Vallourec : Statutory Auditors’ report on the Financial Statements

VALLOUREC

Société anonyme

12, rue de la Verrerie 92190 Meudon

___________________________________

Statutory Auditors' Report on the Financial Statements

For the year ended December 31, 2023

KPMG S.A.	Deloitte & Associés
2, avenue Gambetta	6, place de la Pyramide
92066 Paris-La Défense Cedex	92908 Paris-La Défense Cedex

VALLOUREC

Société anonyme

12, rue de la Verrerie 92190 Meudon

_______________________________

Statutory Auditors' Report on the Financial Statements

For the year ended December 31, 2023

_______________________________

This is a free translation into English of the Statutory Auditors' Report on the financial statements of the Company issued in French and it is provided solely for the convenience of English-speaking users.

This Statutory Auditors' Report includes information required by European regulations and French law, such as information regarding the appointment of the Statutory Auditors or verification of the management report and other documents provided to shareholders.

This report should be read in conjunction with, and construed in accordance with, French law and professional auditing standards applicable in France.

To the Annual General Meeting of Vallourec,

Opinion

In compliance with the engagement entrusted to us at your Annual General Shareholders' Meeting, we have audited the accompanying financial statements of Vallourec S.A. (hereafter, "the Company") for the year ended December 31st, 2023.

In our opinion, the financial statements give a true and fair view of the assets and liabilities and of the financial position of the Company as at December 31st, 2023 and of the results of

its operations for the year then ended in accordance with French generally accepted accounting principles.

The audit opinion expressed above is consistent with our report to the Audit Committee.

Basis for opinion

Audit framework

We conducted our audit in accordance with the professional standards applicable in France. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our responsibilities under those standards are further described in the Statutory Auditors' Responsibilities for the Audit of the Financial Statements section of our report.

Independence

We conducted our audit engagement in compliance with independence requirements of the French Commercial Code (code de commerce) and the French Code of Ethics (code de déontologie) for statutory auditors for the period from January 1st, 2023 to the date of our report and specifically we did not provide any prohibited non-audit services referred to in Article 5(1) of Regulation (EU) N° 537/2014.

Justification of assessments - Key Audit Matters

In accordance with the requirements of Articles L.821-53 and R.821-180 of the French Commercial Code (Code de commerce) relating to the justification of our assessments, we inform you of the key audit matters relating to risks of material misstatement that, in our professional judgment, were of most significance in our audit of the financial statements of the current period, as well as how we addressed those risks.

These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on specific items of the financial statements.

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Statutory Auditors' Report on the Finanial Statements for the year ended December 31, 2023

Measurement of equity interests and Loans from Vallourec Tubes

Notes B "Accounting policies - Equity interests", C.1 "Equity Interest and Receivables, loans, other financial assets" and E.6 "Subsidiaries and equity investments" to the financial statements

Key Audit Matter

Audit Approach

Equity interests on the balance sheet

Our work consisted in gaining an

amounted to €4.856 million as at

understanding of

December 31st, 2022, and represent the

-

the

process

for

preparing

and

most significant balance sheet item. They

approving

the

estimates

and

correspond to shares in Vallourec Tubes,

assumptions used by Management

a

sub-holding

of

the

Vallourec

Group.

to

estimate

the

value

in use of

Loans

from

Vallourec

Tubes

amount to

Vallourec

Tubes

equity

interests,

€1.701 million.

and

As

described

in

the

Note

"Equity

-

procedures

for

approving

the

interests" to the financial statements, the

results by the governance entities,

Company recognizes a provision for

We also assessed the appropriateness of the

impairment when the value in use of

equity interests falls below their net

model used to determine the utility value of

carrying amount. Similarly, the related

these equity interests and related receivables.

receivables

are,

where

applicable,

We

obtained

the cash

flows and

operating

impaired when the risk is greater than the

forecasts for the Vallourec Group prepared by

value of the equity interest and when the

the Company, and verified their consistency

latter have already been impaired.

with the 2024 budget, as approved by the

Value in use is based on expected cash

Board of Directors, assessment made by the

flows, estimated based on the Group's

Management on business forecasts.

strategic plan

for

the

first

five

years,

With the assistance of our valuation experts,

extrapolated over

the

following

three

we

assessed,

with

regards

to the Group's

years and a terminal value.

internal and external industry and

The measurement prepared as at

macroeconomic data, the appropriateness of

December 31st, 2023 leads to, as

the various underlying assumptions used in

indicated in the section "Equity interests"

preparing cash flow forecasts, including

of

the

C.1

of

financial

statements, a

-

regional

price

and

volume

reversal of €887 million for the period.

assumptions, which are dependent

Cash forecasts used to identify

on investments in the exploration

recoverable values are based on available

and production of oil and natural

data at the date of the closing of the

gas,

accounts, in a context of recovery in the

-

forecasts of changes in costs in the

Oil and Gas business.

context of the "New Vallourec"

However,

uncertainties

remain

when

strategic plan, and

considering future outlook, particularly in

-

exchange rates, growth rates and

connection

with the inflationary

context

discount rates.

which

may

adversely

impact

raw

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Statutory Auditors' Report on the Finanial Statements for the year ended December 31, 2023

materials and energy prices as well as the	We also assessed the consistency of cash flow
impact of climate change on Company's	forecasts with past performances, market
business model.					outlook, and forecast data presented to the
In this context, realization could digress	Company's Board of Directors.
these estimations and the variable nature	Lastly, we (i) performed our own sensitivity
of	some	estimation	could	be	analysis, (ii) verified the arithmetic accuracy
strengthened.						of the calculations and (ii) verified that the
We	considered	that	Vallourec	Tubes	value resulting from the cash flow forecasts
has been adjusted to take the Vallourec
equity	interests'	valuation	and related
Group's net debt into account.
Loans is a key audit matter due to its
importance in the financial statements
assets and the fact that the determination
of the value in use of these interests
require	judgement	and	estimations
calculation from Management to build
future cash flow previsions, used to
identify its value.

Specific verifications

We have also performed, in accordance with professional standards applicable in France, the

specific verifications required by French laws and regulations.

Information provided in the Management Report and in the other documents with respect to the financial position and the financial statements provided to shareholders

We have no matters to report as to the fair presentation and consistency with the financial statements of the information provided in the Management Report and in the other documents with respect to the financial position and the financial statements provided to the Shareholders.

We attest to the fair presentation and consistency with the financial statements of the information relating to payment terms, required under Article D.441-6 of the French Commercial Code.

Report on corporate governance

We attest that the corporate governance section of the Board of Directors' management report sets out the information required by Articles L.225-37-4,L.22-10-10 and L.22-10-9 of the French Commercial Code.

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Statutory Auditors' Report on the Finanial Statements for the year ended December 31, 2023

Concerning the information given in accordance with the requirements of Article L.22-10-9 of the French Commercial Code relating to remuneration and benefits paid or awarded to corporate officers and any other commitments made in their favour, we have verified its consistency with the financial statements or with the underlying information used to prepare these financial statements, and, where applicable, with the information obtained by the Company from controlled companies within its scope of consolidation. Based on this work, we attest to the accuracy and fair presentation of this information.

Concerning the information given in accordance with the requirements of Article L.22-10-11 of the French Commercial Code relating to those items the Company has deemed liable to have an impact in the event of a takeover bid or exchange offer, we have verified its consistency with the underlying documents that were disclosed to us. Based on this work, we have no matters to report with regard to this information.

Other information

In accordance with French law, we have verified that the required information concerning the identity of shareholders and holders of the voting rights has been properly disclosed in the management report.

Report on other legal and regulatory requirements

Format of presentation of the financial statements intended to be included in the Annual Financial Report

In accordance with professional standards applicable to the Statutory Auditors' procedures for annual and consolidated financial statements presented according to the European single electronic reporting format, we have verified that the presentation of the financial statements to be included in the annual financial report referred to in paragraph I of Article L.451-1-2 of the French Monetary and Financial Code (Code monétaire et financier) and prepared under the Chief Executive Officer's responsibility, complies with this format, as defined by European Delegated Regulation No. 2019/815 of 17 December 2018.

On the basis of our work, we conclude that the presentation of the financial statements to be included in the annual financial report complies, in all material respects, with the European single electronic reporting format.

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Statutory Auditors' Report on the Finanial Statements for the year ended December 31, 2023

It is not our responsibility to ensure that the financial statements to be included by the Company in the annual financial report filed with the AMF correspond to those on which we carried out our work.

Appointment of the Statutory Auditors

We were appointed as Statutory Auditors of Vallourec at the Annual General Shareholders' Meeting held on June 1st, 2006 for both audit firms.

As at 31 December 2023, KPMG S.A. was in the 18th year of an uninterrupted engagement and Deloitte & Associés in the 22nd year of an uninterrupted engagement, given the succession of mandates between legal entities of the Deloitte network.

Responsibilities of Management and those charged with governance for the financial

statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with French accounting principles and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless it is expected to liquidate the Company or to cease operations.

The Financial and Audit Committee is responsible for monitoring the financial reporting process and the effectiveness of internal control and risk management systems and where applicable, internal audit, regarding accounting and financial reporting procedures.

The financial statements were approved by the Board of Directors.

Statutory Auditors' responsibilities for the audit of the financial statements

Objectives and audit approach

Our role is to issue a report on the financial statements. Our objective is to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with professional standards will always detect a material

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misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As specified in Article L.821-55 of the French Commercial Code, our statutory audit does not include assurance on the viability of the Company or the quality of management of the affairs of the Company.

As part of an audit conducted in accordance with professional standards applicable in France, the Statutory Auditor exercises professional judgment throughout the audit and furthermore:

• Identifies and assesses the risks of material misstatement of the financial statements, whether due to fraud or error, designs and performs audit procedures responsive to those risks, and obtains audit evidence considered to be sufficient and appropriate to provide a basis for his opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control;
• Obtains an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the internal control;
• Evaluates the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management in the financial statements;
• Assesses the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company's ability to continue as a going concern. This assessment is based on the audit evidence obtained up to the date of his audit report. However, future events or conditions may cause the Company to cease to continue as a going concern. If the Statutory Auditor concludes that a material uncertainty exists, there is a requirement to draw attention in the audit report to the related disclosures in the financial statements or, if such disclosures are not provided or inadequate, to modify the opinion expressed therein;

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Statutory Auditors' Report on the Finanial Statements for the year ended December 31, 2023

• Evaluates the overall presentation of the financial statements and assesses whether these statements represent the underlying transactions and events in a manner that achieves fair presentation.

Report to the Audit Committee

We submit a report to the Audit Committee which includes, in particular, a description of the scope of the audit and the audit programme implemented, as well as the results of our audit. We also report any significant deficiencies in internal control that we have identified regarding the accounting and financial reporting procedures.

Our report to the Audit Committee includes the risks of material misstatement that, in our professional judgment, were the most significant in the audit of the financial statements of the current period and which are therefore key audit matters. We describe these matters in this audit report.

We also provide the Audit Committee with the statement required under Article 6 of Regulation (EU) No. 537/2014, confirming our independence within the meaning of the rules applicable in France as set out in Articles L.821-27 to L.821-34 of the French Commercial Code and the French Code of Ethics applicable to Statutory Auditors. Where appropriate, we discuss with the Audit Committee the risks that may bear on our independence, and the related safeguards.

Paris-La-Défense, March 8th, 2024

The Statutory Auditors,

KPMG S.A.

Deloitte & Associés

Alexandra Saastamoinen

Véronique Laurent

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Statutory Auditors' Report on the Finanial Statements for the year ended December 31, 2023