Feb. 7, 2006 — Ipsco Inc. announced net income of $170.2 million on sales of $852 million for the fourth quarter of 2005, and record net income of $585.8 million on sales of $3.03 billion for the full year 2005.

Fourth Quarter Results—The $170.2 million net income ($3.52 per diluted share) compares to $199.1 million ($3.91 per diluted share) for the same period last year and $134.0 million ($2.78 per diluted share) in the third quarter of 2005. Sales, $852 million, represent an increase of 6% ($51 million) over the same quarter last year and 17% ($126 million) over the prior quarter.

As compared to the same quarter last year, gross margins were compressed to 30.3% from 35.5% due to higher costs for alloys, energy and consumables. In addition, Sales, General and Administration expenses for the quarter were $10 million higher than a year ago primarily due to the increased value and number of stock based compensation units, increased expenses related to Ipsco's SOX 404 compliance effort, and increased charitable contributions.

Compared to the prior quarter, increased earnings were driven by a 12% increase in shipments to a new record of 953,000 tons. Average pricing improved 4% to $894 per ton, however margins were down slightly due to increased scrap and alloy costs. Late in the fourth quarter Ipsco received a favorable legal settlement related to the construction of the Mobile Steelworks. Approximately $10 million ($0.15 per diluted share) of this settlement was recorded as income to offset legal fees expensed in previous periods.

Changes in the foreign exchange rate resulted in a foreign exchange loss of $9.8 million ($0.15 per diluted share) versus a gain in the prior quarter of $18.1 million ($0.24 per diluted share). Early debt retirement expense impacted earnings by $5.5 million ($0.09 per share). The effective tax rate for the quarter was 25% compared to 38% in the prior quarter and the 36% rate assumed in guidance for the fourth quarter. Compared to the prior quarter and the effective tax rate assumed in the guidance, the fourth quarter rate favorably impacted results by $0.62 and $0.52 per diluted share, respectively.

The effective tax rate of 25%, and subsequent impact on the annual rate of 34%, was the result of changes in the statutory tax rates and allocation factors within Canadian jurisdictions and the utilization of certain foreign tax credits for which benefit was not previously taken. An additional factor in the reduction of the effective tax rate for the quarter was the restructuring of certain subsidiaries within the company.

Operating income per ton was $244 compared to $300 per ton in the fourth quarter of 2004 and $238 per ton in the prior quarter.

Ipsco established a number of new company records during the fourth quarter, including total shipments of 953,000 tons, an increase of 58,000 tons compared to last year and 106,000 tons higher than the prior quarter. Energy tubular shipments increased 18% and 1% respectively over last year and the prior quarter. Ipsco's average fourth quarter product price was $894 per ton, inclusive of surcharge, the same as a year ago and up from $856 in the prior quarter.

Full Year Results—The $585.8 million record net income ($11.96 per diluted share) compares to $454.9 million ($8.69 per diluted share) in 2004. Ipsco attributes the increased earnings primarily to higher average selling prices, increased margins across most product lines, and a stronger product mix due to record sales of energy tubular products. Income before taxes increased 43% to $883.5 million compared to $618.9 million in 2004. This increase was partially offset at the net income line by a higher tax rate of 34% in 2005 versus 29% in 2004.

Ipsco's sales increased 20% in 2005 to $3.03 billion compared to $2.53 billion in 2004. Average selling price per ton increased 23% while customer shipments of 3.46 million tons declined 3%. Record energy tubular shipments and strong large diameter pipe shipments totaled 903,000 tons, an increase of 5% over the prior year, and were offset by a 4% decline in steel mill products and an 18% decline in industrial products shipments. About 32% (1.1 million tons) of Ipsco's total shipments in 2005 were tubular products.

Operating income per ton shipped was $259, which compares to $186 in 2004.

Management Comments—"We are pleased to report Ipsco's fourth consecutive year of record sales and production levels. Our challenge in 2005 was to sustain the record financial results achieved in 2004. Our employees and facilities responded with another record setting performance where we were able to increase earnings per share by 38% over our previous record," said David Sutherland, President and CEO. "Our 2005 financial results were another new milestone for the Company as we enter 2006 and begin to celebrate Ipsco's 50th anniversary."

Outlook—The company believes that end user demand for steel mill products will remain relatively stable in 2006. The company also expects high oil and gas prices to continue to drive high rig counts and demand for OCTG products. The current 2006 forecasts suggest that drilling activity will increase 6-8% over 2005, which was itself a very strong year. Large diameter pipe bookings have been very strong and the company now expects its spiral pipe facilities to be running at full capacity throughout 2006.

Ipsco says it expects to invest approximately $150 million of capital in its tubular and steelmaking facilities in 2006, to both maintain production capabilities and increase the company’s value-added product mix. The Mobile Quench and Temper mill commenced normalizing operations in December of 2005, and Ipsco is now in the process of ramping up production. Completion of the Quench and Temper Line is expected to be slightly delayed into the second quarter due to the effects of Hurricane Katrina and rain.

The company anticipates that higher costs of steelmaking inputs in the first quarter will result in some margin compression in the company’s product lines. Excluding foreign exchange gains or losses and assuming a significantly higher effective tax rate of 39%, Ipsco forecasts first quarter 2006 earnings to be in the range of $2.70 to $2.90 per diluted share.

Ipsco operates steel mills at three locations and pipe mills at six locations in the United States and Canada. As a low cost North American steel producer, Ipsco has a combined annual steel making capacity of 3,500,000 tons. The company's tubular facilities produce a wide range of tubular products including line pipe, oil and gas well casing and tubing, standard pipe and hollow structurals. Steel can also be further processed at Ipsco's five temper leveling and coil processing facilities.