fairness opinion - vallourec | smart tubular solutions€¦ · fairness opinion 30 march 2021...

30 March 2021

Fairness opinion

Proposed rights issue and capital increase reserved for certain creditors

Free translation of the original report entitled "Rapport de l’expert indépendant - Attestation d’équité" dated

March 30, 2021. In case of discrepancies in translation or interpretation between English and French

versions, only the French version shall prevail.

Fairness opinion 30 March 2021

FINEXSI EXPERT AND FINANCIAL ADVISOR

Finexsi Expert & Financial Advisory 2

Contents

1. Brief presentation of the transaction ................................................................ 6

2. Context of our engagement ............................................................................... 8

2.1 FINEXSI’s engagement ................................................................................. 8

2.2 Declaration of independence ...................................................................... 8

2.3 Work carried out ......................................................................................... 9

3. Presentation of VALLOUREC ............................................................................... 11

3.1 VALLOUREC shareholding ........................................................................... 11

3.2 Share subscription and allocation plans ................................................... 12

3.2.1 Share subscription plans............................................................................... 12

3.2.2 Performance share plans .............................................................................. 12

3.3 Organisation chart of the VALLOUREC group .............................................. 13

3.4 VALLOUREC's history .................................................................................. 14

3.5 Presentation of VALLOUREC's activities ...................................................... 16

3.5.1 Oil, gas and petrochemicals ......................................................................... 17

3.5.2 Industry ......................................................................................................... 19

3.5.3 Electrical energy ........................................................................................... 20

3.5.4 Iron ore mine ................................................................................................. 21

3.5.5 Geographical organisation ............................................................................ 21

4. Presentation of VALLOUREC's economic and competitive environment ....... 23

4.1 Oil and gas sector ..................................................................................... 23

4.1.1 Market trend .................................................................................................. 23

4.1.2 Competitive market environment .................................................................. 26

4.2 Industry sector .......................................................................................... 26

4.2.1 Market trend .................................................................................................. 26

4.2.2 Competitive market environment .................................................................. 28

4.2.3 The iron ore market ....................................................................................... 28

4.3 Electrical Energy sector ............................................................................ 29

4.4 Sectors facing significant risk factors ........................................................ 29

5. Financial analysis of VALLOUREC ...................................................................... 31




5.1 Presentation of the Group's historical results for the period 2014 - 2020. 31

5.1.1 Profit and loss account for the period 2014-2019 ......................................... 32

5.1.2 Income statement for the 2019-2020 period (Post IFRS 16) ....................... 39

5.1.3 Review of the 2014-2020 period ................................................................... 40

5.2 Analysis of the Group's financial position at the end of 2020 .................... 46

5.3 SWOT matrix ............................................................................................ 52

6. Presentation of and arrangements for the Restructuring ............................. 54

6.1 Summary of the process leading to the Restructuring .............................. 54

6.2 Presentation of the reasons for and terms of the Restructuring ................ 54

6.2.1 Reasons for and description of the Restructuring ........................................ 54

6.2.2 Main conditions for the completion of the Transaction foreseen in the

Safeguard Plan ............................................................................................................ 56

6.3 Description of the Transaction .................................................................. 57

6.3.1 Set up of an SGL .......................................................................................... 58

6.3.2 Repayment of Restructured Claims for €262 million .................................... 59

6.3.3 Bond debt reinstated by way of set-off: New Notes ..................................... 59

6.3.4 Conversion of a portion of the Commercial Bank Loans into a new revolving

credit facility ................................................................................................................. 60

6.3.5 Establishment of market bonding lines ......................................................... 61

6.3.6 Debt write-off by Commercial Banks ............................................................ 61

6.3.7 Issuance of Warrants to commercial banks .................................................. 62

6.3.8 Capital increase with cancellation of preferential subscription rights at the

subscription price: the Reserved Capital Increase ...................................................... 62

6.3.9 Capital increase with preferential subscription right: the Rights Issue ......... 63

6.3.10 Fees paid in connection with the Restructuring and costs related to the

Restructuring ................................................................................................................ 63

6.3.11 Impact of the Transaction on the governance of the Company and

agreements to be entered into with SVP and APOLLO ................................................ 64

6.3.12 Commitments of the Reference Shareholders ............................................. 66

6.3.13 Summary ....................................................................................................... 67

7. Valuation of VALLOUREC group shares after Restructuring ............................ 69

7.1 Situation of the VALLOUREC group in the absence of the Restructuring and

impact on the valuation approach ....................................................................... 69

7.2 Discarded references and valuation methods ........................................... 70




7.2.1 Consolidated net book value ........................................................................ 70

7.2.2 Revalued net book value .............................................................................. 70

7.2.3 Sum of the Parts ........................................................................................... 70

7.2.4 The yield value (dividend capitalisation) ....................................................... 71

7.2.5 Net asset value ............................................................................................. 71

7.2.6 Recent transactions on the Company's capital ............................................ 71

7.3 References and methods used for the post-Restructuring valuation ........ 71

7.4 Reference data for the valuation of VALLOUREC ........................................ 72

7.4.1 Number of shares used................................................................................. 72

7.4.2 Elements of the transition from enterprise value to equity value.................. 73

7.5 Calculation of VALLOUREC's valuation after the Restructuring ................... 75

7.5.1 Discounted cash flow forecasts (main valuation method) ............................ 75

7.5.2 Market multiples method (secondary method) ............................................. 80

7.5.3 Transaction multiples method (secondary) ................................................... 83

7.5.4 Reference to the stock market price (for information purposes) .................. 84

7.5.5 Reference to analysts' price targets (for information) ................................... 94

7.6 Summary of our valuation work after the Restructuring ............................ 98

8. Financial analysis of the Restructuring ........................................................ 100

8.1 Approach taken....................................................................................... 100

8.2 Analysis of the financial structure post Restructuring ............................. 100

8.2.1 Impact of the Restructuring on gross debt ..................................................101

8.2.2 Impact of the Restructuring on the Company's cash flow ..........................102

8.2.3 Impact of the Restructuring on the Company's equity ................................102

8.3 Impact of the Restructuring on the shareholder's situation in terms of dilution

………………………………………………………………………………….103

8.4 Average subscription price for shareholders and Creditors .................... 105

8.5 Impact of the Restructuring on the shareholders' situation in terms of

theoretical value creation .................................................................................. 106

8.5.1 Based on the 60-day VWAP at 29 March 2021 ..........................................107

8.5.2 Based on the 60-day VWAP at 1 February 2021 .......................................111

8.5.3 Pre-restructuring value per share resulting in a neutral change in assets .112




8.6 Impact of the Restructuring on the position of the Creditors in terms of

theoretical value creation .................................................................................. 112

8.6.1 Changes in the assets of Other Creditors ..................................................112

8.6.2 Evolution of the Commercial Banks' equity ................................................114

9. Related agreements ........................................................................................ 117

10. Conclusion ...................................................................................................... 118

11. Annexes ........................................................................................................... 121

11.1 Presentation of comparable transactions ................................................ 121

11.2 Presentation of FINEXSI and the engagement.......................................... 123




1. Brief presentation of the transaction

Following the 2015-2016 oil crisis, the VALLOUREC group (hereinafter the "Group"), headed by

parent company VALLOUREC SA (hereinafter the "Company" or "VALLOUREC"), implemented a

transformation plan for the 2016-2020 period so as to return to profitability.

Against the backdrop of a significant improvement in the Group's profitability over the period, the

Company announced in February 2020, in addition to a new gross savings programme for the

2021-2022 period, its intention to carry out a capital increase of €800 million and refinance debt for

the same amount through the establishment of new credit facilities.

This transaction aimed to improve the Group's financial structure in a context where the level of

debt has limited its room for manoeuvre due to the burden of interest payments.

However, due to the pandemic in the first quarter of 2020 and its impact on the Group's business,

this transaction could not be completed.

The Company then began looking for an alternative solution and, in this context, resumed

discussions with some of its creditors and its reference shareholders, BPIFRANCE PARTICIPATIONS

(hereinafter "BPI FRANCE") and NIPPON STEEL CORPORATION (hereinafter "NSC" and together with

BPI FRANCE, the "Reference Shareholders"). These discussions were not successful.

Against a background of significant upcoming debt payments, the Group announced on

1 September 2020 its intention to begin talks with all of VALLOUREC's creditors and restructure the

Company's financial debt, namely the revolving credit facilities that have been drawn down

(hereinafter the "RCF") and the bonds issued by the Company (hereinafter the "Bonds").

VALLOUREC therefore asked the groups of creditors concerned to waive their right to bring action

for non-payment that they would be entitled to upon the appointment of a mandataire ad hoc.

After this waiver was secured on 18 September 2020, a mandataire ad hoc was appointed at the

request of the Company by the President of the Nanterre Commercial Court on

23 September 2020 and tasked with assisting the Company in its negotiations with its creditors and

shareholders so that a financial restructuring plan could be agreed on. In this context, VALLOUREC's

Supervisory Board set up an ad hoc committee composed exclusively of independent members to

supervise the restructuring process and monitor the discussions between the various stakeholders.




The negotiations conducted under the aegis of the mandataire ad hoc with some of the Company's

main creditors (under the RCFs and the Bonds) and their respective advisors resulted in an

agreement in principle (the "Agreement in Principle") announced to the market on 3 February

2021. This agreement was reached with a group of creditors representing 65.1% of the total amount

of the Company's financial debt, consisting of:

• some of its partner commercial banks – BNP PARIBAS, Natixis and BANQUE FÉDÉRATIVE DU

CRÉDIT MUTUEL (hereinafter the "Commercial Banks") – representing 38.8% of the principal

amount of the RCFs;

• investment funds holding Bonds or interests in the RCFs (the "Ad Hoc Group"), i.e. funds

managed by affiliates of APOLLO GLOBAL MANAGEMENT, INC. (collectively, "APOLLO"),

STRATEGIC VALUE PARTNERS, LLC and its affiliates (collectively, "SVP"), BYBROOK and M&G

representing approximately 50.5% of the aggregate principal amount of the RCFs and 41.4%

of the principal amount of the Bonds.

The Agreement in Principle would allow the Company to reduce its gross debt by more than half

and secure the cash it needs to implement its strategic plan in a deteriorating market environment.

This agreement was unanimously approved by the members of the Supervisory Board of the

Company and its Reference Shareholders. The latter also confirmed their support for the

Agreement in Principle and undertook in particular to (i) approve the resolutions necessary to

implement the financial restructuring envisaged and (ii) participate in the rights issue provided for

in this agreement, to the tune of €35 million for NSC and €20 million for BPI FRANCE.

In this context, the Commercial Banks and the members of the Ad Hoc Group entered into an

agreement with the Company (hereinafter the "Lock-Up Agreement") whereunder the parties

undertook to support and carry out any steps or actions reasonably necessary for the

implementation and performance of the Agreement in Principle. The terms and conditions of the

Lock-Up Agreement are relatively standard and include, among other things, the obligation for

creditors to vote in favour of the implementation of the Agreement in Principle. The Commercial

Banks1, APOLLO and SVP nevertheless undertook not to transfer their interests in the RCFs and

the Bonds under the conditions permitted by the Lock-Up Agreement, not even to a signatory,

present or future, of the Lock-Up Agreement until the date of completion of the transactions

contemplated by the Agreement in Principle (hereinafter the "Effective Restructuring Date").

The Agreement in Principle would be implemented as part of a safeguard plan following the opening

of a safeguard procedure by the Nanterre Commercial Court on 4 February 2021. The draft

safeguard plan (hereinafter the "Safeguard Plan"), which reflects the Agreement in Principle, has

been prepared by the Company for submission to the creditors' committees.

1 With the exception of a transfer between BFCM and CIC.




2. Context of our engagement

2.1 FINEXSI’s engagement

Pursuant to the provisions of Article 261-3 of the General Regulation of the Autorité des Marchés

Financiers (hereinafter the "AMF"), VALLOUREC's Supervisory Board, meeting on

16 February 2021, appointed FINEXSI EXPERT & CONSEIL FINANCIER (hereinafter "FINEXSI") as an

independent expert in connection with the Company's proposed financial restructuring (hereinafter

the "Restructuring" or the "Transaction").

This appointment was motivated by the Supervisory Board's desire to ensure that the Company's

shareholders are as fully informed as possible. It is therefore a voluntary appointment as provided

for in Article 261-3 of the AMF General Regulation.

In this context, we have been engaged to assess the fairness of the financial terms of the

Restructuring project from the perspective of VALLOUREC's shareholders. In particular, this involves

assessing the value of VALLOUREC shares, the positioning of the subscription price of the capital

increase reserved for certain creditors and the exercise price of the share subscription warrants

subscribed by the Commercial Banks relative to these values and considering the subscription

price of the rights issue and, more generally, the impact of the Restructuring on VALLOUREC'S

shareholders.

This report, which describes the terms and consequences of the Transaction for the Company's

shareholders, has been prepared in accordance with Article 262-1 of the AMF General Regulation

and its application instruction No. 2006-08 of 25 July 2006, as amended on

10 February 2020, relating to independent appraisals, itself supplemented by AMF

recommendation 2006-15 as amended on 10 February 2020.

This report therefore complies with the provisions of the AMF General Regulation and is intended

for persons subject to French law. In particular, although our report may be made available to

American Depository Receipt (ADR) holders, it falls exclusively within the framework of French

regulations, and we therefore assume no responsibility for persons subject to other regulations.

2.2 Declaration of independence

FINEXSI and its partners:

• are independent within the meaning of Articles 261-1 et seq. of the AMF General Regulation,

and are therefore in a position to draw up the declaration of independence provided for in

Article 261-4 of the said General Regulation, and are not affected by any of the cases of

conflict of interest referred to in Article 1 of AMF Instruction 2006-08 on independent

appraisal;

• have the necessary human and material resources to carry out their engagement, as well as

sufficient insurance or financial resources to cover the possible risks associated with it;

• are members of the Association Professionnelle des Experts Indépendants (APEI), an

association recognised by the AMF pursuant to Articles 263-1 et seq. of its General




Regulation; one of the signatory partners is also a member of the IVSC Standard Review

Board.

FINEXSI certifies that it has no known past, present or future ties with the persons concerned by the

Restructuring or their advisers that could affect its independence and the objectivity of its judgement

in the context of this engagement.

2.3 Work carried out

Our work consisted mainly of:

• understanding the context of the Transaction, the Group’s activities and historical

performance and the difficulties it faces;

• becoming familiar with the envisaged Restructuring as set out in the Agreement in Principle

and the draft Safeguard Plan and as it will be presented to the Combined General Meeting

for approval of the resolutions necessary for its implementation, of its terms and conditions

and of the specific context in which it takes place;

• implementing a multi-criteria valuation approach for VALLOUREC, including:

• a review of VALLOUREC's historical financial performance;

• an analysis of the risks and opportunities identified for VALLOUREC that are likely to affect

its valuation, summarised in the form of a SWOT matrix;

• an analysis of public information including the review of analysts' notes;

• the reasoned choice of evaluation criteria (excluded/selected);

• an analysis of the historical evolution of the share price;

• an analysis of the evolution of the Company's listed bond debt;

• an analysis of the accounts and business plan with operational management, including

identification of key assumptions and assessment of their relevance;

• sensitivity tests on the structural assumptions considered;

• the identification of comparable listed companies and transactions and the good use of

the information available on them.

• on this basis, examining the positioning of the subscription price of the capital increase

reserved for certain creditors and the exercise price of the Warrants subscribed for by the

Commercial Banks in the context of the Restructuring relative to the results of the valuations

carried out and considering the subscription price of the rights issue;

• analysing the potential dilutive effects of the Restructuring on the Company's current

shareholders;




• examining and assessing the pre- and post-Restructuring situation of the Company's current

shareholders;

• preparing a report in the form of a fairness opinion setting out the valuation work carried out

on the VALLOUREC shares and our opinion on the consequences of the Transaction for its

shareholders in view of the arrangements and conditions affecting the Company's capital.

Our engagement has been carried out under the supervision of the ad hoc committee with whom

we exchanged information as our work progressed.

We held several discussions with the Company's financial management and its advisers, both to

understand the background to the Transaction and to understand the business outlook and

resulting financial forecasts.

For the analogical valuation methods (transaction and comparable company multiples), we studied

publicly available information on comparable companies and transactions from our financial

databases.

In order to carry out our engagement, we used the documents and information provided to us by

VALLOUREC. These documents were considered to be accurate and complete and were not subject

to any particular verification. We did not seek to validate the historical and forecast data used, but

only verify their plausibility and consistency. This engagement did not include an audit of the

financial statements, contracts, litigation or any other documents provided to us.

A quality review was carried out by Mr Jean-Marc BRICHET, Partner of the firm, who did not

participate in the engagement.

The purpose of our report is not to give an implicit or explicit recommendation as to whether

the Transaction should be completed, but to provide VALLOUREC's shareholders with

information and an opinion on the terms and conditions of this Transaction and its impact

on them.

Our report is based on the 2020 Universal Registration Document (the "URD 2020"), the draft

securities note2 dated 30 March 2021 relating to the Reserved Capital Increase and the

Warrants3 (hereafter the "Draft Securities Note"), the report of the Management Board to the

Combined Shareholders' Meeting of 20 April 2021 (hereinafter the "Management Board's

Report to the Shareholders' Meeting") and on the terms and conditions of the Agreement in

Principle and the Lock-up Agreement, which were presented by the Company on 3 February

2021 and which will be submitted to the vote of the Shareholders' Meeting convened on 20

April 2021, insofar as they fall within its competence.

2 It has been confirmed to us by letter of affirmation that this draft reflects the final version of the said document subject to non-material adjustments unlikely to change our assessment of the Restructuring. 3 As these terms are defined below (§6.2.1).




3. Presentation of VALLOUREC

3.1 VALLOUREC shareholding

VALLOUREC SA is a société anonyme (public limited company) with a Supervisory Board and a

share capital of €228,993.88, divided into 11,449,694 shares with a par value of €0.02 each. The

Company's registered office is located at 27 avenue du Général Leclerc in Boulogne-Billancourt

(92100).

It is registered in the Nanterre Trade and Companies Register under number 552 142 200.

The Company's financial year is 12 months, from 1 January to 31 December.

Its shares are listed on compartment B of EURONEXT Paris under ISIN code FR0013506730-VK

and the Company also has an American Depositary Shares programme which trades on the US

OTC market.

VALLOUREC shares are included in the SBF 120 index.

The breakdown of capital as at 28 February 2021 is as follows:

Table 1- Shareholding as at 28 February 2021

On 1 February 2016, the company entered into shareholders’ agreements with BPI FRANCE and

NSC for a period of 15 years. These agreements provide in particular, subject to certain

reservations, for a cap on their voting rights at 15% for a period of 15 years.

For the record, in the event that the Restructuring is implemented, these shareholders' agreements

will terminate.

We have not been informed of any new agreements or actions in concert following the restructuring

transactions, other than those concluded between the Company and each of the Future Reference

Shareholders4, i.e. the Shareholder Agreements4.

4 As defined below (§6.3.11).

Number % Number %

State 7 772 614 67,88 % 7 917 126 67,05 %

Group employees 341 215 2,98 % 383 733 3,25 %

Nippon Steel Corporation 1 667 392 14,56 % 1 756 184 14,87 %

Bpifrance Participations SA 1 667 392 14,56 % 1 750 268 14,82 %

Treasury shares 1 081 0,01 % 1 081 0,01 %

Total 11 449 694 100,00 % 11 808 392 100,00 %

Voting rights (theoretical)Shares

Source: Draft Securities Note




3.2 Share subscription and allocation plans

3.2.1 Share subscription plans

VALLOUREC's Management Board has historically granted share subscription plans to certain Group

managers and corporate officers.

Table 2- Summary of stock option plans as at 31 December 2020

Source: URD 2020

As at 31 December 2020, there are 143,877 options outstanding, of which 41,056 can be exercised.

3.2.2 Performance share plans

VALLOUREC's Management Board has also agreed, between 2016 and 2020, to performance share

plans for the benefit of certain Group managers and corporate officers.

Table 3- Summary of performance share plans as at 31 December 2020

Source: URD 2020

As at 31 December 2020, there were 78,664 shares in the process of being vested.

In number of options 2019 2020

Options outstanding at 1 January 149 406 137 039

Options exercised - -

Options lapsed (12 186) (7 825)

Options cancelled (9 036) (65 744)

Options distributed during the year 8 856 80 407

Options outstanding at 31 December 137 039 143 877

Including options that may be exercised 44 297 41 056

In number of options 2019 2020

Number of shares in their vesting period at 1 January 55 612 64 470

Shares delivered over the year (4 453) (14 451)

Shares cancelled (7 605) (5 445)

Shares allocated during the year 20 916 34 090

Number of shares during vesting period at 31 December 64 470 78 664




3.3 Organisation chart of the VALLOUREC group

The organisation chart below shows the Group's legal structure and the main subsidiaries and

participating interests held directly or indirectly by VALLOUREC in terms of capital and voting rights:

Figure 4- Simplified organisation chart of the VALLOUREC group

Source: URD 2020

VALLOUREC

VALLOUREC TUBES

100%

EUROPE / AFRICA (EA)

MIDDLE EAST / ASIA (MEA)

NORTH AMERICA (NA) SOUTH AMERICA (SA)

FRANCE

• Vallourec Bearing Tubes (100%)

• Vallourec Oil and Gas France (100%)

• Vallourec Tubes France (100%)

• Vallourec Umbilicals (51%)

• Serimax Holdings (80%)

REST OF EUROPE

• Vallourec Deutschland GmbH (Germany) (100%)

• Vallourec Oil&Gas UK (100%)

• Vallourec RUS (Russie)(100%)

• Vallourec Niko Tube Holding GmbH (Germany) (50,1%)

• Hüttenwerke Krupp Mannesmann (Germany) (20%)

AFRICA

• VAM Field Service Angola, LDA (Angola) (100%)

• Vallourec Nigeria Limited (Nigeria) (100%)

• Vallourec Oil and Gas EgyptLLC (Egypte) (100%)

• Vallourec Oil and Gas Kenya Limited (Kenya) (100%)

• Vallourec O & G Nigeria Limited (Nigeria) (49%)

• Vallourec Oil and Gas Uganda (Ouganda) (100%)

MIDDLE EAST

• Vallourec Al Qahtani LLC (Saudi Arabia) (75%)

• Vallourec Middle East FZE (EAU) (100%)

• Vallourec Saudi Arabia LLC (Saudi Arabia) (80%)

• Vallourec Tubular Services LLC (UAE) (49%)

CHINA

• Vallourec Tianda (Anhui) Co., Ltd. (99.7%)

• Vallourec (Beijing) Co., Ltd. (100%)

• Vallourec (China) Co., Ltd. (100%)

• Vallourec Oil & Gas (China) Co., Ltd. (100%)

REST OF ASIA

• PT Citra Tubindo Tbk(Indonesia) (81,7%)

• Vallourec Asia Pacific Corp. Pte Ltd. (Singapore) (100%)

• VAM Far East (Singapore) (51%)

SPECIALTY TUBES

• Valinox Nuclear (FR)** (100%)

• Valinox Nuclear Tubes Guangzhou Co., Ltd. (100%)

OCTG

• Vallourec Canada Inc. (Canada)*** (100%)

• Vallourec Oil & Gas Mexico, SA de CV (Mexico) (100%)

• Vallourec Star, LP (United States) (80.5%)

• Vallourec Tube-Alloy, LLC (United States) (100%)

• VAM USA LLC (United States) (51%)

MARKETING COMPANY

• Vallourec Canada Inc. (Canada)*** (100%)

• Vallourec USA Corp. (United States) (100%)

BRAZIL

• Vallourec SoluçõesTubulares do Brasil S.A. (84.6%)

• Vallourec Tubos do BrasilLtda (100%)

• Tubos Soldados Atlântico Ltda (100%)

• Vallourec Florestal Ltda(100%)

• Vallourec Transportes e Serviços Ltda (100%)

OTHER

• Vallourec Trading South America (Uruguay) (100%)

• Vallourec SolucionesTubulares Argentina (Argentina) (100%)

** VALINOX NUCLÉAIRE is part of the Middle East/Asia region.

*** VALLOUREC CANADA INC. has both OCTG and marketing activities.




3.4 VALLOUREC's history

Figure 5- History of the VALLOUREC group

Sources: URD 2020 and FINEXSI analyses

The Group's first international acquisitions took place shortly after 2000, with the purchase of the

Brazilian subsidiary of MANNESMANNRÖHREN-WERKE in 2000 and the seamless steel tube business

of NORTH STAR STEEL COMPANY in the United States in 2002, which were renamed VALLOUREC

SOLUÇÕES TUBULARES DO BRASIL and VALLOUREC STAR, respectively.

In 2005, VALLOUREC acquired the remaining capital of the joint subsidiary with

MANNESMANNRÖHREN-WERKE AG and undertook a series of acquisitions and subsidiary openings

in France and abroad, including:

• in France: acquisition of SOCIÉTÉ DE MATÉRIEL DE FORAGE INTERNATIONAL in 2006 and

SERIMAX in 2010, investment in new tube production capacity for nuclear power plants in

Montbard and Guangzhou in 2009;

• in the United States: acquisition of the assets of SHAWCOR's OMSCO division in 2005, as well

as ATLAS BRADFORD PREMIUM THREADING & SERVICES, TCA and Tube-Alloy IN 2008 and

commissioning of the small diameter pipe mill in Youngstown (Ohio) in 2012;

VALLOUREC

ESTABLISHED

1886 - 1976

International development and external growth

1976 - 2014

Transformation and financial difficulties

2013 - 2021

➢ 1886 Discovery of the seamlesssteel tube rolling process

➢ 1890: MANNESMANNRÖHREN-WERKE

AG (“MW AG”) established

➢ 1899 SOCIÉTÉ MÉTALLURGIQUE DE

MONTBARD (“SMM”) ESTABLISHED

➢ 1907: SMM changes its name toSOCIÉTÉ MÉTALLURGIQUE DE

MONTBARD-AULNOYE ("SMMA")

➢ 1930: the name of VALLOUREC

appears for the first time as amanagement company for the tubefactories of Valenciennes, Denain,Louvroil and Recquignies

➢ 1937 SMMA becomes Louvroil-Montbard-Aulnoye ("LMA") after theabsorption of LOUVROIL AND

RECQUIGNIES

➢ 1957: Merger of LMA and Sociétédes Tubes de Valenciennes to formVALLOUREC; Group is listed on theParis stock exchange

➢ 1965 Creation of the VAM®connection

➢ 1976 Industrial partnership withSUMITOMO

➢ 1984 Joint venture VAM USA LLCestablished with SUMITOMO

➢ 1997 Joint venture with MW AGestablished

➢ 2000 Acquired Brazilian subsidiary ofMW AG (renamed VALLOUREC

SOLUÇÕES TUBULARES DO BRASIl)

➢ 2002 Acquired steel tubes businessof NORTH STAR STEEL COMPANY

(renamed VALLOUREC STAR)

➢ 2005 Redemption by VALLOUREC ofshares of MW AG in the jointsubsidiary

➢ 2006-2014: Multiple acquisitions andopening of new capacities in France(2 acq.), USA (4 acq.), China (3cap.), Middle East (2 acq.) and inAfrica

➢ 2013 VALLOUREC becomes a singlebrand for all Group companies

➢ 2015 “Valens” competitiveness plan

➢ 2016-2017: Transformation of theGroup’s operational organisation -VALLOUREC raises €1bn throughcapital increase and €800m by bondissue

➢ 2020-2021: Faced with a lack ofimprovement in the oil and gasmarket, the Group announces itsintention to refinance itself with acapital increase of €800m and arenewal of its credit facility also for€800m.

The COVID crisis prevents thecompletion of these refinancingoperations - VALLOUREC then beginsdiscussions with a view to financialrestructuring

These discussions lead to theAgreement in Principle.




• in China: opening of the subsidiary VALLOUREC CHANGZHOU CO. in 2006, creation of VAM

CHANGZHOU OIL & GAS PREMIUM EQUIPEMENTS IN 2007, acquisition of a stake in Tianda OIL

PIPE (TOP) COMPANY LIMITED, a Chinese manufacturer of seamless tubes listed on the Hong

Kong stock exchange, in 2011;

• in the Middle East: acquisitions of DPAL FZCO in Dubai in 2009 (UAE), PROTOOLS in Abu

Dhabi (UAE) in 2010, SAUDI SEAMLESS PIPES FACTORY COMPANY LTD. in Saudi Arabia in

2011; and

• in Africa: opening of a sales office and a premium thread-cutting plant in 2009.

In order to consolidate its leadership and support its growth strategy, in 2013 the Group brought

together all its entities under the VALLOUREC brand, including those that were still operating under

the V & M brand, the legacy of the joint subsidiary VALLOUREC & MANNESMANN TUBES.

Following the collapse in oil prices at the end of 2014 and its impact on the Group's orders,

VALLOUREC announced in 2015 the launch of the "Valens" plan, a two-year competitiveness plan

aimed at optimising its costs and cash generation. Following this, on 1 February 2016, the Group

announced strategic initiatives aimed at transforming its operational organisation, improving its

short and long-term competitiveness and strengthening its financial structure. The Group

streamlined its operations in Europe and Brazil, taking control of TIANDA OIL PIPE in China and

raising €1 billion in an equity offering to increase the Group's capital.

The following year, in addition to the completion of an €800 million bond issue, VALLOUREC

reorganised its organisational structure around four regions and two central departments.

As the Group's profitability recovered, VALLOUREC announced in the first quarter of 2020 its intention

to strengthen its capital structure and its liquidity through a capital increase of €800 million and the

refinancing of a credit facility of €800 million. However, the impact of the COVID-19 pandemic and

the oil market crisis on the Group's activity prevented the completion of these transactions.

Faced with significant upcoming debt payments, the Company announced on 1 September 2020

that it had approached its creditors to initiate discussions with a view to restructuring its financial

debt. These discussions led to the signature of the Agreement in Principle, the terms of which are

presented below (§6).




3.5 Presentation of VALLOUREC's activities

VALLOUREC is a global manufacturer of seamless steel tubes and other premium tubular solutions

primarily for the oil & gas, industrial and power generation markets.

Figure 6 - Illustrations of the group's flagship products

The Group's offer includes:

• a complete range of seamless tubes: with tubes available in more than 250 steel grades

(low- and high-alloy carbon steels, stainless steels, nickel alloys, etc.), VALLOUREC offers one

of the widest ranges of tubular solutions in the world in terms of dimensions and proportions

(length, diameter, thickness);

• Specialty tubes: mainly stainless steel or special alloy tubes, particularly for the nuclear

energy market (e.g. tubes for nuclear islands);

• connections and other accessories: including VAM® connections, one of the Group's

flagship products with over 30 patented product lines;

• innovative and connected services: welding on offshore and onshore sites, coating,

bending, complex project management, onshore and offshore wind power, carbon and

hydrogen transport and storage, etc.

VAM® connection system Seamless steel tubes

Source: Company, website




This range of products and services is mainly aimed at the following three markets:

Figure 7 - Illustrations of the Group's core markets

The Group also owns the Pau Branco iron ore mine in Brazil, the part of whose production not used

by the Group is sold on the market. It also manages eucalyptus forests to supply blast furnaces

with charcoal, a necessary component for the production of liquid pig iron.

3.5.1 Oil, gas and petrochemicals

VALLOUREC offers the oil & gas industry a range of tubular solutions with characteristics that address

the specific constraints of these industries (pressure, temperature, corrosion, etc.). The Group

covers the entire production chain, from exploration to production, including the transportation of

hydrocarbons.

In addition to connected services, the Group's product offering is divided into two categories:

OCTG5 products and tubular solutions for transport and processing.

5 Oil Country Tubular Goods.

Oil and gas / Petrochemicals

Electric energy

Industry and

Others

Industry: light and resistant tubes, hollow

profiles, tubes and blanks for a wide range

of applications, intended in particular for

the automotive, mechanical or construction

markets;

Electric energy: wide range of

tubes necessary for the

construction of nuclear and

conventional power plants.

Oil and gas: complete range of tubes, connections and

connected services for the exploration and exploitation of the

most complex oil and gas fields, intended for oil extraction players

(shale, onshore and offshore);





Figure 8 - Illustrations of the uses of the Group's products in the oil and gas sector

3.5.1.1 OCTG products

OCTG products are threaded seamless tubes for use in oil and gas wells. These products include

casing tubes, which are used to consolidate the walls of an oil/gas well, and tubing, which is used

to transport working fluids from the bottom of the well to the surface.

These different tubes are mainly connected using VAM® connections, a technology developed by

the Group which allows for screwed assembly using threaded premium connections whose

technical characteristics make it possible to meet the constraints to which OCTG tubes are

subjected in extreme conditions (depth, high pressure/high temperature, corrosive environments,

horizontal routing, etc.).

3.5.1.2 Tubular solutions for transport and processing

In the oil & gas transportation segment, the Group offers rigid pipes, both subsea and onshore, for

transporting production or injection fluids or for lifting fluids from the wellhead to the surface and

transporting them to processing units (risers). VALLOUREC also offers specialised solutions such as

umbilical tubes and process tubes.

Industrial fluid and hydrocarbon processing pipes include a wide range of carbon and alloy steel

pipes, as well as blanks – semi-finished pipes that can be processed to meet specific market

requirements – and fittings tailored to the needs of specific projects.

3.5.1.3 Services for the oil and gas market

The Group offers a range of services to meet the specific needs of its customers (operators,

engineering companies, distributors):

• VALLOUREC GLOBAL SOLUTIONS: a range of services relating to the entire life cycle of the

installation (inspection of connections, supervision of screwing, inventory management,

consulting and staff training);

Rigid pipesOil wells Refineries





• VALLOUREC.SMART: a range of customised services that can include inspection, tube

maintenance and repair, preparation for drilling operations and coordination of well supplies

in relation to the drilling programme;

• SERIMAX: through two companies, SERIMAX FRANCE and SERIMAX FIELD JOINT COATING, the

Group offers integrated welding solutions for offshore pipelines as well as coating services

for butt-welded pipes both onshore and offshore;

• The Group also offers integrated services dedicated to the subsea pipeline market with

welding, coating, line insulation, logistics and contracting based on customer needs.

3.5.1.4 Application to petrochemicals

VALLOUREC operates in the market by offering tubular solutions used by its customers in their

refineries, petrochemical complexes, plants or floating natural gas liquefaction (NGL) units and

floating production, storage and offloading (FPSO) units.

3.5.2 Industry

In the Industry segment, the Group operates in the automotive, mechanical and construction

markets.

Figure 9 - Illustrations of the uses of the Group's products in the Industry sector


3.5.2.1 Automotive

VALLOUREC offers a diversified range of products to manufacturers operating in the automotive

market, including axle tubes and gearbox applications. In particular, the Group is a European leader

in ball bearing rings made from seamless tubes produced by its subsidiary VALLOUREC BEARING

TUBES.

In Brazil, VALLOUREC SOLUÇÕES TUBULARES DO BRASIL is the market leader in seamless tubes,

whether hot-rolled, forged or cold-drawn. These products are used in particular for transmission

and steering systems for light and heavy vehicles and two-wheelers, as well as for construction

and agricultural machinery and equipment.

Hydraulic cylindersCar axles Steel tube bridges




3.5.2.2 Mechanics

In the mechanical engineering market, the Group is one of the European leaders in seamless tubes

for mechanical engineering applications. The range of uses for the Group's products in this segment

is very varied (civil engineering, agricultural or mining machinery, etc.).

3.5.2.3 Construction

In construction, the Group supplies seamless tubes and profiles for civil construction projects (halls,

stadiums, museums, bridges, etc.) and offshore projects (oil and gas platforms).

More specifically, the Group also supplies the Brazilian market with standard or shaped seamless

tubes for infrastructure projects.

3.5.3 Electrical energy

Figure 10 - Illustrations of the uses of the Group's products in the Electrical Energy sector


VALLOUREC is also active in the power generation market. The Group's portfolio of tubes for

conventional thermal power plants, new-generation coal-fired power plants known as "ultra-

supercritical" plants and nuclear power plants has historically been among the most varied in the

world in terms of product sizes and steel grades.

Nevertheless, with fewer new coal-fired power plants being developed in Asia since 2018 and

heavier tariffs levied on the Group's German-made products destined for the Chinese market, the

Group decided at the beginning of 2020 to launch a plan to divest itself of this business. In this

context, the specialised site in REISHOLZ, Germany was closed during the year. The Group will thus

significantly reduce its activities in this sector to maintain only a repair and maintenance activity in

Europe and North America. The biomass business in Brazil and some piping applications in China

and for the nuclear power market more generally will also be maintained. It should be noted,

however, that the Company has announced that it has initiated discussions for the sale of VALINOX

NUCLÉAIRE SAS, which could take place during the first half of 2021.

The Group is also positioning itself on various projects in the field of renewable energies, in

particular onshore and offshore wind power and the transport and storage of carbon and hydrogen,

which would enable it to benefit from new outlets in the medium or long term.

Ultra-supercritical power plantsThermal power stations


FINEXSI EXPERT AND FINANCIAL ADVISORY


3.5.4 Iron ore mine

VALLOUREC owns the Pau Branco iron ore mine in Brazil.

The initial production capacity of 4.7 million tonnes in 2018 is expected to be increased to around

8.7 million tonnes by 2022 following the construction of a new processing unit.

In addition to supplying the Group's blast furnaces and steel mills in Brazil, the mine's production

is sold on the local market. Against a backdrop of strong growth in iron ore prices in recent years,

the mine's contribution to the Group's EBITDA generation has increased.

3.5.5 Geographical organisation

With nearly 17,000 employees at the end of 2020 and a presence in more than 20 countries, the

Group is positioned as one of the world leaders in tubular solutions.

Figure 11 - Geographical presence of the Group (with percentage of 2020 turnover)

Source: URD 2020, FINEXSI analysis

Europe (16.4% of turnover)

Asia and the Middle East (27.8% of

turnover)

Commonwealth of Independent States and rest of the world (10.3%

of turnover)

South America (23.3% of turnover)

North America (22.2% of turnover)




As of 31 December 2020, the Group's locations include:

• 3 steel mills, including one in Germany - HÜTTENWERKE KRUPP MANNESMANN (HKM) - in which

the Group has a 20% stake, one in the United States and one in Brazil;

• 12 pipe mills in Europe, the United States, Brazil and Asia;

• 5 Research and Development centres;

• 26 finishing units;

• numerous marketing offices (sales and services);

• a set of forestry assets and the Pau Branco iron mine in Brazil.

The Group overhauled its organisation in 2017 in order to (i) improve its local presence in its various

markets to facilitate the support of its customers in the various phases of their development projects

and (ii) optimise its industrial tool. Its organisation is now structured around:

• 2 central departments:

• Development & Innovation (D&I) department: this department is responsible for

innovation, Research & Development and product line development strategy;

• Technology & Industry (T&I), which is in charge of industrial strategy (technology,

procurement and central planning) and is responsible for implementing levers to improve

the Group's cost base.

• 4 major regional divisions covering the Group's geographical areas of activity

(Europe/Africa, Middle East/Asia, North America and South America) which oversee all sales

cycles and industrial operations in their area.




4. Presentation of VALLOUREC's economic and competitive

environment

As detailed above in §3.5, VALLOUREC operates in four sectors of activity: (i) oil, gas and

petrochemicals, (ii) industry, (iii) power generation and (iv) iron ore.

The fundamentals and prospects of these markets are presented below.

4.1 Oil and gas sector

4.1.1 Market trend

The evolution of the tubular products activity in this market is correlated to the evolution of oil prices,

as well as to the depletion of oil fields. As a matter of fact:

• high oil prices are favourable to the activity of oil companies, with an increase in their

investments in Exploration & Production (E&P) projects;

• depletion of exploited reserves is also a driving force behind drilling activity.

Variations in investment by market players therefore have a strong impact on demand for tubular

products.

The figure below shows the historical and projected capital expenditure for Exploration &

Production by region, as well as the observed and expected medium-term changes in WTI (West

Texas Intermediate) and Brent oil prices between 2014 and 2025.




Figure 12 - Evolution of E&P CAPEX by region and WTI price between 2014 and 2025E

Sources: CAPITAL IQ, IHS MARKIT

We can observe that:

• The collapse of oil prices between 2014 and 2016 led to a drastic fall in capital expenditure

on hydrocarbon exploration and production, from $712 billion in 2014 to $354 billion in

2016 – a fall of 50.3%. This fall in oil prices is due to an overproduction at the global level,

which is explained in particular by the maintenance of production levels in OPEC countries,

as well as by the high production levels of shale oil in North America.

• The gradual recovery of oil prices between 2016 and 2018, combined with an alignment

between supply and demand, then allowed these investments to rise again, particularly in

North America, where they accounted for 43% of total expenditure in 2018.

• The COVID-19 pandemic had a brutal impact on Brent and WTI prices from March 2020.

This sharp fall was initially due to the contraction in global economic activity, followed by

producer countries’ inability to agree on production quotas.

This sharp fall in prices had an impact on the level of capital expenditure in 2020, amounting

to $302 billion, leading to pressure on volumes and prices for tubular suppliers.

0

20

40

60

80

100

120

140

0

100

200

300

400

500

600

700

800

2014 2015 2016 2017 2018 2019 2020 2021E 2022E 2023E 2024E 2025E

WT

I /

Bre

nt price (

US

D)

-consensus p

ost 2021

E&

P c

apex b

y r

egio

n (

US

D b

illio

ns)

Africa Asia Pacific Europe Middle East North America Russia and Caspian Latin America WTI (USD) Brent (USD)

712

489

354

415

454440

302 321 379

426453

468




IHS MARKIT's forecast for global capital expenditure over the 2021E-2025E period shows an

average annual growth rate of 9.9%, with a 6% increase between 2020 and 2021E, and a return to

the 2019 level ($440 billion) from 2024E.

However, it should be noted that the impact of the pandemic on market players, as well as on the

prospects for recovery, may vary by region.

Outlook for the North American market

In the US, the increase in Exploration & Production capital expenditure due to a favourable recovery

in oil prices between 2016 and 2018 was more pronounced than in other regions of the world. For

example, North American capital expenditure increased by 23% between 2017 and 2018.

However, the contraction in drilling activity following the COVID-19 pandemic has been particularly

significant as there is a high correlation between oil prices and rig counts in this territory. As a

result, North America will account for only 28% of global Exploration & Production investment in

2020.

However, IHS MARKIT estimates that North American capital expenditure will continue to grow

steadily between 2021E and 2025E, with an expected CAGR of 16.1%, making North America a

key player in the sector's recovery from 2021E onwards.

Outlook for the EA-MEA market

In the EA-MEA Oil & Gas market, national oil companies in the Middle East and North Africa

confirmed their resilience in 2020 despite the postponement of some Exploration & Production

projects.

From 2021 to 2023, continued but moderate growth in investment in the Middle East is expected,

mainly in offshore projects.

At the same time, the recovery on the African continent is expected to take place in two stages,

with a slow recovery for West Africa from 2021 and a recovery from 2023 for East Africa.

Outlook for the Brazilian market

The Brazilian business was relatively unaffected by the COVID-19 crisis as activity for the years

2020 and 2021 was already secured by firm drilling contracts signed prior to the pandemic.

The forecast places capital expenditure on deepwater offshore Exploration & Production projects

at the centre of the region's oil market output.

PETROBRAS, a major player in the Brazilian market, reduced its investment programme in 2020 by

29% and also revised its spending forecasts for the years 2021 to 2024. However, the group is

expected to pay particular attention to deepwater offshore activities.




Moreover, the region should also be able to count on international oil companies maintaining their

activities for the next few years, despite plans to reduce their costs.

4.1.2 Competitive market environment

The oil and gas tubular goods market is highly competitive and faces downward pressure on prices

across all product ranges, including premium products.

The historical players in this market, namely TENARIS, VALLOUREC, NSC, JFE, US STEEL TUBULARS,

TMK, TPCO and VOEST ALPINE TUBULARS, have seen their market shares challenged by new,

lower-cost suppliers, notably Chinese, whose technical progress has resulted in increased

pressure on the prices of premium tubes for international oil groups. This pressure on prices is

particularly present in the EA - MEA market.

4.2 Industry sector

4.2.1 Market trend

The activity of this market is directly based on the level of activity of a few major sectors such as

the automotive, agricultural, construction or manufacturing industries, which is strongly correlated

to the dynamism of the world economy.

This market was fully affected by the COVID-19 pandemic. Indeed, the drop in global demand for

industrial products, together with a disruption of production in the automotive and construction

sectors in particular, resulted in a reduction in outlets for industrial equipment products.

The outlook for this market also varies by region.

Outlook for the European market

In Europe, industrial production was particularly affected from April 2020 onwards, but shows signs

of recovery in December 2020.

The figure below illustrates the historical and projected GDP development of the euro area over

the period 2018 to 2025.




Figure 13 - Evolution of eurozone GDP in constant prices between 2018 and 2025

Source: International Monetary Fund (IMF)

We can see that after a sharp fall to €10,373 billion in 2020, a very significant rebound in the area's

economic activity is expected from 2021, followed by more moderate growth over the rest of the

observation period.

Outlook for the Brazilian market

In Brazil, the difficulties of the automotive industry contrast somewhat with the resilience of the

mining (§4.2.3) and construction sectors. The evolution of Brazilian GDP between 2018 and 2025

according to the forecasts of the International Monetary Fund (IMF) is presented below:

Figure 14 - Evolution of Brazilian GDP in constant prices between 2018 and 2025

Source: International Monetary Fund (IMF)

11164 1130710373 10907 11246 11495 11691 11857

1,9%1,3%

-8,3%

5,2%

3,1%2,2% 1,7% 1,4%

-10,0%

-5,0%

0,0%

5,0%

10,0%

15,0%

-10000

-5000

0

5000

10000

15000

2018 2019 2020 2021 2022 2023 2024 2025

In b

illio

ns o

f euro

s

GDP, constant prices (in billions of euros) Variation (%)

1 184 1 1981 128 1 160 1 186 1 213 1 240 1 267

1,3% 1,1%

-5,8%

2,8%2,3% 2,2% 2,2% 2,2%

-8,0%

-6,0%

-4,0%

-2,0%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

-1000

-500

0

500

1000

1500

2018 2019 2020 2021 2022 2023 2024 2025

In b

illio

ns o

f B

razili

an r

eais

GDP, constant prices (in billions of Brazilian reais) Variation (%)




Brazil's GDP in constant prices is expected to fall by -5.8% in 2020 with a growth forecast of 2.8%

between 2020 and 2021 according to IMF figures.

Thus, the expected rebound in activity in 2021 seems less pronounced than that of the eurozone,

but the growth of the Brazilian economy is still resilient until 2025, with GDP expected to reach a

level of 1,267 billion Brazilian reais for that year.

4.2.2 Competitive market environment

This market is characterised by a great diversity of techniques, product types and industrial

applications and, as a consequence, a significant fragmentation of the competitive landscape.

The result of this fragmentation is significant cost pressure and a shift in supply towards lower

quality products at lower prices, favouring low-cost production regions.

Furthermore, it should be noted that during episodes of declining demand in the oil sector, some

players may reorient themselves towards the industrial market, resulting in an increase in

competitive intensity.

4.2.3 The iron ore market

The activity of the iron ore production sector is largely based on the world prices of this commodity.

Below we present the evolution of the average annual iron ore price between 2018 and 2025:

Figure 15 - Evolution of the average annual Target Price for iron ore between 2018 and 2025

Source: CAPITAL IQ

69,5

92,8103,1

132,4

103,8

83,577,2 74,0

0

20

40

60

80

100

120

140

160

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026

In U

SD

Average annual Target Price Consensus - Iron Ore 62% FE




After a sharp rise in the price of iron ore, which peaked in 2021, it is expected to fall over the 2022-

2025 period.

As a result, the selling prices of iron ore are expected to fall, with the direct consequence of a

decrease in the turnover of the mining operations.

4.3 Electrical Energy sector

The tubular products sold in this sector are intended for nuclear or conventional power generation

players. Their levels of expenditure on the construction or maintenance of power plants therefore

directly influence the sector's sales volumes, as well as the pressure exerted on market prices.

The global activity of conventional coal-fired power plants is characterised by a general decline

which is expected to continue over the next few years. In this context, a recovery in demand for

tubular products is not expected in the short to medium term.

The development of the nuclear sector has been slowed down by political problems, combined with

financing difficulties and an increase in the safety requirements of the installations.

For information purposes, we recall that the Group has largely reduced its exposure to this sector

(§3.5.3).

4.4 Sectors facing significant risk factors

The various markets in which the Group operates are confronted with numerous risk factors,

including:

Dependence on investment in hydrocarbon exploration and production

As previously mentioned, the oil and gas tubular goods market is directly correlated to the level of

Exploration & Production investments made by oil companies. As these investments are

themselves largely dependent on the level of oil prices, the latter have a direct and significant

influence on activity in this market.

A cyclical business, dependent on the global economic situation

More generally, the Group's other markets, notably the automotive, construction and power

generation industries, are sensitive to current and expected macroeconomic conditions in the

geographic areas where these activities are carried out.

The result is a cyclical business that is largely at risk in the event of a significant deterioration in

the global economic environment.




A sector exposed to changes in the regulatory framework

The sector is also exposed to changes in the regulatory framework. Tube and pipe manufacturers

are notably confronted with legislation that impacts the export of their products.

Developments in the international regulatory context, particularly customs, therefore have a direct

influence on the activity of market players

Furthermore, the nature of the industrial activity of the players in the sector makes them particularly

sensitive to changes in environmental, safety or public health regulations. The extension of the

regulatory framework of the market constitutes a risk of seeing the expenses of authorisations or

compliance increase.

Dependence on commodity prices as a source of volatility

Tube and pipe manufacturers are subject to volatile prices for commodities such as iron ore, coal,

coke and scrap metal.

The production of tubes consumes these commodities, which represent significant costs for

specialists in the sector. A rise in the price of these commodities could have a significant impact on

manufacturers' production costs.

In addition, the uncertain dimension of these economic conditions and the intensity of competition

may limit the ability of industry players to pass on these increases in their sales prices. Although

commodity inflation is a global phenomenon, there are structural differences in cost adjustment

between regions. For example, the time to pass on cost increases is slightly higher in the EA-MEA

regions than in the US.

Business affected by exchange rate fluctuations

Variations in exchange rates and currency exchange rates are a major risk for the sector. Indeed,

industry actors generally sell their production in US dollars, the reference currency for this market.

However, not all manufacturers' cost structures are dollar-based: the cost of infrastructure, as well

as the purchase of commodities and the supply of energy needed for their activities, may be

denominated in local currencies.

For example, the sector's largely globalised production and supply chains, involving a wide variety

of currencies, pose significant exchange and conversion risks for the sector. A depreciation of the

US dollar against other currencies can therefore weaken the margins of manufacturers in the

sector.




5. Financial analysis of VALLOUREC

Our financial analysis of VALLOUREC, described below, distinguishes between the performance for

the period prior to the pandemic, i.e. the financial years 2014 to 2019, and the performance for the

period afterwards, i.e. the financial year 2020. We also present an analysis of the Group's balance

sheet structure.

5.1 Presentation of the Group's historical results for the period

2014 - 2020

The consolidated financial statements summarised below for the years 2014 to 2020 have been

certified without qualification by VALLOUREC's auditors, DELOITTE & ASSOCIÉS AND KPMG AUDIT.

The half-yearly accounts as at 30 June 2019 and 2020 have been subject to a limited review by

the statutory auditors.




5.1.1 Profit and loss account for the period 2014-2019

Changes in VALLOUREC's income statement aggregates before application of IFRS 166 is

summarised below:

Table 16 - Consolidated income statement for the period 2014-2019 (before IFRS 16)

6 We present the income statement before the application of IFRS 16 to allow for a more consistent comparison of the different years.

2014 2015 2016 2017 2018 2019

Turnover 5 700 536 3 803 423 2 965 061 3 749 641 3 920 677 4 173 047

Growth (%, N-1) N/A (33,3)% (22,0)% 26,5 % 4,6 % 6,4 %

Industrial costs of products sold (4 248 149) (3 352 744) (2 726 709) (3 297 148) (3 342 399) (3 435 289)

Selling, administrative, and research expenses (567 154) (512 829) (447 602) (439 587) (404 929) (411 390)

Other (29 982) (15 097) (9 466) (10 676) (23 094) (12 840)

EBITDA 855 251 (77 247) (218 716) 2 230 150 255 313 528

Margin (% of turnover) 15,0 % (2,0)% (7,4)% 0,1 % 3,8 % 7,5 %

Fixed assets depreciation (361 309) (346 911) (331 796) (341 477) (299 789) (276 480)

Impairment of assets and goodwill (1 103 700) (296 222) (71 391) (65 105) (53 249) (29 920)

Asset disposals, restruct. and non-rec. elements (50 830) (117 960) (127 471) (79 236) (74 356) (26 250)

EBIT (660 588) (838 340) (749 374) (483 588) (277 139) (19 122)

Margin (% of turnover) (11,6)% (22,0)% (25,3)% (12,9)% (7,1)% (0,5)%

Financial income 43 141 36 764 29 764 26 007 14 289 14 441

Financial expenses (132 226) (111 695) (124 922) (155 129) (155 137) (188 232)

Other financial income and expenses 26 893 164 (35 177) (44 461) (78 783) (35 576)

Earnings before tax (722 780) (913 107) (879 709) (657 171) (496 770) (228 489)


Net income share of equity-accounted companies (157 654) 15 178 (8 003) (3 173) 1 320 (3 895)

Income tax 2 487 (25) 80 166 100 615 (4 917) (75 192)

Net income (877 947) (897 954) (807 546) (559 729) (500 367) (307 576)


Share of minority interests (45 647) 33 201 49 530 23 038 (2 088) 2 554

Net income, Group share (923 594) (864 753) (758 016) (536 691) (502 455) (305 022)


in €K12 months (Pre-IFRS16)

Sources: Universal Registration Document 2019, Reference documents from 2014 to 2018 and FINEXSI analyses




5.1.1.1 Turnover

VALLOUREC's turnover comes mainly from the sale of finished products (tubular solutions) and

associated services.

We present below the evolution of the Group's turnover and production volumes between 2014 and

2019:

Figure 17 - Evolution of turnover by activity and tube production between 2014 and 2019

Generally speaking, from 2014 to 2016, the Group was strongly impacted by the oil crisis that began

in mid-2014 since this this market accounts for the lion’s share of its sales. The volumes produced

by the Group in its rolling mills, i.e. tonnes of hot-rolled seamless tubes, fell by almost 45% over

this period, which largely explains the 48% cumulative fall in turnover observed over this period.

Similarly, the recovery in oil prices and exploration and production investments from 2017 onwards

has had the direct consequence of returning to production volumes close to those of 2014.

However, the impact of this volume growth is limited to the turnover level, notably due to the

unfavourable price effect linked to competitive pressure on the OCTG product market.

We present below the specific developments in each of the Group's activities.

67%

62%60%

61% 63% 66%

18%

18%

19%

21%21%

23%

5%

5%

4%

7%9%

7%

11%

15%

16%

11%7%

5%2 323

1 411 1 281

2 256 2 364 2 291

1 000

1 500

2 000

2 500

3 000

-

1 000

2 000

3 000

4 000

5 000

2014 2015 2016 2017 2018 2019

Electric energy Petrochemicals

Industry and others Oil and gas

Total production shipped (in thousands of tonnes)

€MK tonnes

5 701

3 803

2 965

3 750 3 921 4 173





5.1.1.1.1 Oil, gas and petrochemicals turnover development

We present below the evolution of the Group's turnover between 2014 and 2019 in the Oil, Gas

and Petrochemicals market:

Figure 18 - Oil, gas and petrochemicals turnover evolution

As previously mentioned, the development of the Group's activity in this market depends mainly on

investments by the oil and gas industry.

Following record turnover in this segment in 2014, the Group was hit hard by the impact of the oil

crisis in 2015 and 2016, with a significant drop in demand combined with destocking by distributors,

leading to strong pressure on prices.

From 2017 onwards, the Group experienced significant annual growth, which is mainly explained

by the recovery in investments in this sector linked to the rise in oil prices as well as the

replenishment of distributors' stocks. From a geographical point of view, this growth was notably

driven by the North American market due to significant drilling activity linked to the strong growth

in shale oil and gas production, as well as by the dynamics of the Brazilian market.

Activity in the petrochemicals segment was also strongly impacted between 2014 and 2016. This

trend is explained in particular by the low level of new projects in Europe and increased competitive

intensity. A very significant recovery in activity was then observed, driven in particular by the

recovery of activity in North America. However, its impact should be put into perspective given the

limited weight of this activity in the Group's turnover.

4 084

2 566 1 920

2 567 2 813 3 042

-

1 000

2 000

3 000

4 000

2014 2015 2016 2017 2018 2019

€M





5.1.1.1.2 Evolution of the "Industry" turnover

We present below the evolution of the Group's turnover between 2014 and 2019 in the Industry

market:

Figure 19 - Evolution of the turnover of the "Industry & others" activity

The Group's activity in the Industry segment is strongly correlated to the macroeconomic

environment of the geographical areas in which it is positioned, namely Europe and Brazil.

The sharp reduction in activity between 2015 and 2016 is mainly due to:

• a contraction in volumes and pressure on prices in Europe, particularly in a context where

the sluggishness of the oil market has led some competitors to position themselves more

widely on the Construction and Mechanical Engineering markets, leading to an increase in

supply in these two segments

• the activity generated in Brazil, the Group's second largest geographical area in this market,

which also suffered from the macroeconomic context, particularly in terms of sales in the

automotive sector, and was impacted by more limited mining activity

In 2017 and 2018, the upward trend in prices in the mechanical applications segment led to a

significant recovery in turnover in Europe. Brazil also experienced this trend, which was combined

with (i) volume growth in the automotive and mechanical applications segment and (ii) a better

performance in the mining sector due to higher iron ore prices, allowing the Group to rebuild a

significant portion of the turnover lost in previous years.

In 2019, the decline in the Industry market was largely offset by a very strong performance in mining

due to both higher prices and increased volumes due to increased productivity.

37 %30 % 32 %

34 % 25 %

49 %

44 %

54 %50 %

47 % 57 %

39 %

19 %

17 %

18 %

19 %18 %

12 %

1 007

678

559

775819

939

-

200

400

600

800

1 000

2014 2015 2016 2017 2018 2019

Construction & others Mechanical Automotive

€M





5.1.1.1.3 Evolution of the "Electrical energy" turnover

We present below the evolution of the Group's turnover between 2014 and 2019 in the electrical

energy market:

Figure 20 - Evolution of the turnover of the "Electrical energy" activity

The conventional energy market, which historically represents the bulk of the business with 80% of

the segment's sales in 2015, experienced a significant decline over the period. This evolution is

explained both by the decarbonisation process initiated by developed countries and by a difficult

competitive environment in the Asian market.

In the nuclear energy market, the problems of financing and safety of installations in a post-

Fukushima context have largely contributed to a significant drop in activity in this segment despite

the desire of governments to reduce their CO2 emissions.

5.1.1.2 EBITDA margin

In line with the trend in turnover, VALLOUREC's EBITDA increased steadily from 2016 to 2019 after

two years of sharp decline due to the crisis affecting the oil industry.

610559

486

408

289

192

-

100

200

300

400

500

600

700

2014 2015 2016 2017 2018 2019

Electric energy





We present below the comparative evolution of the Company's consolidated EBITDA and Brent

and WTI prices between 2014 and 2020:

Figure 21 - Evolution of the Group's EBITDA and Brent and WTI prices over the period 2014-2020

Sources: CAPITAL IQ, Universal Registration Document 2019, Reference Documents 2014 to 2018 and FINEXSI analyses

As can be seen from the comparative evolution of EBITDA and Brent and WTI prices, the Group's

profitability is correlated to the evolution of these prices, which largely explains the Group's

performance over the period.

In addition to this correlation and the various factors explaining the changes in activity mentioned

above, the Group's profitability over the period, measured in terms of EBITDA, is explained by the

measures implemented by VALLOUREC's management to reduce its cost base and reorganise its

business.

Previously and following the oil crisis that began in 2015, the Group implemented various

successive plans to significantly improve its performance:

• the Valens Plan for the 2015-2016 period, which aims at reducing costs by 10%, excluding

commodity prices, i.e. €350 million in gross savings, reducing the annual level of investment

by €100 million and reorganising around the Group's four geographical divisions

• the Transformation Plan for the 2016-2020 period, following on from the Valens Plan, which

set a gross cost savings target of €400 million and an expected scope effect/development of

new production centres on gross operating income of €350 million over the period. This plan

was based in particular on a reorganisation of the European activities through a reduction in

the Group's industrial footprint in this region, additional job cuts and the development of the

Chinese and Brazilian production centres after the takeover of TIANDA and VSB in 2016

855

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125

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2014 2015 2016 2017 2018 2019 2020

EBITDA (€ millions) WTI Price (USD) Brent Price (USD)

In €M In $




• the Transformation Plan has been adjusted for the years 2019-2020 by additional gross

savings of €200 million through (i) a large savings plan in Germany, including a reduction in

headcount by 600 full-time equivalent employees over the period, (ii) the sale of assets

dedicated to conventional power plants, notably the REIZHOLZ plant in Germany and the

VCHA plant in China, as well as (iii) further measures to improve productivity and capacity in

the Chinese and Brazilian production hubs.

In its 2019 earnings presentation, the Group thus indicated that it had achieved almost €586 million

in gross savings between 2016 and 2019, corresponding to an overrun of €45 million of the €400

million target set in the Transformation Plan and the achievement of €141 million of the €200 million

of savings envisaged for the years 2019-2020.

These savings are the result of a significant 21% reduction in headcount between 2014 and 2019,

a 40% reduction in operating7 costs over the same period, as well as the successful development

of new production routes with VSB's exports representing more than 60% of its production and the

upscaling of the highly competitive TIANDA production base. As a result, the weight of Europe in the

initial majority of production (45%) has been reduced to 25% and the Group has reduced its

breakeven point by 25% between 2017 and 2019.

7 Production, administrative, commercial and research costs per ton excluding commodities.




5.1.2 Income statement for the 2019-2020 period (Post IFRS 16)

We present below the consolidated income statement of the Company for the years ended

31 December 2019 and 31 December 2020 and the six months ended 30 June 2019 and

30 June 2020:

Table 22 - Consolidated income statement for the period 2019-2020

The financial statements for the year 2019 presented above include restatements related to the

implementation of IFRS 16, which explains the differences from the data shown above for that year

in the presentation of the results for the 2014-2019 period.

2019 2020 H1 2019 H1 2020

Turnover 4 173 047 3 242 400 2 109 000 1 695 528

Growth (%, N-1) 6,4 % (22,3)% N/A (19,6)%

Industrial costs of products sold (3 435 289) (2 634 268) (1 727 683) (1 398 149)

Selling, administrative, and research expenses (378 390) (325 660) (198 039) (173 366)

Other (12 840) (24 504) (14 404) (12 739)

EBITDA 346 528 257 968 168 874 111 274

Margin (% of turnover) 8,3 % 8,0 % 8,0 % 6,6 %

Fixed assets depreciation (307 303) (268 084) (154 665) (138 449)

Impairment of assets and goodwill (29 920) (850 280) (21 353) (440 967)

Asset disposals, restruct. and non-rec. elements (26 250) (141 936) (11 440) (45 769)

EBIT (16 945) (1 002 332) (18 584) (513 911)

Margin (% of turnover) (0,4)% (30,9)% (0,9)% (30,3)%

Financial income 14 441 4 017 7 321 3 490

Financial expenses (188 232) (200 514) (90 410) (101 666)

Other financial income and expenses (70 280) (30 434) (38 789) (16 769)

Earnings before tax (261 016) (1 229 263) (140 462) (628 856)


Net income share of equity-accounted companies (3 895) (3 083) (580) (1 019)

Income tax (75 192) (96 051) (22 366) (30 276)

Net income (340 103) (1 328 397) (163 408) (660 151)


Share of minority interests 2 554 122 266 (3 772) 92 930

Net income, Group share (337 549) (1 206 131) (167 180) (567 221)


12 months (Post-IFRS16) 6 months (Post-IFRS16)in €K

Sources: URD 2020, Universal Registration Document 2019 and FINEXSI analyses.




5.1.2.1 Turnover

Most of the decline in Group turnover (-22.3%) came from the Oil & Gas segment, which fell by

27% over the year. This fall was mainly due to the US market, which was impacted by a very

significant reduction in the number of active drilling rigs and lower sales prices. Sales volumes in

the Europe/Africa and Middle East/Asia regions were also affected, but this impact was largely

offset by deliveries of special steel products. In South America, Oil & Gas sales were up due to

higher volumes of deliveries of premium OCTG products to pre-salt fields combined with a

favourable price/mix effect.

The Industry segment was also impacted by the pandemic in Europe, but was up at the Group

level. Turnover was stable in South America before an unfavourable exchange rate impact, and

activity at the Pau Branco mine rose significantly, combining a 26% increase in volumes with a

strong increase in iron ore prices.

The Electrical Energy segment increased slightly against a backdrop of scheduled project deliveries

and despite the impact of the closure of the Reisholz site in the third quarter of 2020.

5.1.2.2 EBITDA margin

Operating profitability, expressed as the ratio of EBITDA to turnover, remained relatively stable with

a decrease of 0.3 points over the year. This stability is the result of the impact of the savings plans

and the cost control policy implemented by the Group, which made it possible to offset the lower

absorption of fixed costs in view of the observed change in turnover.

The Group has also indicated that it will have achieved €165 million of gross cost savings by 2020,

which is higher than expected for this financial year. This brings the total amount of savings

achieved over the 2016-2020 period to €751 million.

In addition, the Group has announced a new gross savings plan of around €400 million over the

2021-2025 period, based in particular on cross-functional cost saving programmes and regional

initiatives.

As a reminder, the significant drop in EBIT of nearly €1 billion is linked to the €850 million in asset

and goodwill impairment that was recognised at the 31 December 2020 closing in connection with

asset impairment tests. These tests were carried out taking into account the consequences of the

pandemic with deteriorated forecast data (see balance sheet review below).

5.1.3 Review of the 2014-2020 period

The evolution of VALLOUREC's balance sheet over the 2014-2020 period is presented before IFRS

16 for the years ended 31 December 2014 and 31 December 2018 and after IFRS for the years

ended 31 December 2019 and 31 December 2020.




Table 23 - VALLOUREC's consolidated balance sheet for the period 2014-2020

5.1.3.1 Fixed assets

Intangible assets consist mainly of technology, software, patents and licences, as well as know-

how and customer relationships recognised in business combinations (purchase price allocation).

in €K 31-déc.-14 31-déc.-15 31-déc.-16 31-déc.-17 31-déc.-18 31-déc.-19 31-déc.-20

Intangible assets 165 910 148 821 124 982 88 695 71 277 63 405 49 515

Purchased goodwill 332 218 329 569 382 684 348 200 358 416 363 983 24 815

Property, plant & equipment 3 523 249 3 161 061 3 617 614 2 976 889 2 690 639 2 642 079 1 718 259

Biological assets 213 923 154 694 88 411 71 494 59 611 62 486 30 236

Equity-accounted companies 184 125 176 835 124 800 101 529 134 358 129 421 41 912

Other long-term investments 120 689 107 208 142 641 63 376 44 180 43 134 54 033

Other non-current assets 314 375 125 925 205 930 73 787 111 920 87 660 74 733

Deferred taxes 223 102 148 783 190 269 242 440 250 215 248 582 186 571

Fixed assets 5 077 591 4 352 896 4 877 331 3 966 410 3 720 616 3 640 750 2 180 074

Inventories 1 490 031 1 066 165 1 034 749 1 003 833 1 135 017 987 975 663 891

Trade accounts receivable 1 145 654 544 904 546 218 567 923 598 558 638 120 467 580

Other short-term investments 28 211 20 341 57 985 32 451 4 963 7 221 45 283

Other current assets 343 155 307 474 283 019 230 612 214 315 237 527 195 404

Cash and cash equivalents 1 146 913 630 540 1 286 722 1 021 035 739 577 1 793 843 1 389 533

Current assets 4 153 964 2 569 424 3 208 693 2 855 854 2 692 430 3 664 686 2 761 691

Assets for sale and discontinued operations - 68 964 46 327 64 119 - - 106 523

Assets 9 231 555 6 991 284 8 132 351 6 886 383 6 413 046 7 305 436 5 048 288

Shareholders’ equity - Group share 3 743 359 2 645 668 3 283 530 2 426 030 1 802 257 1 467 337 (187 100)

Minority interests 426 253 391 941 494 432 458 545 462 019 512 708 320 777

Equity 4 169 612 3 037 609 3 777 962 2 884 575 2 264 276 1 980 045 133 677

Shareholder loans - - 83 172 71 702 28 892 20 560 8 613

Commitments to staff 244 282 224 477 226 763 208 565 214 359 227 787 202 635

Risk provisions 176 433 248 622 375 984 199 351 176 876 165 578 214 600

Bond debt 1 595 662 1 597 916 1 600 201 1 714 908 2 117 352 1 726 538 1 735 860

Bank loans 318 784 238 010 214 556 137 279 117 415 1 737 712 1 727 709

Other loans and similar debts 740 876 307 890 749 379 700 440 560 215 359 924 136 827

Bank overdrafts 38 195 5 981 9 608 10 712 2 528 208 3 115

Financial debt 2 693 517 2 149 797 2 573 744 2 563 339 2 797 510 3 824 382 3 603 511

Deferred tax liabilities 256 246 216 172 80 494 18 284 15 313 9 499 19 914

Trade accounts payable 806 856 523 476 530 391 581 622 582 272 579 739 426 097

Other long-term debt 173 300 152 430 105 293 12 894 31 831 151 679 128 977

Other non-current liabilities 711 309 378 566 335 337 333 397 301 717 346 167 273 427

Payables 4 641 228 3 420 441 3 625 259 3 509 536 3 728 643 4 911 466 4 451 926

Liabilities for sale and discontinued operations - 60 135 43 211 12 654 - - 36 837

Liabilities 9 231 555 6 991 284 8 132 351 6 886 383 6 413 046 7 305 436 5 048 288

Sources: URD 2020, Universal Registration Document 2019, Reference documents from 2014 to 2018 and FINEXSI analyses




Goodwill corresponds, over the period 2014-2019, to the CGUs8 VALLOUREC DO BRASIL and

VALLOUREC NORTH AMERICA and, to a lesser extent, to the CGUs VALLOUREC EUROPE and SERIMAX.

The changes observed over the period are explained, in addition to exchange rate effects, by the

impairment of all SERIMAX goodwill in 2015 (€36.3 million), the impact of the takeover of VSB

(VALLOUREC DO BRASIL CGU) and TIANDA OIL PIPE (VALLOUREC EUROPÊ CGU) in 2016 (~€40

million) and in 2017 (€12.3 million).

VALLOUREC's property, plant and equipment consist mainly of:

• the Group's real estate assets, which include factory buildings and administrative premises;

and

• industrial equipment, which includes steel production and tube manufacturing equipment.

The change in this item over the 2014-2019 period is explained by both currency effects and the

impact of changes in the Group's scope.

The significant equity-accounted companies at the end of 2014 were HKM and TIANDA OIL PIPE.

Following the takeover of TIANDA OIL PIPE in 2016, the latter is now fully consolidated. In addition,

VALLOUREC UMBILICALS has been equity-accounted since the establishment of joint control with the

BANQUE PUBLIQUE D'INVESTISSEMENT in 2018.

Deferred tax assets and liabilities consist mainly of capitalised tax loss carryforwards9 and deferred

tax associated with fixed assets.

The sharp decrease in the Group's fixed assets at the end of the year 31 December 2020 is the

result of the consequences of the pandemic on the short- and medium-term business outlook.

Indeed, the impairment tests carried out at the time of this closing led to the recognition of significant

impairments, in particular:

• 327 million on non-amortisable intangible assets and goodwill, mainly related to the

VALLOUREC NORTH AMERICA CGU (€311 million) and the VALLOUREC EUROPE CGU

(€14 million) due to lower forecasts, notably linked to an anticipated significant reduction in

investments by oil & gas operators;

• 431 million on depreciable property, plant and equipment and rights of use, mainly relating

to the VALLOUREC EUROPE CGU;

• 81 million on equity-accounted companies due to the impairment of the entire stake held in

HKM.

8 Cash Generating Unit. 9 269 million of deferred tax assets at 31 December 2020.




As a reminder, the discount rates used in the impairment tests are as follows:

• VALLOUREC EUROPE CGU: 9.5% in 2020 compared to 8.4% in 2019;

• VALLOUREC NORTH AMERICA CGU: 9.8% in 2020 compared to 8.8% in 2019;

• VALLOUREC DO BRASIL CGU: 11.8% in 2020 compared with 11.1% in 2019.

The amount of these impairments largely explains the change in consolidated shareholders' equity

(Group share) over the period, which was negative at 31 December 2020 (-€187.1 million).

5.1.3.2 Working capital requirement

We present below the change in the gross value of VALLOUREC's WCR as shown in the Company's

financial reports. The amounts of the asset items (inventories and trade receivables) correspond to

the gross value and therefore differ from those shown in the balance sheet (Table 23), which

represent the net book value, i.e. after provisions.

Table 24 - VALLOUREC's consolidated gross working capital over the period 2014-2020

The changes in working capital requirements related to operations include certain impacts,

particularly those resulting from translation differences, which tend to disrupt the assessment of

changes in working capital requirements. We have thus specified in the table above the change

in WCR as it appears directly from the Group's cash flows.


Inventories 1 663 461 1 234 047 1 240 512 1 183 837 1 274 594 1 122 361 768 012

Trade receivables and advances received 1 164 309 599 719 579 168 603 653 609 838 644 071 474 351

Suppliers (806 698) (523 476) (530 391) (581 622) (582 272) (579 739) (426 097)

WCR 2 021 072 1 310 290 1 289 289 1 205 868 1 302 160 1 186 693 816 266

As a % of turnover 35,5% 34,5% 43,5% 32,2% 33,2% 28,4% 25,2%

Other receivables and payables 16 855 7 306 82 678 (70 877) 2 819 5 091 49 203

WCR linked to business 2 037 927 1 317 596 1 371 967 1 134 991 1 304 979 1 191 784 865 469

As a % of turnover 36% 35% 46% 30% 33% 29% 27%

Variation (710 782) (21 001) (83 421) 96 292 (115 467) (370 427)

Including change in WCR cash flow (632 117) (179 631) (60 555) 155 203 (124 321) (172 813)

Sources: URD 2020, Universal Registration Document 2019, Reference Documents 2014 to 2018 and FINEXSI analyses




Furthermore, it should be noted that, due to the seasonal nature of the Group's activity, the position

at 31 December, the closing date of the financial year, appears to be a low point in terms of the

evolution of the historical quarterly WCR:

Figure 25- Evolution of the quarterly net working capital expressed in days of turnover over the period 2014-2020

Sources: Presentation of VALLOUREC's annual results for the years concerned and FINEXSI analysis

The Group's WCR was largely impacted by the oil industry crisis in the

2015-2016 period, during which it deteriorated as a percentage of turnover.

In the following years, the Group nevertheless improved its management of operating working

capital, despite a strong recovery in the Group's activity. Thus, the days working capital ratio

gradually returned to the level observed in 2014.

5.1.3.3 Financial structure

We present below the details of VALLOUREC's consolidated net financial debt for the years 2014 to

2020:

Table 26 - VALLOUREC's consolidated net financial debt over the period 2014-2020


125 122

135

100

162 160154

115

149

133 135

114

141

114 111

84

121114

124

94

117108 105

95

119115

120

78

Number of days

121

133

113 106 108

148

112

Annualised quarterly average


Bond debt (1 595 662) (1 597 916) (1 600 201) (1 714 908) (2 117 352) (1 726 538) (1 735 860)

Bank loans (318 784) (238 010) (214 556) (137 279) (117 415) (1 737 712) (1 727 709)

Other loans and similar debts (740 876) (307 890) (749 379) (700 440) (560 215) (359 924) (136 827)

Bank overdrafts (38 195) (5 981) (9 608) (10 712) (2 528) (208) (3 115)

Loans and financial debt (2 693 517) (2 149 797) (2 573 744) (2 563 339) (2 797 510) (3 824 382) (3 603 511)

Investment securities 806 485 460 526 950 476 805 367 401 896 925 505 761 597

Cash on hand 340 428 170 014 336 246 215 668 337 681 868 338 627 935

Cash and equivalents 1 146 913 630 540 1 286 722 1 021 035 739 577 1 793 843 1 389 533

Net financial debt (1 546 604) (1 519 257) (1 287 022) (1 542 304) (2 057 933) (2 030 539) (2 213 978)

Evolution 27 347 232 235 (255 282) (515 629) 27 394 (183 439)




The Group's financial debt is mainly composed of three types of financing: simple bonds associated

from 2017 with a convertible bond (OCEANE) redeemable at maturity, commercial paper

programmes and credit facilities.

The evolution of the nominal value of the bond debt over the period is as follows:

Table 27 - Evolution of the Company's bonded debt over the period 2014-2020


The outstanding amount of the commercial paper programme has remained relatively stable over

the 2014-2019 period, fluctuating between approximately €100 million and €400 million depending

on the year. At 31 December 2020, the Company had no commercial papers outstanding.

The Group historically benefits from available credit facilities in Europe in excess of €1 billion. 2019

was the first year in the period in which the Group drew down €1.7 billion from these facilities, a

position maintained at 31 December 2020.

The evolution of the Group's net financial debt is as follows:

• It remained stable in amount between 2014 and 2015. In fact, the improvement in the WCR

linked to the actions undertaken and the reduction in activity compensates for the operational

losses linked to the oil crisis and the invested amounts.

• The decrease in net debt in 2016 is explained by the combined effect of an improvement in

the value of working capital and the completion of the €1 billion capital increase subscribed

for by BPI FRANCE and NSC, the amount of which is higher than the operational amount, the

amount of tangible investments and the takeover of TIANDA and VSB.

• The increase in net debt in 2017 was mainly due to operating losses and investments partially

offset by asset disposals and currency effects.

• The sharp fall in 2018 was mainly due to operational losses, investments and a deterioration

in the value of working capital.

• The stability of the 2018-2019 evolution is due to the achievement of the break-even point in

terms of self-financing capacity and a change in WCR, largely offsetting the investments of

the financial year.

• The increase in net debt in 2020 is the result of the pandemic and more particularly the impact

of operating cash flow and investments not offset by the reduction in working capital due to

the drop in activity.

in €M 31-déc.-14 31-déc.-15 31-déc.-16 31-déc.-17 31-déc.-18 31-déc.-19 31-déc.-20

Bond debt maturing in 2017 (4.25%) 650 650 650 - -

Private placement maturing in 2019 (3.25%) 400 400 400 400 400 - -

Private placement maturing in 2027 (4.125%) 55 55 55 55 55 55 55

Bond debt maturing in 2024 (2.25%) 500 500 500 500 500 500 500

OCEANES maturing in 2022 (4.125%) - - - 250 250 250 250

Bond debt maturing in 2022 (6.625%) - - - 550 550 550 550

Bond debt maturing in 2023 (6.375%) - - - - 400 400 400

Total 1 605 1 605 1 605 1 755 2 155 1 755 1 755




5.2 Analysis of the Group's financial position at the end of 2020

5.2.1.1 Analysis of the main financial debt facilities

The main components of the Group's financial debt at 31 December 2020 were as follows:

Table 28 - Main components of the Company's financial debt at 31 December 2020

Sources: URD 2020 and FINEXSI analysis

Revolving credit facilities (RCFs)

As at 31 December 2020, the Group's cash facilities amounted to €1,712 million out of a total

available of €1,724 million. For the record, these credit facilities consist of:

• a syndicated revolving credit facility for a total principal amount of €1,100,000,000, under a

loan agreement dated 12 February 2014, with VALLOUREC as borrower, maturing on

9 February 2021, with €1,028,890,000 drawn as at 31 December 2020;

• a revolving credit facility for a total principal amount of €90,000,000, under a loan agreement

dated 25 June 2015, between VALLOUREC, as borrower, and NATIXIS, as lender, maturing on

9 February 2021, with €89,000,000 drawn as at 31 December 2020;


dated 21 September 2015, between VALLOUREC, as borrower, and a pool of French banks10,

as lender, initially maturing on 13 July 2020, extended by €300,000,000 until 9 February

2021, and with €297,000,000 drawn as at 31 December 2020;


dated 2 May 2016 between VALLOUREC, as borrower, and a pool of French banks11, as

lender, initially maturing on 12 February 2020, extended by €300,000,000 until

9 February 2021, and with €297,270,000 drawn as at 31 December 2020.

10 BNP PARIBAS, NATIXIS and SOCIÉTÉ GÉNÉRALE. 11 BNP PARIBAS, NATIXIS and SOCIÉTÉ GÉNÉRALE.

In €MBalance

sheet ISIN Nominal Maturity

€1.1 billion facility - February 2014 1 029 1 034 feb.-21

€90 million bilateral facility - June 2015 89 90 feb.-21

€400 million facility - September 2015 297 300 feb.-21

€450 million facility - May 2016 297 300 feb.-21

Total RCF 1 712 1 724

Bonds 2027 (private placement) 54 FR0011292457 55 augu.-21

Bonds 2024 499 FR0012188456 500 sept.-24

OCEANE 2022 239 FR0013285046 250 oct.-22

2023 Senior Bonds 397 XS1807435026

XS1807435539

400 oct.-23

2022 Senior Bonds 547 XS1700480160

XS1700591313

550 oct.-22

Total Bonds 1 736 1 755 feb.-21




As a reminder, the RCFs are subject to a gearing covenant which stipulates that the ratio of

restated12 net financial debt to restated equity13 calculated at 31 December of each year must

remain less than or equal to 100%.

Figure 29 - Evolution of the gearing covenant ratio between 2016-2020

Sources: Half-yearly financial report for the six months ended 30 June 2020, URD 2020, Universal Registration Document 2019,

and registration documents for 2017 to 2018

At 31 December 2020, the gearing ratio is 180%.

Bonded debt

The Group's bond debt consists of five bond issues, the characteristics of which are set out in the

table above:

• 2027 Bonds: a €55 million issue of straight bonds issued by the Company in August 2012

maturing in 2027 with a coupon rate of 4.125%

• 2024 Bonds: a €500 million issue of French straight bonds issued in 2014 by the Company

maturing in 2024 with a coupon rate of 2.250%

• OCEANEs 2022: a €250 million issue of bonds convertible into and/or exchangeable for new

and/or existing shares under French law, issued in 2017 by the Company and maturing in

2022 with a coupon rate of 4.125%

12 VALLOUREC's consolidated net debt including finance lease debt and the shareholder loan in Brazil. 13 VALLOUREC's consolidated shareholders' equity restated for gains and losses on derivatives and translation reserves (gains and losses on consolidated foreign currency subsidiaries).

1 614

2 087 2 101

2 376 2 253

3 414

2 896 2 584

1 919

1 255

47 %

72 %81 %

124 %180 %

0 %

40 %

80 %

120 %

160 %

200 %

0

1 000

2 000

3 000

4 000

2017 2018 2019 H1 2020 2020

Restated net debt Restated shareholders’ equity Restated banking covenant




• 2022 Senior Bonds: a €550 million high-yield bond issue governed by New York State law,

issued in 2017 by the Company and maturing in 2022 with a coupon rate of 6.625%

• 2023 Senior Bonds: a €400 million class of New York State law high-yield bonds issued in

2018 by the Company with a coupon rate of 6.375%

With the exception of the 2027 Bonds, all of the Company's bond issues are listed.

Figure 30 - Evolution of the quotation of VALLOUREC's straight bonds

Sources: CAPITAL IQ and FINEXSI analysis

Our recent analysis of the market price of VALLOUREC's plain vanilla bonds leads us to make the

following observations:

• VALLOUREC's convertible bonds were strongly impacted by the effects of the COVID-19

pandemic with market price levels reflecting less than 50% of their nominal value;

• a gradual rise in prices was observed from the announcement of VALLOUREC SA's willingness

to hold discussions with its creditors, and this upward trend was confirmed following the

announcement of the terms of the Agreement in Principle. As at 25 March 2021, these bonds

were trading at between 93% and 97% of their nominal value.

0

20

40

60

80

100

120

avr.-18 juil.-18 oct.-18 janv.-19 avr.-19 juil.-19 oct.-19 janv.-20 avr.-20 juil.-20 oct.-20 janv.-21

400M HY 6,375% Oct.2023 550M HY 6.625% Oct.2022 500M 2,25% Sept.2024

The Companyannounces it wants to talk with its creditors

COVID-19 pandemic

Q3 results lower than expected / S&P rating

downgraded




The same remarks apply to the price movements of the OCEANEs 2022:

Figure 31 - Evolution of the market price of VALLOUREC's OCEANE bond (€250 million at 4.125%, maturity October 2022)

Sources: CAPITAL IQ and FINEXSI analysis

For the record, the initial conversion price of the OCEANEs was €6.89. However, due to the impact

of the reverse stock split on May 25, 2020, this price has been adjusted accordingly and is now

€275.60.

Evolution of the debt rating

VALLOUREC S.A.'s debt is monitored by STANDARD & POOR'S.

At the end of November 2018, VALLOUREC's debt rating was downgraded from B to B-, justified by

the persistence of negative free operating cash flows.

At the beginning of 2020, the Company's debt, still classified as B-, was subject to successive

downgrades due to:

• the impact of the COVID-19 pandemic on the health of the oil industry, putting significant

pressure on the Group's business and its ability to generate cash;

• the company's high level of debt (€3.5 billion of debt), which is considered difficult to sustain;

• the abandonment of the proposed capital increase and associated refinancing;

• the RCF €1.7 billion payment due by February 2021, whereas the available cash was

€1.4 billion at 30 June 2020.

0 €

1 €

2 €

3 €

4 €

5 €

6 €

7 €

8 €

9 €

avr.-18 juil.-18 oct.-18 janv.-19 avr.-19 juil.-19 oct.-19 janv.-20 avr.-20 juil.-20 oct.-20 janv.-21

Evolution of the price of OCEANEs October 2022 (€250m at 4.125%)

The Companyannounces it wants to talk with its creditors

COVID-19 pandemic

Q3 results lower than expected / S&P rating

downgraded




We present below the main changes in VALLOUREC's debt rating:

Figure 32 - Evolution of the debt rating

5.2.1.2 Cash flow from 2016 to 2020

We present below the evolution of the Company's consolidated cash flows over the years 2016 to

2020:

Figure 33 - Consolidated cash flow statement 2016 to 202014


This table provides a summary view of the cash flows for the years 2017 to 2020 resulting from the

analysis of VALLOUREC's historical consolidated income statements and balance sheets.

The evolution of the Group's cash flow over the 2016-2019 period shows a significant recovery in

cash flow before interest, which is nevertheless still not sufficient to cover debt servicing and the

financing of the investments needed to improve its operating performance.

14 Cash and cash equivalents at the beginning or end of the year should be compared with the balance sheet amount of cash and cash equivalents less the amount of current bank loans.

DateUpgrade /

DowngradeRating Comments

26/11/2018 B to B-

This downgrade of Vallourec’s debt rating comes after the publication of below-expectation

results in mid-November. In addition, the rating agency justifies this rating change by the

persistence of negative free operating cash flow which continues to erode the Group’s cash

position.

31/03/2020 B- to CCC

This downgrade is the result of a weakening of the Group’s markets resulting from the COVID-

19 pandemic and the risk relating to the completion of the €800 million capital increase and

the associated refinancing in a deteriorated market context.

02/09/2020 CCC to CCC-

This downgrade follows the announcement of the company’s desire to consider a debt

restructuring. The agency estimates distressed exchange or a payment default are very likely

within 6 months due in particular to the cash position of only €1.4 billion and the €1.7 billion

RCF debt payment coming in February 2020.

24/11/2020 CCC- to CC

This downgrade of Vallourec’s rating follows the Company’s announcement, which the

agency qualifies as “distressed”, of its desire to reduce its debt by 50% through a debt for

equity swap.

11/02/2021 CC to SD

The downgrade of Vallourec’s rating results from the non-payment of the €1.7 billion RCF

debt payment and the conversion of 50% of the debt into shares contemplated in the

Agreement in Principle.

The agency also indicates that the rating should settled in the lower part of the B category if

the Restructuring is carried out.

Sources: S&P Rating Report

Standard & Poor's

in €K 2016 2017 2018 2019 2020

Cash flow before interest (303 928) (203 276) (34 842) 168 280 57 183

Interest paid net of interest received (95 160) (129 134) (175 189) (173 791) (202 713)

Interest received 29 762 25 995 14 301 14 441 4 017

Interest and taxes (85 879) (143 202) (190 820) (205 933) (291 255)

Cash flow (399 088) (332 410) (210 031) (5 511) (145 530)

Change in working capital requirement linked to operations 179 631 60 555 (155 203) 124 321 172 813

Net operating cash flow (219 457) (271 855) (365 234) 118 810 27 283

Net cash flow from investing activities (267 500) (95 099) (95 489) (139 611) (128 164)

Net cash flow from financing operations 1 095 409 130 282 219 496 1 085 445 (216 615)

Impact of exchange rate variation 44 103 (30 119) (32 047) (8 058) (89 547)

Impact of reclass. of assets for sale and discontinued operations - - - - (174)

Cash flow change 652 555 (266 791) (273 274) 1 056 586 (407 217)

Cash at opening 624 559 1 277 114 1 010 323 737 049 1 793 635

Cash at closing 1 277 114 1 010 323 737 049 1 793 635 1 386 418




In a context where the markets in which the Group operates are not expected to recover quickly,

the cash flow generated by the Group before the impact of financing operations is expected to

remain negative in the short term15 and will, in any event, not be sufficient to enable the repayment

of the Group's financial debts.*

5.2.1.3 Summary

The analysis of the Group's cash flows illustrates the difficulty for the Group to finance the

investments necessary to improve its operational performance, while reducing its financial debt.

As the planned €800 million capital increases and the associated refinancing of the same amount

could not be carried out due to the pandemic, VALLOUREC was faced with the problem of refinancing

its debt:

• Under the terms of the RCFs, the repayment of the amounts drawn by the Group, i.e.

€1.7 billion at 31 December 2020, should have been completed in February 2021.

• Part of the Bonds were to be redeemed in October 2022 for an amount of €800 million.

The Group was therefore faced with a significant level of debt insofar as its cash position was not

enough to meet its repayment obligations.

This financing issue is also noted by the Statutory Auditors in their reports on the 2019 and 2020

consolidated financial statements and in their limited review of the financial statements as at

30 June 2020:

• The report on the 2019 consolidated financial statements, which includes an unqualified

certification of the said financial statements, mentions in the key points of the audit the

Group's liquidity risk with regard to the RCF payment deadline. In this context, the Statutory

Auditors indicated that they had assessed the Group's liquidity needs with regard to the

proposed capital increase of €800 million and the refinancing of the credit facilities for the

same amount, bearing in mind that, at that date, the pandemic had not yet rendered the

project uncertain.

• In the context of their limited review of the consolidated half-yearly financial statements at 30

June 2020, the Statutory Auditors refer in their conclusions to note 2.2 of the notes to the

said financial statements, which sets out the uncertainty relating to the Group's liquidity that

could jeopardise its ability to continue as a going concern in the event that the discussions

between the Company, its reference shareholders and the banks were not successful.

• In the section on "Justification of assessments - Key points of the audit" of their report on the

consolidated financial statements for the financial year 2020, the Statutory Auditors have

considered liquidity risk as a key point in their opinion. In this context, they refer the reader

to notes 1.3.2 "Liquidity risk and going concern", 7.1 "Net financial debt", 7.5.4 "Financial risk

management - Liquidity risk" and 11.2 "Post balance sheet events" of the notes to the

consolidated financial statements.

15 By reference to the forecasts qualified as estimated financial data according to AMF recommendation 2016-05 presented in the press release on the financial restructuring of 3 February 2020.




In this context, the Company had to find a refinancing solution that would not jeopardise its ability

to continue as a going concern.

Discussions with its creditors and Reference Shareholders led to the Agreement in Principle, and

then to the opening of a safeguard procedure aimed in particular at enabling the implementation of

this agreement.

We remind you that the entry into the safeguard procedure of the Company has as a consequence

a prohibition to pay all claims on the Company having arisen before the opening judgment.

5.3 SWOT matrix

The Company's strengths and weaknesses, as well as the threats and opportunities it faces in its

markets, are summarised in the matrix below:

Sources: FINEXSI analyses

Strengths

- Strong reputation of the Group in its markets, particularly in the premium segment

- Production sites all over the world, particularly in regions where costs are lower, making it possible to supply regions which are less cost competitive

- Good local presence in Brazil / historical relationship with Petrobras giving the Group a solid position in this market

- Historical capacity of management to carry out cost reduction plans

- Competitive iron ore mine in Brazil which supplies the Group while generating revenues not exposed to the oil economy

Weaknesses

- Very significant level of debt of the Company reducing its room for manoeuvre, particularly in a context of market downturn

- Low generation of FCF not allowing to face both investments and debt service despite a notable improvement in recent years

- Strong dependence of the activity on the Oil & Gas market

- Significant working capital requirement with financing peaks, particularly during the first half of the year

Opportunities

- Rebound of the OCTG market after the COVID-19 pandemic

- Successful bids in calls for tenders with national or multinational oil companies, particularly in the Middle East and Asia

- Recent increase in iron ore and petroleum prices

- Consolidation of the market in North America (distributors and suppliers) which has allowed VALLOUREC to gain market share

- Ways to diversify the activity in the context of the expected energy transition (geothermal energy, carbon capture, etc.)

Threats

-Strong correlation of the level of activity to oil prices

- Strong competitive intensity that can lead to loss of market share or erosion of the margin

- Exposure to currency risk ($, BRL)

- Import protectionist policy and customs protection barriers (Brexit, China, US Section 232, etc.)

- Iron ore price expected to decline over the coming years

- Volatility of commodity costs




Despite its undeniable strengths in terms of market positioning, the VALLOUREC group must adapt

in real time to a changing environment, affected by the COVID-19 pandemic, and is currently

suffering from a deteriorated financial situation that could jeopardise its ability to continue as a

going concern if the restructuring plan is not implemented.




6. Presentation of and arrangements for the Restructuring

6.1 Summary of the process leading to the Restructuring

As mentioned above (§1), after the cancellation of the proposed €800 million capital increase and

the refinancing which became unfeasible due to the impact of the COVID-19 pandemic, the

Company approached its Reference Shareholders and some of its banks to discuss an alternative

refinancing scenario.

These discussions were subsequently extended to the RCF and bond creditors and other

stakeholders with the objective of a financial restructuring of all the Company's borrowings.

As a result of these discussions, on 3 February 2021, the Company announced the entering into

the Agreement in Principle and the Lock-Up Agreement with certain of its creditors.

In this context, the Company requested and obtained the opening of a safeguard procedure by the

Nanterre Commercial Court on 4 February 2021.

The purpose of this procedure is to implement the terms of the Agreement in Principle as reflected

in the Safeguard Plan, the main terms of which are set out below.

6.2 Presentation of the reasons for and terms of the Restructuring

6.2.1 Reasons for and description of the Restructuring

The purpose of the proposed Transaction is to enable the Company to reduce the principal amount

of its debt by more than half. It mainly consists of a restructuring of the Company's RCF debt and

bonded debt, i.e. the Bonds, as well as a portion of the accrued interest and utilisation fees relating

to the latter (hereinafter the "Restructured Claims").

The Restructured Claims consist of:

• the principal amount of the Bonds at the Reference Date16 of approximately €1,755 million at

31 December 2020;

• the total principal amount of the advances made available under the RCFs at the Reference

Date, i.e. approximately €1,712 million at 31 December 2020;

• interest, and related default interest, accrued and unpaid over the period from 2 February

2021 (included) to 30 June 2021 (included) in respect of the RCFs and the Bonds, as well as

the utilisation fees over the same period in respect of the RCFs, in a total amount of

approximately €80 million (the "Restructured Interest").

16 Or the last day of the subscription period of the Rights Issue as defined below.




The Restructuring provides for a distinction in treatment between:

• the RCF claims held by the Commercial Banks, i.e. approximately €664 million in principal

and €17 million in Restructured Interest (hereinafter the "Commercial Bank Loans");

• the balance of the Restructured Claims, being the principal amount of the Bonds of

approximately €1,755 million and the principal amount of the RCF debt not held by the

Commercial Banks of approximately €1,048 million, together with the associated

Restructured Interest of approximately €63 million (the "Converted Claims").

Figure 34 - Composition of Restructured Claims

Sources: Draft Securities Note, Safeguard Plan and FINEXSI analyses.

The Agreement in Principle is composed of three major components, which are detailed below

(§ 6.3):

• a significant reduction in gross debt of around €1,800 million through:

• a rights issue of approximately €300 million (the "Rights Issue"). This transaction will

lead, regardless of the subscription scenario of the shareholders, to a decrease of the

gross debt by the same amount insofar as (i) the proceeds will be allocated to the

repayment of the Converted Claims and, as the case may be, (ii) the unsubscribed amount

will be fully guaranteed by the holders of the Converted Claims by a debt-to-equity swap;

Converted Claims

€2,866m

61.2% of the

principal of RCFs

(€1,048m)

Bonds

€1,755m

Related

Restructured

Interest (€63m)

Commercial Bank

Loans

€681m

38.8% of the

principal of RCFs

(€664m)

Related

Restructured

Interest (€17m)

Restructured Claims

Total: €3,547m

Bonds

€1,755m

RCF

€1,712m

Restructured

Interest

€80m




• the conversion into capital of the Converted Claims for an amount of approximately €1,331

million by way of a capital increase reserved for the holders of the Converted Claims

subscribed for by way of set-off of claims (hereinafter the "Reserved Capital Increase");

• a debt write-off by the Commercial Banks for an amount of approximately €169 million

with a “better-fortune instrument” (instrument de retour à meilleure fortune) in the form of

share subscription warrants (hereafter the "Warrants").

• refinancing of residual debt and securing liquidity and operational financing with:

• the conversion of part of the Commercial Bank Loans, amounting to €462 million, into a

new revolving credit facility (hereinafter the "Reinstated RCF");

• the subscription by the holders of the Converted Claims of new senior notes subject to

New York State law in the principal amount of €1,023 million (the "New Notes");

• the implementation of a €262 million State-guaranteed loan17 (hereinafter the "SGL");

• a cash repayment by the Company of the Restructured Claims of €262 million;

• 178 million in contract bonding lines, notably for bid and performance bonds, granted by

the Commercial Banks.

• as the Restructured Interest is included in the amount of the Converted Claims and the

Commercial Bank Loans, they will thus also be partly reimbursed and partly converted into

capital through the above-mentioned transactions.

We remind you that the interest, commitment fees, utilisation fees and default interest accrued in

respect of the Bonds and the RCFs up to and including 1 February 2021, i.e. approximately €52

million, will be paid in full in cash on the Effective Restructuring Date (hereinafter the "Unaffected

Interest").

Furthermore, it should be noted that, with the exception of the Unaffected Interest and the

Restructured Claims, any amounts due under the Bonds and the RCFs will be waived on the

Effective Restructuring Date.

6.2.2 Main conditions for the completion of the Transaction foreseen in the

Safeguard Plan

The implementation of the Safeguard Plan is subject to a number of standard conditions, including

the approval of the necessary resolutions by the combined general meeting of the Company's

shareholders to be held on 20 April 2021 and the obtaining of the required level of support from

creditors under the safeguard procedure.

17 For simplification purposes, we refer to a single SGL, even if there is actually one SGL per Commercial Bank.




As described in the Management Board's report to the General Meeting, the main conditions

precedent of the Safeguard Plan are as follows:

• the approval of the Safeguard Plan by the Credit Institutions and Similar Committee and the

single General Meeting of the Company's bondholders;

• obtaining a fairness opinion from the independent expert appointed by the Company's

Supervisory Board confirming the fairness of the restructuring transactions provided for under

the Safeguard Plan;

• the granting by APOLLO of an exemption from the obligation to make a public offer for the

VALLOUREC shares as a result of the financial restructuring, pursuant to article 234-9 2 of the

AMF's General Regulations;

• the approval by the AMF of the securities note relating to the Reserved Capital Increase and

the issuance of the Warrants;

• the approval of the resolutions necessary for the implementation of the Safeguard Plan by

the General Meeting of Shareholders of the Company (it being specified that the

corresponding resolutions form an indivisible whole and are interdependent);

• obtaining the prior authorisations for merger control and foreign investment by the competent

authorities necessary for the implementation of the Safeguard Plan;

• the approval of the Safeguard Plan by the Nanterre Commercial Court;

• the approval by the AMF of the securities note relating to the Rights Issue;

• the settlement-delivery of the New Notes and the shares resulting from the Rights Issue and

the entry into force of the credit lines which are provided for in the Safeguard Plan, which

shall be completed concomitantly.

Assuming all conditions precedent are satisfied or waived, the implementation of the Safeguard

Plan is expected to occur on 30 June 2021 according to the indicative timetable and no later than

31 July 2021 or such later date as may be agreed in accordance with the terms of the Lock-up

Agreement and the Safeguard Plan.

6.3 Description of the Transaction

The planned restructuring project groups together several transactions which are legally

interdependent. In this context and for a better understanding, we present them hereafter in a

chronology which does not perfectly correspond to the one foreseen by the Lock-Up Agreement:

• the implementation of an SGL amounting to €262 million (§6.3.1);

• the partial repayment of Restructured Claims of €262 million (§6.3.2);




• the subscription by the holders of the Converted Claims of the New Notes for €1,023 million

(§6.3.3);

• the conversion of part of the Commercial Bank Loans, amounting to €462 million, into a

new revolving credit (§6.3.4);

• the setting up of market bonding lines, in particular bid and performance bonds, for an

amount of €178 million (§6.3.5);

• a debt write-off by the Commercial Banks of approximately €169 million combined with a

better-fortune instrument (§6.3.6);

• the issue of 30,342,337 share subscription warrants (hereinafter the "Warrants") to the

Commercial Banks as a better-fortune instrument (§6.3.7);

• a rights issue for an amount of approximately €300 million (§6.3.8);

• a capital increase of approximately €1,331 million with cancellation of the preferential

subscription right by way of set-off of claims (§6.3.9).

We will also analyse the terms of the Transaction in relation to:

• fees paid in connection with the Restructuring and costs related to the Restructuring

(§6.3.10);

• the impact of the Transaction on the governance of the Company and the agreements with

SVP and APOLLO (§6.3.11);

• the commitments made by the Reference Shareholders in the context of the Transaction

(§6.3.12).

6.3.1 Set up of an SGL

The Company plans to take out State-guaranteed loans (SGLs) with the Commercial Banks. Please

note that, for simplification purposes, we refer to a single SGL in the rest of our report, even if there

will actually be one SGL per Commercial Bank.

These SGLs, for an amount of €262 million, will have a maturity of one year with an option to extend

that will allow the Company18 to push back the maturity for 5 more years and repay all of it at

maturity. The average annual cost of the SGL s will be 1.80% (including the cost of the guarantee).

The main terms of each SGL are as follows:

• Zero interest rate in the first year and thereafter, if the Company opts for the extension of

the SGL, at 0.50% per annum;

• Default interest applicable to any amount due and unpaid is equal to the interest rate plus

(i) the Enhanced €STR and (ii) 1% per annum;

18 At its sole discretion




• From the first anniversary of the date of availability of the SGL s, the Company shall pay to

each lender a guaranteed fee equal to 0.50% for the first year, then depending on the

extension option exercised by the Company and the repayment schedule chosen, 1% in

the second and third years and 2% in the fourth, fifth and sixth years, as well as an annual

agent's fee payable to the agent;

• Each SGL must be repaid in full no later than one year after the date it is made available,

unless the Company exercises the extension option. If the extension option is exercised,

all SGLs must be repaid on the extended maturity date, i.e. no later than six years after the

date on which they were made available;

• In addition, a change of control of the Company (in favour of a person or group of persons

acting in concert), a cross-default, a failure to comply with the conditions required to benefit

from the State guarantee in respect of the SGLs or any event that calls into question the

State guarantees in respect of any of the SGLs may result in the acceleration of the SGLs;

• The SGLs will benefit from the State guarantee covering up to 90% of the principal, interest

and ancillary amounts for the benefit of each lender under each SGL in accordance with

the criteria established by the SGL regulations;

• The SGLs will be pari passu with the New Notes and the New RCFs.

6.3.2 Repayment of Restructured Claims for €262 million

On the Effective Restructuring Date, it is expected that the Company will repay the Restructured

Claims in cash in proportion to their holding, equivalent to approximately:

• €50 million for the holders of the Converted Claims;

• €212 million for Commercial Banks.

6.3.3 Bond debt reinstated by way of set-off: New Notes

As part of the Transaction, the Company is expected to issue, on the Effective Restructuring Date,

new 5-year senior notes with a principal amount of €1,023,372,909.

The New Notes will be subscribed for by the holders of the Converted Claims by way of set-off of

claims in the same amount.

The bonds will bear interest at 8.50% per annum19 and be redeemable at maturity with a 2-year

non-call period20 and then redeemable at par. They will be unsecured and listed on the Euro MTF

in Luxembourg.

19 Payable semi-annually. 20 In the event of early redemption of the New Notes prior to the second anniversary of the Effective Restructuring Date, the Company shall pay the amount of interest that would have been due in respect of the period between the redemption date and such second anniversary.




In the event of a change of control, each holder of New Notes may require the Company to redeem

some or all of the New Notes it holds for a price equal to 101% of the principal amount of such

debt, plus accrued and unpaid interest to the date of redemption. In addition, failure to comply with

the gearing ratio under the Reinstated21 RCF and certain cross defaults may also result in the early

redemption of the New Notes.

The following is a reminder of the financing terms of the New Notes compared to the existing Bonds.

Figure 35 - Evolution of bond financing conditions

Source: URD 2020, Management Board's Report to the Shareholders' Meeting and Draft Securities Note

6.3.4 Conversion of a portion of the Commercial Bank Loans into a new revolving

credit facility

It is planned to convert part of the Commercial Bank Loans, amounting to €462 million, into a new

revolving credit facility by way of set-off of said claims for an identical amount.

The Reinstated RCF taken out by the Company will be unsecured, redeemable at maturity in 5

years and will bear interest at EURIBOR +5% per annum with a floor set at 0%, which is not

significantly different from historical rates.

21 As defined below.

Current conditions Post-Restructuring Conditions

Nominal amount of €500 million: 2024





Nominal amount of €55 million: 4.125%





Nominal amount of €55 million: annual payments (on 02/08)

Nominal amount of €500 million: annual payments (on

30/09)

Nominal amount of €550 million: semi-annual payments (on

15/04 and 15/10)


15/04 and 15/10)


04/04 and 04/10)

Interest payment terms

Semi-annual.

2-year non-call period, then redeemable at

par

Maturity Nominal amount of approximately €1,023

million: 5 years after the Effective

Restructuring Date

Applicable interest

rates 8.5% coupon per year




It is provided that the rate of default interest under the Reinstated RCF, applicable to any amount

due and unpaid, will be equal to the interest rate plus 1% per annum. In addition, the Company will

be required to pay to each lender a commitment fee equal to 40% of the margin applicable to euro

drawdowns applied to the total amount of commitments available to the lender in question, as well

as an agent's fee payable annually to the agent.

A change of control of the Company, a Cross Default or a failure to comply with the gearing22 ratio

may result in the acceleration of the Reinstated RCF.

It will be drawn for the first time on the Effective Restructuring Date and will be subject to a financial

gearing covenant which will be tested for the first time on 31 December 2023.

The following is a reminder of the financing conditions for the Reinstated RCF compared to the

existing RCF:

Figure 36- Changes in the financing conditions of the RCF

Source: URD 2020, Draft Securities Note

6.3.5 Establishment of market bonding lines

It is planned to set up a bonding line agreement between VALLOUREC TUBES SAS and the

Commercial Banks no later than the Effective Restructuring Date.

This contract will provide VALLOUREC TUBES SAS, and all its subsidiaries, with market bonding lines,

including bid bonds and performance bonds, for an amount of €178 million for a period of 5 years.

6.3.6 Debt write-off by Commercial Banks

A debt write-off by the Commercial Banks in the amount of €168,791,641.25.

This debt write-off is combined with the implementation of the better-fortune instrument in the form

of Warrants which will be allocated to the Commercial Banks in the context of the Transaction

(§6.3.7).

22 As defined in the Draft Securities Note.

Current conditions Post-Restructuring Conditions

Maturity Deadline for drawdowns: February 2021

Nominal amount of €462 million.

Maturity 5 years after the Effective

Restructuring Date

Repayment of principal At the end of loan term (after last interest payment) At the end of loan term (after last interest

payment)

Financial covenants Gearing (ratio of consolidated net financial debt to

consolidated shareholders’ equity) less than or equal to

100%, calculated on 31 December of each year.

Gearing (<100%) tested annually and for the

first time on the basis of the consolidated

accounts at 31/12/2023




6.3.7 Issuance of Warrants to commercial banks

It is envisaged that 30,342,337 Warrants will be allocated to the Commercial Banks, i.e. with

cancellation of the shareholders' preferential subscription right in their favour.

These Warrants will have a unit subscription price of €0.01, i.e. a total cumulative amount of

303,423.37, which will be paid in full by way of set-off of claims.

Each Warrant will give the right to subscribe for one share of the Company so that the Commercial

Banks would obtain, if they exercise the Warrants, 11.7% of the share capital on a fully diluted

basis of the Restructuring transactions, including the exercise of the Warrants.

Therefore, the exercise of the Warrants could lead to the issuance by the Company of a maximum

number of approximately 30.3 million new shares23 (hereinafter the "Warrant Shares"):

Figure 37- Number of Warrants allocated to Commercial Banks and associated potential dilution

Source: URD 2020, Draft Securities Note

These Warrants will have an exercise price of €10.11 per share, to be paid in full in cash,

representing a total amount, if all of them are exercised, of approximately €307 million. They may

be exercised over a period of 5 years from the Effective Restructuring Date and will be listed on

Euronext Paris.

6.3.8 Capital increase with cancellation of preferential subscription rights at the

subscription price: the Reserved Capital Increase

In the context of the Restructuring, it is planned to swap €1,330,999,993.27 of the Converted

Claims for equity by means of a capital increase reserved for the holders of the Converted Claims,

in proportion to their holding, at a subscription price of €8.09, including premium, subscribed for by

way of set-off of claims.

Figure 38- Dilution effect of the Reserved Capital Increase


The Reserved Capital Increase will lead to the issuance by the Company of 164.5 million new

shares (the "Reserved Shares").

23 Subject to the anti-dilution adjustments described in the Draft Securities Note.

BNP Paribas (a) 13 147 015

Natixis (b) 13 113 508

BFCM (c) 4 081 814

Potential number of Shares from Warrants (d)=(a)+(b)+(c) 30 342 337

In €

Reserved Capital Increase Amount (a) 1 330 999 993

Exercise price (b) 8,09

Number of shares issued (c)=(a)/(b) 164 524 103




6.3.9 Capital increase with preferential subscription right: the Rights Issue

The Company will carry out a rights issue, i.e. a capital increase with preferential subscription right

(or "PSR") of €299,724,360.44 to be subscribed for in cash24 at a unit subscription price per share,

including premium, of €5.66.

It will lead, whatever the underwriting scenario, to a decrease in gross debt in the same amount as

long as:

• the cash proceeds received by the Company in respect of the latter is used in full to repay

the Converted Claims;

• the Rights Issue is fully backstopped by the holders of the Converted Claims by way of set-

off of claims, so that the unsubscribed amount will be deducted accordingly from the

Converted Claims.

Figure 39- Dilutive effect of the Rights Issue


The Rights Issue will result in the Company issuing 53 million new shares (the "PSR Shares").

We remind you that, due to the commitment of the Reference Shareholders (§1), the Rights Issue

will be subscribed in cash for a minimum amount of €55 million, i.e. 18%.

6.3.10 Fees paid in connection with the Restructuring and costs related to the

Restructuring

The Lock-Up Agreement provides that creditors who have acceded to it will benefit from, on the

terms and subject to the conditions set out therein:

• a 50-basis-point commission in case of early entry on 12 February 2021 (hereinafter the

"Early Bird Lock-Up Fee")

• a fee equal to 25 basis points of the principal amount of their claim, if they join after 12

February and before 1 March 2021 included (hereinafter the "Lock-Up Participation Fee")

These fees will be paid in full in cash on the Effective Restructuring Date.

As at 1 March 2021, all RCF creditors and bondholders, representing 90.5% of their total principal

amount, have adhered to the Lock-Up Agreement. As a result, the total amount payable by the

Company is approximately €16 million.

24 Except in the case of the enforcement of the guarantee by the holders of the Converted Claims as described below.

In €

Rights Issue amount (a) 299 724 360

Exercise price (b) 5,66

Number of shares issued (c)=(a)/(b) 52 954 834




Restructuring-related costs, including the above-mentioned fees, were estimated at €80 million.

6.3.11 Impact of the Transaction on the governance of the Company and agreements

to be entered into with SVP and APOLLO

We present below the main governance changes expected in the context of the Transaction.

Under the Lock-up Agreement, it is intended that two governance agreements will be entered into

with the Company for a period of 15 years25, one with SVP and one with APOLLO (the

"Shareholders' Agreements").

The Shareholders' Agreements are intended to set out certain rights and obligations in relation to

the structure and composition of the Board of Directors and the disposal of the shares held by

APOLLO and SVP (the "Future Reference Shareholders") following completion of the Transaction.

As detailed in the Management Board's Report to the General Meeting, due to the impact of the

Restructuring on the Company's shareholding and pursuant to the Shareholders' Agreements and

the Lock-up Agreement:

• The governance of the Company will be in accordance with the AFEP-MEDEF Code;

• The Company will change its governance structure from a Société Anonyme with a

Supervisory Board to a Société Anonyme with a Board of Directors and a Chairman and

CEO;

• The Board of Directors will be composed of 10 directors:

• The Chief Executive Officer;

• APOLLO and SVP, who will become the two main shareholders following completion of the

Transaction, with respectively, depending on the level of subscription of the Shareholders

to the Rights Issue, between 23.2% and 29.3%26 and between 11.9% and 15.1%26 of the

capital27, will be entitled to propose the appointment of three directors:

• As long as APOLLO holds 15% of the Company's share capital, APOLLO may propose

the appointment of two directors, one of whom will be Vice-Chairman and Lead

Director28. It is provided that, in the event that APOLLO holds less than 15% but at least

5% of the capital, it will only have the right to propose the appointment of one director29

and, in the event that it holds less than 5% of the capital, it will no longer have the right

to propose the appointment30;

25 Unless terminated early, if the shareholder concerned no longer holds any shares in the Company. 26 Assuming a subscription level of between approximately 18%, reflecting the level of BPI FRANCE and NSC commitments, and 100%. 27 Before exercise of the Warrants. 28 To the extent that it would meet the criteria (independence in particular) of the AFEP-MEDEF Code for this position. 29 And one of the two directors appointed by APOLLO should then resign. 30 And the second director appointed by him should then resign.




• One director may be proposed for appointment by SVP, it being specified that this right

applies if SVP holds at least 5% of the Company’s capital. In addition, if SVP holds

more than 15% of the Company’s capital, it will be entitled to propose the appointment

of a second member of the Board of Directors. In the event that SVP exceeded the

15% threshold, the same rules as set out above for APOLLO regarding its right to

propose the appointment of directors would apply31;

• The General Meeting of Shareholders of 20 April 2021 will be proposed the

appointment as directors, with effect from the Effective Restructuring Date, of the two

directors proposed by APOLLO (Mr Gareth TURNER and Mr Pierre VAREILLE) and one

director proposed by SVP (Mr William DE WULF). Please note that the adoption of the

resolutions relating to the appointment of these candidates, as well as the resolution

relating to the change of the mode of governance, are conditions precedent to the

Safeguard Plan, so that, in the absence of adoption, the Safeguard Plan cannot be

implemented.

• Four independent directors;

• One director representing the employees and one director representing the employee

shareholders in accordance with the law.

• The Board of Directors would also include a non-voting director appointed by APOLLO and a

non-voting director appointed by SVP32, this appointment being subject to the retention of

the right of appointment of a member of the Board of Directors referred to above;

• Certain decisions will be subject to the prior authorisation of the Board of Directors, it being

specified that the most important of these will require a majority of

8 out of 10 directors, including two independent directors (in particular "external growth

transactions beyond thresholds to be determined, certain transactions on capital, new debt,

litigation or transactions beyond thresholds to be determined, significant restructuring, annual

budget and business plan, change of strategy concerning a significant activity or

establishment in a new country, significant modification of the articles of association,

distribution of dividends, granting of options or bonus shares"33);

• The Board of Directors will create an Audit Committee, an Appointments and Remuneration

Committee, a Strategy and Finance Committee, which will include one of the directors

appointed by each of the Future Reference Shareholders, and a CSR Committee;

• Due to the decrease in the shareholding of the Reference Shareholders, which will be 2.3%

for BPI FRANCE and 3.4% for NSC, the shareholders' agreements between the Company and

the Reference Shareholders will end. In this context, the Reference Shareholders will no

longer be able to propose the appointment of a member of the Board;

31 In which case the parties would determine whether the total number of 10 directors can be maintained or should be increased. 32 In an advisory capacity only. 33 Report of the Management Board to the Combined General Meeting of 20 April 2021.




• In terms of limiting the transfer of shares held by the Future Reference Shareholders:

• APOLLO and SVP each undertake to hold on to the shares of the Company acquired in the

Restructuring for a period of 6 months from the Effective Restructuring Date34;

• They may not sell more than 25% each of the average daily number of shares traded

during the 30 days preceding the date of the proposed sale35 during a single trading

session;

• In the event of a proposed sale of shares by each of the Future Reference Shareholders

to a competitor of the Company, the Company will have a right of first offer, i.e. it will be

able to make a proposal to buy shareholding concerned by the proposed sale and each

of the Future Reference Shareholders will only be able to sell their shares to the said

competitor if the proposed sale price is higher than that offered by the Company and the

sale takes place within a period of 6 months;

• The Future Reference Shareholders will each undertake not to solicit or facilitate the

launch by a competitor of a public offer for the Company's shares.

It should be noted that APOLLO and SVP have declared that they do not intend to act in concert,

either with each other or a third party, and will not act in concert in relation to the Company on the

Effective Restructuring Date.

Furthermore, it is planned to propose to the General Meeting of 20 April 2021 the abolition of the

existing double voting rights, which is not, however, a condition precedent to the completion of the

Restructuring.

6.3.12 Commitments of the Reference Shareholders

In the context of the Transaction, the Reference Shareholders have undertaken, subject to certain

standard conditions

• to vote on the resolutions of the general meeting of shareholders necessary for the

implementation of the envisaged Restructuring;

• for NSC only, not to sell or transfer any of their shares in the Company for a period of 6

months from the date of completion of the Rights Issue, subject to the exceptions provided

for contractually;

• to subscribe to the Rights Issue for €35 million for NSC and €20 million for BPI FRANCE.

34 Subject to certain exceptions, including a transfer to affiliates, a contribution to a public offer or a transfer in the event of a public offer, or in the event of a merger or demerger. 35 Subject in particular to the same exceptions as mentioned in note 34case of off-market transfers.




6.3.13 Summary

In summary, the balance of the main transactions planned in the framework of the Restructuring

can be summarised as follows:

• The terms of the Transaction would result in a reduction in the Company's gross debt by

€1,800 million to €1,747 million post-Restructuring (hereinafter the "Restructured Debt")

through the transactions described above and summarised in the figure below:

Figure 40- Impact of the Transaction on the Company's gross debt

Source: FINEXSI analyses

• The first principal repayments of the Restructured Debt would occur 5 years after the

Effective Restructuring Date;

• Debt service would be significantly reduced as a result of the reduction in the Company's

gross debt. We note that the interest rates on the Reinstated RCF are close to those

prevailing prior to the Restructuring and that those on the New Notes are higher than the

rates on the Company's last two high-yield bond issues (8.5% for the New Notes compared

to 6.625% for the 2022 Senior Bonds and 6.375% for the 2023 Senior Bonds);

IMPACT OF THE RESTRUCTURINGPRE-RESTRUCTURING DEBT RESTRUCTURED DEBT

refinancing through the

issuance of New Notes Restructured Debt

Total: €1,485m

SGL of €262m

(Commercial

Banks)

Converted

Claims

Total: €2,866m

61.2% of the nominal

value of RCFs

(€1,048m)

Bonds

€1,755m

Related

Restructured

Interest (€63m)

Commercial Bank

Loans

Total: €681m

38.8% of the

nominal value of

RCFs (€664m)

Related

Restructured

Interest (€17m)

Restructured

Claims

Total: €3,547m

Bonds

€1,755m

RCF

€1,712m

Restructured

Interest

€80m

€300m

€1,331m

€212m

€462m

€169m

€50m

New Notes

€1,023m

Reinstated RCF

€462m

repaid in respect of the

repayment share for €262

million

converted into capital as part

of the Reserved Capital

Increase

refinancing by the

Reinstated RCF

Debt write-off with an

instrument of return to better

fortune via Warrants

repaid in respect of the

repayment share for €262

million

€1,843m

€219m

€1,023m

repaid or converted under the

Rights Issue

Post-Restructuring

gross financial debt of €

1,747m

Repaid, debt write-off or converted

Restructured Debt

€1,023m

€462m

€0.3mConverted in respect of the

payment of the Warrants

subscription price




• We recall that in 2021E, net financial leverage (i.e. net financial debt/EBITDA) would be 4.1x

following the Restructuring compared to 8.6x (after IFRS 16) in 2020R. The Company

indicated, in the context of the projections made for the purposes of the negotiations leading

to the Agreement in Principle, the achievement of a net financial leverage of 1.2x by 202536;

• The subscription price of €8.09 that would be offered to the Bondholders under the Reserved

Capital Increase (§6.3.8) is less favourable than the price offered to the shareholders under

the Rights Issue (€5.66), but relates to a significantly higher quantum and is based on a

subscription by way of set-off of claims relating to the Converted Claims;

• As part of the guarantee given by the holders of the Converted Claims, the latter would

subscribe, by way of set-off of claims, to the portion of the Rights Issue that would not have

been subscribed for by the shareholders;

• Holders of Restructured Claims who have adhered to the Lock-up Agreement will receive a

fee in accordance with the conditions set out above.

For the record, management's business plan, as presented in the press release of 3 February 2021,

shows the Group's ability, subject to the achievement of the outlook provided for therein, to service

its debt and to meet the covenant under the Reinstated RCF (the gearing ratio, which will be tested

for the first time on 31 December 2023, and which must be less than 100%).

We also remind you that the Company will not be able to distribute dividends, reserves or premiums

during the 2021 financial year and, as regards subsequent financial years, the distribution of

dividends by VALLOUREC will only be permitted in certain cases as described in the URD 202037.

36 As per the announcement of the terms of the Agreement in Principle dated 3 February 2021. It should be noted that this does not constitute guidance from the Company. 37 §2.5 Dividend distribution policy




7. Valuation of VALLOUREC group shares after Restructuring

7.1 Situation of the VALLOUREC group in the absence of the Restructuring and

impact on the valuation approach

Following the difficulties encountered over the last few years, the Group had planned to carry out

a savings plan and a capital increase of €800 million. Due to the pandemic in the first quarter of

2020 and its economic consequences, the capital increase project could not be completed.

The COVID-19 crisis intensified the deterioration of the Company's fundamentals in a context of

over-indebtedness and low free-cash-flow generation given the Group's level of activity.

It should be noted that without the implementation of the proposed Restructuring or an alternative

refinancing scheme validated by the stakeholders, the Company would have been unable to repay

the €1,712 million credit facilities maturing on 9 February 2021 (despite the cash position of

€1,390 million at the end of December 2020) and therefore to meet its operational needs in a

deteriorated market environment.

In the absence of such an alternative refinancing scenario to date, it is not possible to assume any

other terms and conditions than those provided for in the Agreement in Principle.

In the event that this agreement cannot be implemented, the Company would have to initiate new

discussions with the stakeholders with the risk that the safeguard procedure would be converted

into a receivership or liquidation procedure. In this context, it would be appropriate to calculate a

net asset value, which would imply considering assumptions of debt renegotiations and/or

determination of net asset value that are very hypothetical in the current context and appear

extremely theoretical.

In this scenario, considering the Company's financial position, VALLOUREC's shareholders would

find themselves in a situation where they could lose all of their investments.

Therefore, in order to assess the shareholders’ situation, it seems more relevant to us to consider

a valuation of the Company after the Restructuring in a going concern scenario, taking into account

the financial debt position after the Restructuring and the number of shares and dilutive instruments

issued in connection with it. The valuation of the Company after taking into account the terms of

the Restructuring makes it possible to assess, based on the results of our valuation work, the

possible evolution of the shareholders' and creditors' assets from a financial point of view (see §8).

Our assessment therefore assumes that the Restructuring, as defined by the Agreement in

Principle dated 3 February 2021 and the Safeguard Plan, is put in place to ensure the Group's

continued operation on the basis of its current strategy and scope.




7.2 Discarded references and valuation methods

7.2.1 Consolidated net book value

Net Book value is generally not considered to be representative of the intrinsic value of the

company as it does not take into account growth and profitability prospects, nor any capital gains

on assets.

For information, the consolidated net book value (Group share) at 31 December 2020 was -€187.1

million for a market capitalisation of approximately €306 million.

As presented below (§8.2.3), the consolidated net book value (Group share) would amount to

approximately €1,613 million after the impact of the Restructuring, i.e. €7.04 per VALLOUREC share

on a non-diluted basis, without this amount including the impact of the activity between 1 January

2021 and the Effective Restructuring Date or the costs associated with the Restructuring.

7.2.2 Revalued net book value

The revalued net book asset method consists of correcting the net book assets for unrealised gains

or losses identified on the assets, liabilities or off-balance sheet. This method, which is often used

to value companies in certain sectors (holding companies, real estate companies), is particularly

suitable for companies whose main assets have a market value and the acquisitions and disposals

of such assets constitute the operating process, which is not the case for the Company.

In the case in point, VALLOUREC does not hold any significant assets independent of its current

operations for which the market value would be significantly higher than the value derived from

their operation as an integrated Group. In this context, this approach has not been applied.

7.2.3 Sum of the Parts

The sum of the parts, or SOTP, is an approach to determining the total value of a business by

valuing and adding the value of each of its businesses or subsidiaries.

In the case in point, the Company's business involves the manufacture of seamless steel tubes

and other premium tubular products as described above (see §3.5) for three main markets. In view

of the intra-group/regional sales and supply, we do not consider it possible to implement a sum of

the parts. It should also be noted that the management's business plan is not constructed by market

(i.e. “Oil & Gas, Petrochemicals”, “Industries and Others” and “Electrical Energy”) but by

geographical region. Therefore, the information that would be necessary to implement this

approach is not available.




7.2.4 The yield value (dividend capitalisation)

This method consists of valuing the company based on the present value of its future dividends. It

can only be used for companies that have a significant payout capacity with regular and predictable

payout rates.

As the Company has not made any dividend distributions in the last 5 years, nor has it announced

any distribution forecasts to the market, this method has not been implemented.

7.2.5 Net asset value

We did not consider that we should use this method as it is not relevant in the context of the

restructuring of the Company's debt, which should allow it to continue as a going concern.

Furthermore, a valuation using this approach would be very theoretical as it would require a large

number of assumptions subject to high uncertainty.

7.2.6 Recent transactions on the Company's capital

This method consists of valuing a company by reference to recent significant transactions in its

capital.

There are no recent significant transactions in the Company's capital that would allow us to

determine an EBITDA multiple. We have therefore disregarded this criterion.

7.3 References and methods used for the post-Restructuring valuation

We have implemented a multi-criteria approach after Restructuring which includes the following

benchmarks and evaluation methods:

• the discounted cash flow (DCF) valuation method based on the management's 2021E-

2025E business plan including the updated 2021E Budget presented in §7.5.1.1 (on a

principal basis);

• the comparative valuation method based on multiples observed on comparable listed

companies (secondary);

• the comparative valuation method based on multiples observed on relatively recent

comparable transactions (secondary);




• analysis of VALLOUREC's share price prior to the Company's announcement on 1 September

2020 that it had initiated discussions with all of its bank and bond creditors with a view to a

financial restructuring of all of the Company's borrowings (for information purposes);

• an analysis of financial analysts' price targets for VALLOUREC shares published prior to the

same date (for information purposes).

7.4 Reference data for the valuation of VALLOUREC

7.4.1 Number of shares used

As indicated above, our calculations are based on the number of shares after the Restructuring.

Figure 41- Diluted number of shares used for our post-Restructuring valuation

Sources: URD 2020, Draft Securities Note and FINEXSI analyses

At 31 December 2020, VALLOUREC's share capital consisted of 11,449,694 shares, from which we

have removed the treasury shares held by the Group at that date (1,081 shares).

Concerning dilutive instruments:

• 143,877 options are outstanding at 31 December 2020 but are out of the money;

• 78,664 performance shares under the Plans are in their vesting period as at 31 December

2020 and would have a dilutive impact, which is why we have included them in our

calculation.

Taking into account the different stages of the Restructuring presented above (§6):

• 52,954,834 shares will be issued in the context of the Rights Issue;

• 164,524,103 shares will be issued under the Reserved Capital Increase.

31/12/2020

Shares making up the share capital before Restructuring 11 449 694

Restatement of treasury shares (1 081)

Taking into account dilutive instruments 78 664

Diluted number of shares before Restructuring 11 527 277

Rights Issue 52 954 834

Reserved Capital Increase 164 524 103

Diluted number of shares after Restructuring 229 006 214




On this basis, the number of shares issued in the context of the Restructuring, before Warrants, is

217,478,937. Taking into account the number of shares used for our pre-Restructuring valuation,

the adjusted (i.e. post-dilution) number of shares amounts to 229,006,214 shares after the

Restructuring. It should be noted that this adjusted number of shares is purely theoretical and was

determined for the sole purpose of the valuation. Indeed, it is based on an assumption of a capital

increase of the Company in order to cover the performance share plans, even though the Company

may decide to acquire them on the market. We have nevertheless considered this theoretical

approach to take into account the dilutive impact of these instruments on the Company's per share

value.

It is important to note that the exercise price of the Warrants subscribed for by the Commercial

Banks, taking into account their debt write-off of €169 million (§6.3.7), is €10.11.

Insofar as the results of our valuation work, developed below, lead to values lower than this price,

these Warrants appear to be out of the money, making their exercise theoretical at this stage.

Consequently, we have not considered the impact of the exercise of the Warrants in the context of

our multi-criteria valuation.

7.4.2 Elements of the transition from enterprise value to equity value

As indicated above, we have carried out a valuation based on the Company's situation after the

Restructuring. However, we present below for information purposes the adjusted net financial debt

as at 31 December 2020 before the Restructuring and then present the impact of the Restructuring

on it.

Figure 42- Adjusted net debt before Restructuring

Sources: URD 2020 and FINEXSI analysis

Net financial debt before restructuring was €2,214 million at 31 December 2020. This level of debt

does not include the impact of the application of IFRS 16 and the resulting debt.

In €K 31/12/2020

Bonds 1 735 860

Borrowing from credit institutions 1 727 709

Other loans and similar debts 136 827

Current bank loans 3 115

Gross financial debts 3 603 511

Cash and cash equivalents (1 389 533)

Net financial debt 2 213 978

Equity-accounted companies (41 912)

Other financial assets (22 748)

Minority interests 226 857

Shareholder loans 8 613

Provisions 250 231

Other non-current financial liabilities 7 100

Other 6 595

Adjusted net financial debt (cash) before Restructuring 2 648 714




We have also included the following key items in our transition from enterprise value to equity value:

• the book value of equity-accounted companies (€42 million);

• other financial assets (€23 million), consisting mainly of loans and investments in non-

consolidated entities;

• the book value of minority interests (€227 million), after neutralising the interests relating to

VALLOUREC SOLUÇÕES TUBULARES DO BRASIL (VSB), whose stake held by NSC is being

purchased by VALLOUREC;

• the shareholder loan granted by NIPPON STEEL & SUMITOMO METAL CORPORATION (NSSMC)

TO VSB (€9 million);

• provisions not subject to disbursement in the business plan flows, i.e. mainly commitments

to employees and provisions for miscellaneous contingencies and charges (€250 million);

• other non-current financial liabilities, i.e. the price paid by the Company for the minority

stake in VSB38 (€7.1 million);

• other adjustments: consisting mainly of deferred tax assets on employee benefits, the

finance lease liability, the discounted tax saving resulting from the existence of a residual

stock at the horizon of the business plan, as well as an adjustment to the WCR given the

observed seasonality.

Adjusted net debt was €2,649 million before Restructuring.

We present below the impact of the Restructuring on the adjusted net financial debt:

Figure 43- Adjusted net financial debt after Restructuring

Source: URD 2020, Draft Securities Note, Safeguard Plan and FINEXSI analyses

38 We would point out that the appointment of a mandataire ad hoc opened up the possibility for VSB's minority shareholders to sell their stake in this company to VALLOUREC. The latter decided to exercise this option, which will result in the recognition of a financial liability at 31 December 2020 by the recognition of a current financial liability in the amount of the exercise price, i.e. €7.1 million.

In €K 31/12/2020

Adjusted net financial debt (cash) before Restructuring 2 648 714

Rights Issue (299 724)

Reserved Capital Increase (1 331 000)

Debt write-off granted by Commercial Banks (168 697)

Warrant subscription (303)

Estimated costs of the transaction 80 000

Adjusted net financial debt (cash) after Restructuring 928 990




The total impact of the Restructuring on adjusted net debt is approximately €1,720 million. It results

from:

• The Rights Issue of approximately €300 million;

• The Reserved Capital Increase of approximately €1,331 million (debt-for-equity swap);

• The debt write-off of approximately €169 million granted by the Commercial Banks. It should

be noted that given the stock of tax losses carried forward in France, the tax liability

associated with the debt write-off is zero;

• The payment of the subscription price of the Warrants of approximately €0.3 million by way

of set-off of claims;

• The disbursement of costs related to the Restructuring estimated at around €80 million.

Thus, after implementation of the Restructuring, adjusted net financial debt stands at €929 million.

We remind you that the other transactions planned in the context of the Restructuring will have no

impact on the Company's consolidated net financial debt.

Furthermore, we would like to point out that the net debt used in our comparative approaches has

been adjusted in order to use an approach consistent with the one used to calculate the enterprise

value of the comparable listed companies and transactions. Thus, provisions have not been taken

into consideration for the analogical approaches, in particular insofar as these data are not available

for comparable transactions. Furthermore, for the market comparable method alone, the rental debt

related to the application of IFRS 16 has been maintained, as the level of detail in the analysts'

projections for the companies in the sample does not allow the impact to be restated39.

7.5 Calculation of VALLOUREC's valuation after the Restructuring

7.5.1 Discounted cash flow forecasts (main valuation method)

This method consists of determining the intrinsic value of a company by discounting the cash flows

from its business plan at a rate that reflects the market's demand for profitability from the company,

taking into account an exit value at the horizon of this plan.

This method makes it possible to recognise the value attributable to the Company's development

prospects and seems to us to be appropriate to VALLOUREC's situation in the context of the financial

Restructuring.

39 With regard to comparable transactions, almost all transactions took place before the application of this standard.




7.5.1.1 Presentation of the management's business plan

We conducted our work on the basis of management's 2021E-2025E business plan finalised in

September 2020. This plan was presented to and approved by the Group's Supervisory Board at

the end of 2020.

This business plan is a mix of a "top-down" approach, particularly for macroeconomic assumptions

(oil prices, commodity prices, etc.) and a "bottom-up" approach by region, which allows for the

objectives of the sales forces in each region to be reported. Its preparation took more than ten

months with several iterations per region.

The business plan sets out the implementation of the Group's transformation plan, which should

generate cost savings in order to improve operational performance and, in particular, to generate

profitability that is more representative of the Group's level of activity. It incorporates management's

ambitions to reduce costs and investments between 2021 and 202540, notably through:

• general and administrative cost reductions through the "Acceleration" plan established over

three years, which concerns all regions through more than 20 identified projects and a social

plan at head office level. In particular, in France, a reduction of approximately 350 positions

in production units and support functions is planned, including the closure of the DÉVILLE heat

treatment facility. A further reduction of around 200 positions over 2021-2022 is also

envisaged in Germany;

• local structural and investment reduction programmes widely identified, 95% of which would

be achieved over the period 2021-2023;

• potential savings on procurement costs, of which about 65% through specific industrial

initiatives and actions.

As part of our work, we have integrated into the business plan the updated 2021 Budget

communicated by the management. This corresponds to the management's best view of the

Group's level of activity to date as well as short-term forecasts in terms of operational profitability.

The following years remain unchanged from the September 2020 version of the business plan.

The main structuring assumptions of this business plan are as follows:

• Turnover of around €4,473 million by 2025, i.e. 7.2% higher than the turnover published in

2019. As a result of the crisis, turnover is expected to reach a low point in 2021 before

growing annually at an average rate of +8.4% until 2025.

40 Gross savings plan of around €400 million.




• An average annual growth rate in EBITDA of around +21.7% between 2020 and 2025 to

reach €690 million by the end of the plan. The EBITDA margin of 15.4% of turnover expected

in 2025 would be close to the level observed at the top of the cycle in 2014 (15% of turnover,

after the impact of rents now restated in accordance with IFRS 16), but significantly higher

than that achieved in 2019 (8.3% of turnover after IFRS 16). This strong improvement in

operating profitability reflects the recovery in activity as well as the impact of the savings

plans envisaged over the business plan horizon. In this last respect, we recall that the risk of

execution of these savings plans is however to be assessed in the light of management's

ability to achieve them historically.

• EBITDA as shown in the business plan is net of an amount for "contingencies", i.e. EBITDA

is reduced by an amount intended to take into account the hazards and risks relating to some

of the assumptions made in the context of the business plan (loss of market share in certain

regions, impact of the termination of the supply contract between VSB and NSC resulting

from the latter's exercise of the option to sell its 15.4% shareholding in VSB41 in particular).

• Capital expenditure (hereafter "CAPEX") amounting to an annual average of 4.6% of

turnover over the explicit horizon of the business plan, the majority of which corresponds to

recurring investments in strategic programmes identified in particular in North and South

America (digitalisation of the industrialisation process, expansion of the mine in Brazil, etc.)

enabling the Group to sustain its level of activity. The other investments concern

development CAPEX and implementation costs related to the expected savings plans.

• A modelling of corporate income tax incorporating the savings related to the consumption of

the Group's significant tax loss carryforwards.

• An improvement in the WCR to reach the level observed in 2019 by 2025.

The achievement of the forecasts to 2025 is conditional on the assumption of a recovery in the

markets consistent with the market expectations at the date of our report. There is therefore a risk

that the recovery will not be achieved if it differs significantly from these expectations.

Consequently, in our opinion, there are risks concerning the achievement of the 2025 objectives

given the current deteriorated and volatile market environment, which is highly correlated with the

evolution of the price of oil and marked by competitive pressure on prices in various regions.

The assumptions used in the Company's business plan thus appear to be in line with a best-case

scenario. In order to qualify this assessment, it should be noted that the Company has included in

its cash flows a risk of achievement of forecasts, by taking into account a significant amount

intended to cover certain contingencies identified by management.

41 For the record, the exercise of this option was not effective at the date of the business plan but is effective at the date of this report.




7.5.1.2 Determination of cash flows

IFRS 16

Management's business plan incorporates the effect of the implementation of IFRS 16, which

means that rental expenses are not included in the determination of EBITDA. Therefore, in

implementing the DCF approach, we have reintegrated the expected rental flows over the period

in order to better capture the Group's cash generation, it being noted that the associated IFRS 16

debt has not been considered in our adjusted net debt calculation (§7.4.2).




Normalised flow

The main assumptions used in the terminal value are as follows:

• The terminal growth rate of 2.4%42 used to determine the normalised flow was determined

by reference to the weighting of inflation expected in the long term by the IMF to the

respective turnover of each region. This level is explained in particular by the weight of

Brazil in the turnover.

• The normalised flow has been constructed on the basis of an EBITDA margin after

restatement of the impact of IFRS 16 in line with the expected level in 2025E.

• Depreciation and amortisation have been set at the level of CAPEX.

• The normalised tax rate has been modelled, based on the weighting of tax rates by region

to pre-tax profit.

• The normalised change in WCR has been assumed to be zero in the long term.

• CAPEX remain stable compared to that expected in 2025, representing around 4.2% of

turnover.

7.5.1.3 Discount rate

We used the Company's weighted average cost of capital to discount future cash flows. This rate

was estimated at 10.8% based on the following elements:

• a risk-free rate of -0.18% corresponding to the average rate of the TEC 10-year OAT

(1-year average calculated on 28 February 2021 - Source: Banque de France);

• an equity market risk premium of 9.05% (1-year average of the Associés en Finance risk

premium at 28 February 2021);

• a deleveraged beta of the Company of 1.06 (Pr. Aswath Damodaran World, sector "Oilfield

Svcs/Equip" in which VALLOUREC is included);

• a country risk premium of 1.3%, taking into account VALLOUREC's geographical location and

the respective weight of each region in the EBITDA expected at the end of the explicit

business plan horizon;

• a cost of debt before tax of 6.6%, which corresponds to the weighted average cost of

borrowing calculated on the basis of the effective borrowing rates of the Company's various

sources of financing after the Restructuring (Notes, RCFs and SGLs);

• a target gearing ratio of 46.6% determined on the basis of the adjusted net debt to equity

ratio as derived from our DCF modelling;

42 Source: IMF Database October 2020.




• a tax rate of 31.2% corresponding to the projected effective tax rate for the

Group given the expected geographical distribution of its results excluding tax savings from

financial interests.

This rate of 10.8% is not significantly different from those used by analysts following VALLOUREC

shares (on average around 10%) and by the Company in its impairment tests.

7.5.1.4 Results of the valuation

The sensitivities of VALLOUREC'S share price to a combined change in (i) the discount rate (from

-0.25 point to +0.25 point) and the terminal growth rate (from -0.25 point to +0.25 point) and (ii) the

discount rate (from -0.25 point to +0.25 point) and the normalised EBITDA margin (from -0.75 point

to +0.75 point), are presented below:

Figure 44- Sensitivity analysis to a combined change in the terminal growth rate and discount rate


Figure 45- Sensitivity analysis to a combined change in the discount rate and normalised EBITDA margin


This approach results in a value per share of between €7.92 and €9.47 with a central value of

€8.70.

7.5.2 Market multiples method (secondary method)

The market multiples method consists of determining the value of a company by applying multiples

observed on a sample of other listed companies in the same sector of activity, to the aggregates

deemed relevant.

0,0

9 10,3% 10,6% 10,8% 11,1% 11,3%

2,9% 10,50 9,95 9,43 8,95 8,49

2,6% 10,06 9,54 9,05 8,60 8,16

2,4% 9,65 9,16 8,70 8,26 7,85

2,1% 9,27 8,80 8,36 7,95 7,56

1,9% 8,90 8,46 8,04 7,65 7,28

Discount rate (%)

Terminal

growth rate (%)

-333,1%

-333,1% 10,3% 10,6% 10,8% 11,1% 11,3%

+1.5pt 11,33 10,77 10,25 9,75 9,28

+0.75pt 10,49 9,96 9,47 9,01 8,57

- 9,65 9,16 8,70 8,26 7,85

-0.75pt 8,81 8,35 7,92 7,52 7,14

-1.5pt 7,97 7,55 7,15 6,77 6,42

Discount rate (%)

Normalised

EBITDA margin

(%)




Given the specific characteristics of VALLOUREC, we have not identified any listed companies that

are fully comparable to it, particularly in terms of activity, geographical location, size or operating

profile (growth, profitability, capital intensity). For this reason, we present this method as a

secondary consideration.

However, we have identified three companies operating in sectors close to those of VALLOUREC:

TENARIS SA, PAO TMK and SHAWCOR LTD, which operate in the oil equipment and services market,

in which VALLOUREC has a significant share of its business.

These three companies are presented below:

• TENARIS SA, an Italian company, designs, manufactures and supplies welded and seamless

steel tubular products, mainly for the oil and gas industries. The company operates through

two segments: 1) pipe production (manufacture and marketing of welded and seamless steel

pipes, in particular for drilling activities in the oil and gas industries) and related installation,

assembly and logistical support services for pipe management, and 2) other activities (in

particular the manufacture of pipes for the transport of oil and gas fluids).

The group operates mainly in North America (c. 47% of turnover), South America (c. 19% of

turnover), the Middle East and Africa (c. 19% of turnover) and Europe (c. 10% of turnover).

The Group's 2020 turnover was $5,147 million (c. €4,214 million), with the OCTG tube

business accounting for approximately 94% of turnover, for a total EBITDA of $638 million

(c. €522 million), giving an EBITDA margin of 12.4% in 2020.

• PAO TMK, a Russian company, produces and markets welded and seamless steel pipes for

the oil and gas industry. The company operates through 2 segments: 1) activities related to

the oil and gas industries (supply of welded and seamless steel pipe products and a wide

range of related services, including heat treatment and protective coating), and 2) activities

for other industries (engineering, construction, power equipment, etc.).

In addition, PAO TMK operates mainly in the Russian market, which in 2020 accounts for

about 75% of its turnover, while the share of turnover attributed to the European market is

about 10%. The company achieved turnover of around RUB 222,621 million (approximately

€2,467 million) in 2020, with the segment of steel OCTG tubular products for the oil and gas

industry accounting for around 68.7% of turnover. The Group expects to achieve an EBITDA

of approximately RUB 42,480 million (approximately €472 million) in 2020, representing an

EBITDA margin of 19.1%.

• SHAWCOR LTD, A Canadian company, produces and markets products and services for the

energy and infrastructure sectors. The company operates through 3 segments: 1) Pipeline

and Pipe Services (56% of turnover): provision of pipeline protection, coating and inspection

solutions as well as the provision of onshore and offshore pipe management services

(installations and engineering services), 2) Composite Systems (27% of turnover):

manufacturing of composite systems and solutions including flexible composite pipelines,

and 3) Automotive and Industrial (17% of turnover): supply of cables, sheaths and wires for

electrical systems for various industries including the automotive industry.




The group is mainly based in North America (62% of 2020 turnover) and Europe/Middle

East/Africa/Russia (EMAR for 25% of turnover). Its turnover was strongly impacted by the

COVID-19 crisis and is expected to reach CAD 1,178 million (around €758 million) in 2020

for an EBITDA of C$26 million (around €17 million), i.e. an EBITDA margin of around 2.2%.

In implementing this approach, we have selected EBITDA, which we consider to be the most

relevant aggregate in this case. It is also the aggregate mainly used by analysts following the

Company's share to implement their valuations. We have discarded turnover multiples given the

differences in margins between the companies. In addition, the differences in depreciation

levels/policies among the various comparable companies limit the relevance of the reference to

EBIT multiples.

We present below the turnover and EBITDA margin growth prospects expected by analysts through

2023 for the companies in our peer group:

Figure 46- Consensus turnover and EBITDA growth expectations for the peer group

Source: CAPITAL IQ, FINEXSI analysis

We note that the EBITDA margin rates expected by 2023 for the companies in the sample are

within the 15.4% targeted by the Company's management for 2025E and that this is below the rate

expected for TENARIS, the company most comparable to VALLOUREC43.

As the impact of the COVID-19 pandemic is still expected to be significant in 2021, and in order to

capture a value that reflects a better view of the end of this crisis, we have selected the 2022 and

2023 EBITDA multiples for the implementation of this approach.

Furthermore, we have not restated the impact of IFRS 16 on the Company's EBITDA or on that of

comparable companies, as the forecasts published by analysts do not allow such a restatement.

Consequently, the IFRS 16 debt has been included in the net financial debt calculations used for

this approach.

43 It should also be noted that SHAWCOR LTD appears to be the least comparable company in our sample to VALLOUREC.

2021e 2022e 2023e 2021e 2022e 2023e

Tenaris S.A. Luxembourg 4 207 6,1 % 12,4 % 14,1 % 16,5 % 18,4 % 19,8 %

PAO TMK Russia 2 461 14,8 % 1,7 % n/a 14,2 % 13,8 % 15,1 %

Shawcor Ltd. Canada 756 1,0 % 4,9 % 2,9 % 9,0 % 10,0 % 10,6 %

Median 2 461 6,1% 4,9% 8,5% 14,2% 13,8% 15,1%

Comparable CountryTurnover

(€M)

Turnover growth EBITDA margin




We present below the EBITDA multiples from our sample of comparable companies:

Figure 47- Multiples* observed on the comparable companies in the sample


*Multiples induced by (i) an Enterprise Value calculated on the basis of the three-month VWAP as at 15 March 2021 and a three-

month average number of shares.

**Enterprise value calculated on the basis of the three-month VWAP at 15 March 2021.

After taking into account the net financial debt as determined after the Restructuring

(see §7.4.2), the value per share of the Company is between €7.56 and €9.56 after Restructuring.

It should be noted that this is a secondary approach due to the limitations outlined above and that

the small sample size of three companies also limits the relevance of the approach.

7.5.3 Transaction multiples method (secondary)

The transaction multiples method is based on the analysis of multiples generated by total or partial

acquisitions of companies in the sector of activity of the entity being valued. The implementation of

this approach is limited by the difficulty of obtaining complete information on the targets and the

terms of the transactions.

This approach is presented only on a secondary basis as (i) these transactions reflect market

conditions prior to the COVID-19 pandemic, thus limiting the relevance of the approach, and (ii)

due to the low comparability of transactions in terms of size, product mix and EBITDA margin.

Over the last five years, we have selected six transactions in the field of equipment and services

for the Oil & Gas market, the details of which are presented in the Annexes.

2022e 2023e

Tenaris S.A. Luxembourg 4 207 11 091 9,3x 7,6x

PAO TMK Russia 2 461 2 636 5,9x 5,1x

Shawcor Ltd. Canada 756 520 5,0x 4,7x

Median 2 461 2 636 5,9x 5,1x

xEBITDA*Comparable Country

Turnover

(€M)

EV

(MEUR) **




The sample of comparable transactions and the characteristics of these transactions are presented

below:

Figure 48- Comparable transactions selected over the last five years

Source: CAPITAL IQ, MERGERMARKET, EPSILON, and press releases of target companies

This multiple should be applied to the EBITDA generated by the Group for the year 2020. However,

as the latter has been strongly impacted by the effects of the COVID-19 pandemic, this approach

would lead to a significant reduction in the value of the Company, as the multiples are based on

pre-pandemic transactions. Therefore, we have applied the median multiple from these

transactions to the Company's consolidated 2019 EBITDA before IFRS 16.

In this context, the value resulting from this approach reflects pre-pandemic expected levels of

activity and prospects, which limits the relevance of the results obtained using this approach.

After taking into account the adjusted net financial debt (see §7.4.2), the value per share of the

Company after the Restructuring is €8.81.

7.5.4 Reference to the stock market price (for information purposes)

We have analysed the share price up to 31 August 2020, the date on which VALLOUREC announces

to the market that, following discussions with its banks and Reference Shareholders, the Group

plans to extend the dialogue to all its bank and bond creditors and other stakeholders in order to

achieve a financial restructuring. The reference to this date enables the VALLOUREC share price to

be assessed before the announcement, i.e. before it was impacted by the announcement.

The shares comprising VALLOUREC's capital are listed in Compartment B of the regulated market

of Euronext in Paris (ISIN code: FR0013506730-VK).

The prices on which our analyses are based take into account the April 2020 reverse stock split.

As a reminder, a share consolidation by way of an exchange of 40 existing shares for 1 new share

was approved by the shareholders at the general meeting on 6 April 2020.

Date Target Country Buyer%

acquired

EV (millions

CUR)EBITDAx

02/01/2020 IPSCO Tubulars Inc. United States Tenaris SA 100 % 1 107 6,7x

28/03/2019 Ovako AB Sweden Sanyo Special Steel Co., Ltd. 100 % 783 8,1x

28/10/2016 Anhui Tianda Oil Pipe Company Limited China Vallourec Tubes S.A.S. 51 % 951 9,2x

01/07/2016 Columbia Pipeline Group, Inc. United States Transcanada Pipeline USA Ltd. 100 % 13 105 12,8x

01/04/2016 Cameron International Corporation United States Schlumberger Limited 100 % 14 830 8,9x

13/03/2015 IOS/PCI, LLC United States L.B. Foster Company 100 % 330 11,8x

Median 9,1x




7.5.4.1 Analysis of VALLOUREC'S share price performance

The price of VALLOUREC shares has changed as follows over a two-year period (from

31 August 2018 to 31 August 2020):




Figure 49- VALLOUREC share price over two years up to 31 August 2020


0

200

400

600

800

1 000

1 200

1 400

1 600

0

50

100

150

200

250

Volume (in thousands) Vallourec closing price Rebased SBF 120 Rebased Brent price Rebased STOXX Global 3000 Oil & Gas

Price(in EUR)

Volume (in thousands)

Source: Capital IQ

15/11/2018: Publication of Q3 2018. Turnover of €961m (-0.3% y/y). Results below expectations.

1

19/02/2020: Presentation of 2019 results. Net loss of €338m. Vallourec contemplates a €800

million capital increase. Beginning of the COVID-19 crisis impacts financial markets.

6

14/11/2019: Publication of Q3 2019 results. Confirmation of 2019 targets.

5

19/02/2019: The management declares that Vallourec is ruling out recourse to a capital

increase in 2019.

3

02/08/2019: Publication of H1 2019 results. Despite good results, the group suffers from the sharp drop in oil prices.

4

1 2

26/11/2018: Standard & Poors downgrades its rating of the Group's debt from B to B-.

2

13/05/2020: Vallourec still intends to proceed with the capital increase in a volatile market

context.

7

29/07/2020: Vallourec announces that it has not been possible to carry out the

€800 million capital increase.

8




Over the two years prior to 31 August 2020, VALLOUREC'S share price has fallen by -87%, while the

SBF 120 has fallen by -10%. Over this two-year period, the share price has moved between €25.7

(reached on 31 August 2020) and €210.8 (reached on 25 September 2018), it being noted that the

price trends are fairly correlated with those of Brent.

We distinguish two phases of price development over the period analysed. The first phase,

corresponding to the period before the impact of the COVID-19 crisis on the financial markets, runs

from the end of August 2018 to the end of February 2020. The second phase runs from the

beginning of March 2020 to the end of August 2020, and reflects the impact of the pandemic on

the stock:

1. VALLOUREC's share price followed a strong downward trend during the first phase

identified. Its evolution was mainly marked by the following events:

On 15 November 2018, the Group published its results for the third quarter of 2018

(No. 1). The following session showed a sharp decline of -32.1% to €104.4 (from €153.9

the previous day) explained by the downward revision of analysts' price targets, with a

high level of short-selling as well as a general feeling of mistrust towards the stock. As

such, on 26 November 2018, STANDARD & POORS (No. 2) downgraded its rating on the

Group's debt from B to B- in view of the results published below consensus

expectations.

The downward trend in the share price continued until early February 2019 (€57.6 per

share on 4 February 2019). However, the Group's announcements on 19 February

2019 (No. 3), concerning the management's intention not to resort to a capital increase

in 2019, among other things, resulted in a significant rise in the share price until the end

of July 2019. On 31 July 2019, the share price closed at €125.4, an increase of almost

86.6% since 19 February 2019.

On 2 August 2019, the Group published its results for the first half of 2019 (No. 4).

These good results were nevertheless not welcomed by the market, in a context of

falling oil prices (-13.5% on Brent between 31 July 2019 and 7 August 2019 compared

to -16.3% for VALLOUREC over the same period). In addition, the Group confirmed its

objectives for the 2019 financial year (positive FCF in the fourth quarter, and

compliance with the banking covenant at the end of the financial year based on current

market trends and targets) when it published its third quarter 2019 results on

14 November 2019 (No. 5). This was followed by a period of relative price stability until

18 February 2020 at €94.7.

During this first phase, VALLOUREC shares fell by 51.9%, compared with a 6.6% rise for

the SBF 120 index and a 31.6% fall for the Brent crude oil price.




2. Moreover, the bearish trend in the stock intensified after the publication of the 2019

financial year results on 19 February 2020 (No. 6), which resulted in a net loss of €338

million. At the same time, the Group announced that it intended to carry out a capital

increase of €800 million. This publication of results took place against the backdrop of

the COVID-19 crisis, which begins to impact the financial markets from

mid-February 2020 (No. 6). On 13 May 2020, the management announced that

VALLOUREC still intended to proceed with the capital increase in a volatile market context

(No. 7). It was not until 29 July 2020 that the Company announced that the planned

capital increase of €800 million could not be carried out due to the market conditions

impacted by the COVID-19 crisis (No. 8).

Thus, the share price fell sharply by approximately -65% between 20 February 2020

and 16 March 2020. The SBF 120 and the Brent crude oil price experienced a more

moderate change (-36.4% and -46.1% respectively).

VALLOUREC's share price, which was €30.5 at the close of 16 March 2020, continued to

fall until 31 August 2020, reaching €25.7.

In this second phase, VALLOUREC's share price fell by 72.9%, compared with a fall of

15.3% for the SBF 120 index and 14.8% for the Brent crude oil price.

7.5.4.2 Analysis of the volatility of VALLOUREC shares

Volatility is the measure of the amplitude of changes in a security historically observed. It is

therefore used as a basis for measuring the risk of the security.

Given VALLOUREC's stock market performance over the last two years, it seems relevant to observe

the evolution of the stock market's volatility over this period.

The historical volatility (60 days) calculated on the daily returns of VALLOUREC shares over the last

two years compared with the STOXX EUROPE 600 OIL & GAS sector index44 is shown below.

44 We would like to point out that as of 17 September 2020, we no longer have the STOXX GLOBAL 3000 OIL & GAS data in our databases, which is the index used in Vallourec's communication.




Figure 50- Analysis of the 60-day volatility of VALLOUREC shares compared with the STOXX EUROPE 600 OIL & GAS

over two years


A comparative analysis of the volatility of the VALLOUREC share and that of the STOXX EUROPE 600

OIL & GAS index over the period gives rise to the following observations:

• The average volatility of VALLOUREC shares (around 65%) is significantly higher than that of

the sector index (27% on average);

• The very significant levels of volatility observed between November 2018 and February 2019

(more than 100%) follow the disclosure to the market on 15 November 2018 of the results

for the third quarter of 2018, which fell short of consensus expectations. This increase in

volatility should be seen in the context of the drop in the share price of around 50% in a few

sessions (lowest point since February 2016);

• The stock's volatility then decreased to stabilise in a range of 40% to 60% before increasing

significantly following the occurrence of the COVID-19 crisis in the first quarter of 2020 (as a

reminder, -37.7% on the CAC 40 between 19 February 2020 and 18 March 2020), as well as

the volatility of the STOXX EUROPE 600 OIL & GAS.

This analysis shows high levels of volatility in VALLOUREC shares, reflecting the market's perception

of the risk associated with holding the Company's shares.

7.5.4.3 Weight of equity in market value in enterprise value before Restructuring

It should be noted that the value of shareholders' equity, assessed in relation to the market value

of VALLOUREC shares, represents only a limited proportion of the Company's enterprise value

(around 10%).

0

200

400

600

800

1 000

1 200

1 400

1 600

0%

20%

40%

60%

80%

100%

120%

sept.-18 mars-19 sept.-19 mars-20

Volume (in thousands) - (right) 60-day volatility - Vallourec - (left)

60-day volatility - STOXX Europe 600 Oil & Gas - (left)




To illustrate our point, we will consider the enterprise value of VALLOUREC determined as follows:

• €416 million by reference to the 3-month weighted average share price at 31 August 2020 of

€36.12 (§7.5.4.4) and a theoretical adjusted (post-dilution) number of shares of 11,527,277

(§7.4.1);

• to which we add the adjusted net financial debt before Restructuring of €2,649 million

presented above (§7.4.2);

• for an enterprise value of €3,065 million45, of which 13.6% is equity.

On this basis, we present below the mathematical impacts that would result from an increase or

decrease of approximately 5% in the enterprise value on the equity value, all other things being

equal, i.e. at a constant level of adjusted net debt.

Figure 51- Illustration of the sensitivity of the enterprise value to the value per VALLOUREC share before the

Restructuring


This analysis shows that a variation in the enterprise value of plus or minus 5% would result in a

variation of almost 36% in the value of the share.

From this point of view, it should be noted that any event impacting the enterprise value would have

a greatly multiplied effect on the value per share considering the stable adjusted net financial debt.

45 This value is provided for illustrative purposes only as it is based on data with a different time frame (WACC prior to the date of determination of the other parameters), although this bias has no impact on the results of the analysis.

Enterprise value sensitivity (€ million)

Enterprise value 3 065 3 065 3 065 3 065 3 065

Change in the enterprise value considered (150) (75) - 75 150

Resulting enterprise value 2 915 2 990 3 065 3 140 3 215

Variation vs EV @€3,065M (5%) (2%) - 2% 5%

Adjusted net financial debt (2 649) (2 649) (2 649) (2 649) (2 649)

Resulting equity value 266 341 416 491 566

Variation vs EV @€3,065M (36%) (18%) - 18% 36%

Diluted NOSH (k) 11 527 11 527 11 527 11 527 11 527

Resulting value per share (€/share) 23,10 € 29,61 € 36,12 € 42,62 € 49,13 €

Delta vs €36.12 (13,01€) (6,51€) - 6,51€ 13,01€

% change (36%) (18%) - 18% 36%




7.5.4.4 Analysis of the liquidity of VALLOUREC shares and the resulting post-Restructuring

value

Based on the last trading price before the announcement of the discussions between the Group

and its creditors on 1 September 2020 in respect of a possible restructuring of the financial debt,

i.e. that of 31 August 2020, the volume-weighted average prices (hereinafter referred to as

"VWAP"), the volumes traded in the share and the resulting turnover rates are as follows over a

12-month period:

Figure 52- Analysis of the VWAP and liquidity of VALLOUREC shares before 31 August 2020


The analysis of prices over the period calls for the following observations on our part:

• The liquidity of VALLOUREC shares over the period, expressed in terms of capital turnover and

free float, means that the share price can be considered representative, with a free float of

more than 66% of the capital. Thus, over the last six months, the volume of VALLOUREC

shares traded was 17.3 million shares (i.e. approximately 135,000 shares per trading day).

Over the same period, capital turnover was 151.1% and free float turnover was 223.87%;

• VALLOUREC's value per share over the period ranges from €25.66 (spot) to €70.97 (12-month

VWAP). The upper limit of this range is based on a period starting in September 2019, several

months before the COVID-19 pandemic. From this point of view, this reference cannot be

considered as representative of the value of VALLOUREC shares;

• The downward trend in VALLOUREC's share price over the period is the result of the combined

effect of the impact of the pandemic on the Group's operating performance and the

uncertainty as to the Company's ability, in this context, to meet its debt repayments.

Despite the large volume of trading, we believe that the relevance of the VALLOUREC share price in

assessing the Company's value is limited. Indeed, these observations were made prior to the date

of the announcement of the start of discussions with a view to restructuring the Company's debt,

i.e. more than six months ago. They therefore do not include events that have occurred since that

date, particularly in a highly volatile and changing market environment.

We would also point out that due to the level of the Group's debt, the portion of the enterprise value

accruing to shareholders is very small. From this point of view, the value of the shareholders' equity

assessed before the Restructuring is subject to a significant amplitude.

Average Cumulative Average CumulativeVolume

traded

Capital

rotation

Volume

traded

Float

rotation

Spot (31/8/2020) 25,66 127 127 3 290 3 290 1,11 % 1,11 % 1,65 % 1,65 %

1-month VWAP 28,28 67 1 481 1 904 41 879 0,59 % 12,95 % 0,87 % 19,19 %

60-day VWAP 34,25 80 4 702 2 729 161 012 0,70 % 41,11 % 1,03 % 60,91 %

3-month VWAP 36,12 93 6 050 3 362 218 512 0,81 % 52,90 % 1,21 % 78,38 %

6-month VWAP 39,82 135 17 281 5 376 688 069 1,18 % 151,10 % 1,75 % 223,87 %

12-month VWAP 70,97 150 38 204 10 633 2 711 359 1,31 % 334,05 % 1,95 % 495,98 %

12 month high (10/9/2019) 115,32

12 month low (8/31/2020) 25,66

% of free floatAverage-Weighted

Average Pricesin €/share

Volume traded (in K) Capital traded (in K) % of capital




However, we present below, for information purposes, the values per share after the Restructuring

resulting from the mathematical impact of the various restructuring transactions provided for in the

Agreement in Principle on the range of share prices presented above.

For the reason mentioned above, we have excluded from our analysis the reference to the 12-

month VWAP and therefore present the results of this approach in terms of the stock market values

of the share over the 6 months prior to the announcement date:

Figure 53- Values per share post Restructuring induced by the VWAP observed over the 6 months preceding the

announcement date


This analysis results in a value per VALLOUREC share after the Restructuring of between €8.79 and

€9.50 based on stock market observations over the six months preceding 1 September 2020.

7.5.4.5 Recent share price development

For information purposes, we present below the evolution of the share price after the date of the

announcement of the entry into discussions for the restructuring of the Company's debt.

Spot (31/8/2020) 25,66 8,79

1-month VWAP 28,28 8,92

60-day VWAP 34,25 9,22

3-month VWAP 36,12 9,32

6-month VWAP 39,82 9,50

6 month high (3/3/2020) 68,94

6 month low (8/31/2020) 25,66

Post-Restructuring

value (€/share)Average-Weighted Average Prices in €/share




Figure 54- VALLOUREC share price performance since 1 September 2020


0

200

400

600

800

1 000

1 200

1 400

1 600

10

15

20

25

30

35

40

sept.-20 oct.-20 nov.-20 déc.-20 janv.-21 févr.-21 mars-21

Volume (in thousands) Vallourec closing price Rebased SBF 120 Rebased Brent price Rebased STOXX Europe 600 Oil & Gas

Price(in EUR)

Source: Capital IQ

01/09/2020: the Group announces that it has started a discussion with all of its bond creditors and RCFs, in

order to restructure the Group's debt.

1

21/09/2020: appointment of an ad

hoc agent.

2

18/11/2020: Q3 publication Turnover -32%. Net loss of €636m. 1,050

redundancies planned.

4

17/11/2020: Vallourec wantsreduce his debt by about 50% by

means of a debt/equity swap.

3

03/02/2021: Agreement in Principle announced.

5

04/02/2021: Nanterre Commercial Court opens a safeguard procedure.

6

17/02/2021: Fiscal 2020 results published.

7




Following the announcement that the Company had initiated discussions to restructure its debt on

1 September 2020, the share price fell sharply by -53.8% to €11.7 at the close of 29 October 2020.

The correction observed since this low point should be seen in the context of the general rise in the

Oil & Gas sector and in particular the price of oil. It should be noted that the announcement of the

terms of the Agreement in Principle on 3 February 2021 does not disrupt this upward trend. Indeed,

the share price shows an increase of approximately +77% between 5 February 2021 and

26 February 2021 (i.e. from €22.895 to €40.525).

After rising by 17.1% in February 2021, the price of Brent crude oil fell by 3.9% on 1 March 2021.

VALLOUREC's share price then began a downward trend, reaching €30.2 at the close of 24 March

2021.

We also note that the volatility of the share price between December 2020 and February 2021 is

at levels (around 110%) comparable to those observed during the COVID-19 crisis on the financial

markets (see §7.5.4.2).

Figure 55- Analysis of the 60-day volatility of VALLOUREC shares compared to the STOXX EUROPE 600 OIL & GAS since 1

September 2020


We recall that, for the reasons mentioned above, the reference to the Company's recent stock

market prices has not been used in the context of our multi-criteria valuation approach to the

Company.

7.5.5 Reference to analysts' price targets (for information)

This method consists of determining the value of a company on the basis of the price targets of the

analysts who cover the stock. VALLOUREC's shares are regularly monitored by ten financial analysts

(BANK OF AMERICA MERRIL LYNCH, BARCLAYS, BTIG, CIC MARKET SOLUTIONS, GOLDMAN SACHS,

JEFFERIES, KEPLER CHEUVREUX, ODDO BHF, SOCIÉTÉ GÉNÉRALE and UBS).

Following the same logic as that developed above with regard to the reference to the share price

(§7.5.4), we have based our analysis on the price objectives of financial analysts following

VALLOUREC shares published before 1 September 2020.

0

500

1 000

1 500

0%

20%

40%

60%

80%

100%

120%

sept.-20 oct.-20 nov.-20 déc.-20 janv.-21 févr.-21 mars-21

Volume (in thousands) - (right) 60-day volatility - STOXX Europe 600 Oil & Gas - (left)60-day volatility - Vallourec - (left)




The analysts who follow VALLOUREC shares communicate, in varying degrees of detail, on the

Company's operating forecasts used for their valuation work.

The latest publications identified by analysts who follow VALLOUREC shares prior to 1 September

2021 are listed below:

Figure 56- Analysts' price targets before the announcement

Source: CAPITAL IQ, analyst notes

Three analysts are not publishing price targets at this time. In particular, KEPLER CHEUVREUX and

ODDO BHF have suspended their price target and recommendation in view of the low visibility on

the uncertainty of the modalities that would be implemented to meet the debt maturities:

• KEPLER CHEUVREUX IS considering a debt-to-equity scenario. “In our view, a debt-to-equity at

VALLOUREC is more and more likely. EUR800m of capital increase is not enough. The banking

covenant ratio has been broken (while it's tested only at the end of the year and VK still has

access to the RCF). VALLOUREC could be preparing such operation in our view, as it stated

in the presentation - VALLOUREC continues discussions in particular with its reference

shareholders and its banks, in order to define a new refinancing plan taking into account the

consequences of the Covid and oil markets crises.”

• ODDO BHF believes that “the financial structure remains the main issue. At 30 June, leverage

stood at 124%, i.e. above the 100% covenant. In this context, the €800 million capital

increase could not be completed, and the group is seeking new financing arrangements. The

Group's liquidity is at €1.5 billion (€1.9 billion at the end of Q1) and it is doing everything

possible to limit cash outflows (reduction of CAPEX by 20% to €160 million, increased cost

reductions for €130 million in addition to the €200 million ‘Acceleration’ plan).

‘Acceleration’ plan for €200 million).”

• BTIG does not publish a price target.

Date Analyst Target price Recommendation

30/07/2020 BoAML 20,0 € "Underperform"

03/08/2020 Barclays 40,0 € "Underweight"

28/07/2020 BTIG Aucun "Neutral"

27/07/2020 CIC Market Solutions 35,0 € n/a

31/07/2020 Goldman Sachs 29,0 € "Sell"

30/07/2020 Jefferies 29,0 € "Hold"

30/07/2020 Kepler Cheuvreux None No recommendation

30/07/2020 Oddo BHF Suspended No recommendation

03/08/2020 Société Générale 29,6 € "Hold"

29/07/2020 UBS 20,0 € "Sell"

Min 20,0 €

Median 29,0 €

Max 40,0 €




The price targets are thus set in a wide range between €20 and €40 with a median value of €29

per VALLOUREC share, it being specified that the overall consensus is "neutral" or "sell".

In our view, this wide range can be explained by the uncertainty about the Group's refinancing

arrangements already mentioned, as well as by the weight of equity in the Company's enterprise

value.

We have calculated the values per share after the Restructuring which would result from taking into

account the mathematical impact of the various transactions of the Restructuring on these price

targets:

Figure 57- Induced share values after Restructuring based on analysts' price targets

Source: CAPITAL IQ, analyst notes

This reference has been excluded for the same reason as the reference to stock prices and is

therefore presented for information purposes.

With reference to the minimum and maximum of these objectives, this analysis produces a

value per VALLOUREC share after the Restructuring of between €8.51 and €9.51.

For information purposes, we note that following the announcement of the terms of the Agreement

in Principle on 3 February 2021, the median of analysts' price targets stands at €27 per VALLOUREC

share, i.e. €2 less than before 1 September 2020, it being specified that GOLDMAN SACHS' coverage

is no longer assured.

We note the main comments of the following analysts in their latest notes:

• BANK OF AMERICA MERRIL LYNCH: “Despite 1-to-20 dilution, the deal offers significantly

better terms to current equity holders, than we originally expected. We believe debt holders

are coming out of this process as the key beneficiaries. [...] The company will retain >E1b

of cash liquidity, which should be more than sufficient to carry it through 2021, which will

remain a difficult year. [...] Importantly, restructuring helps to significantly lower cash

breakeven point for VALLOUREC.”

Date Analyst Target price Post-Restructuring value (€/share)

30/07/2020 BoAML 20,0 € 8,51 €

03/08/2020 Barclays 40,0 € 9,51 €

27/07/2020 CIC Market Solutions 35,0 € 9,26 €

31/07/2020 Goldman Sachs 29,0 € 8,96 €

30/07/2020 Jefferies 29,0 € 8,96 €

03/08/2020 Société Générale 29,6 € 9,01 €

29/07/2020 UBS 20,0 € 8,51 €

Min 20,0 € 8,51 €

Median 29,0 € 8,96 €

Max 40,0 € 9,51 €




• BARCLAYS: “Restructuring still needs to clear a few approval hurdles, but has the backing

of 30% of the equity base from two long-term holders and 65% of the financial debt holders.

We see this a solid base from which to get the agenda passed. [...] VALLOUREC is doing

what it can to navigate the downturn, including a full financial restructuring, but, on our

numbers, even in a recovery scenario, it generates little cash.”

• CIC: “The proposed restructuring would reduce leverage from ~8.6x DN/EBITDA at the end

of 2020 to ~4x at the end of 2021 and 2.5x at the end of 2022 based on VALLOUREC's

EBITDA forecasts to its creditors, which are lower than our 2021 forecast and higher than

our 2022 forecast. In the restructuring, VALLOUREC would buy out the minority shareholders

of its plant in Brazil (VSB) for less than $15 million, a very attractive price. [...] VALLOUREC's

continued slow recovery in 2021 and the restructuring of its debt currently looks correctly

priced in our opinion. [...] For 2021, which should see the debt restructured in H1,

VALLOUREC is guiding on another difficult year in oil.”

• JEFFERIES: “Financial restructuring poses significant overhang to share price due to

potential dilutive effect. [...] Financial restructuring resolution becomes prolonged, creating

uncertainty for the stock. [...] Restructuring Advancing Positively.”

• KEPLER CHEUVREUX: “In the end, as suspected, VALLOUREC will implement a very

complicated refinancing operation, with debt-to-equity, a write-off, new equity, and new

bonds. [...] Such an operation is difficult to implement and will not solve the problem 100%

in our view (VALLOUREC would still not be able to generate cash in 2021-22E). [...] The

current share price does not reflect the upcoming restructuring in our view. [...] The financial

restructuring is positive for the group's balance sheet, but this is far from solving all of the

issues.”

• ODDO BHF: “on a first approach and excluding the Warrants, dilution will be significant with

the creation of more than 217.5 million shares vs. 11.4 million shares currently, i.e. a dilution

of 95% (we had estimated it between 90% and 95% previously, as a reminder, dilution of

70% in 2016 during the previous restructuring).”

• SOCIÉTÉ GÉNÉRALE: “While a few details are still unclear, our initial analysis of the financial

restructuring plan unveiled yesterday by VALLOUREC is an overall positive for shareholders”.




7.6 Summary of our valuation work after the Restructuring

The graph below summarises the value ranges per VALLOUREC share after the Restructuring46 and

on the basis of the valuation methods and references studied:

Figure 58- Summary of values per VALLOUREC share after the Restructuring


In this context, we consider the DCF approach to be the most appropriate criterion for assessing

the value of the VALLOUREC share. This approach shows a value per share after Restructuring of

between €7.92 and €9.47, with a central value of €8.70.

We remind you that these results assume that the forecasts established by management, which

are based on a significant rebound in activity as of 2022 in a highly volatile Oil & Gas market and

the implementation of cost savings plans as anticipated, are achieved without any major hazard.

46 Before exercise of the Warrants of the Commercial Banks which are out of the money.

7,92

7,56

8,81

8,79

8,51

8,70

9,47

9,56

9,50

9,51

Value/share (€) Shareholders’ subscription price discount on the

post-Restructuring value

-28,6%

-25,1%

-35,8%

-35,6%

-33,5%

Creditors’ subscription price discount on the

post-Restructuring value

2,1%

7,1%

-8,2%

-8,0%

-4,9%

-40,8%

-40,4%

-40,5%

-15,4%

-14,8%

-14,9%

-40,2% -14,6%

Results of valuation methods and references after Restructuring

23/08/2018

Main method

used

Comparable

listed

companies

Comparable

transactions

DCF

Secondary

methods

Share price

Post value

before Warrants

(min - max of

VWAP up to 6

month)

References

for

informational

purposes Analysts’ price

targets

Post value

before Warrants

Shareholders’

subscription price

€8.09

Creditors’

subscription price

€5.66




This range is corroborated by the results of the analogical stock market and comparable transaction

approaches implemented on a secondary basis, which show a range of value per VALLOUREC share

of €7.56 to €9.56.

References to share prices and analysts' price targets, which we remind you are presented for

information purposes only given the limitations mentioned above, do not differ significantly from

these results.

The results of our valuation work call for the following remarks on the terms and conditions of the

issues of instruments giving access to the capital planned in the context of the Restructuring:

• The subscription price of the Rights Issue of €5.66 appears to be significantly discounted

compared to the post-Restructuring values resulting from our work, with a discount in the

range of 29% to 40% by reference to the DCF approach used as the main basis.

• The subscription price of €8.09 for the Reserved Capital Increase is at the lower end of the

range of this reference with a discount/premium of between (-14.6)% and +2.1%. This

observation attests to the fairness of the transaction for shareholders, whose dilution will be

mitigated by this subscription price.

• The exercise price of the Warrants of €10.11 is out of the money with a premium on the

theoretical post-restructuring value of the DCF approach between 6.7% and 27.6%. We recall

that these Warrants are to be put in perspective of the debt write-off by the Commercial

Banks. We present below an analysis of the impact of the Transaction for the latter.




8. Financial analysis of the Restructuring

8.1 Approach taken

We analysed the theoretical impact of the Transaction on:

• VALLOUREC's financial structure (gross debt, cash and equity);

• VALLOUREC's shareholding;

• the situation of the shareholders (theoretical evolution of their assets);

• the situation of the holders of the Restructured Claims (hereinafter the "Creditors"),

considering the holders of the Restructured Claims (hereinafter the "Other Creditors")

separately from the Commercial Banks (theoretical evolution of their assets).

We will also present the average subscription price of the various stakeholders to the capital

increases planned as part of the Restructuring.

The various analyses presented below depend on the actual terms and conditions of the

transactions contemplated by the Restructuring and, in particular, on the subscription percentage

(hereinafter "Take-up") of the existing shareholders to the Rights Issue.

Thus, our analyses will integrate the different impacts of the Restructuring according to different

levels of Take-up (0%, 18.3%, 25%, 50%, 75% and 100%), it being specified that the 18.3% Take-

up reflects the scenario in which the Rights Issue would only be subscribed in the amount of the

commitments made by the Reference Shareholders, i.e. €55 million.

We remind you that the analyses presented below are based in particular on the results of our DCF

valuation carried out on the basis of an adjusted (post-dilution) number of shares as at 31

December 2020 which may differ from the number of shares effective on the date of completion of

the Restructuring.

8.2 Analysis of the financial structure post Restructuring

The effects of the various stages of the Restructuring on gross debt, cash flow and equity under

different scenarios are detailed in the following paragraphs.

These analyses were performed with reference to the data appearing in the Company's

consolidated balance sheet at 31 December 2020. We would like to point out that they do not

include the impact of operating flows after this date, the repayment of Unaffected Interest (§6.2.1),

the payment of approximately €16 million in respect of the Early Bird Lock-Up Fee and the Lock-

up Participation Fee and, more generally, all the costs associated with the Transaction (§6.3.10).

We also did not consider the impact of the exercise of the Warrants, which appears theoretical in

light of the results of our valuation work.




8.2.1 Impact of the Restructuring on gross debt

It should be noted here that, for the purposes of this report, we are using the nominal amount of

the Group's financial debt, irrespective of the amount to be determined in accordance with IFRS

rules or its market value for creditors.

We present below the impact of the implementation of the Restructuring on the Company's gross

debt under the different Take-up scenarios:

Figure 59- Evolution of the Group's gross financial debt


We observe that:

• The implementation of the Restructuring will reduce the Company's gross debt by

approximately €1,800 million to €1,747 million, a reduction of approximately 50%, regardless

of the Take-up scenario;

• The only difference between the different Take-up scenarios is in the Rights Issue. As a

reminder, this capital increase, for which the cash generated by the payment of the

subscription prices is intended for the repayment of the Restructured Claims, is backstopped

by the holders of the said claims. As the payment of the subscription price in the event of the

implementation of this guarantee will be made in full by way of set-off of claims, the Rights

Issue will lead to a reduction in gross debt of approximately €300 million by way of a

repayment or set-off of claims, depending on the Take-up scenario envisaged.

In K Take-up 0% Take-up 18% Take-up 25% Take-up 50% Take-up 75% Take-up 100%

Principal of the Bonds 1 755 000 1 755 000 1 755 000 1 755 000 1 755 000 1 755 000

Restructured Interest 62 897 62 897 62 897 62 897 62 897 62 897

Total Bonds 1 817 897 1 817 897 1 817 897 1 817 897 1 817 897 1 817 897

RCF 1 712 160 1 712 160 1 712 160 1 712 160 1 712 160 1 712 160

Restructured Interest 17 136 17 136 17 136 17 136 17 136 17 136

Total RCF 1 729 296 1 729 296 1 729 296 1 729 296 1 729 296 1 729 296

Gross financial debt before Restructuring 3 547 192 3 547 192 3 547 192 3 547 192 3 547 192 3 547 192

SGL (§6.3.1) 262 000 262 000 262 000 262 000 262 000 262 000

Repayment of Converted Claims (§6.3.2) (211 669) (211 669) (211 669) (211 669) (211 669) (211 669)

Repayment of Commercial Bank Loans (§6.3.2) (50 331) (50 331) (50 331) (50 331) (50 331) (50 331)

Repayment of Restructured Claims (§6.3.2) (262 000) (262 000) (262 000) (262 000) (262 000) (262 000)

Debt write-off (§6.3.6) (168 792) (168 792) (168 792) (168 792) (168 792) (168 792)

Conversion in respect of the payment of the Warrants subscription price (§6.3.7) (303) (303) (303) (303) (303) (303)

Reserved Capital Increase (conversion of Converted Claims) (§6.3.8) (1 331 000) (1 331 000) (1 331 000) (1 331 000) (1 331 000) (1 331 000)

Guarantee/backstop Rights Issue (§6.3.9) (299 724) (244 775) (224 793) (149 862) (74 931) -

Repayment of Converted Claims Rights Issue (§6.3.9) - (54 949) (74 931) (149 862) (224 793) (299 724)

Rights Issue (§6.3.9) (299 724) (299 724) (299 724) (299 724) (299 724) (299 724)

Residual gross financial debt after Restructuring 1 747 373 1 747 373 1 747 373 1 747 373 1 747 373 1 747 373

Variation (1 799 819) (1 799 819) (1 799 819) (1 799 819) (1 799 819) (1 799 819)

New Notes 1 023 373 1 023 373 1 023 373 1 023 373 1 023 373 1 023 373

Reinstated RCF 462 000 462 000 462 000 462 000 462 000 462 000

SGL 262 000 262 000 262 000 262 000 262 000 262 000




8.2.2 Impact of the Restructuring on the Company's cash flow

We also simulated the impact of the Restructuring in terms of cash flows for the Company under

the different Take-up scenarios:

Figure 60- Impact of the Restructuring on the Company's consolidated cash flows


This analysis shows that the Restructuring will have no impact on the Company's consolidated

cash flows:

• The cash generated by the Rights Issue will be entirely devoted to the repayment of the

Converted Claims;

• The cash generated by the SGL will offset the repayment of the Converted Claims and

Commercial Bank Loans.

For information purposes, the exercise of the Warrants would lead to an additional increase in cash

of €306,761,02747.

8.2.3 Impact of the Restructuring on the Company's equity

We present below the impact of the Restructuring on the Company's consolidated equity. The latter

will be impacted by the amount of the various issues of instruments giving access to the capital, as

well as by the debt write-off by the Commercial Banks.

The figures presented below are only an approximation as they only include the main impacts

expected from the Transaction48.

47 Total potential number of Warrant shares, i.e. 30,342,337, multiplied by the unit exercise price of €10.11. 48 In particular, the tax impact of the debt write-off by the Commercial Banks is not included.

In €K Take-up 0% Take-up 18% Take-up 25% Take-up 50% Take-up 75% Take-up 100%

Cash position at 31 December 2020 1 389 533 1 389 533 1 389 533 1 389 533 1 389 533 1 389 533

Subscription price payment Rights Issue - 54 949 74 931 149 862 224 793 299 724

Cash generated by capital increases - 54 949 74 931 149 862 224 793 299 724

Cash generated by the SGL 262 000 262 000 262 000 262 000 262 000 262 000

Repayment of Converted Claims Rights Issue (§6.3.9) - (54 949) (74 931) (149 862) (224 793) (299 724)

Repayment of Converted Claims (§6.3.2) (211 669) (211 669) (211 669) (211 669) (211 669) (211 669)

Repayment of Commercial Bank Loans (§6.3.2) (50 331) (50 331) (50 331) (50 331) (50 331) (50 331)

Debt repayment (262 000) (316 949) (336 931) (411 862) (486 793) (561 724)

Cash generated by the Restructuring - - - - - -




Figure 61- Impact of the Restructuring on the Company's equity


At the end of December 2020, the Group's share of consolidated shareholders' equity stood at

€187.1 million. It should be reduced to an amount close to €1,613 million after the Restructuring.

The lack of change in the 0% to 100% Take-up scenarios is due to the guarantee of the Rights

Issue by the holders of the Converted Claims by way of set-off of claims, which ensures the

subscription for the entire amount.

For information purposes, the exercise of the Warrants would lead to an additional increase in

equity of €306,761,027.

8.3 Impact of the Restructuring on the shareholder's situation in terms of

dilution

The table below shows the changes in the number of shares held by shareholders and Creditors

following each stage of the Restructuring:

Figure 62- Shareholder base after the Restructuring and before the exercise of the Warrants



Equity at 31 December 2020 133 677 133 677 133 677 133 677 133 677 133 677

Minority interests (320 777) (320 777) (320 777) (320 777) (320 777) (320 777)

Equity, group share, 31 December 2020 (187 100) (187 100) (187 100) (187 100) (187 100) (187 100)

Repayment of Converted Claims Rights Issue (§6.3.9) - 54 949 74 931 149 862 224 793 299 724

Guarantee/backstop Rights Issue (§6.3.9) 299 724 244 775 224 793 149 862 74 931 -

Reserved Capital Increase (conversion of Converted Claims) (§6.3.8) 1 331 000 1 331 000 1 331 000 1 331 000 1 331 000 1 331 000

Debt write-off Commercial Bank Loans (§6.3.6) 168 792 168 792 168 792 168 792 168 792 168 792

Conversion in respect of the payment of the Warrants subscription price (§6.3.7) 303 303 303 303 303 303

Equity after Restructuring 1 612 719 1 612 719 1 612 719 1 612 719 1 612 719 1 612 719

Impact of Restructuring 1 799 819 1 799 819 1 799 819 1 799 819 1 799 819 1 799 819

In K Number % Number % Number % Number % Number % Number %

Shares b. Restructuring (exc. treasury shares) 11 449 5,0% 11 449 5,0% 11 449 5,0% 11 449 5,0% 11 449 5,0% 11 449 5,0%

Rights Issue - 0,0% 9 708 4,2% 13 239 5,8% 26 477 11,6% 39 716 17,3% 52 955 23,1%

Total shareholders 11 449 5,0% 21 157 9,2% 24 687 10,8% 37 926 16,6% 51 165 22,3% 64 403 28,1%

BPI 1 667 0,7% 5 201 2,3% 5 201 2,3% 5 201 2,3% 5 201 2,3% 5 201 2,3%

NSC 1 667 0,7% 7 851 3,4% 7 851 3,4% 7 851 3,4% 7 851 3,4% 7 851 3,4%

Other shareholders 8 114 3,5% 8 114 3,5% 11 635 5,1% 24 874 10,9% 38 113 16,6% 51 351 22,4%

Rights Issue 52 955 23,1% 43 246 18,9% 39 716 17,3% 26 477 11,6% 13 239 5,8% - 0,0%

Reserved Capital Increase 164 524 71,9% 164 524 71,9% 164 524 71,9% 164 524 71,9% 164 524 71,9% 164 524 71,9%

Total Creditors 217 479 95,0% 207 771 90,8% 204 240 89,2% 191 002 83,4% 177 763 77,7% 164 524 71,9%

Total 228 928 100,0% 228 928 100,0% 228 928 100,0% 228 928 100,0% 228 928 100,0% 228 928 100,0%

Including historical shareholders 8 114 3,5% 8 114 3,5% 11 635 5,1% 24 874 10,9% 38 113 16,6% 51 351 22,4%

Including BPI 1 667 0,7% 5 201 2,3% 5 201 2,3% 5 201 2,3% 5 201 2,3% 5 201 2,3%

Including NSC 1 667 0,7% 7 851 3,4% 7 851 3,4% 7 851 3,4% 7 851 3,4% 7 851 3,4%

Including Other Creditors 217 479 95,0% 207 771 90,8% 204 240 89,2% 191 002 83,4% 177 763 77,7% 164 524 71,9%

Take-up 100%Take-up 0% Take-up 18% Take-up 25% Take-up 50% Take-up 75%




The impact of the Transaction on the shareholder base, as presented in the table above, before

exercise of the Warrants, calls for the following comments:

• The 0% Take-up scenario is presented for information purposes only as it is not likely due

to the subscription commitments of the Reference Shareholders mentioned above.

• It should be noted that the final number of shares after the Restructuring is constant,

regardless of the Take-up level, as the holders of the Converted Claims have undertaken

to backstop the Rights Issue by way of write-off of their claims.

• The impact of the Transaction on the Company's post-Restructuring shareholder base

results mainly from the effect of the Reserved Capital Increase at a subscription price of

€8.09, the quantum of which is significantly higher than that of the Rights Issue at a

subscription price of €5.66.

• The shares resulting from the Reserved Capital Increase issued at a price of €8.09 thus

represent a very significant percentage of the capital (approximately 71.9%).

• The level of the Take-up plays a predominant role in the position of shareholders in the

post-Restructuring capital, with a percentage varying from 28.1% to 5%49 depending on

whether or not they subscribe to the Rights Issue.

• The holders of the Converted Claims will have their equity interest increased by the amount

of the Rights Issue which is not subscribed by the shareholders. In this context, they will be

able to benefit from the discounted price of the Rights Issue. The benefit of access to this

discounted price should nevertheless be seen in the light of the increased exposure to

equity risk instead of a cash payment.

• As a result of their commitment to subscribe to the Rights Issue, BPIFRANCE PARTICIPATIONS

and NSC would hold 2.3% and 3.4% respectively of VALLOUREC's capital after the

Restructuring.

• With regard to the Future Reference Shareholders, APOLLO and SVPGLOBAL:

o APOLLO would hold between 29.3%50 (if only NSC and BPI subscribe to the Rights

Issue) and 23.2% in case of a 100% Take-up;

o SVPGLOBAL would hold between 15.1%51 (if only NSC and BPI subscribe to the

Rights Issue) and 11.9% in case of a 100% Take-up.

A similar analysis is presented below, but this time taking into account the exercise of the Warrants

granted to the Commercial Banks.

49 Considering the theoretical scenario of no subscription by the Reference Shareholders. 50 Before exercise of the Warrants. 51 Before exercise of the Warrants.




Figure 63- Shareholder base after the Restructuring and after the exercise of the Warrants


This scenario, in which the Commercial Banks would be granted 11.7% of VALLOUREC's capital

after the Restructuring, follows the same development mechanisms as those presented above, but

with a dilution of all the stakeholders listed in Figure 62 as a result of the dilutive impact of the

Warrants.

We recall that, by reference to the results of our valuation work, the Warrants are out of the money.

From this point of view, this scenario appears theoretical.

8.4 Average subscription price for shareholders and Creditors

We present below the average subscription price for the different stakeholders in the capital

increases, i.e. the shareholders and the Creditors.

Figure 64- Average subscription price for Shareholders and Creditors


We note that the average subscription price of shareholders is always lower than that of Creditors.

The higher the level of take-up, the greater the differential.

In K Number % Number % Number % Number % Number % Number %

Shares b. Restructuring (exc. treasury shares) 11 449 4,4% 11 449 4,4% 11 449 4,4% 11 449 4,4% 11 449 4,4% 11 449 4,4%

Rights Issue - 0,0% 9 708 3,7% 13 239 5,1% 26 477 10,2% 39 716 15,3% 52 955 20,4%

Total shareholders 11 449 4,4% 21 157 8,2% 24 687 9,5% 37 926 14,6% 51 165 19,7% 64 403 24,8%

BPI 1 667 0,6% 5 201 2,0% 5 201 2,0% 5 201 2,0% 5 201 2,0% 5 201 2,0%

NSC 1 667 0,6% 7 851 3,0% 7 851 3,0% 7 851 3,0% 7 851 3,0% 7 851 3,0%

Other shareholders 8 114 3,1% 8 114 3,1% 11 635 4,5% 24 874 9,6% 38 113 14,7% 51 351 19,8%

Rights Issue 52 955 20,4% 43 246 16,7% 39 716 15,3% 26 477 10,2% 13 239 5,1% - 0,0%

Reserved Capital Increase 164 524 63,5% 164 524 63,5% 164 524 63,5% 164 524 63,5% 164 524 63,5% 164 524 63,5%

Total Creditors 217 479 83,9% 207 771 80,1% 204 240 78,8% 191 002 73,7% 177 763 68,6% 164 524 63,5%

Commercial Bank Warrants 30 342 11,7% 30 342 11,7% 30 342 11,7% 30 342 11,7% 30 342 11,7% 30 342 11,7%

Total 259 270 100,0% 259 270 100,0% 259 270 100,0% 259 270 100,0% 259 270 100,0% 259 270 100,0%

Including historical shareholders 8 114 3,1% 8 114 3,1% 11 635 4,5% 24 874 9,6% 38 113 14,7% 51 351 19,8%

Including BPI 1 667 0,6% 5 201 2,0% 5 201 2,0% 5 201 2,0% 5 201 2,0% 5 201 2,0%

Including NSC 1 667 0,6% 7 851 3,0% 7 851 3,0% 7 851 3,0% 7 851 3,0% 7 851 3,0%

Including Other Creditors 217 479 83,9% 207 771 80,1% 204 240 78,8% 191 002 73,7% 177 763 68,6% 164 524 63,5%

Including Commercial Banks 30 342 11,7% 30 342 11,7% 30 342 11,7% 30 342 11,7% 30 342 11,7% 30 342 11,7%

Take-up 0% Take-up 18% Take-up 25% Take-up 50% Take-up 75% Take-up 100%

ValueNo. of

shares

Val /

shareValue

No. of

shares

Val /

shareValue

No. of

shares

Val /

shareValue

No. of

shares

Val /

shareValue

No. of

shares

Val /

shareValue

No. of

shares

Val /

share

For Creditors

Rights Issue 299 724 52 955 5,66 244 775 43 246 5,66 224 793 39 716 5,66 149 862 26 477 5,66 74 931 13 239 5,66 - - -

Reserved Capital Increase 1 331 000 164 524 8,09 1 331 000 164 524 8,09 1 331 000 164 524 8,09 1 331 000 164 524 8,09 1 331 000 164 524 8,09 1 331 000 164 524 8,09

Creditors’ average subscription price 1 630 724 217 479 7,50 1 575 775 207 771 7,58 1 555 793 204 240 7,62 1 480 862 191 002 7,75 1 405 931 177 763 7,91 1 331 000 164 524 8,09

For Shareholders:

Rights Issue - - - 54 949 9 708 5,66 74 931 13 239 5,66 149 862 26 477 5,66 224 793 39 716 5,66 299 724 52 955 5,66

Shareholders’ average subscription price - - - 54 949 9 708 5,66 74 931 13 239 5,66 149 862 26 477 5,66 224 793 39 716 5,66 299 724 52 955 5,66

Take-up 100%Take-up 0% Take-up 18% Take-up 25% Take-up 50% Take-up 75%




Furthermore, we note that the average subscription price of the Creditors of €7.50 would still be

significantly higher than the discounted price of €5.66 of the Rights Issue if the Shareholders did

not participate in the Rights Issue.

8.5 Impact of the Restructuring on the shareholders' situation in terms of

theoretical value creation

We present below the simulation of the theoretical impact of the Restructuring on the shareholders'

assets.

To do so, we simulated the impact of the Restructuring on the assets of a shareholder hypothetically

holding 100 shares before the Restructuring, based on a theoretical cost price and according to

different subscription levels of the Rights Issue.

Our analysis consisted in comparing, according to the different Take-up scenarios, the evolution

between:

• the pre-Restructuring shareholders' wealth reflected by (i) the Company's stock market

valuation, which is liquid, increased by (ii) the amount paid for the subscription price of the

Rights Issue according to the different Take-up scenarios;

• the theoretical post-Restructuring shareholder wealth consisting of the value of the shares

held in the Company's capital post-Transaction by reference to the values per share resulting

from our valuation work.

It is recalled that the number of shares making up the capital after the Restructuring would remain

constant regardless of the level of subscription by the shareholders. Similarly, the Take-up does

not influence the value of the Company after the Transaction. Therefore, the level of subscription

to the Rights Issue by an individual shareholder has no influence on the assets of the other

shareholders.

The analysis was conducted on the basis of:

• the range of values per share post Restructuring resulting from our DCF valuation between

€7.92 and €9.47, with a central value of €8.70 per VALLOUREC share;

• the taking into account of two historical acquisition price levels for the existing shareholder

(the VWAP 60 days prior to the announcement of the terms of the Agreement in Principle,

i.e. on 1 February 2021 of €26.11 and the VWAP 60 days on 29 March 2021 of €30.39, it

being recalled that the turnover over these periods represents 200% and 162% of the free

float respectively);

• its level of subscription to the Rights Issue between 0% and 100% by tranche of 25%, in

addition to the 18.3% scenario corresponding to the scenario in which NSC and BPIFRANCE

PARTICIPATIONS invest €35 million and €20 million respectively in the Rights Issue.




For our analyses, we did not take into account the value of the PSRs, assuming that the shareholder

would want to sell them. The price at which a shareholder can theoretically sell its PSR on the

market will vary greatly depending on the number of PSR that all shareholders make available to

the market. In other words, the less the capital increase is subscribed for, the more PSRs will be

sold on the market, which will put strong downward pressure on the price of the PSRs.

The tables of changes in assets presented below therefore do not include any proceeds from the

sale of PSRs that are not exercised by the shareholder. These rates therefore reflect a floor value,

which may be increased by the sale price of these PSRs, the theoretical value of which we will

present.

We recall that the Warrants are out of the money by reference to our valuation work. Therefore, we

did not consider their exercise in our analysis.

8.5.1 Based on the 60-day VWAP at 29 March 2021

On the basis of the assumptions described above, the theoretical situation of the shareholders after

all the dilutive and accretive steps of the Restructuring would be as follows, considering:

• a pre-Restructuring asset base determined by reference to a value per share of €30.66, i.e.

the 60-day VWAP at 29 March 2021;

• a theoretical post-Restructuring asset base determined by reference to three post-

Restructuring value per VALLOUREC share scenarios: worst-case (€7.92), average (€8.70)

and best-case (€9.47) resulting from the implementation of our DCF valuation approach.

Figure 65- Sensitivity analysis of the theoretical impact of the Restructuring on the shareholder's post-Transaction

wealth as a function of the % of PSRs exercised and the post-Restructuring value


(13,91%) 0% 18% 25% 50% 75% 100%

Low post-Restructuring value (€7.92) (74,2%) (58,7%) (54,1%) (40,0%) (29,6%) (21,6%)

Central post-Restructuring value (€8.70) (71,6%) (54,7%) (49,6%) (34,1%) (22,7%) (13,9%)

High post-Restructuring value (€9.47) (69,1%) (50,6%) (45,1%) (28,3%) (15,8%) (6,2%)

% PSRs exercised by the shareholder holding 100 Vallourec shares

Shareholder gain /

(loss) (%)




To illustrate this table, let us take the example of a shareholder who holds 100 shares prior to the

Transaction and who subscribes to the Rights Issue with 100% of their PSRs52, considering a

theoretical post-Restructuring value resulting from the central value of our DCF approach, i.e.

€8.70:

Figure 66- Theoretical impact of the Restructuring on the assets of a shareholder holding 100 VALLOUREC shares on the

basis of the 60-day VWAP at 29 March 2021


In the envisaged scenario (100% Take-up and theoretical post-Restructuring wealth determined in

relation to the central value of our DCF approach), the amount invested by the shareholder would

be €5,684, including a payment of €2,618 in respect of the subscription price of the Rights Issue

(i.e. 46.1% of the amount invested).

The value of this shareholder's assets would be 563 shares at the end of the Transaction,

representing, on the basis of the central value resulting from our DCF approach of €8.70, €4,893,

i.e. a decrease of approximately 13.9% compared to his initial investment.

52 Our analysis does not take into account the impact of break-ups.

Determination of the % in the shareholder’s capital

Number of shares held (a) 100

Number of shares at 31 December 2020 (excluding treasury shares) in k (b) 11 449

% of the capital (c)=(a)/(b) 0,0009%

Determination of the amount invested by the shareholder

60-day VWAP at 29 March 2021 (d) 30,66

Value of shares held (€) (e)=(d)*(a) 3 066

% PSRs exercised (f) 100%

Rights Issue amount (g) 299 724

Subscription price, Rights Issue (h) 5,66

Number of shares issued Rights Issue (i) 52 955

Payment of the exercise price (j)=(h)*(c)*(f)*(i) 2 618

Amount invested by the shareholder (k)=(e)+(j) 5 684

Number of shares pre-Restructuring (a) 100

Number of shares, Rights Issue (k)=(c)*(f)*(i) 463

Number of shares held post-Restructuring (l)=(a)+(k) 563

Post DCF value (central value) (m) 8,70

Post-Restructuring shareholder’s equity (n)=(l)*(m) 4 893

Shareholder gain / (loss) (o)=(n)-(k) (791)

Shareholder gain / (loss) (%) (13,9%)




The following comments can be made on these tables:

• The gain and loss rates are theoretical and do not correspond to an immediate capital gain

or loss for the shareholder, but to a theoretical capital gain or loss based on a target price

over an indefinite time horizon that incorporates the success of the plan and an assumption

of the Company's value equivalent to the results of our DCF approach.

• These theoretical rates must be assessed in the light of the risks incurred by the shareholder

and the rate of return they require from their investment.

• The theoretical loss of the shareholder on their initial investment is very significant (69.1% to

74.2% depending on the post-Restructuring value considered), as long as they do not

exercise any of their PSRs in the context of the Rights Issue.

• The shareholder's participation in the Rights Issue by exercising all of their PSRs allows them

to significantly limit the dilution of their initial investment with a theoretical loss of between

(21.6)% and (6.2)%. Nevertheless, this recovery requires the shareholder to pay the

subscription price of the Rights Issue.

• The collective subscription of the shareholders to the Rights Issue has no impact on the

theoretical loss of the individual shareholder on their initial investment.

We remind you that this analysis does not take into account the sale of the shareholder's

preferential subscription rights in the event that they do not exercise them in full, i.e.. it does not

take into account the proceeds from the sale of these preferential subscription rights and therefore

reflects a floor value from this point of view.

As we cannot predict the market value of the PSR, we nevertheless present below the calculation

of the economic value of the PSR based on the 60-day VWAP of the VALLOUREC share on 29 March

2021, it being specified that the sequence of the restructuring transactions presented below is not

the one planned in the context of the Transaction.




Figure 67- Economic value of the PSRs based on the 60-day VWAP at 29 March 2021


The calculation made tends to reflect the economic value of the PSRs. More specifically, we have

not considered the value of the PSRs only at the limits of the Rights Issue, which would have

consisted in determining it with regard to the theoretical price differential before and after the said

increase by reference to the timetable of the transactions envisaged in the context of the

Restructuring.

In our view, this approach would lead to a significant overvaluation of the value of the PSRs, as it

would not take into account the impact of the transactions occurring after the Rights Issue with

reference to the timetable planned for the Restructuring.

The listing of the PSRs at this theoretical value seems unlikely, however, given:

• the unforeseeable change in the market value of the share between 29 March 2021 and the

date of completion of the Transaction;

• the volume of the planned capital increases;

• of variable dilution since it depends on the collective behaviour of shareholders.

EqV (€k)Number

of shares (k)Value per share

Equity Value (EqV) before Restructuring 351 011 11 449 30,66 €

Reserved Capital Increase 1 331 000 164 524 8,09 €

EqV post Reserved Capital Increase 1 682 011 175 973 9,56 €

Debt write-off 168 488

Warrants subscription price 303

EqV post debt write-off 1 850 803 175 973 10,52 €

Estimated costs of the transaction (80 000)

EqV post estimated transaction costs (a) 1 770 803 175 973 10,06 €

Rights Issue 299 724 52 955 5,66 €

EqV post Rights Issue (b) 2 070 527 228 928 9,04 €

EqV post Restructuring 2 070 527 228 928 9,04 €

Economic value of the PSR (a) - (b) 1,02 €




8.5.2 Based on the 60-day VWAP at 1 February 2021

We conducted an analysis identical to that presented above, but considering pre-Restructuring

shareholder wealth by reference to the 60-day VWAP of the VALLLOUREC share observed on 1

February 202153, i.e. €26.11.

Figure 68- Sensitivity analysis as a function of the % of PSRs exercised and the post-Restructuring value


The same remarks as those made in the context of the analysis by reference to the 60-day VWAP

apply to the results resulting from this approach, with the proviso that:

• As the VWAP level on 1 February 2021 of €26.11 is lower than that observed on 29 March

2021, the dilutive effect of the Restructuring on the shareholder's initial investment is more

limited.

• In this hypothesis, the theoretical loss of the shareholder would be between 63.7% and

69.7% in the absence of a subscription to the Rights Issue.

• The theoretical impact of the Transaction on the assets of the shareholder subscribing to the

Rights Issue would be between (14.7)% and +1.9% depending on the post-Restructuring

valuation considered.

Under this assumption, the value of the preferential subscription right, determined using the same

approach as above, would be €0.95.

53 Last day of trading in Vallourec shares before the Company's press release setting out the terms of the Restructuring.

(6,42%) 0% 18% 25% 50% 75% 100%

Low post-Restructuring value (€7.92) (69,7%) (52,6%) (47,7%) (33,0%) (22,6%) (14,7%)

Central post-Restructuring value (€8.70) (66,7%) (48,0%) (42,6%) (26,5%) (15,0%) (6,4%)

High post-Restructuring value (€9.47) (63,7%) (43,4%) (37,4%) (19,9%) (7,5%) 1,9%


Shareholder gain /

(loss) (%)




8.5.3 Pre-restructuring value per share resulting in a neutral change in assets

For information purposes, we present below the level of initial investment price from which the

Restructuring would be neutral in terms of value for a shareholder depending on his level of

subscription and the range of theoretical values resulting from our DCF modelling.

Figure 69- Initial investment price reflecting a neutral change in shareholder wealth as a function of the % of PSR

exercised and the post-Restructuring value


By way of illustration, the acquisition value of the VALLOUREC shares of an existing shareholder

reflecting a neutral impact of the Restructuring for the latter, by reference to the central value of our

DCF (€8.70) and considering that he exercises all its rights to subscribe for shares, is €22.76.

We remind you that VALLOUREC's share price reached its historic low of €11.69 at the close of

business on 29 October 2020, which is why all share prices below this low are shaded in the above

graph, since they do not correspond to any economic reality.

8.6 Impact of the Restructuring on the position of the Creditors in terms of

theoretical value creation

For information purposes, we present below an analysis of the value creation for Creditors, similar

to that carried out for Shareholders, differentiating the position of Commercial Banks from Other

Creditors.

8.6.1 Changes in the assets of Other Creditors

For information purposes, we present an analysis of the theoretical value creation/loss for Other

Creditors, similar to the one performed for shareholders.

2 276,00% 0% 18% 25% 50% 75% 100%

Low post-Restructuring value (€7.92) 7,93 € 9,85 € 10,55 € 13,16 € 15,78 € 18,36 €

Central post-Restructuring value (€8.70) 8,70 € 11,28 € 12,21 € 15,73 € 19,24 € 22,76 €

High post-Restructuring value (€9.47) 9,48 € 12,71 € 13,88 € 18,31 € 22,71 € 27,10 €


Entry price from which

the Restructuring would

be neutral for the

shareholder




For illustration purposes, we also present the details of the analysis under the DCF central value:

Figure 70- Theoretical gain/(loss) of Other Creditors


We have considered the initial investment of the Other Creditors (Bonds of approximately

1,755 million and 61.2% of the RCF of approximately €1,048 million and the related Restructured

Interest) which we compared to the following:

• the cash received in the context of the partial repayment of the Restructured Claims,

amounting to €262 million in proportion to the weight of the Converted Claims in the

Restructured Claims;

• the cash flow from the repayment of the Restructured Claims in respect of the cash received

by the Company in the context of the Rights Issue;

• the New Notes of approximately €1,023 million;

• the value of the PSR Shares subscribed for in the context of the Rights Issue (in respect of

the guarantee) on the basis of the central value resulting from the DCF after the

Restructuring (i.e. €8.70);

• the value of the shares subscribed for by way of set-off of claims under the Reserved

Capital Increase (164,524,103 converted shares) on the basis of the DCF central value

after the Restructuring (i.e. €8.70);

• the Early-Bird Lock-Up and Lock-up Participation fees obtained.

We present hereafter the theoretical effect of the Transaction according to the different scenarios

of value of the Company post-Transaction:

Figure 71- Theoretical gain/(loss) of Other Creditors

Source: Finexsi analyses


Converted Claims 2 865 766 2 865 766 2 865 766 2 865 766 2 865 766 2 865 766

Repayment of Restructured Claims (§6.3.2) 211 669 211 669 211 669 211 669 211 669 211 669

Redemption as part of the Rights Issue (§6.3.9) - 54 949 74 931 149 862 224 793 299 724

New Notes (§6.3.3) 1 023 373 1 023 373 1 023 373 1 023 373 1 023 373 1 023 373

Vested shares Rights Issue under the guarantee (§6.3.9) 52 955 43 246 39 716 26 477 13 239 -

Post DCF value (central value) (€) 8,70 8,70 8,70 8,70 8,70 8,70

Value of PSR Shares held by Other Creditors 460 526 376 096 345 395 230 263 115 132 -

Vested shares Reserved Capital Increase (§6.3.8) 164 524 164 524 164 524 164 524 164 524 164 524

Post DCF value (central value) (€) 8,70 8,70 8,70 8,70 8,70 8,70

Value of Reserved Shares held by Other Creditors 1 430 798 1 430 798 1 430 798 1 430 798 1 430 798 1 430 798

Early Bird Fee et Lock-Up Fee (§6.3.10) 12 853 12 853 12 853 12 853 12 853 12 853

Total equity Other Creditors 3 139 219 3 109 739 3 099 019 3 058 818 3 018 618 2 978 417

Other Creditors’ Gain / (loss) 273 453 243 972 233 252 193 052 152 851 112 651

Other Creditors’ Gain / (loss) (%) 9,5 % 8,5 % 8,1 % 6,7 % 5,3 % 3,9 %

- 9,54% 0% 18% 25% 50% 75% 100%

Low post-Restructuring value (€7.92) 3,7% 2,9% 2,6% 1,6% 0,5% (0,5%)

Central post-Restructuring value (€8.70) 9,5% 8,5% 8,1% 6,7% 5,3% 3,9%

High post-Restructuring value (€9.47) 15,4% 14,1% 13,7% 11,9% 10,1% 8,4%

% Take-up

Other Creditors’ Gain /

(loss) before Warrants (%)




This analysis shows a positive impact of the Restructuring on the assets of the Other Creditors in

almost all the scenarios envisaged with54:

• a loss (of 0.5%) or a limited gain (from 3.9% to 8.4%) in the event that the shareholders

subscribe for the entire Rights Issue;

• a more significant gain of up to 14.1% in the case of the implementation of the guarantee of

the said increase.

8.6.2 Evolution of the Commercial Banks' equity

We present below, for information purposes, an analysis of value creation for Commercial Banks,

similar to that carried out for shareholders.

Figure 72- Gain/(loss) of the Commercial Banks' equity before exercise of Warrants


We recall that, insofar as the Commercial Banks will not hold any shares in the Company after the

Restructuring (before any exercise of their Warrants), the Take-up scenario has no influence on

our analysis.

We have considered the initial investment of the Commercial Banks, i.e. the Commercial Bank

Loans (38.8% of the RCF, plus the related Restructured Interest) which we have compared to the

following elements:

• the cash received in the context of the partial repayment of the Restructured Claims;

• the Reinstated RCF of €462 million;

• Early Bird Lock-Up and Lock-Up Participation Fees obtained.

Whatever the scenario, the theoretical value of the Commercial Banks' asset decreases by (24.3)%

after Restructuring without taking into account the better fortunes instrument from which they

benefit.

54 It should be noted that we exclude any reference to the 0% take-up scenario which will not occur due to the subscription commitment of the Reference Shareholders.

In €K

Commercial Bank Loans 681 426

Repayment of Restructured Claims (§6.3.2) 50 331

Reinstated RCF (§6.3.4) 462 000

Early Bird Lock-Up Fee (§6.3.10) 3 321

Total equity Commercial Banks 515 652

Commercial Banks’ gain / (loss) (165 774)

Commercial Banks’ gain / (loss) (%) (24,3)%




This theoretical loss should nevertheless be assessed in the light of the Warrants granted to the

Commercial Banks in the context of the Restructuring, which would give them the possibility of

acquiring shares representing 11.7% of the capital at an exercise price of €10.11.

For information purposes only, we have determined the post-Restructuring value per VALLOUREC

share that would allow the Restructuring to have a neutral impact on the theoretical assets of the

Commercial Banks, i.e. the post-Restructuring value per share that would allow the Commercial

Banks to increase their equity by the amount of the loss observed above, i.e. -€165.8 million.

Figure 73- Value after Restructuring induced by a neutral position of the Commercial Banks after exercise of the

Warrants


The value per share after the Restructuring, allowing the Commercial Banks to obtain a neutral

impact of the Transaction through the exercise of their Warrants, is €15.57, i.e. +79.1% compared

to the central value of the DCF (€8.70) presented on a principal basis. It should be noted that the

Warrants will be listed on the EURONEXT Paris market and may therefore be sold by the Commercial

Banks. The price at which the Commercial Banks could sell their Warrants on the market is

nevertheless difficult to predict as it depends on their arbitrage as well as on the evolution of the

share price, which cannot be anticipated.

On this basis and for information purposes only, we present below the evolution of the shareholders'

assets on the basis of the 60-day VWAP at 29 March 2021 as the initial investment price and a

theoretical value of €15.57 per VALLOUREC share after the Restructuring.

In K

RCF 664 290

Restructured Interest 17 136

Warrants exercise price 306 761

Amount invested by Commercial Banks after exercise of Warrants 988 187

Partial repayment of Restructured Claims in the amount of € 262 million pro rata 50 331

Reinstated RCF 462 000

Shares vested under Warrants 30 342

Post Restructuring value allowing a for neutral impact of the Restructuring for Commercial Banks post Warrants (€) 15,57

Warrants participation value 472 535

Early Bird Lock-Up Fee 3 321

Total Commercial Banks equity after exercise of the Warrants 988 187

Commercial Banks’ gain / (loss) after exercise of Warrants -

Commercial Banks’ gain / (loss) after exercise of Warrants (%) 0,0 %




Figure 74- Theoretical gain/(loss) of the shareholders based on the value induced after Restructuring allowing a neutral

position of the Commercial Banks after exercise of the Warrants


In K Take-up 0% Take-up 18% Take-up 25% Take-up 50% Take-up 75% Take-up 100%

Number of shares pre-Restructuring 11 449 11 449 11 449 11 449 11 449 11 449

60-day VWAP at 29 March 2021 30,66 30,66 30,66 30,66 30,66 30,66

Value of the Company Pre-Restructuring 351 011 351 011 351 011 351 011 351 011 351 011

Number of shares issued, Rights Issue 52 955 52 955 52 955 52 955 52 955 52 955

Subscription price, Rights Issue 5,66 5,66 5,66 5,66 5,66 5,66

Take-up - 18,3% 25,0% 50,0% 75,0% 100,0%

Subscription price, Rights Issue - 54 949 74 931 149 862 224 793 299 724

Initial amount invested by Shareholders 351 011 405 961 425 942 500 874 575 805 650 736

Number of shares pre-Restructuring 11 449 11 449 11 449 11 449 11 449 11 449

Post-Restructuring value determined above 15,57 15,57 15,57 15,57 15,57 15,57

Value of initial shares after exercise of Warrants 178 294 178 294 178 294 178 294 178 294 178 294

Shares acquired by Shareholders, Rights Issue - 9 708 13 239 26 477 39 716 52 955

Post-Restructuring value determined above 15,57 15,57 15,57 15,57 15,57 15,57

Value of the Rights Issue after exercise of the Warrants - 151 193 206 172 412 345 618 517 824 689

Shareholders’ equity after exercise of the Warrants 178 294 329 487 384 467 590 639 796 811 1 002 983

Shareholders’ gain / (loss) after exercise of Warrants (172 717) (76 473) (41 476) 89 765 221 007 352 248

Shareholders’ gain / (loss) after exercise of Warrants (%) (49,2)% (18,8)% (9,7)% 17,9 % 38,4 % 54,1 %




9. Related agreements

We remind you that the Company will enter into Shareholders' Agreements with the Future

Reference Shareholders in the context of the Transaction, which have not yet been formalised, the

main terms of which are set out in §6.3.11.

In the absence of concerted action by the Future Reference Shareholders, the planned terms and

conditions as they appear in the Management Board's Report to the General Meeting do not call

for any particular comment on our part. Indeed, the individual rights to appoint directors granted to

the said shareholders (2 at the most) do not allow them individually to block the decisions qualified

as important which require the agreement of 8 directors, including 2 independent ones, out of the

10 that will make up the Company's Board of Directors. These decisions concern in particular the

following: "external growth transactions beyond thresholds to be determined, certain transactions

on capital, new debt, litigation or transactions beyond thresholds to be determined, significant

restructuring, annual budget and business plan, change of strategy concerning a significant activity

or establishment in a new country, significant modification of the articles of association, distribution

of dividends, granting of options or bonus shares"55. We note that the Company has confirmed to

us in a letter of representation that the said Shareholders' Agreements would reflect the terms and

conditions presented in the Report of the Management Board to the General Meeting.

The commitments of the Reference Shareholders, materialised by two "shareholder support

agreements", concluded between the Company and the said shareholders, the main characteristics

of which have been made public, do not call for any particular remark on our part either.

In addition to these observations, there are no related agreements56 between the Company or its

management and the parties involved in the Transaction, which were confirmed to us in letter of

representation by the management.

55 Report of the Management Board to the Combined General Meeting of 20 April 2021. 56 The joint venture agreements entered into between the Company and NSC prior to the Restructuring discussions are not considered to be related agreements.




10. Conclusion

First of all, it should be noted that the purpose of our report is not to give an implicit or explicit

recommendation to shareholders to participate in the various components of the Restructuring, but

to provide them with information and an opinion on the terms and conditions of this Transaction

and its impact on them.

As the planned €800 million capital increase and the associated refinancing of the same amount

could not be carried out due to the pandemic, VALLOUREC was faced with the problem of refinancing

its debt:

• Under the terms of the RCF, the repayment of the amounts drawn by the Group, i.e.

€1.7 billion at 31 December 2020, should have been completed in February 2021;

• Part of the Bonds were to be redeemed in October 2022 for an amount of €800 million.

The Group was therefore facing with a significant level of debt in a context where its operating

performance would not have allowed it to meet its repayment obligations given its available cash.

In this context, the Company has approached its Reference Shareholders and creditors with a view

to a financial restructuring of all the loans contracted by the Company.

These discussions led to the entering into the Agreement in Principle and the Lock-Up Agreement

with certain of its creditors. The Company then requested and obtained the opening of a safeguard

procedure by the Nanterre Commercial Court on 4 February 2021, the purpose of which is to

implement the terms of the Agreement in Principle. We remind you that the Company’s entering

into safeguard proceedings results in a prohibition on the payment of any claims on the Company

having arisen before the opening judgment.

The proposed Transaction aims at reducing the principal amount of its debt by just over half. It

consists mainly of a restructuring of the RCF debt and the bond debt.

The financial leverage would be restored to a sustainable level and the post-Restructuring financial

structure would allow the Company to cover its medium-term cash requirements and to continue

the implementation of its strategic plan.

We would point out that, in the event that this agreement could not be implemented, the Company

would have to initiate new discussions with the parties involved, with the risk that the safeguard

procedure would be converted into a receivership or liquidation procedure. VALLOUREC's

shareholders would thus find themselves in a situation where they could lose all or part of their

investment.

In order to assess the situation of the shareholders in the context of this restructuring, we carried

out a multi-criteria valuation of VALLOUREC, with the DCF method, which was used as the main

method, giving a theoretical value per share of between €7.92 and €9.47. This value range takes

into account the impact of the financial Restructuring but also assumes that the updated forecasts

drawn up by the Management be achieved without any major disruption, both of which are

conditions to the ability for the Group to continue as a going concern. We then calculated the dilution

and return on investment for the shareholder by reference to this value range.




The work described in this report on the valuation of the Group and the examination of the financial

conditions of the Transaction calls for the following main remarks on our part:

With regard to the shareholders:

In terms of the impact of dilution of the shareholders in the Company's capital, the situation of the

shareholders will depend on the percentage of their subscription for the Rights Issue intended for

them. Without taking into account the subscription commitments made by the Reference

Shareholders, the percentage of capital held by the shareholders would be, post-Restructuring, a

minimum of 5.0%. This percentage would increase to 28.1% if the shareholders were to subscribe

for the entirety of the Rights Issue.

The subscription price of €5.66 proposed in the context of the Rights Issue represents a significant

discount of between -40.2% and -28.6% compared to the theoretical post-Restructuring values

resulting from the DCF approach used as the main basis.

Our analysis shows that a shareholder who would exercise all his subscription rights would, subject

to the achievement of the business plan and the associated value creation, only suffer a nil or

relatively limited loss of value with regard to the average 60-day stock market prices observed on

1 February 2021 and 29 March 2021. However, we would point out that this implies an additional

exposure for the shareholder of approximately 1 time the initial value of his investment by reference

to recent stock market valuation levels.

Depending on the level of participation in the Rights Issue, this dilution or theoretical increase in

value for the shareholder would be between (-69.7)% and +1.9% or between (-74.2)% and (-6.2)%,

depending on whether one considers an asset base determined by reference to the 60-day VWAP

as at 1 February 2021 or 29 March 2021.

However, these theoretical analyses do not take into account the possibility for shareholders to sell

their PSRs, the effective negotiability of which is difficult to assess, particularly in view of the size

of capital increases.

With regard to Creditors:

The capital increase reserved for holders of the Converted Claims concerns a very significant

amount (€1,331 million) compared to the Rights Issue (€300 million), but for a subscription price of

€8.09, which is within the theoretical post-Transaction value range resulting from our main valuation

approach. This observation attests to the fairness of the Transaction for the shareholders, whose

dilution will be mitigated by this subscription price.

These holders will nevertheless be able to benefit from the conditions of the Rights Issue, but only

for the part that may not be subscribed for by the shareholders. Since this method guarantees the

amount of the capital increase in the event that the shareholders do not exercise their rights, and

thus the reduction of the Company's indebtedness, the subscription price identical to that of the

shareholders is not unfavourable to the latter.




The allocation of the Warrants to the Commercial Banks should be examined in the context of the

debt write-off of approximately €169 million by the Commercial Banks. The €10.11 exercise price

of these Warrants represents a premium over the theoretical post-Restructuring value (between

6.7% and 27.6%). From this point of view, the exercise of these Warrants appears random since it

assumes an outperformance of its share price compared to the value resulting from our valuation.

In this hypothesis, the situation of the Company's shareholders would also be substantially

improved.

On the basis of the elements developed above and in the context of the Company's current financial

difficulties, we believe that, as of the date of this report, the terms of the Transaction are fair from

a financial point of view for the shareholders.

Done in Paris on 30 March 2021,

FINEXSI EXPERT & FINANCIAL ADVISORY

Errick UZZAN Olivier PERONNET

Partner Partner

Attached: Annexes




11. Annexes

11.1 Presentation of comparable transactions

The transactions selected are as follows:

• The acquisition of 100% of the capital of IPSCO TUBULARS INC. by TENARIS S.A., A company

previously owned by PAO TMK. This transaction was announced on 22 March 2019.

IPSCO TUBULARS INC designs and manufactures welded and seamless steel tubular

products. These products are primarily for the US onshore oil and gas exploration and

production (E&P) operator market. The company's annual turnover as at 30 September

2018 was approximately $1,402 million (approximately €1,250 million) for an EBITDA of

approximately $166 million (approximately €148 million) or a margin of 11.8%. This

strategic acquisition allows TENARIS SA TO benefit from the company's strong presence in

the western and north-eastern part of the US.

• The acquisition of OVAKO AB by SANYO SPECIAL STEEL CO. LTD for ¥51.7 billion

(approximately €400 million), announced on 15 March 2018. OVAKO AB is a Swedish

company that develops high-tech steel products (including steel tubes, bars or rings),

mainly for the transportation and manufacturing industries. In 2017, OVAKO AB's turnover

was €921 million and its EBITDA was €96 million, giving a margin of 10.4%.

• The acquisition of 50.61% of the capital of ANHUI TIANDA OIL PIPE COMPANY LTD (TOP) by

VALLOUREC TUBES SAS, announced on 29 January 2016. This acquisition is part of

VALLOUREC's reorganisation strategy aimed at strengthening its international

competitiveness. Since 2011, VALLOUREC HAS held 19.46% of TOP's shares. This

acquisition gives VALLOUREC 70.07% control of the Chinese company. This step comes at

the same time as the launch of a mandatory takeover bid for the remaining minority interests

in TOP. TOP manufactures and markets seamless tubular products, mainly for the Oil &

Gas sector. The company operates mainly in the Chinese market, which accounted for

approximately 65% of its turnover in 2015. At the end of June 2015, the group's annual

turnover was approximately 2,032 million yuan (approximately €287 million) for an EBITDA

of 87 million yuan (approximately €12 million), representing a margin of 4.3%. The

acquisition price paid by VALLOUREC TUBES SAS for 50.61% of ANHUI TIANDA OIL PIPE

COMPANY LTD is HKD 847 million (~€100 million), while the total amount of the two

transactions is nearly $175 million.




• The merger between COLUMBIA PIPELINE GROUP INC. and TRANSCANADA PIPELINE USA LTD,

announced on March 17, 2016. COLUMBIA PIPELINE GROUP INC. develops pipelines and

storage facilities for the oil and natural gas market. Through these facilities, COLUMBIA

PIPELINE GROUP INC. provides oil and gas transportation and storage services. The Texas-

based group has one of the largest interstate pipeline systems in the United States,

including a strong presence in the Appalachian production basin, as well as in the Gulf of

Mexico. In 2015, the company reported turnover of approximately $1,335 million

(approximately €1,221 million), with an EBITDA of $555 million (approximately €511 million)

or a margin of 41.6%. Under the terms of the all-cash transaction, which was unanimously

approved by the boards of directors of both companies, COLUMBIA PIPELINE GROUP INC.

shareholders will receive $25.5 per share of common stock, representing an 11% premium

based on COLUMBIA PIPELINE GROUP INC.'s closing price and a 32% premium based on the

30-day VWAP, for a transaction value of approximately $13 billion (including €2.8 billion of

debt).

• The merger between CAMERON INTERNATIONAL CORPORATION and SCHLUMBERGER LIMITED,

announced on 25 August 2015. CAMERON INTERNATIONAL CORPORATION designs,

manufactures and markets a wide range of products for the Oil & Gas market: drilling

systems, wells for onshore and offshore oil platforms, pipelines, valves, etc. In 2014,

CAMERON INTERNATIONAL CORPORATION's turnover amounted to $10,381 million

(approximately €8,577 million, of which 36% in North America, 23% in Asia/Middle East,

18% in Europe, etc.) for an EBITDA of $1,642 million (approximately €1,357 million) or a

margin of 15.8%. The transaction value is $14.8 billion (~€11.3 billion). CAMERON

INTERNATIONAL CORPORATION shareholders receive 0.716 shares of SCHLUMBERGER

LIMITED and $14.44 in cash for each share of CAMERON INTERNATIONAL CORPORATION held.

• The acquisition of IOS/PCI, LLC by L.B FOSTER COMPANY, announced on 13 March 2015.

IOS/PCI, LLC provides tubular management, testing and inspection services within the Oil

& Gas market. The US-based company develops inspection technologies and software that

enable customers to obtain accurate information about the integrity of their tubular

equipment. IOS/PCI, LLC is predominantly positioned in the North American market,

particularly in the major oil and gas producing regions, and in 2014 had turnover of $117

million (~€97 million), with EBITDA of $28 million (~€23 million) or a margin of 24%.




11.2 Presentation of FINEXSI and the engagement

Presentation of FINEXSI EXPERT & CONSEIL FINANCIER

FINEXSI EXPERT & CONSEIL FINANCIER (FINEXSI) operates within the framework of the professions

regulated by the Ordre des Experts Comptables and the Compagnie Nationale des Commissaires

aux Comptes. It mainly covers the following activities:

• auditing

• business acquisitions and disposals

• contributions and mergers

• evaluation and independent expertise

• assistance in litigation

To carry out these assignments, the firm employs staff that by and large boasts a high level of

experience and expertise in each of these specialities.

List of independent appraisals carried out by FINEXSI over the last 18 months

Date Target Initiator Presenting bank(s) TransactionAdvisory bank(s)

(1)

sept.-19 Latecoere Searchlight JP Morgan, Natixis Takeover Bid followed by a Squeeze-Out Deutsche Bank

oct.-19 Groupe Flo BertrandRothschild,

Portzamparc

Simplified Takeover Bid followed by a Squeeze-

Out -

oct.-19 Altran CapgeminiBNPP, Crédit Agricole

CIB, HSBC, LazardTakeover Bid

Perella Weinberg

Partners,

Citigroup

mars-20 AprilAndromeda

Investissements

Deutsche Bank,

Lazard, Natixis

Public Withdrawal Offer followed by Squeeze-

Out-

juil.-20 Antalis KPP Oddo BHF Simplified Takeover Bid -

juil.-20 SoLocal Group N/A N/A Capital increase reserved for creditors Rothschild & Co

sept.-20 Technicolor N/A N/A

Capital increase with Preferential Subscription

Rights and capital increase reserved for certain

creditors

Rothschild & Co

juil.-20 Devoteam Castillon Crédit Agricole CIB Takeover Bid -

oct.-20 Sodifance Sopra Steria Bryan, Garnier & Co Simplified Takeover Bid -

nov.-20 Bourbon N/A N/A Capital increase reserved for creditors Lazard

déc.-20Europcar Mobility

GroupN/A N/A

Capital increase with Preferential Subscription

Rights and capital increase reserved for certain

creditors

Rothschild & Co

(1): if different from the presenting bank




Membership of a professional association recognised by the Autorité des Marchés

Financiers

FINEXSI EXPERT & CONSEIL FINANCIER is a member of the APEI (Association Professionnelle des

Experts Indépendants), a professional association recognised by the Autorité des Marchés

Financiers in application of article 263-1 of its General Regulation.

Furthermore, FINEXSI EXPERT & CONSEIL FINANCIER applies procedures aimed at protecting the

independence of the firm, avoiding situations of conflict of interest and controlling the quality of the

work carried out and the reports before they are issued for each assignment.

Remuneration received:

Our remuneration for this assignment is €200,000, excluding taxes, fees and expenses.

Description of the work carried out

The following detailed work programme was implemented:

1 - Familiarisation with the transaction and acceptance of the engagement

2 - Risk identification and engagement orientation

3 - Gathering of information and data necessary for the assignment: review of the sector analysis

notes, the analysis notes on the Company's comparable companies and the analysis notes on

comparable transactions

4 - Assessment of the specific context of the Transaction:

- Exchanges with the Company's management and the ad hoc committee in charge of

supervising our work

- Exchanges with the Company's financial and legal advisors

5 - Analysis of the transaction and related legal documentation

6 - Review of the Company's accounting and financial documentation

7 - Implementation of a multi-criteria evaluation approach for VALLOUREC, including

• an analysis of the risks and opportunities identified for VALLOUREC that are likely to affect

its valuation, which is summarised in the form of a SWOT matrix

• an analysis of public information including the review of analysts' notes

• the reasoned choice of evaluation criteria (excluded/selected)

• an analysis of the evolution of the share price (including analysis of liquidity, volatility)

• a review of VALLOUREC's historical financial performance, in particular during the financial

year 2020R

• an analysis of the accounts, the 2021E budget and the business plan with operational

management, including the identification of key assumptions considered and the

assessment of their relevance




• identifying comparable listed companies and transactions and exploiting the information

available on them

• an analysis of the price targets published by analysts for VALLOUREC shares

• sensitivity tests on the structural assumptions considered

8 - In order to assess the fairness of the financial terms of the restructuring, our work also included

the following analyses

• the examination of the positioning of the subscription prices proposed in the context of the

various capital increases in relation to the results of the valuations carried out

• an analysis of the impact of the transaction on the situation of the issuer and the existing

shareholders according to the different possible scenarios of the subscription reserved for

them

• the examination of the dilution induced by the terms of the issues of instruments giving

access to capital reserved for Creditors for existing shareholders according to the various

possible scenarios of their own subscription

• an analysis of the theoretical dilution/reduction in value for existing shareholders as a result

of the transaction according to the scenarios of their subscriptions

• an analysis of possible agreements and related transactions that could have a significant

impact on the price of the capital increases

• meetings with the Ad Hoc Committee in charge of the supervision of the financial

restructuring project

• exchanges with the AMF as part of their investigation of the case

9 - Obtaining letters of affirmation from the Company's representative

10 - Independent review

11 - Writing the report




Timetable of the study

16 February 2021 Appointment of FINEXSI as independent expert by the VALLOUREC

Supervisory Board

17 February 2021 Launch meeting with Claire LANGELIER, Frédéric BERNET and the

ROTHSCHILD & CO team

5 March 2021 Working meeting with the Group's management on the global

strategy and business plan

5 March 2021 Conference call with the ROTHSCHILD & CO team ON valuation issues

8 March 2021 First progress report with the ad hoc committee

11 March 2021 Working meeting with management regarding our additional

questions on the Group's adjusted net financial debt

18 March 2021 Second progress report with the ad hoc committee

19 March 2021 Progress report on our work with the AMF

25 March 2021 Presentation of our work and analysis to the Supervisory Board

26 March 2021 Exchange with the AMF on our draft report

30 March 2021 Obtaining the letter of affirmation.

30 March 2021 Delivery of the fairness opinion.




List of main people met or contacted

VALLOUREC

• Mr Olivier MALLET, Chief Financial Officer

• Ms Claire LANGELIER, General Secretary and Group Legal Director

• Ms. Aude BARAGNON, Director of the Finance Department

• Mr Jérôme FRIBOULET, Director of Investor Relations and Financial Communication

• Mr. Frédéric BERNET, Group Treasurer

• Mr Jacques DELAHOUSSE, Director of Management Control

• Mr Jacky MASSAGLIA, Director of Corporate Planning

VALLOUREC Supervisory Board, some of whom are members of the ad hoc committee

• Ms Vivienne COX, President (member of the ad hoc committee)

• Mr Pierre PRINGUET, Vice-Chairman and Lead Member (member of the ad hoc

committee)

• Ms Maria-Pilar ALBIAC-MURILLO, Member

• Ms Corine DE BILBAO, Member

• Ms Virginie BANET, Member (member of the ad hoc committee)

• Mr Alexandre OSSOLA, Member and representative of BPIFRANCE PARTICIPATIONS

• Ms Laurence BROSETA, Member

• Mr Antoine CAHUZAC, Member (member of the ad hoc committee)

• Ms Pascale CHARGRASSE, Member

• Mr Mickaël DOLOU, Member

• Mr Yuki IRIYAMA, Member

• Mr Jean-Jacques MORIN, Member (member of the ad hoc committee)

• Mr Ayhan ÜSTÜN, Member




ROTHSCHILD & CO, advisor to the Company

• Mr Vincent DANJOUX, M&A Partner

• Mr François PROUST, Managing Director M&A

• Mr Jean-Baptiste LEROUX, Assistant Director M&A

• Mr Antoine DECAS, Associate M&A

• Ms Julie PEROUZEL, M&A Analyst

Legal counsel to the Company:

• Mr Antoine GOSSET-GRAINVILLE, Partner (BDGS ASSOCIÉS)

• Ms Agathe SOILLEUX, Corporate Partner (WEIL GOTSHAL & MANGES LLP)

• Mr Vincent CHAUDET, Associate (WEIL GOTSHAL & MANGES LLP)

Information sources used

The main information used in our engagement was of several kinds:

Information provided by VALLOUREC and its advisors:

• Financial document relating to the Transaction (Agreement in Principle, Lock-up

Agreement, Draft Safeguard Plan...)

• VALLOUREC's corporate, accounting and financial legal documentation

• Business Plan 2021E-2025E

• Analysts' note before and after the announcement of the Transaction

Market information:

• VALLOUREC's financial communication for the years 2014 to 2020

• Communication by VALLOUREC relating to the Transaction (press release, investor

presentations, etc.)

• Stock market prices, comparable listed companies, market consensus: CAPITAL IQ

• Market data (risk-free rate, risk premium, beta, etc.): CAPITAL IQ, ASSOCIÉS EN FINANCE,

DAMODARAN, US DEPARTMENT OF THE TREASURY, DUFF & PHELPS




Staff involved in the implementation of the assignment

The signatories, Messrs Olivier PERONNET (Partner) and Errick UZZAN (Partner), were assisted

by Mr Marc de LA BEDOYERE (Manager), and Mr Arthur LANDES (Associate).

The independent review was carried out by Mr Jean-Marc BRICHET.

Engagement letter

Please refer to the French version of the report.