Transaction Overview

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Key Operational and Strategic Benefits

•                  Access to stable supply of high-quality, globally competitive seamless tubular products and services

•                  Output from mills (melt shops through product finishing) of approx 1MM seamless pipe tons annually

•                  Additional capabilities include small- and large-diameter billet casting, heat treating and OCTG finishing

•                  Exclusive marketing and sales rights in North America to annual minimum of 200,000 tons of OCTG product manufactured by Joint Venture

•                  Enhanced ability to provide value-added commercial solutions for customers

•                  Addition of high-quality seamless tubular products and oilfield services complements Lone Star’s existing line of premium welded OCTG offerings

•                  Offers customers fuller array of competitively-priced products and services from a single source, when and where they need them

•                  Expanded global reach

•                  Participation in Chinese oilfield tubular markets

•                  Proximity to other high-growth markets

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Expanded Sourcing and Global Reach

Graphic representation of a world map showing the following entities at the following locations:

Bellville Tube, Bellville, TX – ERW-FBN OCTG, LP

Citra Tubindo, Batam, Indonesia – Seamless OCTG

Lone Star Steel, Lone Star, TX – ERW-FBN OCTG, LP, ST

Tex-Tube, Houston, TX – ERW-SA LP & OCTG

Northwest Pipe, Atchison, KS – ERW-SA LP

Texas Tubular Prod., Lone Star, TX – ERW-SA OCTG & LP

Tubos Apolo, Sao Paulo, Brazil – ERW-SA OCTG & LP

TMK, Volgograd & Others , Russia – Seamless OCTG

Valin Tube & Wire, Hengyang China – Seamless OCTG

Welspun, Vettadora, India – SAW & ERW LP

ERW = Electric Resistance Welded

FBN = Full-Body Normalized

LP = Line Pipe
OCTG = Oil Country Tubular Goods

SA = Seam Annealed

SAW = Submerged Arc Welded

ST = Specialty Tubing

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Key Financial Benefits

•                  Preferred profit sharing arrangement for Sales Company

•                  Preferential return for Lone Star until earlier date of:

•                  Recovery of full value of investment; or

•                  10 years after the Sales Company is established

•                  Profits shared equally thereafter

•                  Sizable equity stake in modern, well-established and profitable production facilities

•                  Joint Venture profits shared based upon partners’ ownership stakes

•                  Enhanced, sustainable long-term revenue generation and value creation potential

•                  Expected to be accretive to EPS in 2007

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Overview of Facilities

•                  Seamless pipe mills

•                  Including newly built state-of-art seamless pipe mill

•                  Combined range of tubular products from 1” to 13 — 3/8” in outside diameter

•                  New thermal treating and finishing facility, currently under construction

•                  Capable of finishing carbon and alloy grades of OCTG and line pipe up to 13.750” in diameter

•                  One heat treat line

•                  Processes all ranges of products from 1” to 5” in diameter

•                  One upset line

•                  Processes pipe from 2-3/8” to 5” in diameter

•                  Two cold draw pipe processing facilities

•                  A spacious, packaging and shipping area

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Overview of Facilities (cont’d)

•                  2 electric arc furnace melt shops and billet casters

•                  Original melt shop

•                  2 40-ton electric arc furnaces

•                  2 ladle furnaces

•                  Combination ladle furnace / vacuum tank degasser

•                  3 twin-strand horizontal round billet casters with a capacity of approx 400,000 tons of billets

•                  Newly constructed melt shop

•                  100-ton AC electric arc furnace

•                  Ladle furnace with 2 ladle cars

•                  Vacuum degassing (tank)

•                  4-strand continuous caster with a capacity of approx 600,000 tons of round blooms

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Management and Governance

•                  Joint Venture

•                  Board of Directors composed of 10 directors

•                  4 designated by Lone Star

•                  6 designated by Valin Tube and Wire and affiliates

•                  Chairman appointed by Valin Tube and Wire

•                  Management

•                  General Manager nominated by Valin Tube and Wire

•                  CFO, COO, Director of Quality Assurance and Director of International Marketing nominated by Lone Star

•                  Sales Company

•                  Board of Directors composed of 6 directors

•                  3 designated by Lone Star

•                  3 designated by Valin Tube and Wire

•                  Chairman appointed by Lone Star

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About Valin Tube and Wire

•                  One of China’s largest steelmakers

•                  Headquartered in Hunan Province with approx 32,000 employees

•                  Manufactures, processes and sells semi-finished and finished steel products, ferrous metals, non-ferrous metals and related products

•                  Primary market is southern China; exports to the U.S. as well as South Korea and other Asian countries

•                  Manufactured approx 8.5MM tons of steel and 7.8MM tons of steel products in 2005

•                  Reported net sales of RMB 28,501MM (US$3.5B) in 2005

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Chinese Steel Market

•                  China recorded a CAGR of slightly over 20% in the growth of steel production between 2000 and 2005, representing an increase as a percentage of global steel production from 15% in 2000 to 31% in 2005

•                  Valin Tube and Wire is one of the leading seamless steel pipe manufacturers in China

Line graph and bar graph entitled “China Steel Production as a % of Global” showing, for China, the following numbers of tons and percentages of global production:

1994 

China 93 million tons

13% of Global Production

1995 

China 95 million tons

13% of Global Production

1996 

China 101 million tons

13% of Global Production 

1997 

China 109 million tons

14% of Global Production

1998 

China 116 million tons

15% of Global Production 

1999 

China 124 million tons

16% of Global Production 

2000 

China 129 million tons

15% of Global Production

2001 

China 152 million tons

18% of Global Production

2002 

China 182 million tons

20% of Global Production

2003 

China 222 million tons

23% of Global Production

2004 

China 273 million tons

26% of Global Production

2005

China 352 million tons

31% of Global Production

Pie chart, entitled “China Seamless Steel Tube Production (2004), showing the following percentages:

Tianjin Pipe Group — 14%

Bao Steel — 13%

Baotou Iron & Steel — 9%

Chengdu Iron & Steel — 8%

Hengyang Steel — 6%

Anshan Iron & Steel — 4%

Others — 46%

Source: IISI, China Statistical Yearbook, China Steel Statistics Yearbook

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