May. Dear Shareholder,

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1 LettER TO SHAREHOLDERS May Editorial Results 02 Sustainable Development policy 03 News 04 Shareholder information Editorial Dear Shareholder, F or Vallourec, the year 2011 has been a year of growth and preparation for the future. The Group s big strategic projects are nearing completion. The new integrated mill at Jeceaba in Brazil was inaugurated last September, and the construction of the new Youngstown pipe mill in the USA is nearly finished, with the first sales expected in the second half of the year. In the Middle East and China, our Group is consolidating its industrial and commercial positions in order to better serve its clients in the markets that offer good growth potential. This new capability will enable Vallourec to develop in tandem with its clients. Energy markets, and the oil and gas markets in particular, are remarkably resilient: there is a sustained demand for tubes, especially in the premium segment where the Group is a world leader. Furthermore, this growth is giving rise to more and more technological challenges, and there are ever more environmental and safety requirements. This is why Vallourec has committed itself to a long-term project for innovation that will help it to meet the technological requirements of its clients. New technical solutions are needed to respond to the energy sector s challenges. This is a world that is diversifying rapidly: new players are entering the market, and new production areas are cropping up alongside more traditional resources. Against this backdrop, the Group is pursuing its efforts to further improve its industrial efficiency and promote the quality of the services it offers around the world. In 2011, Vallourec saw strong growth in its sales, with its plants operating near to full capacity. Costs associated with ongoing projects nearing completion and the rise in the price of raw materials at the start of the year impacted on the Group s net income, which remained more or less stable. The proposed dividend is identical to that given last year. The Shareholder s Meeting to be held on 31 May will be a chance to discuss all of these points, and we are inviting you to attend. To help you exercise your rights as a shareholder, a special supplement to AGM is attached to this letter. It shows the agenda of the meeting and the resolutions submitted for your approval, and explains you how you can participate or ensure your views are represented. We are convinced that the Group s strategy will help it cement its leading position and create more value over time, and we thank you for your trust and loyalty. Jean-Paul Parayre Chairman of the Supervisory Board Philippe Crouzet Chairman of the Management Board By expanding its premium production capacity, Vallourec continues its transformation to keep up with growth in energy markets. It is bolstering its presence around the world and improving its competitiveness. 1

2 Annual results SUstainable development policy 2011 Results 2011 was marked by strong business growth and favorable conditions in Vallourec s main markets. The full year results of the Group were stable compared to A growing business In 2011, the Group recorded a good level of operations, with the majority of its plants working at high capacity. Sales volume increased by 19% to 2,251 million tonnes, a rate of growth similar to that of the Group s consolidated sales, which rose by 18% compared to 2010, to 5.3 billion. The sales growth was largely driven by the Oil and Gas activity (+21%), which saw significant development in North America, Asia, the Middle East, Brazil, Africa and Europe. Sales in non-energy sectors also recorded strong growth (+38%), notably mechanical engineering, boosted by the German manufacturing industry. As a result of the rise in the price of raw materials over the year and start-up costs associated with strategic projects in Brazil and the United States, the EBITDA for 2011 was only slightly higher than the year before, at 940 million. This translates to an EBITDA/sales margin of 17.7%, compared to 20.6% in The CAPTEN+ improvement program generated cost savings of 83 million in 2011, in line with the set objectives. Investments for the future The Group invested 909 million during the fiscal year, of which 622 million related to strategic projects. Vallourec, through these major investments, has pursued the development of its production tool in order to better meet its clients needs in their key markets, and increase efficiency. The Group has a solid capital structure with net debt limited to 23% of equity at the close of Outlook for 2012 Vallourec expects sales to grow by around 10% in 2012, mainly driven by the dynamism of its Oil & Gas activities and the resilience of the price increases implemented in However, the Group will be confronted with a less favorable environment for its other businesses, in Europe and in Brazil. The EBITDA margin is expected to be lower than that of 2011, as the net contribution from the new plants in Brazil and the United States will continue to be negative. Sustainable Development: a strong commitment Vallourec s sustainable development policy is comprehensive and pragmatic. The Group is committed to being a responsible company, in line with the following objectives: to sustain its business and create value over the long term; to guarantee the health and safety of its employees; to maintain social dialogue and preserve trusting relations with its stakeholders; and to protect the environment and use the natural resources needed for its operations responsibly. No. 1 Priority: safety In the three years since its launch in 2008, the Cap Ten Safe plan has cut the number of lost time injuries by three. Motivated by this progress, the Group introduced CAPTEN+ Safe, a new three-year plan that aims to once again increase awareness and team commitment. Safety Meeting at the Aulnoye pipe mill in France KEY FIGURES SALES 5,296 million +18 % sales breakdown by market (in %) % 54 growth in sales volume +19% 13 capital Expenditure 909 million Oil & Gas Power Generation Petrochemicals Construction and other Automotive Mechanical engineering ebitda margin 17.7% 2

3 NEWS United States: a new plant in Youngstown A key player in the USA, Vallourec is benefitting from the dramatic development of shale hydrocarbons. With an electric steel mill and pipe mill already established in Youngstown, Ohio, Vallourec recently invested in a new plant on the same site, due to enter commercial production in the second half of The first VAM SG column sent down on the Nabors M44 rig in the United States. Investing in growth markets This year was marked by several significant investments designed to raise Vallourec s local presence in growing markets. This includes the installation of new capacity at Valinox Nucléaire in France, the acquisition of a 19.5% share in Tianda Oil Pipe in China, a key actor on the local oil and gas market and, finally, the acquisition of Zamil Pipes in Saudi Arabia. Inauguration of VSB The Vallourec & Sumitomo Tubos do Brasil (VSB) plant was officially inaugurated on 1 September 2011, in the presence of Dilma Rousseff, the Brazilian president. Built to produce premium tubes for the international oil and gas markets, the plant s facilities are currently undergoing certification by its clients. When operating at full capacity, it will boost Vallourec s global tube production capacity by over 10%. T he exploitation of unconventional resources has revolutionized the American oil and gas markets. Two thirds of American drilling activities are now focused on shale plays. Approved in 2010, construction of the pipe mill was completed very quickly, and production equipment will soon be entering the test phase. With an initial production capacity of 350,000 tons of tubes per year, this new mill will produce small diameter tubes adapted to the exploitation of shale deposits, thereby completing the Group s offer and responding perfectly to the needs of local operators. While the persistently low gas prices have affected drilling activity in dry gas basins, there has been a very rapid development of shale plays rich in liquid hydrocarbons, such as those at Eagle Ford, Permian or Bakken in Dakota. This is a contributing factor to the high number of active rigs in the United States. A new VAM premium threading facility will also be built in Youngstown, to meet demand for shale oil and gas extraction. This requires a greater proportion of premium threaded connections. In the USA, Vallourec works in partnership with distributors and maintains close relations with end users thus helping it to better identify their needs. Vallourec s finished goods offer which combines seamless tubes and VAM premium connections, is enjoying growing success. From the very outset of construction of this plant, the Group has paid close attention to protection of the environment. The pipe mill, located on a former brownfield site that has been reclaimed, is equipped with tools and machines that were especially chosen for their energy efficiency. The new facility will furthermore lead to the creation of almost 450 direct jobs in Youngstown. Dilma Rousseff and employees at the VSB plant in Brazil. VAM 21: a successful launch In 2011, Vallourec successfully released its new generation of premium threaded connections, VAM 21. Certified ISO CAL-IV 2011, a technical specification required by all oil companies for the most challenging applications, this connection withstands the most extreme temperature and pressure conditions, corrosion, and the severest axial strain. Perfectly gas tight, VAM 21 is the only connection offering the same mechanical properties as the pipe. 3

4 stock exchange Shareholder information 100 Dividend for the 2011 fiscal year Dividend of 1.30 per share, payable in cash or in shares Vallourec will ask the Shareholder s Meeting of 31 May 2012, to approve the payment of a dividend of e1.30 per share for the fiscal year 2011, which represents a pay-out ratio of 39.3%. The Supervisory Board has proposed an identical dividend to that granted last year, which represents a pay-out ratio above the Group s long-term target of 33%. Shareholders once again will be able to choose, during the period from 5 to 19 June 2012 inclusive, to receive payment of the dividend in cash or in shares, with a discount of 10% on the price of the new shares. 80 Share price performance from 2 April 2009 to 30 March 2012 Earnings per share (in ) Dividend per share (in ) * Pay-out ratio (in %) * Submitted for approval at the Shareholders Meeting on 31 May Breakdown of capital at 31 December 2011 (in %) /02/09 At 2 April 2009 Vallourec CAC /02/09 08/02/09 10/02/09 12/02/09 02/02/10 Vallourec share 04/02/10 Listed on the Euronext Paris Eurolist (section A) Part of the deferred settlement section (SRD) ISIN codes Share: FR (ticker: VK) ADR: US92023R2094 (ticker: VLOWY) Indices: CAC 40, Euronext 100, MSCI World Index Market capitalization: e 5.8 billion at 31 March 2012 Vallourec share price (in ) At 31 March 2012 % CAC 40 (in, rebased to the Vallourec Vallourec share price as at April 2, 2009) CAC /02/10 08/02/10 10/02/10 12/02/10 02/02/11 04/02/11 Shareholder agenda Financial releases 10 May 2012 First quarter results, July 2012 Second quarter results, November 2012 Third quarter results, 2012 Meetings 31 May 2012 Annual Shareholder s Meeting 12 December 2012 Information meeting in Strasbourg New: an exclusive site visit for individual shareholders On 12 April 2012, a group of shareholders visited the pipe mill on the Saint-Saulve site (North of France), and attended presentations of the Group s different operations. Other visits are planned for The program will be updated on the Group s website, in the Individual Shareholders area. 06/02/11 08/02/11 10/02/11 12/02/11 02/02/12 04/02/ Public FSI & Caisse des Dépôts et Consignations Employee Shareholders Capital Research Bolloré Group Sumitomo Metal Industries Directly held by Vallourec Number of shares at 31 December ,434,409 Shareholder Contact Shareholder Relations 27 avenue du Général Leclerc Boulogne-Billancourt Tél. : +33 (0) actionnaires@vallourec.fr Of which individual shareholders 10.1% Copyrights: Gérard Uféras, Victor Lupianez, Philippe Stroppa, Phototèque Vallourec. 4

5 special supplement TO SHAREHOLDERs meeting May 2012 REsolutions Ordinary and Extraordinary Shareholders Meeting on Thursday 31 May 2012 at 2:30 pm at Palais Brongniart, 28 place de la Bourse, Paris. AGENDA Ordinary Shareholders Meeting 1. Approval of the statutory financial statements for the 2011 financial year 2. Approval of the consolidated financial statements for the 2011 financial year 3. Allocation of the net profit for the 2011 financial year and setting of the dividend at 1.30 per share 4. Option to receive payment of the dividend in shares 5. Renewal of the mandate of KPMG S.A. as statutory auditor 6. Appointment of KPMG AUDIT IS as alternate auditor to KPMG S.A. 7. Renewal of the mandate of Deloitte & Associés as statutory auditor 8. Renewal of the mandate of BEAS as alternate auditor to Deloitte & Associés 9. Renewal of the term of office of Jean-François Cirelli as a member of the Supervisory Board 10. Renewal of the term of office of Edward G. Krubasik as a member of the Supervisory Board 11. Appointment of Olivier Bazil as a member of the Supervisory Board 12. Appointment of José Carlos Grubisich as member of the Supervisory Board 13. Authorization to be given to the Management Board to trade in the Company s shares Extraordinary Shareholders Meeting 14. Authorization to be given to the Management Board to grant stock options 15. Delegation of authority to the Management Board to issue shares and/or securities giving access to the capital of the Company, reserved for members of savings schemes, with the cancellation of preferential subscription rights in their favour 16. Delegation of authority to the Management Board to issue shares and/or securities giving access to the share capital of the Company, reserved for employees of Vallourec companies outside France (and those with similar rights in accordance with Article L of French Labour Code) excluding company savings schemes, with the cancellation of preferential subscription rights in their favour 17. Delegation of authority to the Management Board to issue shares and/or securities giving access to the capital of the Company, reserved for credit institutions or any entity, whether or not incorporated as a legal entity, whose sole object is to subscribe for, hold, and sell the Company s shares or other financial instruments within the scope of an operation reserved for employees, with the cancellation of preferential subscription rights 18. Authorization to be given to the Management Board to allocate existing shares free of charge, or to issue new shares to subscribers to an employee share ownership offering implemented within Group companies located outside France, or to some of them, pursuant to the fifteenth and/or sixteenth resolution(s) 19. Authorization to be given to the Management Board to allocate performance shares 20. Powers to conduct formalities To contact CACEIS Corporate Trust By mail: CACEIS CORPORATE TRUST Service des Assemblées Générales centralisées 14 rue Rouget de Lisle Issy-les-Moulineaux Cedex 09 France by phone: +33 (0) By fax: +33 (0) You can consult all of these resolutions in the notice of meeting published in the BALO of 13 April 2012 and on the Vallourec website at 1

6 SPECIAL supplement to shareholders meeting Exercise your voting rights The Shareholders Meeting is an ideal opportunity to obtain information and exchange views. It is also an opportunity for you, the shareholders, to take an active part in the key decisions affecting the Group via your vote, regardless of the number of shares you hold. To vote at the 31 May 2012 Shareholders Meeting, you must: Hold Vallourec registered or bearer shares on 28 May 2012 at 00:00 Paris time, and physically attend, or send your voting documents to CACEIS Corporate Trust by 28 May 2012 at the latest (deadline for receipt of the documents by CACEIS Corporate Trust). Step 1 Indicate how you wish to vote Option 1 \ You wish to vote in person by attending the meeting: Tick box A of the single form and return it as soon as possible so that you can be sure of receiving your admission card in time. Option 2 \ You wish to vote by post: Tick box Vote by post and follow the voting instructions. Option 3 \ You wish to appoint the Chairman of the meeting to exercise a proxy vote on your behalf: Tick the box I hereby give my proxy to the Chairman of the meeting. Option 4 \ You wish to appoint another person as your proxy: Tick the box I hereby appoint and fill in the contact details of your representative for the meeting. Detailed instructions for filling out the single form can be downloaded from the Vallourec website. The single form will be automatically sent by mail to all registered shareholders. Holders of bearer shares must apply to CACEIS Corporate Trust before 25 May A notification of appointment or revocation of a proxy can be submitted electronically, under the conditions specified at under Finance / Shareholder corner / General Meetings. Step 2 Check that your contact details are correct and make necessary changes. Step 3 Date and sign the form (regardless of your choice in Step 1). Step 4 Return your single form (regardless of your choice in Step 1). If you are a registered shareholder: send the form directly to CACEIS Corporate Trust by post or fax. In any case, CACEIS Corporate Trust must receive the form no later than 28 May Any form received after that date will not be included in the voting at the Meeting. If you are the holder of bearer shares: send the form to the establishment that manages your securities account, which will send it to CACEIS Corporate Trust with a certificate of holding. However, if you are the holder of bearer shares and your valid form has not arrived by 28 May 2012, you may ask the establishment that manages your securities account for a certificate of holding and attend the Annual Shareholder s Meeting to vote in person. Please note that: Once recorded by the CACEIS Corporate Trust staff, your vote cannot be changed. Your shares are free for trading: you may sell all or part of your shares, even if you have already voted or applied for an admission card. Vallourec will take into account your exact position as of midnight on 28 May 2012 (the institution holding your account is required to inform Vallourec of this). For any request for documents and information, you can contact the Shareholder Relations: By actionnaires@vallourec.fr By telephone: +33 (0) By fax: +33 (0)