've manage the stock of --. And then we are able to order and even contraction on the event of --. So through for even capital it is importantly especially at these moment we'll hear all that. On these - reduction of shoppers there is a lot of possible seats for the industry. And then let me add to demand to be the view of WCDLA are also a reduction on the total performance report.

And I think you probably know I think this is a back level key are you search we're looking at the total cost of ownership of - at that - type. And we will deduct the system in adding so we believe with that the purely synchronized our production programs to really programs really nice in that quarter that even further --. But it's not only that this also second of second inspections which we believe are not required. And so REIT returns management than in effective way this repair those - which this is a - management that we think we can also recall. Now within that quarter we have established sourcing and service as we for instance as statutory we live it for second generation marketing --. And today even surprising environment we believe operators had in fact providing additional intent to so what has to explore better ways of working.

Let me thank you can I? We are doing really big across the inventory. It is we - associated to the investment in - the reposition of our industrial commercial and service that if you can now see that. we really think that - seller point of view see you look at the situation at the - shares that is there and we would be very well in the coming three, four, five, ten years I mean the fact is very being in this - opportunity dependence on the correct that today we will see a sudden drop of rigs but there is no way the potential of shares will be developed or reached in full potential over time and on this assumption we are organizing our industrial promotion operation.

Thank you, gentlemen. That is very helpful.

And you next question comes from the line of Stephen Gengaro with Sterne Agee.

Thank you. Good morning, good afternoon guys. I guess two things, the first is would you be able to give us a sense in the first quarter of ’15 or even as you look back at ’14 as an average when you look at your cost of sales the percentage of that which is fixed versus variable?

We do not have right to speak and talk to people I tell them nothing to speak with some. I might speak to my line - on this. Nothing - I mean we should be able to transform our business in a flexible and variable business we are doing at biggest in this direction. Obviously there are contract in some case there was floor that it depend we will be there independently form the volume in still making without a - and in the finish off earnings that he treat that all - that really could not I mean when we operate at a very low level of volume we cannot absorb or visualize all the cost energy that equalize market or about that but when I say I think we can add to the - it takes time we can act on this. Usually 20%-30% of our cost are very difficult to transforming unable cost but this is the say the hard decision to make that is more difficult to feel with the power of our cost recoveries difficult to get volume.

Thank you and maybe as a little bit different way when you look at sort of the pure input cost is there anything that is giving lease in the next of couple of quarters that is sort of very short-term oriented you know whether it is power cost or steel cost anything on those lines? That is helping a bit?

I don’t think that I mean you know in area the situation and prices went down but - is the cost reduction getting to our cost of - sure I would - this would be guiding into - and seems this in terms of the - we the significant reduction in the core steel we are not going to see these - in the next two quarters because the inventory that we have as of December into our - that are probably the first two quarters of this year. in terms of receiving this - prices and iron ore purchase has been keeping up plus - first quarter that is very marginally we will see the - but last of this quarter I am coming to next one however, all this changed rate that has been associated with the level across in the facility in which we operate that has been depreciated against the dollar has a more immediate reaction. So probably less than one quarter of lag for this.

Okay, great. No that’s very good color, thank you guys.

Your next question comes from the line of Raphael Veverka with Exane. Please proceed.

Yeah good morning thank you for taking my questions. First follow-up on your guidance when you talk about your margins retuning to a more balance level in Q4 could you be a little bit specific about the drivers which you are seeing to get this kind of gradual recovery with mostly about cost and ForEx as you pointed before or do you see an improvement in your volumes for seasonal reason or anything else?

We expected that overtime there will be different factor that will have an impact of our margin and make them recover gradually. On our side increasing shipment in the next two quarters will be the worse because of the stock absorption and we will be recover volumes starting for the 4Q and this has an impact on our margin has a clearly -. Second the mix will change gradually the recovery to some more value added component because some of the project offshore complex project that has been postponed will be start get back again and we expect this to drive our mix in towards some more value added structure overtime in the course of the recovery. An example of this is Saudi Arabia very complex project for gas difficult application when the destocking will be finished gradually we expect in 2016 a recovery of sales of this. And so also changing our mix into a more complex value added high margin mix. And will happen everywhere in deep offshore, in high complexity HBST and to some extent this also will happen in United States for the Gulf of Mexico and other complex application. At the same time there will a reduction of import and we are very sure that we will be able to reduce the level of import especially in the United States overtime, will allow a gradual recovery of the pricing term.

Okay thank you very much. And my second question was on CapEx it seems to be that you were maybe a little in your spending in this quarter wondering if you could us give an updated guidance for this year and in terms of your net cash balance sheet whether you think the $1.9 billion which you show this quarter can be a target for the end of this year? Thank you very much.

Yes on this question as I was mentioning before we are continuing on our project in - at a slower pace but during the second half of 2016 we will get to the plant and production gradually but in the second half of 2016. So we will continue to invest in that area, and this will drive our investment level in 2015 to a relatively high level we expect to invest around $1.2 billion this is the more or less broad range investment that we expect for this year is a high level of investment probably one of highest here because of the new industrial investment in the state. So we can expect something more in the coming quarter compared to what we have done in the first quarter.

Okay, thank you.

And your next question comes from the line of Felipe Santos with JP Morgan. Please proceed.

Thank you, gentlemen. Most of question had asked but just more one point here. You made the shutdown the two plants in US throughout this year are you looking for the next plants and to hold operations on other places in the world. This will be my first question. And do you think that the Canada decision on the - process - decision last year this year the entities call this do you think that is - case, so that help to reduce the import level? Thank you.

Thank you. On the first question we had to do a temporary shutdown of some of the plants. We do not expect to have to shut down to take similar decision in other places. Such we are going down the level of production of the plant as we were mentioning specially let’s say in the next two quarters. But I do not envision the need to grow because what we are seeing is a recovery and we want to be prepared for the moment in which the - will stop and introducing the increase level of investment and we need to be there especially if we want to increase our market share in some of the market. So we do not need the additional product, yes we will see some reduction in level of operation. On the other question - if you want to add on this question?

Thank you Paolo. Just a few - the Canadian - case that provide us important elements of the way the cost was structured the normal values we believe that we couldn’t use some of those findings in the upcoming - petition which we intend to file together with the rest of the industry during Q3. And by the way those - rates are been captured already by this bill that was introduced in the summit last week.

Okay, thanks very much.

Your next question comes from the line of Amy Wong with UBS. Please proceed.

Hello, good morning. Couple of questions from me. Firstly I just want to understand a little bit more about your mix in the North America what is the mix between in terms of premiums summer premium and commodity grade there and how do you see that evolving, please?

Thank you Amy. Well we do not give…

Thank you Paolo. Well Amy we initially don’t disclose the mean specifics of - I could probably say to help provide a color is that a - connections market participation in this stage of about 85% and we believe going forward this could be absolutely sustainable. Hopefully that helps.

Okay. And my second question is on the Middle East region, you mentioned in the last call and we are expecting activity to slowdown in the 2015 but you are seeing a very high tendering activity and this could lead to a higher at some market in 2016. How do you guys feel about that now at this point in the year? Thanks.

Thanks Amy. I think we have answered that - in the previous question with - summarizing yes we have important in activity in and UAE , not so much in - we expect later in the year, - will be translated into higher demand, higher shipment in 2016, but we will not see any improvement until then even.

Your next question comes from the line of Luigi De Bellis with Equita Inc. Please proceed.

Yes good morning to everybody. Two quick questions for me. The first one could you us and guidance that are related the tax rate for 2015. And clarification it also next - acquisitions expected by 2015 year end. And the second question do you believe that how many deal involving Tenaris could be accelerated in the current scenario and which will be characteristics of our potential targets in terms of product and geographical area. Thank you.

Thank you Luigi on the tax rate and the financial guy you can hear --.

Yeah the tax rate as we can add an impressive lease we have been affected making in this quarter because of the effects on certain tax deferred tax liabilities. But the real facts for Tenaris stay in the five with deferred tax as in rentals 25%. Looking forward for the year we are expecting to end up depend in very much of with retention of the currencies ranges 28% to 30% of that. in terms of the financial position as we commented we are expected the continued recovery in the revenue capital as we are aiming to end up the year with the free cash flow that are with - not only to cover our CapEx plan as - was mentioned but also to continue to paying dividend as we expect. So overall with net cash position should remain low with one probably have at the end of 2014 either we have.

Yeah on the - M&A, clearly we are considering and starting what is happening to this, but it is clear that - the industry is facing the major transformation will need to restructure for our great and you see this happening and they already moving their service open is there sector and that this is also happen in that our now - segment of the industry. They will be a changer to make all of these modification as to consolidate product on the --. And also it could be redesign of achieving a value for the industry to make it more efficient and correctly to competitor for the late long-term challenges for the --. So we are monitoring and analyzing what is happening within including all of our option open. I think our financial strength is one sider a big advantage in the market leads in the building relation on solid so stay in relation with our customer. And on the other hand is also enabling us to play a role in - a restructuring of the industry that could typically in the next two- three years.

Thank you very much.

Your next question comes from the line of Ole Slorer with Morgan Stanley.

Yeah thank you very much again. This aim to have you have tell to Tokyo guys and not ask about what's going on in some of your core markets of Mexico, Venezuela and Argentina given fully sort of big and specific events going on in all of those regions. Could you give us your latest thought at - now with do you have - release on the call enough but did not? Could you give us your latest also on unexpectedly how the Mexican privatization is playing out whether shift to you have you have planned it and when it's will translate into possible increase this in drilling, and then give us with the one of the largest service companies - remarkably off beat about Venezuela which was a bit surprising effort and then Venezuela that something specific to them over that you're asking something similar. And then finally just on the robustness on of shade activity in Argentina and I told that a policy of the local policy - prices.

Thank you it will maybe can make some comment on Venezuela first - when down to a very almost to nothing because of the trend issue you know being faster we had to regime the sun loss and prepare the sign out the major company and also this compared I mean very conscious in enough to build out receivable that we cannot collect so we are limiting our operation I don’t think situation will change during this year. The operation are going on but the ability, big condition of - financial obligation and limited. So I do not expect a lot of work a lot of business in Venezuela. As far as Argentina is concerned Argentina because the government is implementing policy in the area of oil that are supporting the rare of the company that - more or less stable and this allow - the refining operation to continue counting regional level of price for their oil is important and so the development of our converter is proceeding at reasonable pace in the case of gas, we expect that as - and gas is available expenses with $9, $10, $11 million BTU from weaker sources from Bolivia is also supporting the price of gas for additional exploration and operation recommendations so we see - certainly developing and this eleven operation is - on top of this we have some pipeline one pipe both on pipeline for gas that are producing now. For Mexico will that be general to - expected leads for ’15 and ’16.

Thanks, Paolo. Hi, how are you? We are selling in both Mexico I would say 2015 is being effected by two things one is the migration of the oil service contracts we have finished which was supposed to be done by the end of last year and the beginning of this year has been delayed and that has brought the activity in this sector to very, very low levels and then because of the reduction in prices Spanish market was affected though so and so if you see the rig counts from the fourth quarter the first quarter if you see a reduction to 8 rigs from 92 rigs with more or less situational result in the demand. Moving toward I think the volumes we are seeing coming from - in the first quarter I want to stay here for the rest of the year. Migrations are - finish the migration by the third quarter so that we might see an activity coming back in the fourth quarter and next year and in terms of - they just get kept their conference call and they announce for the next year that they plan to increase the budget investment budget by around 30% so we see climax coming stronger in 2016. And at the same time they are considering 11 - for firm outs that should also be good news in terms of activity for 2015. In terms of the energy report it is moving - there is enough interest in the first stage of the deferred there are steady - parties and it is moving ahead the second stage today we know that there is 23 directed I think the geological the favor of geological conditions of the Mexican field is brining interest even though prices are lower and I think that energy reforms is going to move ahead is going to subset of and I think that we are see that also coming in 2016. So we see a level of demand this year but we see a very good profits for 2015 and later on.

Thank you very much for clarifying so - third quarter and what's the migration of contract and there should also be a time when you get better visibility in 2016 as a privatization kind of becomes clearer, right.

Right.

Thank you very. I'll hand it back.

And your final question is a follow-up question from the line of Frank McGann with Bank of America Merrill Lynch. Please proceed.

Thank you. Just looking out into the end of this year beginning next year you've mentioned key things that can lead to an improvement both in terms of volume as well as cost cutting but I was wondering how you see the rebound in the market as you go into 2016. Do you expect it to be fairly sharp or do you think it's going to be a slow recovery based on what you see today.

Thank you Frank. We expect a gradual recover because our experience in 2009 and has been that in the second year we recover on volume but it takes time to recover on prices and in the end there is a - for the change in practice that we are seeing and you see in the logic we see also in the new contract - coming that we signing in this area, these will kick in during 2016 so - recovering volume there will be lower price and so the recovery margin will be gradual. Also there is a differential, in 2009 they drop seven because of the buildup of stock in the last part of 2008. That was a different environment - supporting the recovery in 2010. In our case we see a similar very steep drop because of the next quarter and quarter number three, third quarter will be very, very much affected in term of volume, so we will start recovery from a very low basis. It was mentioned before and in term also margin.

Okay. Thank you very much.

There are no additional questions in queue at this time.

Well thank you Alex and thank you all for taking part in this conference call and goodbye. Thank you very much.