TETRA TECHNOLOGIES, INC. ANNOUNCES BRAZIL DEEPWATER COMPLETION FLUIDS AWARD AND THIRD QUARTER 2024 FINANCIAL RESULTS
Third-quarter revenue of $142 million
GAAP income before taxes and discontinued operations of $7.6 million and EPS from continuing operations of $0.02
Adjusted EBITDA of $23.5 million and adjusted net income per share of $0.03
Net cash provided by operating activities of $19.9 million, total adjusted free cash flow of $7.4 million, base business adjusted free cash flow(1) of $16.0 million
THE WOODLANDS, Texas, Oct. 29, 2024 /PRNewswire/ -- TETRA Technologies, Inc. ("TETRA" or the "Company") (NYSE:TTI) today announced third-quarter 2024 financial results and an increasing deepwater backlog following the award of a deepwater project in Brazil.
Brady Murphy, TETRA President and Chief Executive Officer, stated, "Despite challenging third quarter headwinds with three Gulf of Mexico hurricanes and weaker U.S. onshore activity, cash provided by operating activities of $19.9 million and Adjusted EBITDA of $23.5 million came in consistent with our expectations. Completion Fluids & Products achieved 31.7% Adjusted EBITDA margins, while Water & Flowback Services segment Adjusted EBITDA margins were 14.6%. We generated $16 million of adjusted free cash flow from the base business and total adjusted free cash flow of $7.4 million after investing $8.7 million (net of reimbursements from our Evergreen Unit partner) to advance our bromine project in Arkansas.
We continue to build our backlog of deepwater projects by securing a significant multi-well, multi-year deep water completion fluids contract in Brazil. This is our second significant deepwater Brazil contract in the past three years and establishes us as the high-density offshore completion fluids market leader in Brazil. The third-quarter hurricanes, plus another in early October, have shifted some of our planned Gulf of Mexico deepwater work into early 2025. As a result, we expect a slower fourth quarter, but the Brazil award along with the previously announced three well TETRA CS Neptune fluids Gulf of Mexico project and anticipated material step-up in zinc bromide-based battery electrolyte shipments for energy storage is positioning us for a very strong start to 2025. In anticipation of these projects that are starting in the first quarter of 2025, we are increasing at year-end our bromine-based fluids inventory to capitalize on those opportunities. We have also engaged in discussions with bromine suppliers to expand our access to bromine in 2025 and 2026 to meet those demands that are expected to position TETRA for a strong performance in 2025 and beyond.
We continue to deploy automation technology across all of our water and flowback services, which is even more important in this softer environment, and we are very encouraged with customer adoption. In the third quarter, we set an all-time new record for volumes of produced water recycled for frac re-use and we expect the fourth quarter volumes to materially surpass the third quarter treatment of recycled produced water volumes. Our progress on produced water treatment and desalination for beneficial re-use continues with seven customer non-disclosure agreements ("NDAs") in place and two additional NDAs with major oil and gas operators under negotiation.
It is anticipated that US onshore activity will remain slower throughout the fourth quarter and flattish into 2025, and as a result we initiated a series of cost reduction actions in the third quarter, including a 6.5% reduction in global SG&A headcount, and intend to continue to right size our US onshore operations as needed."
Third-Quarter Results
Third-quarter 2024 revenue of $142 million decreased 6% from the third quarter of 2023 and 18% from the second quarter of 2024 following the traditional seasonal peak of industrial chemical sales in Europe. Third-quarter revenue includes the benefit from the sale of an early production facility ("EPF") expansion in Argentina, that partially offset the weaker onshore activity in the Unites States and lower offshore completions fluids activity, primarily in the Gulf of Mexico and Middle East. Net loss of $3.0 million, inclusive of a $5.8 million charge for decommissioning obligations from discontinued operations and $0.5 million of non-recurring charges, compares to net income of $5.4 million in the third quarter of 2023, inclusive of $3.7 million of non-recurring charges, and to net income of $7.6 million in the second quarter of 2024, inclusive of $1.0 million of non-recurring charges.
Third-quarter cash flow provided by operating activities was $19.9 million and compares to cash provided by operating activities of $14.0 million in the third quarter of 2023 and cash provided by operating activities of $25 million in the second quarter of 2024. Base business adjusted free cash flow was $16.0 million while investments in our Arkansas bromine and lithium projects were $8.7 million, resulting in total adjusted free cash flow of $7.4 million in the third quarter of 2024 and compares to total adjusted free cash flow of $7.1 million in the third quarter of 2023 and $9.4 million in the second quarter of 2024. Working capital at the end of the third quarter was $110 million, a $16.4 million decrease from the prior quarter end. Working capital is defined as current assets, excluding cash and restricted cash, less current liabilities. Marketable equity investments in Kodiak Gas Services ("Kodiak"), Inc. and Standard Lithium Ltd. ("Standard Lithium") totaled $14.4 million as of September 30, 2024.
Completion Fluids & Products third quarter of 2024 Adjusted EBITDA margins were 31.7%, a sequential increase of 280 basis points, despite revenue decreasing year-on-year by 11% and decreasing sequentially by 35% following the strong seasonal European industrial chemicals volumes. Overall completion fluids activity was lower in the quarter relative to the second quarter as multiple hurricanes impacted the timing of deepwater projects, resulting in sequentially lower volumes in the Gulf of Mexico as well as lower sales to a major Middle East national oil customer as we transition from a term ending contract to a new two-year fluids award that will start in 2025. Additionally, we now anticipate the first of three TETRA CS Neptune fluids wells to start in the first quarter of 2025. Net income before taxes for the quarter was $19.1 million (29.4% of revenue) and compares to $26.7 million (26.6% of revenue) in the second quarter of 2024. Adjusted EBITDA was $20.6 million and compares to $28.9 million (28.9% of revenue) in the second quarter of 2024.
Water & Flowback Services revenue of $77 million improved $4.7 million or 6.5% sequentially, with Adjusted EBITDA margins of 14.6%. Water & Flowback Services income before taxes for the quarter was $4.7 million and compares to $3.2 million in the second quarter of 2024. Adjusted EBITDA of $11.2 million increased $0.3 million sequentially. Weaker US onshore completion activity was offset by the sale of the expansion to one of the three Argentina EPFs and a record volume of produced water recycle for frac re-use. As we deploy a larger percentage of our automation technology throughout 2025, we anticipate overall lower field headcount levels - which is expected to allow us to maintain or further improve our mid-teens Adjusted EBITDA margins.
During the quarter, we completed an equity investment in KMX Technologies for treating produced water from oil and gas wells for beneficial re-use. The extensive testing of the KMX vacuum membrane technology ("VMD") and the Hyrec Holdings Company W.L.L. osmotic assisted reverse osmosis ("OARO") technology, along with our proprietary pre-treatment technology and know-how, is meeting the challenge to address all variabilities of produced water as an effective industry solution. In addition to the benefits TETRA brings as a service provider, we are taking a minority equity position in KMX that affords TETRA shareholders an opportunity to also benefit from the value creation we will bring to KMX as we commercialize this revolutionary technology.
(1) Base business adjusted free cash flow is defined as total adjusted free cash flow prior to TETRA's investments in the Arkansas bromine and lithium projects.
This press release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"): Adjusted net income per share, Adjusted EBITDA, and Adjusted EBITDA Margin (Adjusted EBITDA as a percent of revenue) on consolidated and segment basis, adjusted net income, total adjusted free cash flow, base business adjusted free cash flow, net debt, net leverage ratio and return on net capital employed. Please see Schedules E through J for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.
Third Quarter Results and Highlights
A summary of key financial metrics for the third quarter are as follows:
Three Months Ended
September 30,2024
June 30,
2024
September 30,2023
(in thousands, except per share amounts)
Revenue
$ 141,700
$ 171,935
$ 151,464
Income before discontinued operations
2,762
7,640
5,468
Net income (loss)
(2,998)
7,640
5,420
Adjusted EBITDA
23,501
30,234
26,059
Net income per share from continuing operations
$ 0.02
$ 0.06
$ 0.04
Net income (loss) per share attributable to TETRA stockholders
$ (0.02)
$ 0.06
$ 0.04
Adjusted net income per share
$ 0.03
$ 0.07
$ 0.07
Net cash provided by operating activities
19,870
24,831
13,974
Total adjusted free cash flow(1)
$ 7,352
$ 9,369
$ 7,073
(1)
For the three months ended September 30, 2024, June 30, 2024 and September 30, 2023, total adjusted free cash flow includes $8.7 million, $9.8 million and $1.8 million, respectively, of investments in the Arkansas bromine and lithium projects.
Strategic Initiatives Update
Brady Murphy stated, "We invested $8.7 million during the quarter on our strategic initiatives in Arkansas, net of reimbursement from our Evergreen Unit partner, to advance engineering and reservoir studies and began laying the groundwork to put in place power infrastructure for our bromine project. We published a definitive feasibility study in August with compelling economics for the production of bromine from our Evergreen Unit to meet the growing demand for oil and gas offshore completion fluids and the new market for the TETRA PureFlow+ electrolyte in the long duration energy storage market. The zinc bromide electrolyte demand is expected to grow materially beginning in 2025.
We are prioritizing our strategic initiatives on projects that can immediately impact our near-term results, with a focus on TETRA CS Neptune fluids in the Gulf of Mexico, TETRA PureFlow+ electrolyte shipments to Eos Energy Enterprises, and further advancing our water desalination commercial pilot units that are expected to subsequently transition into long duration contracts for commercial desalination plants. Long term we believe that lithium prices will rebound to levels that support increased investment in supply, especially from the U.S., and we and our Evergreen Unit partner remain focused on completing all the engineering studies required to define the lithium project economics."
Free Cash Flow, Balance Sheet and Income Taxes
Cash provided by operating activities was $19.9 million in the third quarter and base business adjusted free cash flow, which excludes investments in Arkansas, was $16 million. Inclusive of $8.7 million of investments in Arkansas, total adjusted free cash flow was $7.4 million. At the end of the third quarter, unrestricted cash was $48 million and TETRA held an aggregate of over $14 million in marketable securities between its holdings in Kodiak and Standard Lithium. Liquidity at the end of the third quarter was $196 million, inclusive of a $75 million delayed draw feature to fund our Arkansas bromine project. Liquidity is defined as unrestricted cash plus availability under the delayed draw from our Term Credit Agreement and availability under our credit agreements. Long-term debt net of discount, with a January 2030 maturity, was $180 million, while net debt was $131 million. TETRA's net leverage ratio was 1.5X at the end of the third quarter of 2024.
TETRA's return on net capital employed was 16.6% at the end of the third quarter of 2024.
Non-recurring Charges and Expenses
Non-recurring credits, charges and expenses are reflected on Schedule E and include the following:
$0.6 million of severance and hurricane repair expenses
$0.2 million of non-cash stock appreciation right credits
$0.1 million impairment related to our corporate office lease
Unrealized gains on investments totaling $0.8 million are included in both reported and adjusted earnings.
Conference Call
TETRA will host a conference call to discuss these results on October 30, 2024 at 10:30 a.m. Eastern Time. The phone number for the call is 1-800-836-8184. The conference call will also be available by live audio webcast. A replay of the conference call will be available at 1-888-660-6345 conference number 57089#, for one week following the conference call and the archived webcast will be available through the Company's website for thirty days following the conference call.
Investor Contact
For further information, please contact Elijio Serrano, CFO, TETRA Technologies, Inc. at (281) 367-1983 or via email at
Financial Statements, Schedules and Non-GAAP Reconciliation Schedules (Unaudited)
Schedule A: Consolidated Income Statement
Schedule B: Condensed Consolidated Balance Sheet
Schedule C: Consolidated Statements of Cash Flows
Schedule D: Statement Regarding Use of Non-GAAP Financial Measures
Schedule E: Non-GAAP Reconciliation of Adjusted Net Income
Schedule F: Non-GAAP Reconciliation of Adjusted EBITDA
Schedule G: Non-GAAP Reconciliation of Net Debt
Schedule H: Non-GAAP Reconciliation to Total Adjusted Free Cash Flow and
Base Business Adjusted Free Cash Flow
Schedule I: Non-GAAP Reconciliation to Net Leverage Ratio
Schedule J: Non-GAAP Reconciliation to Return on Net Capital Employed
Company Overview
TETRA Technologies, Inc. is an energy services and solutions company focused on developing environmentally conscious services and solutions that help make people's lives better. With operations on six continents, the Company's portfolio consists of Energy Services, Industrial Chemicals, and Low Carbon Ventures. In addition to providing products and services to the oil and gas industry and calcium chloride for diverse applications, TETRA is expanding into the low-carbon energy market with chemistry expertise, key mineral acreage, and global infrastructure, helping to meet the demand for sustainable energy in the twenty-first century. Visit the Company's website at www.onetetra.com for more information.
Cautionary Statement Regarding Forward Looking Statements
This news release includes certain statements that are deemed to be forward-looking statements. Generally, the use of words such as "may," "see," "expectation," "expect," "intend," "estimate," "projects," "anticipate," "believe," "assume," "could," "should," "plans," "targets" or similar expressions that convey the uncertainty of future events, activities, expectations or outcomes identify forward-looking statements that the Company intends to be included within the safe harbor protections provided by the federal securities laws. These forward-looking statements include statements concerning economic and operating conditions that are outside of our control, including statements concerning recovery of the oil and gas industry; customer delays for international completion fluids related to global shipping and logistics issues; potential revenue associated with prospective energy storage projects; measured, indicated and inferred mineral resources of lithium and/or bromine, the potential extraction of lithium and bromine from our Evergreen Unit and other leased acreage, the economic viability thereof, the demand for such resources, the timing and costs of such activities, and the expected revenues, profits and returns from such activities; the accuracy of our resources report, feasibility study and economic assessment regarding our lithium and bromine acreage; projections or forecasts concerning the Company's business activities, profitability, estimated earnings, earnings per share, and statements regarding the Company's beliefs, expectations, plans, goals, future events and performance, and other statements that are not purely historical. With respect to the Company's disclosures of measured, indicated and inferred mineral resources, including bromine and lithium carbonate equivalent concentrations, it is uncertain if all such resources will ever be economically developed. Investors are cautioned that mineral resources do not have demonstrated economic value and further exploration may not result in the estimation of a mineral reserve. Further, there are a number of uncertainties related to processing lithium, which is an inherently difficult process. Therefore, you are cautioned not to assume that all or any part of our resources can be economically or legally commercialized. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to several risks and uncertainties, many of which are beyond the control of the Company. With respect to the Company's disclosures regarding the potential joint venture for the Evergreen Unit, it is uncertain about the ability of the parties to successfully negotiate one or more definitive agreements, the future relationship between the parties, and the ability to successfully and economically produce lithium and bromine from the Evergreen Unit. Investors are cautioned that any such statements are not guarantees of future performance or results and that actual results or developments may differ materially from those projected in the forward-looking statements. Some of the factors that could affect actual results are described in the section titled "Risk Factors" contained in the Company's Annual Reports on Form 10-K, as well as other risks identified from time to time in its reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission. Investors should not place undue reliance on forward-looking statements. Each forward-looking statement speaks only as of the date of the particular statement, and the Company undertakes no obligation to update or revise any forward-looking statements, except as may be required by law.
Schedule A: Consolidated Income Statement (Unaudited)
Three Months Ended
September 30,2024
June 30,
2024
September 30,2023
(in thousands, except per share amounts)
Revenues
$ 141,700
$ 171,935
$ 151,464
Cost of sales, services, and rentals
98,391
119,908
104,962
Depreciation, amortization, and accretion
8,837
8,774
8,578
Impairments and other charges
109
—
—
Total cost of revenues
107,337
128,682
113,540
Gross profit
34,363
43,253
37,924
Exploration and pre-development costs
—
—
3,775
General and administrative expense
22,406
22,137
23,838
Interest expense, net
5,096
6,185
5,636
Other income (expense), net
(715)
2,452
(2,041)
Income before taxes and discontinued operations
7,576
12,479
6,716
Provision for income taxes
4,744
4,839
1,248
Income before discontinued operations
2,832
7,640
5,468
Discontinued operations:
Loss from discontinued operations, net of taxes
(5,830)
—
(48)
Net income (loss)
(2,998)
7,640
5,420
Loss attributable to noncontrolling interest
—
3
—
Net income (loss) attributable to TETRA stockholders
$ (2,998)
$ 7,643
$ 5,420
Basic per share information:
Income from continuing operations
$ 0.02
$ 0.06
$ 0.04
Income (loss) from discontinued operations
$ (0.04)
$ 0.00
$ 0.00
Net income (loss) attributable to TETRA stockholders
$ (0.02)
$ 0.06
$ 0.04
Weighted average shares outstanding
131,579
131,263
129,777
Diluted per share information:
Income from continuing operations
$ 0.02
$ 0.06
$ 0.04
Income (loss) from discontinued operations
$ (0.04)
$ 0.00
$ 0.00
Net income (loss) attributable to TETRA stockholders
$ (0.02)
$ 0.06
$ 0.04
Weighted average shares outstanding
132,029
132,169
132,089
Schedule B: Condensed Consolidated Balance Sheet (Unaudited)
September 30,2024
December 31,2023
(in thousands)
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$ 48,355
$ 52,485
Restricted cash
658
—
Trade accounts receivable
110,050
111,798
Inventories
97,704
96,536
Prepaid expenses and other current assets
21,763
21,196
Total current assets
278,530
282,015
Property, plant, and equipment, net
129,257
107,716
Other intangible assets, net
26,027
29,132
Operating lease right-of-use assets
30,181
31,915
Investments
22,754
17,354
Other assets
14,408
10,829
Total long-term assets
222,627
196,946
Total assets
$ 501,157
$ 478,961
LIABILITIES AND EQUITY
