Feb. 6, 2007 — Ipsco Inc. announced net income of $139.0 million on sales of $982.3 million for the fourth quarter, and record net income of $643.1 million on sales of $3.78 billion in 2006.

Fourth Quarter Results—The $139.0 million net income ($2.92 per diluted share) compares to net income of $170.2 million ($3.52 per diluted share) for the same period last year and net income of $197.1 million ($4.15 per diluted share) in the third quarter of 2006. On a comparable basis (excluding factors related to the NS acquisition, foreign exchange losses, the impact of share price appreciation on stock based compensation valuations and the change in the effective tax rate) earnings per share were $3.17 compared to the company’s revised guidance of $3.00 to $3.10 per diluted share.

Sales of $982.3 million reflect a $130.0 million (15%) increase over the same quarter last year. Sales were $14.6 million (1%) less than the prior quarter. Total shipments were 1.0 million tons, an increase of 7% compared to last year and 2% lower than the prior quarter. Energy tubular shipments increased 5% over the prior quarter. Ipsco's average product price was $963 per ton, up 8% from a year ago and up 1% from the prior quarter.

Full Year Results—The $643.1 million record net income ($13.43 per diluted share) compares to net income of $585.8 million ($11.96 per diluted share) in 2005. Ipsco attributes the increased earnings primarily to record sales volumes and higher average selling prices, partially offset by higher costs of production, increases in selling and administration expense, and a higher effective tax rate.

The $3.78 billion in sales reflect a 24% increase compared to sales of $3.03 billion in 2005. Shipment volumes increased 18% to nearly 4.1 million tons while the average selling price per ton increased 6%. Record energy tubular shipments and strong large-diameter pipe shipments totaled 1.1 million tons, an increase of 25% over the prior year. About 1.4 million tons, or 33%, of Ipsco's total shipments in 2006 were tubular products compared to 1.1 million tons in the prior year. Steel mill product shipments increased 16% to 2.7 million tons. Energy tubular shipments increased 4% over last year.

Management Comments—"We are pleased to report Ipsco's fifth consecutive year of record sales and production levels. Our challenge in 2006 was to improve on the record financial results achieved in 2005. Our employees and facilities responded with another record setting performance where we were able to increase earnings per share by 12% over our previous record," said David Sutherland, President and CEO. "Our 2006 financial results were very strong and we are excited to enter 2007 with a broader, higher-value-added product mix and additional energy tubular production capacity resulting from our acquisition of NS Group."

Financial Highlights—Gross margins of 26% in the fourth quarter compare to 30% last year and 32% in the prior quarter. Ipsco says the reduced margin was partially due to amortization of the fair value increases of inventory and other tangible assets related to the NS Group acquisition and previously announced steel mill maintenance outages and related costs incurred in the fourth quarter of this year. Ipsco attributes the reduced margin (as compared to last year), in part, to small-diameter tubular average cost increases in excess of price increases.

During the fourth quarter, Ipsco elected to reduce output volumes to accommodate the inventory reduction in plate and tubular markets. While this had a negative impact on results for the quarter, the company believes that this approach will better position it to deliver improved financial performance in the future.

Selling, general and administrative expenses were $34.7 million for the quarter, $8.9 million higher than the prior year and $9.0 million higher than the prior quarter. Ipsco says the increase was due to expenses incurred for legal and consulting fees and amortization of intangibles relating to the NS acquisition.

Operating income for the quarter was $217.8 million (22% of sales) compared to $232.6 million (27% of sales) in the prior year and $288.9 million (29% of sales) in the prior quarter. Operating income per ton was $213 compared to $244 in the fourth quarter of 2005 and $277 in the prior quarter. The decline in operating results was due to lower gross margins and higher selling, general and administrative expenses.

Ipsco accounted for the acquisition of the NS Group on December 1, 2006 using the purchase method of accounting. Under this method, the purchase price was preliminarily allocated to tangible and intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. Factors related to the acquisition impacted earnings by $0.23 per diluted share. The major expenses were amortization of the fair value increases related to tangibles and intangibles other than inventory ($0.10 per diluted share); additional administrative expenses related to the acquisition ($0.05 per diluted share); and interest expense related to the debt financing of ($0.05 per diluted share).

Other factors outside of Ipsco’s prior guidance were the impact of share-price changes on stock-based compensation valuations and foreign-exchange losses which reduced earnings by $0.04 and $0.12 per diluted share, respectively, and the reduced effective tax rate which improved earnings by $0.13 per share. The effective tax rate for the quarter was 33% compared to 32% in the prior quarter and 25% in the fourth quarter of 2005. Compared to the prior quarter and same quarter last year, the fourth quarter effective tax rate unfavorably impacted results by $0.05 and $0.35 per diluted share, respectively.

Outlook—Ipsco says the end-use market demand for the company’s diverse product offering remains strong for both steel and tubular products. The company expects that distributor inventory reductions in both product groups will continue through the first quarter of 2007. The company will take a two-week planned outage at the Mobile, Ala., facility in March for normal maintenance and the installation of capital improvements. The company says it will also adjust production further as required across its facilities to accommodate order levels from distributors and to focus on end-user sales, increased value-added product mix and maintaining market share.

Because of the fair value increment allocated to NS Group inventory, Ipsco says that first-quarter NS sales will generate little profit. Excluding the effects of this fair value amortization, foreign exchange gains or losses and share price volatility, and assuming an effective tax rate of 36%, the company forecasts first-quarter earnings to be in the range of $2.45 to $2.65 per diluted share.

The company also anticipates continued strength in end-use markets overlaid with continuing inventory corrections throughout distribution channels. Although oil and gas prices have declined recently, the company expects them to remain at levels sufficient to maintain high drilling activity and resultant demand for OCTG products. According to Baker Hughes, active rig counts in North America have increased in the first four weeks of 2007 to 2,282 rigs, 149 above 2006 record levels. The company says that large-diameter pipe shipments will be strong in 2007, consistent with a full order book. Margins in the first quarter are expected to experience some compression due to increased scrap prices and continued amortization of inventory and other tangible assets fair value increments.

"We have positioned ourselves as leaders in the markets we serve," said David Sutherland. "The addition of the NS Group to our family will help us deliver continued growth in the energy tubular market as well as the anticipated synergies. We believe our diverse product offering, state of the art production facilities and the strength of our post acquisition balance sheet will allow us to continue to perform well."

Ipsco is a leading low-cost producer of energy tubulars and steel plate in North America with an annual liquid steelmaking capacity of 4.3 million tons. The company operates four steel mills, eleven pipe mills, nine product finishing facilities and nine scrap processing centers in 25 geographic locations across the United States and Canada. Ipsco's pipe mills produce a wide range of seamless and welded energy tubular products including oil & gas well casing and tubing, line pipe, drill pipe, large diameter transmission pipe, standard pipe and hollow structurals. The company also manufactures premium connections for oil and natural gas drilling and production under its ULTRA^(TM) brand name.