TTI - Earnings call transcript Q3 2019 | TETRA Technologies, Inc.

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Operator

Good morning and welcome to the TETRA Technologies Third Quarter 2019 Results Conference Call. The speakers for today's conference call are Brady M. Murphy, Chief Executive Officer; and Elijio Serrano, Chief Financial Officer; and Jacek Mucha, Vice President of Finance and Treasurer. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. this being note please Instructions] event recorded. is [Operator

conference Mr. Mucha. will now go to the turn I Please over ahead.

Jacek Mucha

a which forward be Thank may you, assumptions of statements based uncertainties to and may and by on factors. These on contain call and the These to be deemed beyond many are certain statements analysis are are Drew. that number are certain This based risks looking are control statements. conference a of the TETRA of statements made or subject number company.

statements cautioned that materially not are the performance You future projected and those actual such forward-looking differ are may guarantees results of statements. in that for

the the share, our considered measures. Please public results measures. with period. In or before adjusted context for non-GAAP release the refer we are financial reconciliations profit and may debt, backlog, These in of to our complete other or non-GAAP measures of this adjusted to website addition, or the course to earnings for a be for adjusted should coverage go EBITDA, in tax prepared financial nearest of ratio GAAP reconciliations per call, news morning's free the refer accordance information net GAAP within not cash substitute financial to financial flow,

to I will turn this Brady. now over

Brady M. Murphy

it Earnings turn Jacek. by your Good then followed I Call. Conference will details XXXX to TETRA the the which summarize some Quarter quarter additional you, Thank highlights be Third morning, everyone. to Elijio And questions. Technologies will some for for welcome over

Compressco another quarter employees again industry start by delivering and to environment. the strong challenging thanking and like would CSI TETRA I it's a for

cost our job sequentially margins quarter, consecutive proactively segments. three EBITDA adjusting structure strategies, while a executing good to For rapidly our conditions. did business employees changing the improve across management all our second our And

which on perform result U.S. a this relative quarter, down decline the U.S. EBITDA achieved navigating chemicals down from both market quarter. in average we by companies northern revenue was the seasonal over as a adjusted environment. our in Again, across rig the business count, for a a X% than the while this from more as land indicators, This industrial XX% the average of the such consolidated we sequentially EBITDA million quarter to is Europe XX% that businesses sequentially, challenging but macro X%. flattish we $XX our many rig of ago year our adjusted did well count job primarily basis fact Although second peaks was the the up good declined was third quarter second that land year-on-year. highlighted On

some activity plus our from in continues fluid mix improved demand of seen as a pricing we've top and favorable improvements. to Completion product an for offshore markets, benefit on products uptick key

XXX sequentially benefit adjusted division Our this quarter to points for any basis CS margins the exclude XX.X% of margins improved since fourth When EBITDA we and EBITDA XXXX. are by Neptune of highest the

fluids margins fluids The our burning Completion long by advantage further and America some the are strong of offset business within volatility land in integration completion industrial chemicals agreements supported North vertical remain our business. supply helps term

the in the fluids to final the confirmed. to to we the be second is is a Unfortunately, projects is complex third again that be expected TETRA completed quarter. project once pressures was the end delayed and Gulf completed in everyone fourth today this signed information contract regards completed that the as quarter. on now filling for drilling In not to But wells project the are to Neptune we expectation previously project of are prone Mexico remind Neptune, during challenges fourth quarter, that is these will and our CS I CS are for provide one are of and until completion know to quarter. material expected ultra-deepwater seeing announced complete guaranteed based towards this deepwater is

completion During Monovalent conference, applications doubtful fluids the the family third Neptune Europe quarter, certain rates of monovalent we lower in in also launched increase fluids, completion and at Petroleum expand of and the products. range corrosion provide CES TETRA Society of environments. reservoirs certain Engineers

operating was TETRA announce Feedback in Neptune to-date Displacement open Oil TETRA to of Best this for Fluids and we been completion customers pleased from technology has Advanced fluids. Magazine's differentiated our successful portfolio also Chemicals that and our efforts our World very Award We're Oilfield will further differentiated technology. Tetra or highlighting new deploy and opportunities for believe highly very encouraging more a offering Systems results finalist TADS to

quarter held Water in given third the the of quarter, U.S. well our followed pullback part pricing very pressure Flowback and the footprint up throughout during the activity by in quarter. latter the onshore and

this basins. improved EBITDA most showing for sequentially to slightly the of U.S. division Our and adjusted resiliency across lower $XX.X million revenue

of points. margins EBITDA increase XX basis XX.X% Our

utilizing integrated focus by efficiencies into customers We provide operation integrated fully continue projects Management automation on Water our to Solution. our a capabilities our and driving with

on projects are the new value with a of or new customers more working with Four offerings. XX basins. The were basins is these encouraging, integrated realizing quarter as XX and customers more customers. integrated new into either the projects finished a penetration different We customers of new the

services. which released management Furthermore, to water Automated loop support we aspect and integrated every capability, our Control System, our closed remote control BlueLinx for provides new of water our monitoring

greater progress Advanced is compares traditional which achieving Cyclone sand closer recovery We proven to System, efficiency to which cyclones our which are sand also made than XX%, recovery.. commercializing XX%

a with displace the we Basin, to run the signed automated was first release press is our who Permian that extensive our E&P a current take-or-pay with cyclone large contract. system. trials major This a on in operator mentioned technology morning, of units contract on a As order this our

other Oil Awards, one for for were for We've Best the in test for and first We for Barrel a Water the Treatment Argentina, Lowest Per Magazine Cost World technology. solutions also been Management Solution. management. System, also two had multiple that American only Management water company for TETRA two contract Technology of awarded TETRA’s SwiftWater this the the in the was our Automated Latin separators technology contract Water type TETRA finals finalist

we while quarter our E&P due while cost our and this quickly So our to be leveraging declining continue changes to managing to differentiation a for market focus proactive to on we in spend, segment with variable see weaker fourth and will conditions. costs nimble to structure, react

at gas again business the production quarter in a XX.X% achieve for compression gross was second a long-term and yet and utilization growth increased The highs key compression of compression margins in to for where and in benefit gas we lift set row This continues use centralized oil service utilizations. service XX.X% of record cycle gross shale of margins compression basins. the records from and

we While request the not compression a segments business the seen gas remains and industry. oil for of customers have compressions down some of additional going services very slow fundamentals the one overall and strong in have changed, into strongest -- a the with XXXX, the

in slightly EBITDA third Total last compression services was was the $X.X but Our from sequentially down equipment sales million on the decrease million million up from margins. adjusted revenue from aftermarket the second was top year. $XX.X improved to of quarter quarter, in this services to up $XX.X the while compression million $XXX million of EBITDA time $XXX due our sequentially revenue on shipments, timing and quarter in to lower new

for demand wills, the or continues our artificial equipment, While for liquids conventional Assisted aging to centralized in has focus see lift Lift gas Backside four-fold with our as year. have resulted our working System a Injection on lift Auto highest GAPL, beginning Gas for jack BAIS methods increased on the in the our or such combined of Plunger application gas this since number of sets we the increase

these applications orders jack backlog of fleet. in million, to quarter are have creating with interest also in of $X $XX third We’re June the increasing for a We've of gas new large million, and million very $XX the net international demand pleased up amount received from XXXX. our order the

two new or help XXXX We equipment in quarter in orders book our fourth for sales. more the one or to expect order XXXX early large to fill see

opportunities. half the pipelines year, strong of our slow equipment in identified are new over orders with While of the remained XXX million first sales

of higher in XX.X% of September, gathering as horsepower We for points end and sequentially added Overall basis points X,XXX focused XXXX. utilization another XX XX,XXX high basis again equipment active of up entire XXX up the this XX.X%, gas was for the on June from lift at acquisition the since fleet Systems horsepower record Incorporated. is end Compression the centralized utilization quarter, of

cash to Elijio up some turn provide on and comments sheet, and questions. financial open I'll it then it the flow we'll for balance over some that, With to

Elijio Serrano

allocation cash Thank then you, flow, few CSO I'll expenditures, on minutes spend capital sheep, balance the capital free Brady. strategy. Compressco's a

$X.X of of year. only In free consumed and the quarter quarter, the $XX to in million. compares million XXXX TETRA this from operations generated $X.X generated second the in flow This cash first quarter of continuing million third

We have of of historically second in the cash the the in half year. first flow the year and consumed generated cash half free

So we those trending are along lines.

XXXX flow generate $X million year. operations exceed continuing in We generated and expect to we free positive last the cash that from

expect equipment buy their to be agreed year million full $XX we opportunities. that approximately in TETRA-only, For capital we've supporting million million expenditures high and $XX Compressco to to CSI of lease to addition to $XX return

of TETRA-only on $XX third June the half in net $XXX hand of $XX expenditures the capital to with year. in cash in compared the were at million million $X first TETRA-only end million quarter was of debt million.

any in debt to structure us include volatility not does material the maintenance the Our which market. maneuver flexibility provides covenant,

remind and a or I collateral, always, and are Compressco. Compressco's that now everyone are spend I debts There As guarantee from separate. between like to CSI default, Compressco. TETRA the on CSI CSI no cross cross will cross debt distinct minutes TETRA again

August which notes $XXX from $XXX of secured CSI gross year million, significant quarter the of notes that debt million in CSI of don't of Compressco, million unsecured activities of was generated September, $X.X a $XXX are from was the XXXX, XXXX. million At $XX end in outstanding operating increase XXXX. year second billion, until mature the and Compressco’s mature the flow cash that total

to annualizing net would ratios improved X Compressco's at quarter as on leverage times. have From has end approximately be adjusted way X.X of a X.X CSI's their net times. high was our EBITDA of times CSI ratio times, towards that X.X the set. end net XXXX, third leverage times the we Compressco's leverage QX well target CSI September X.X When

Yesterday represent XX%. -- reconfirmed their prior guidance between XX% year a their prior year total of year-over-year CSI improvement Compressco and EBITDA

business declining the with We are as encouraged challenging they American North a comparison navigate rig activity. market that

in to have this all amid So improve business. the weaker in had fundamentals activity business fact, And uncertainty. gas effect and on in far market oil not has North quarter continued any last the American market the our the broader compression

capital expenditures CSI and midpoint cash Compressco after guidance flow. adjusted for million Compressco's $XX free interest taxes, the maintenance CSI EBITDA and approximately year's generate At of of XXXX expense, to accounting cash expects cash full

This year units, flow of Compressco the cash and slightly Series cash directed remains amount for capital. over the free a small was preferred the distributions $XX CSI disciplined. was million growth rest capital towards redeeming A towards

CSI XXXX capital. capital XX% more investment flow are growth XX% distributable Compressco in strengthen the Their next balance on debt, are returns year's further cash targeting obtaining to towards reduction XXXX and of their of sheet. than

growth to investments in amount times to They And end XX% goal ratio returns the by It that to below our X.X and capital to XXXX. XXXX. expect continue leverage CSI we Compressco's to expended on improve further the capital. generate of be is expect XXXX

years. positive In each last remained comment flow cash to the from Back downturn downturn, TETRA. of the TETRA free

have We flow on remain positive playbook and free to reduced periods during the difficult cash of execute we'll manage necessary level. the actions to during times activity again

and Neptune and proprietary and activity, chemical onshore model, international business generating compression, last the integration which free includes technologies, flow diverse chemicals vertical in in offshore all the down towards cycle. contributed the Our industrial sales, cash

weaker news fully periods we And release read cash to that to with you all morning CSI and the free Compressco's supporting continue on in a generate market. detail. release I flow from we this positive our encourage news expect will of yesterday

now Brady. turn back it to I'll

Brady M. Murphy

improvement demonstrated quarter by point increased year. EBITDA Again, results to open basis as to we consecutive our I on to overall each this segments just EBIT in our summarize over of a TETRA our leave of like before I'm three you. margins margins second a quarter message And with pleased of of overall business reiterate with Elijio. you, last and for QX and couple questions, key Thank XXX

Neptune confident completion the complete Gulf scheduled the which fourth of CS for well, Mexico We're be we'll in to our able is fluids quarter.

conditions. is land we're experiencing While North adapt potential optimizing America pricing flexible budget our new cost pressures market exhausted committed and market any customers, structure to to our by

don't we quarter flowback in exhausted to the and America the third resilient macro expect fourth indicators North point budget businesses a land business in weaker that for our Although segment. potential to quarter, be we water immune from industry

successful technology, large work Neptune our a monovalent from TETRA’s latest to Our our validated introduction awards, pay by strategies competition for for CS of nominations first contract ever differentiate to TETRA is and World descending flowback Oil

achieve to continue and division operational weakness record see sign amidst strengthen even this And financial business continues to compression Our industry. we the highs. throughout of

very strong only a to year expect flow exceed TETRA year forward very third free on focused looking this and and XXXX. on cash generated in and still total we ending remain generated Lastly, that flow flow cash quarter $X second cash free million we We in the note. generation to

that, questions. With let's some it open for

Operator

ahead. Please question-and-answer Instructions] first begin The from [Operator session. go We James. Narra comes question will Praveen Raymond of now

Praveen Narra

Hey, good morning, guys.

Brady M. Murphy

Praveen. morning, Good

Praveen Narra

Neptune may we do play of are timeframe XXXXs how talk co-works in but like well, through you see confident can should XXXX the think sounds any how the What about could that -- about and guess, CS profile when of it pretty getting out? about we completed in the guys schedule we I or think that? you kind think XQ, Halliburton we coming of that

Brady M. Murphy

thanks, Praveen. Yeah,

a we've early know, a Introduction in North of you Neptune's in in for had good interest As we expecting, It's little fluids. Sea our are the XXXX. CS business completion predict. particularly I the really lot mentioned, monovalent to our some monovalent and

more the of clarity this XXXX, for you have projects You know for into to know customers little budgets we year. our one Neptune the we for a new some hope the deepwater as our at generation point see but larger

Praveen Narra

XQ fairly then if see the projects the Neptune we the do kind CS talk ex-CS hold we Can thinking about just don't still margin? strong. think without that of about And we project Okay. Neptune you guess a how ability I as fluids about if markings or XQ to having normalized in the were

Brady M. Murphy

very base fluids for consistently margins well. was think think business we've completion -- up holding Yeah, I or XX% communicated before. we EBITDA achieve can think We communicated our We we above business without and see much and year, market next very that's base at what we right QX the we Neptune believe beyond that as look now CS we for still based intact. on

Elijio Serrano

contributes margins. that we the integrated our to the remember vertical door vertically in that Praveen bromine And are elemental get agreement the steady long-term to market bromine. That integration

Praveen Narra

Right.

talk CapEx Okay. just about more next squeeze think one XXXX. CapEx how about do If for yesterday, I that in for TETRA-only you could year? of think Obviously, CSI

Elijio Serrano

our I are we now. us plans I would the would for it's any process. internal we'll process suggest suggest that terms our customers budgeting CapEx. we're their information, early in complete the XXXX process in what right XXXX. Once We're early gathering that volunteer in for that feedback to from do of

Elijio Serrano

Thank Okay. you.

Operator

Simmons The ahead. Energy. next from Watson comes of question Please John go

John Watson

morning. Good Thank you.

Brady M. Murphy

Good morning.

John Watson

Brady, takes begun? And on the complete the it already to can you complete Neptune projects? me in how one of side, remind has project long you expect to the QX typically

Brady M. Murphy

about any of get to want for operations into phase don't this our more well well. really We the customers' completion specific details

can for customers very prefer not any a we project our it's imagine details. you more major give and to As

is timing month. log a the the the from the On few typically site a the then run for completion days well and can after to the well phase which taken then of to drilled project, is a we're rig pressures, mobilized data for

John Watson

that. thanks Okay, for

continue relative the what more to quarter. some not to attribute completions impressive you it continue back third you give and XQ? us Can for were to expectations Secondly, water on into out-performance flow and revenues activity maybe that in or detail

Brady M. Murphy

has and the pricing providing new think I automation, some more technology, pressure projects think to what I our our QX, up our in see activity sand said, pleased our margins, cost technology back in reducing operations, new pulling labor some pricing executed we very on we introducing of hold in that, clearly and well well. our help cyclones, as part costs, integrated the with believe the as quarter. we said in team Having very streamline us, some quarter did fourth I QX very that Yeah, third our

that So, weaker we QX. for will expect be

John Watson

understood. Okay,

late that become and benefit a does have TETRA? spec Specs, intensive those coming to water you Lastly, seen ENP are that among Water we reaching less Treating customers consensus closer so, of and if

Brady M. Murphy

say about our we customers working with seen the with you wouldn't change reuse that produced are water I frac we've talking and water for major with, a specs for John. operations,

John Watson

That's right. Yes.

Brady M. Murphy

Yeah, with the are say I that wouldn't operating customers we with.

We real have seen any change. any, major

Now, I'll at that. it leave

John Watson

I'll Brady? All it right. turn Thank you, back.

Brady M. Murphy

you. Thank

Operator

of [XX.XX] the FBR. from question Please The comes go Riley Brian [indiscernible] ahead. B. next

Unidentified Analyst

Hey, good morning, guys.

Brady M. Murphy

morning. Good

Unidentified Analyst

over what's for Sticking and did with quarter water outlook transfer. third for How your evolve pricing XXXX? temporary the

Brady M. Murphy

quarter, first during pricing saw the two We well. the we along pullback more the more held of month of some which, pricing from think I in pressure the that saw with pressure. in customer fairly in of some the September, months definitely last So, quarter up also pullback pricing

budgets, Along think differentiation it's to budgets, base do I flow announced XXXX. that going how a they're ourselves. like have to Obviously, that we we'll those our our we for attention the customer’s back. like sand relates We predict position and it what's with automation as XXXX to little to paying with have. our happen we early customer close with the TETRA in be pricing. as and we do Steel,

an do in pricing we premium for a think early it's can I market. point, us. to the at at guess, believe this our and expectation we bit overall, number achieve XXXX give this So, what's for I But point,

Unidentified Analyst

you perhaps hose were to of much in rough grown here? And could That's share maybe of range flat how fair. likely XXXX? expand continue Thank then supply And lie you. could industry's the

Brady M. Murphy

Elijio accuracy. that? of I'm not comment a sure that with answer any I fair degree could on

Elijio Serrano

a we've hose that's jacketed double focus advantage. our high -- represents proprietary that on disciplined would we and we that believe end competitive I suggest been

or I comment can the on represent jacket the comment that what can for a others doing. are hose, We're focused traditional However differentiator. on we technologies single

Unidentified Analyst

Got more you and have just that that -- Flowback, so share maybe could you. that. Thank Water a on a a far and then guys or you now And for of entails percentage you of revenue so? year that BlueLinx one target percentage from or project

Brady M. Murphy

different as we're So to targeting two that. assets

we we a of on automation. have our have we BlueLinx of We're all network. part automated XXX% have there this But mentioned, a that close yet. a our particular is is XX job, targeting not we For And think pump I of for loop BlueLinx kit we is had where whole the to automated Anytime offerings, that of jobs solution. integrated critical jobs piece managing fully quarter. part objective. are jobs

between key So, a transfer integrated all where of is with our role automation projects jobs our for us. plays BlueLinx and

Unidentified Analyst

Got call, future in said much could one horsepower cash delivery to you compressor on direct growth plan possibly in know could for distributable currently on order I how If have you. in just you the or sneak you I XXXX? XX% capital flow compression, so but towards share, you guys

Elijio Serrano

The for in XX% amount respond responding to generating horsepower on wise either are being to point. capital. those We're we this billion of only very to terms concentrated at less selective and with existing, scheduled and than opportunities what of dollar delivery in $X equates customers that are returns

flow committed. of with will only capital at So be year's is point, $X cash this that next million from operations, funded

Unidentified Analyst

the I'll guys. answers. I Great. back. it turn appreciate Thanks,

Brady M. Murphy

Thank you.

Operator

question Please next go comes from of Steven ahead. The Gengaro Stiefel.

Steven Gengaro

and look the if Halliburton Alliance you I on that doubt the anymore you you side, seeing are as Have traction morning, any seen what as from Neptune you I XXXX? as apologize so this. touched I late, into Thanks. Good far answered gentlemen. CS expectations --

Brady M. Murphy

very that know be Halliburton bit But We to a Yeah. I answer question. little your I'm earlier. the positive. happy We'd traction. talked

their of in engaged quarter that on deepwater brought announced operators with some six relationship, our were major super projects. of key Halliburton I Three those by were think six last we we we

this We again, some these Europe introduced some projects. monovalent has technology strong our even type integrated in at quarter. markets presence a Halliburt SP and And drilling very of

technologies and And pipeline clients. they those that XXXX. lead introduced are revenue good and they about have for into monovalent we very business feel Whether

still but of perspective. term So longer than positive gain others, positive very from overall, very traction, our some them

Steven Gengaro

episodic of you're factors a a returns what just helpful Thank you. writings, think Give cetera maybe will deepwater one market, ultimately some other consistent. is for the of that but sort things a and seeing more and et of little gas becomes the based these projects on a normal the more pattern the I little where for be consistency less,

some to the in of on market just for kind couple I based be mean, years? over sense of general. for the that how But of out that's any plays next

Brady M. Murphy

market the we the think levels. and I suppressed in XXXX that perhaps obviously deepwater still XXXX saw from peak fairly Yeah, days is

are still a there think lot the on I of So deepwater. upside

I think tied market the specifically again monovalent overall offshore and not is deepwater. to solution

robust last back years. tied more we it's even Sea seeing certainly markets offshore, not better markets. to any means. saw peak levels or say North activity But type few troughs the And East in would by I than to we're Middle that the that fairly

Steven Gengaro

Okay, thank you.

Operator

This Mr. Instructions] conference [Operator any to, answer concludes over session. I would our back remarks. question the turn to closing Murphy like and for

Brady M. Murphy

And thank thanks in TETRA us morning. Technologies. this your you. call. interest time to the the concludes our joining This Well, call our taking appreciate for on We

Operator

has The concluded. conference

You may time. your disconnect at this line

TETRA (TTI) 7 Nov 192019 Q3 Earnings call transcript