TTI - Earnings call transcript Q3 2021 | TETRA Technologies, Inc.

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Operator

Good morning, and welcome to TETRA Technologies Third Quarter 2021 Results Conference Call. The speakers for today's call are Brady Murphy, Chief Executive Officer; and Elijio Serrano, Chief Financial Officer. All participants will be in a listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. Instructions]. [Operator event this being is note recorded. Please turn now the conference Mr. to over I'll Serrano. go Please ahead.

Elijio Serrano

Good you These to and third you, deemed contain morning, Thank [Betsy]. or are, thank this call results maybe I statements that that be quarter call. for would you like forward-looking. remind to conference may statements XXXX TETRA's joining uncertainties statements and many company. of a number on are certain and assumptions based beyond number are based which a analysis factors. of are are These the on risks the to and made by TETRA of subject of control

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

non-GAAP reconciliations adjusted of net EBITDA, GAAP nearest be cash of financial yesterday's EBITDA adjusted accordance the in with within free liquidity financial and refer to a measures. to reconciliation the for results information margins, debt our adjusted complete in financial course context public In the call, not addition, for we EBITDA, the for considered are website prepared measures gross flow, other These our the release or should to Please measures. of non-GAAP and period. GAAP substitute press financial may to refer

now release it we that refer I'll yesterday, were over addition to to In to our press encourage turn also that yesterday. announcement filed you went out to XX-Q Brady. our

Brady Murphy

our quarter initiatives. TETRA's then the and and on earnings Elijio update fourth third perspective Thanks energy some third I'll an XXXX provide the summarize provide carbon morning to Welcome highlights on quarter, everyone. call. some for good low quarter,

of our cash recognition hurricane item. To and to I'd turning devastating give that a the Gulf back with start discuss to flow, balance the sheet Elijio Mexico dealt liquidity. Before it to like special Louisiana employees to

supports base, employees Fortunately, get But to Again, and their Fourchon service to our their and these thanks families. a back recognition order Louisiana dedication and needs. repairs no operations. all Mexico to underway. to incredible employee Gulf serious our well of customer's employees our special our Functionally thanks our we which injuries being property are in employees to and special XXX% suffered

the Gulf not despite contributing growing operations, deliveries years. hurricane Mexico seen port choke many challenges massive inflationary industry, globe, we've for macro for environment the industry of For including improve. to impacting for of quarter and item unique continues delayed the shipping pressure the type to across The overall that our some points,

impact still revenue importantly early a the been Such on demonstrates each shipping multi-year Hurricane quarter of our we're believe recovery the low the for XX% we're we But more and global we the and carbon if have growth period of of Year-on-year days energy not accelerating factors. by these in XX%, macro for results executing a our quarters and strategies. As Ida services markets. of impacting reflect delays, market oilfield success deliveries. third the having fluid grew over would completion as

XXXX and year-over-year level is of to market the the grew The prior XX% $XX COVID-XX adjusted pandemic. and EBITDA third and first million of a sequentially, the impact highest since XXX% quarter quarter

million in Third of and free delayed to $X.X fluid reductions to delays revenue progress deliveries the backlogs. the realize adjusted into cash extent, keeping again EBITDA on liquidity a quarter of Lithium chemicals in our for the this Standard reduced and announced by materials the in million, inflationary leases Hurricane term loan, quarter our towards raw and from $XX million. certain these services jobs brines products adjusted include million the flow Mexico of gain We $XX time mark-to-market fourth while offset million of in CSI And was Arkansas by Compressco, largely monetizing some Ida lesser global $X.X as and significant EBITDA more dollars around gains Gulf in TETRA our resources. equity and costs the and due does million value rich production. from ownership to very investors pushed The approximately lithium a due completion $X the that quarter generated from shipping

our the earnings to as second Turning segments, call. discussed on quarter

the We was expected quarter This single-digits target third X.X% flow to basis areas. an exceeded increase of is back operational XX.X% improve second the many XXX and in to Despite A pressures inflationary points our the or ongoing cost from water an second quarter. quarter. over that in in high margins third actual services to in XXX% the quarter.

Despite increased quarter Third second compared and frac onshore sequentially. year-over-year. XXX% increased being U.S. the in quarter crews flat revenues to a the active XX% the of number relatively

to contributed model factors service market very safety. quality share plays improve margin continue improvement. in We of efficiency, and the well-developed on because integrated a by management of Various business supported shale to technology, quality and water delivers our automation platform our gain that cost U.S. this compelling services, a

we Building our also in multi-year third operate third on First, project quarter on and secured early that an business the production XXXX. we're also fully we which will starting build Argentina. further the towards mobilization Argentina, SandStorms, operational in completed the SandStorm early contract we in a includes for additional in facility and the project quarter during

U.S. customers. achieving with our of are many price for success we improvements Secondly,

equipment the TETRA units, water As flowback to maximum including our at SandStorms of utilization. transfer rates recycling equipment continue utilization operate steel, including

acceptable existing generate And capital. projects were customers pricing better we coming digitized and appropriate contributed to with our penetration pricing than management profitable return at And some down market through turning integrated profitability. improve is where in are water on levels customers. also secured now projects not the thirdly, some to we an Newly believe

a were quarter, new out third with achieved projects we Water four customers management different During high XX the record of customers. which Integrated XX

aforementioned In seasonal us is business and global quarter launched and High the $XX managed million third third some rated Haynesville. the the our we Lithium, of market to shipping million inroads in And the of achieved revenue have chemicals foundational We to in business, oil value this million second XXK delays, materials. increased very on in continue Adjusting the with due production peak, the for Shifting Hurricane of and year-on-year higher moving & we $XX EBIT and adjusted by groups. immediately offerings see and adjusted continue carry we're mid-XXs market there improvement of share global would frac double-digits although European the chemical quarter traction delayed from for we Ida includes Hurricane less adjusted of quarter third share the our current operators U.S. EBITDA progression the been not shipping gas see similar revenue revenue and revenue to seasonality which number mark-to-market quarter from accounting mid-XXXX, to we're profitability. second fourth gain a procurement at the XXX crews, delayed Hurricane levels Completion the both Fluids parts the services products number the for million height performance. $X.X EBITDA helped business from the mid-teen in with differentiated the issues, the raw comparisons successfully and adjusted and including continue reasons, our DA to due gain to believe in shale percentages, million Lithium Ida SandStorms and were our $XX into to and of private Pressure on of margin quarter-and-quarter inflationary the for rely which in back that potentially likely an market quarter, EBITDA we unusual the our margin X.X the with cost we of make of and in reduction there quarter, our to reflective when as blocks a beyond. and in yet pleased to gains and EBITDA due pressures centrally Overall, Ida Flowback the we business our to investments believe build some and Standard which mid-XXs, active improvement. shipments, for Water Using costs, was over would inflationary has more forward our which the have drop mark-to-market our revenue of quarter Standard Services analysis the pleased loss $XX

Going for bromine especially reflect global inflationary the these chain seeing as as to products. calcium prices tighten increasing supply forward, we're chloride well, costs products and our for we're our core

During the by we continue core Fluids of feel of quarter, we Completion our third to strength which business see points. data number a the supported improve,

our XX% expert competitors. on for customer average of Research industry Mexico average segment Oilfield Completion loyalty Services, supplier reported the and Gulf well-known showed a superior TETRA compared of results XX% Fluid the performance to an of with which of Industry the with The to the compared Firstly, Global

We Brazil as with the awarded This quarter project the new the large addition in Mexico during multiyear the is multiyear previously continue service company. to a to service Deepwater in operator, award be Brazil. as company contracts in major super a well of for announced a for integrated markets, large an Deepwater third major awarded Gulf for awards large integrated Deepwater in

returns, the expect to of forward, activity this during quarter. be will and for Mexico segment many the in Looking fourth quarter, the delivered of we shipments materially delayed the Gulf as see higher revenue

October another the shares, margins not We XX%. range, up expect Lithium including Standard adjusted EBIT any our fourth to mid-XXs to from return through quarter benefit which are

complemented is recovering be we production, refine from improved for manufacturing business to anticipated for we progress. of mentioned COX continues to for support designed investment partnership by what unique production the XXXX our in Europe Free and with in our In continue the with for calcium chemical be CarbonFree. XX% completion for regards strong, second engineering track plant demand market. excited which is increase for believe in own chloride, oil capacity our stay calcium to and quarter demand industrial on will testing finally, chloride the to future low initiatives, the in gas carbon continue The industry we our process and previously and Our to a an

to carbon we're timelines the shipped previous we before purity of zinc secured furthering our a third As progress of high long-term PureFlow, and place ahead and supplier our mentioned generate quarter, this expect in initiatives. our year-end. internal an and making in customer, and second agreement company. In publicly storage press a in sale bromide traded to from commercial the building revenue our to We're release, technology order low energy with energy have strategic solution

materializes PureFlow anticipate well annual other forecasted and an orders XXXX as in for zinc our in increase longer-term growth we of needs. material companies Assuming Considering with in as as also a demands market, as manufacturing needs, discussions energy rates our use storage their energy deliveries we're companies meet which to will support work this collaboratively bromide in electrolyte electrolyte storage demand we with the agreement expected, for their energy full high PureFlow storage. these compound the production for solution, to

on begin of from TETRA acreage advance are two, previously tons the which still press several as economics Standard lithium current reserves, bromine. with reasons. very PEA to tetras Standard TETRA inferred completed Lithium X.XX what current all or option carbonate bromine, was in Arkansas assessment X.XX to agreement will to acreage versus Based equivalent extract for their engineering timeline Standard acreage of than is to this economics from Standard at royalties previously Arkansas. release, attractive Lithium PEA X.XX category, million in attractive bromine available the the million maintains to rights our their One, higher work the to on acreage facilities. for of production were will tail-brine tons on million et XX% TETRA's Moving indicated Standard the is the our the work be interest process Lithium parallel work extraction acreage on Lanxess in rich from resource lithium Standard the fee to lithium we exploration The of targets bromine and estimated. on smackover TETRA preliminary lithium Lithium formation which Lithium's The indicates the cetera generating mineral and to Lithium on on

option to Lithium tons XXX,XXX lithium communicated the exploration move Standard the intend us in are to acreage, then obtain PEA XXX% and inferred to our is for well owned exploration meet resources a our Standard completion In acreage agreement, that agreement significant option storage, There energy phase. resources we dedicated have in samples, from bromine fluids estimate and Standard quarter target a target bromine previously to planning the addition resources. TETRA the our of our in TETRA. study which growing We XXXX. Lithium exploratory and XXX% between allowing move with outside value Smackover on in in mineral our We're demands to acreage XX,XXX Lithium, TETRA to agreement lithium Arkansas addition rights towards an an target to the Formation from on early to of combination drill in lithium fourth

continue We create shareholder evolve to these will to value. resources

progress in COX the to of make Finally, capital SkyCycle capture on area technology. their CarbonFree raising continues to carbon launch capture,

the calcium we our While evolved unique on Free engineering chloride process. manufacturing COX

energy and the for work CarbonFree continue macro pressures, quarter. the good as circumstances we ready with shortfall. shipping of companies inflationary invest logistics required overcoming we growing and continued and need to [EMP] volumes global Heading improvement despite meet the in calcium project. Overall, a will get issues of source see XXXX, had number supply, to a into to industry their We fundamentals and they to Ida, unusual to announce first the with Hurricane chloride

Although, early feedback to and At activity us position the early will U.S. our to progress points time, the in EBITDA from targets the the a increase expect same initiatives. a in modest activity revenue, flow holidays, our customers robust do a carbon we next cash to energy pause we from to putting potentially around the onshore future these market in multiple in near year. communicate make opportunities, on potential continue low

to I'll it details, up we'll additional Elijio Now, open it for some over provide turn to questions. and

Elijio Serrano

you, Thank Brady.

flow cash flow quarter quarter. $X.X from compares for of the operations $X.X operations quarter Third cash second was which and million, million the million flow continued the free adjusted continuing $X improvement second from adjusted was free quarter. Free in million of cash $X.X from to

capital million. end while a $XXX was Total of debt growth We $XXX the positive on flow September, outstanding and are expenditures million XX% in of free debt a despite cash year-to-date basis at year-to-date million. $XX.X was year-over-year September net revenue,

on in to September and the million this year. would quarter at further quarter, of $X quarter fourth expense XX% Liquidity the [$XX an by by end of the And despite We of our pay by $XX from on million saving $XXX at $XX in which from With have million million of term ABL least the the the third quarter fourth another the our last the free year, the $XX term $XX $X September on end have million reduce last loan loan an term $XX annualized amendment XX we our million flow. cash is down since reducing on of used was second than interest million $X from year, third quarter, operations. loan at million] from improves flow expect of this increase reduction expected million, of in basis, paid XX cash liquidity. off it added more least million we

have And of amount $XX no of $XX our We revolver up to was maturity also the extend ABL end cash it At the ABL. we was availability unrestricted million. make the on under third million to XXXX. quarter, in the strong

common in shares the The $X.X in that own Lithium. Compressco, included a to million that adjustments X.X mark-to-market in we third units and million CSI we the own on gain quarter Standard

the for see September will two of equity $XX.X of From the prohibit We October. our by the price you holding end to had And this September to $XX publicly The of Brady value month from the of the to we was traded have share increased market us these to that million XX% holdings We continue entities. of mark-to-market one mentioned value our earlier, beginning position another sheets, evaluate liquidity available restrictions of equity of assets. adjustments in the this as million. year do this the And of of balance appropriate of that investments must end our the securities at million. any as $XX monetizing September, have the at the end us recognize of monetize that Standard that and Lithium not marketable might we cash time. own increased

including EBITDA. in are Given mark-to-market this this our we adjusted adjustments are marketable,

$XX non-cash Standard equates million of net Lithium We next year to the early a third $X The Hurricane year issues expenses. at $X.X $X.X stock items per adjusted third another was XXX,XXX approximately $XX the negatively we improved quarter a we expense, continue also end EBITDA we September cumulative the enterprise $XXX approximately quarter. value next from times by negatively impacting equity to expect legal our $XX $XXX more of we other Ida, Ida to million those Brady we and reduce or $XX to that which from our expense. and service Hurricane to from summary, chain without year $X.X ago million year significant reduce Also, $XX which equity to September doubled Lithium by income million And excluded generate XXX,XXX And from shares quarter of to a of shares or from expenses, value logistics oilfield ago liquidity, And enterprise not impacted option September flow into term million on Standard to a receive we the increased adjustments than at we year cash five was non-recurring a chain a our long-term long-term value negatively by other to exchanges. appreciation million of from index to current expect has from million to totaled million by adjustment represents million. term $X.X more our the estimate than another impacted brought the settlement this supply inflation linger in And into the early back which million value XX% stock in actually our cash free in issues. of of unusual insignificant. stock receive value supply performing September. raw believe approximately million goal. $XX and price incentive that right in million value, of million, addition the to expect of global of a have million, loan several revenue U.S. and to in fourth of our material ago loan process, has share and $X.X expect include year, holders. By We than this of $XXX These In charges our the global best results, of holders Ida challenges Hurricane reported end end gain we by have agreement. to the In million year, year base issues mentioned. and

questions. shareholder we We I are night news open filed operational financial that all creating to with value. details encourage and supporting for issued our additional that the read up in we the for purely XX-Q focused you that, metrics. on yesterday release it we'll Betsy last

Operator

Thank you.

We session. Stifel. begin And with from now the go ahead. Gengaro comes Instructions]. will first question-and-answer Stephen [Operator Please your question

Stephen Gengaro

Thanks. Good morning, gentlemen.

Brady Murphy

Good morning.

Stephen Gengaro

I things. mid-XXs. third mentioned in fluid you'd to that? of wanted something. excluding Brad without wanted query about a side, to just We margins couple on just you with talk clarify start I A mark-to-market - the when the

Brady Murphy

the Yes, pushed felt shipments in think the out, the I which Stephen. in XX% a EBITDA the in. reflective over we Ida. with adjusted been hurricane have had we We more it would and mid-XXs. And for margin If take mark-to-market us delays

Stephen Gengaro

clarify. to want just I what That's Okay.

that there an moving in third mark-to-market I excuse higher revenue you're of Are the going And of, excluding I on addition obviously takes so a mid-XXs And an now. that delays what you bring? forward, relatively fourth as quarter. the order saw fluids can for to number should me and to and guess magnitude puts you of mean, give 'XX? that about is growth move think given - And kind could when into the the us quarter some and 'XX you there good forward? going kind we

Brady Murphy

we long we Elijio environment some of within don't the these revenue. new I'll the we the other because on we're pressures the how I'll will see that some inflationary current feel is mid-XXs we take the pressures partly fourth in ask will the know margin appropriate. And margin pop-up. progression and Yes to see progression if inflation or comment seeing, quarter

but getting inflation timing increases, still are until all we which bromine to see it, We but price we're tightening the this confident inflationary and pressure. behind us. of some of about chloride, some a market we mid-XXs the feel of it's overcome because If hopefully still calcium both situation, pretty the it's whole additional the bit the in able unknown,

Elijio Serrano

the Steven of benefit up got long-term Latin XX% we could QX. Okay, Brady as mentioned towards that the to could on America progression. lot year, because as that this America hurricane Mexico We've projects the a up QX we end in Ida the of and segment not jobs Gulf And and if scheduled, the picked significant got then projects. revenue the the some delayed we've to be sequentially. that Latin of picked come unlikely got project be counts And a high fruition it sequential scheduled they're it's in some progression, of of all XX% up as

Stephen Gengaro

That's obviously quarter Thank one, frame But be have when a this good clear, it's TETRA you probably ask energy things other be to the any It is early Thanks. there. the then you obviously this think you. progressing second in might PureFlow new way job pretty you very me third the to opportunity. Imagine to 'XX? your look there and But net front could shipped positive. for what question. like guys And too seems about a on done Elijio.

Brady Murphy

will start we're the Completion be we a it What the of increase Obviously, of our into a overall the forecast So would for what fairly demand we're now business. in meaningful Fluids impact we will to a bromine consider portion by material in in that, XXXX, it's I'll of XXXX business XXXX. XXXX, overall Based end seeing projecting way, XXXX. Stephen. small answer still see our on

rapidly think we that's you of see that if that side. in progression, things on So terms how that it of moving that,

Stephen Gengaro

Great.

you think flow, any on cash about Elijio, about guidance we probably or and should you one think guess have working So do XXXX big more when in just CapEx how capital? moves for any free I

Elijio Serrano

use capital ramping would is move for there. about be number that I I European the number a is expansion our capital capital see big But that business. any That's XX% don't even because think That big talked chloride we significant positive. by hope by investments not revenue calcium would any the increase working significant to we around a a up materially. capacity

now, if So next don't think could in could and step there's working happen. burden up see be a we material any a big CapEx ramp capital that a up that possibility you year there's in good business and

Stephen Gengaro

great. Okay, you, Thank gentlemen.

Elijio Serrano

you, Thank Stephen.

Operator

The Evercore Hoh Please next from Samantha ahead. go question comes with ISI.

Samantha Hoh

the Hey, you're And guys. that Sea. lifts I your Neptune kind into Maybe just I'm just of completion guys was in any of what to CS in of under to North go job were a margins, on you XQ, the kind back kind was there for here building from wondering XQ? assumption guidance

Elijio Serrano

a part results very of Yes, North job But us was the Sea. that job. we in the Sea guess was going of forward, our a of North a, trial the higher up of frequency in these it somewhat set Samantha I was mentioned, in material job we had a does that job did the it North small Sea for a quarter. successful But jobs in executed, types we not number

variant, But of in the those discussions the timeline of We that that advancing have our XXXX. track been specific with we some project in with see project about than a pipelines lost to our I pace in at COVID-XX, XX months many last the And As we months the for Delta say discussions projects pandemic. would we we say very we're the we've we'd talked that what we lost before, timeline. we pipeline the will with we've of tracking, been carefully. due very that But very, the don't customers optimistic And months are another XX yet. six we've estimated projects better dates track. have we much feel Neptune

Samantha Hoh

been the commentary for same Are spending sort of similar maybe to about I of year. there's the a then about of business? up side your and on guess XX% sort lot of Water, the XX%, switching anticipating you Water gains Okay, and next guys

Elijio Serrano

Yes, are this is at progression over Samantha year over through we quarterly run expect meaningful right we year, very I just a not XX% look rate. now our this if think from jump a where you would

numbers we So gain somewhat expect the have than been XX% - year-on-year an that overall about. would the talked XX% higher of

our double look you digits at that would up in we expect revenues XXXX. be now, quarterly If to from

Samantha Hoh

And I what kind margins mid-XXs of that's of to return that actually. what like, scenario to level? for do are think Yes. that you margins right, heard sort need I

of So what when case could outlines like what target? best kind - of scenario, sort a you that achieve

Brady Murphy

with in the based the inflation wages. of just nice get today. Yes, order generating back for crews that's recycling some is have we're Argentina, on And were margins don't of - The our on Technology, number below it's very that operating crews didn't capabilities to XXX well there I and a back in XXXX. offsetting we XXXX. peak SandStorm returns difficult over the us to those for margins the think business frac XXX us. that kind to which at projects frac automation have The say, in some get clearly, we integrated over to to

now. So that feel you pretty eventually tell I profitability about type right getting below but good couldn't be would that crews, to exactly, I where back of number XXX well frac

we shooting we're and as off the how back first-half And to the to then of XXXX. finish market into to mid-teens, year, responds XXXX try see we'll margin EBITDA get in Next the year. that

Samantha Hoh

great. that's Okay,

start not higher on equipment? also for projects to logistics? you're materials then maybe How take quarter and States, meet our you that kind down time like of lead the those be like kind build there SandStorm last build costs there? addressing to having shipping given are seeing us did seeing address Argentina. like that, deadline it, to the we're existing of take Is I that anticipating issues how for you with and concern of you that able to the these like for it going is you're for and here building For in you the a need long just thinking Can maybe then out? you're

Brady Murphy

do good have some a had We - That's contract. a the issues supply we the Right. fairly we chain negotiated when of question. visibility

feel the we timeline the had believe, issues timeline. shorter But don't mobilize us times supply on were major fairly contracts, that lot have build lead and this contract, for we that meet SandStorms to and additional which the previous we that we with the competent a So into early like to chain don't to production deploy Any didn't we that proceed. for. facility we

Samantha Hoh

guys. Thanks, Congratulations. great. Okay,

Brady Murphy

you. Thank

Elijio Serrano

Thank you.

Operator

would to session. like us your for look thank you We for our Well, Mr. any forward update. This quarter question-and-answer joining Murphy over conference interest. our again Thank for our third to you turn for remarks. call. back to concludes earnings I closing the next

Operator

has for now Thank you presentation. concluded. conference attending today's The

now disconnect. may You

TETRA (TTI) 2 Nov 212021 Q3 Earnings call transcript