Q2 2021 Tetra Technologies Inc Earnings Call
Good morning, and welcome to the Tetra technologies second quarter 2021results conference call. The speakers for today's call are Brady M Murphy, Chief Executive Officer, and <unk> Serrano Chief Financial Officer, All participants will be in listen only mode should you need assisted.
Please signal a conference specialist by pressing the star key followed by zero.
After todays presentation, there will be and opportunity to ask questions to ask a question. You May Press Star then 1 on your Touchtone phone to withdraw from the question queue. Please press Star then 2 please note. This event is being recorded I will now turn the conference over to Mr. Serrano. Please go ahead.
Thank you Kate and.
Good morning, and thank you for joining Tetra second quarter 2021 results call.
I would like to remind you that this conference call may contain statements that are or may be deemed to be forward looking.
These statements are based on certain assumptions and analysis made by Tetra.
And are based on a number of factors. These statements are subject to a number of risks and uncertainties many of which are beyond the control of the company.
You are cautioned that such statements are not guarantees of future performance and the day the.
Actual results may differ materially from those projected in the forward looking statements.
In addition, and as of course other call. We may refer to EBITDA adjusted EBITDA, our budget, our adjusted EBITDA margin adjusted free cash flow net debt liquidity or other non-GAAP financial measures.
Refer to todays press release or to our public website for reconciliations of non-GAAP financial measures to the nearest GAAP measure.
And this reconciliations and not a substitute provides financial information prepared in accordance with GAAP and should not be considered within the context of our complete financial results for the period.
In addition to our press release announcement that went out earlier this morning and have posted on our website. We also filed our 10-Q yesterday that's available on our website.
And I'll turn it over to Brady.
Thanks, Leo and good morning, everyone and welcome to the Tetra technologies second quarter 2021 earnings call.
And as you might've seen from our recent press announcements we've had a very busy few months and so I will summarize some highlights for the quarter as well as some additional color on our recent announcements before turning it back over to <unk> to provide some information on cash flow the balance sheet and liquidity.
For the second quarter financials, we grew revenue by 32% sequentially with and adjusted EBITDA of $13 million up 44% sequentially.
You're on your water and flow back grew 53 per cent, well completion, and well completion fluids were down 9% year on year. We finished the quarter with the month of June being the highest revenue and EBITDA for our completion fluids. Since February of 2020, as we saw a material increase and new activity and the latter part of the quarter.
Our strategic equity investments and CSI Compressco and standard lithium continued to contribute as our equity values continue to increase.
Year to date, this is ed and $5.6 million of EBITDA with $1.6 million coming and the second quarter.
While inflation pressures, particularly labor fuel and materials impacted our water and flowback business and the second quarter ahead of our ability to get broad pricing increases and place. We have line of sight to much improved margins for the third quarter supported by 2 recycling projects to new recycling projects are fully deployed same store and Prague.
<unk> and Argentina and pricing agreements for key customers that started in July.
So while the second quarter results were much improved over the first quarter. It is the more recent uptick and our customer activity in June and July as well as the significant number of positive news and our recent announcements that has us optimistic for our future outlook.
Completion fluids and products adjusted EBITDA increased to $6.8 million sequential and inclusive of $1.5 million favorable mark to market adjustment for our investment and standard lithium.
Adjusted EBITDA margins for the quarter were 27, 7%, marking the ninth straight quarter, and a ROE above our 20% target and in line with our previous guidance of EBITDA margins and the mid twenties.
Revenue increased 39% from the first quarter due to the seasonal increase of our northern European industrial chemicals business and stronger offshore completion fluids compared to the first quarter.
We're very pleased to announce that during the month of July we completed our first international CS Neptune fluids job and the North Sea, which was also our first ever high density Monovalent operations.
While this project was considerably smaller than a typical Gulf of Mexico project. It was a significant milestone and highlighting the acceptance of our proprietary technology into new markets and as we've discussed previously most of the North sea applications for Neptune will be smaller jobs with lower fluid volumes than our prior Gulf of Mexico jobs, but want to accept.
And the market, we believe there is potential for higher frequency of jobs.
As a reminder, zinc is banned for use in the north sea, leaving a zinc free solutions, such as C. S Neptune and a strong market position.
Also during the second quarter, we secured 2 deepwater awards, 1 for the Gulf of Mexico, and another for Brazil, which will increase our market share in both markets and gives us continued confidence and the strength of our completion fluids offering.
We call it and the third quarter of last year, and well known independent industry research firm concluded that Tetra quote delivered the best overall value for completion fluids in the Gulf of Mexico on quote.
And the Gulf of Mexico represents some of the most complex deepwater wells and the World. We feel these recent awards help validate this claim.
And we'll see the benefits of the Gulf of Mexico and awards, starting in the third quarter, while the Brazil work will most likely start and the first quarter of 2022.
We also received a major offshore award in Mexico that started in late June and will continue into the third quarter.
This has been our first major completion fluids award and Mexico and over 3 years, and we believe that market will continue to open for our products and services.
With these recent project awards and overall activity improvements and our key international and offshore markets. We are expecting our international and offshore completion fluids sales to increase materially and the second half of the year compared to the first half.
Also with the ongoing success of our northern European Industrial chemicals business, we're moving forward with a relatively small capital investment and our Coca Cola.
Chemicals plant in Finland to increase capacity by over 25 per cent by mid 2022.
The cocoa facility is back at full capacity for several years and this investment will be a first major expansion and that facility and over a decade.
And the decision to increase our capacity was based on strong returns and this business and has been generating and growth opportunities that we see and the market.
The water and flowback services second quarter revenue increased 22% sequentially and adjusted EBITDA increased 123% driven by a rebound in activity from the first quarter that was negatively impacted by the winter storms in February as well.
And in my opening comments inflationary pressures impacted our profitability and the second quarter quicker than we were able to obtain price increases with our customers.
Regarding customers, we've been very fortunate over the years to enjoy a very strong well capitalized customer base comprised largely of the majors and Super major publicly traded companies. This was pointed out by the data that and the first half of 2021.34 per cent of our revenue was derived from large publicly traded operators, but by the end.
And if June comprised only 12 per cent of the U S rig count.
And this market recovery, where clear you're clearly seeing the privately held and independent operators lead this increase and activity.
And we responded well to this change and then the second quarter, we were awarded multiple integrated water management jobs, including 2 new produced water recycling projects from privately held independent operators and we continue to grow our customer base and in fact, as we close out July we're running at or near maximum asset utilization for our water.
I cling water transfer water treatment and our sand management with same store.
The clear priority as pricing that will allow us to generate an acceptable rate of return before we would add new assets to the operations.
Also in the second quarter, we were actively deploying a fleet of sandstorm units for our first ever international sand management contracts to Argentina to meet the deployment dates of these contracts, we put existing assets from our U S operations absorbing mobilization cost and without revenue for the second quarter and Argentina.
However by mid July all of our Argentina assets are and full revenue and our U S fleet has been replenished and the second quarter Sandstorm Capex and we are now operating again and maximum utilization.
And these reasons, we have a good line of sight of continued growth and the third quarter, but with much improved and expanding margins.
Yes.
With regards to a low carbon and energy business initiatives. As you may have seen from our announcement, we've been very active with a lot of new developments all of them, we view as very positive addressed.
Addressing the news release from yesterday first as announced we completed a preliminary technical assessment by an independent geological consulting firm to assess lithium and bromine exploration targets of the company's approximately 31100 net acres O'brien leases and the smack over formation and southwest Arkansas.
We view this report is very positive supporting our expectations.
And that our acreage is very rich and bromine and lithium concentrations as.
As a reminder, with respect to approximately 27005 hundred acres of that total.
Tetra had previously entered into an option agreement with standard lithium whereby standard lithium has the option to acquire lithium rights center lithium must make annual cash payments to tetra to maintain the option to acquire these rights pursuant to the option agreement after standard lithium ministry its commercial production of royalty payment will replace the annual cash payments.
As previously announced by standard lithium this acreage as 890000 tons of LTE equivalent and the inferred resource category and.
And the second quarter standard lithium announced the commencement of work on a preliminary economic assessment on the Tetra leases and standard lithium indicated that assessment is expected to be completed sometime during the third quarter.
To further clarify the scope of the Tetra initiated exploration target assessment as to where the.
The mineral assets wholly owned by Tetra, which includes all of the bromine and approximately all of the 31000 net acres and lithium for the acreage where tetra holds the lithium rights not subject to the standard lithium option.
For bromine and the technical assessment has identified a Brian exploration target estimated to contain between 254 and 858 million tons of elemental bromine and for lithium day exploration target is estimated to contain and 16050.3000 tons of element of lithium using and elemental.
And to lithium carbonate equivalent conversion of 5.3.
And in a mouse to between 85000 and 286000 tons of LTE.
The current market price.
We also use approximately $12000 per tonne and the current market price of bromine has approximately 3174 per ton and the U S and $7882 per ton and China.
These exploratory target estimates and current market prices represent significant potential source of future value to tetra and <unk>.
So with these developments we plan to accelerate our evaluation of a full economic feasibility of these assets.
Related to our bromine initiatives, we continue to evolve the discussions with multiple energy storage companies that utilize zinc bromide as a key part of their electric like chemistry.
Our pure flow of high purity zinc bromide has been qualified by 3 energy storage manufacturers and we've received our first commercial purchase order and well ahead of our year and expectations.
With what we believe to be a multi year recovering oil and gas market with tetra bromine based completion fluids and continuing to grow and market share.
Combined with the forecasted outlook of flow pure flow based on customer projections. It is clear we need to develop plans for considerably more bromine to meet our future growth potential.
Accordingly yesterday, we announced that we executed a memorandum of understanding to work with aunts and resources in Australia and publicly traded minerals company to explore a business relationship for lithium and bromine extraction from their paradox basin, and Brian project and Southern Utah.
Collaboration will include among other things and potential offtake agreement for bromine to meet our growing demand for both oil and gas and energy storage and the potential for tetra to bring our patents and zinc bromide manufacturing process through a licensing arrangement or operational management of the plants.
Finally, I'm excited to announce that after considerable due diligence and successful C. O 2 mineralization to the design specifications and San Antonio Sky cycle plant.
Pilot plant, we have agreed to make a 5 million dollar investment and carbon free and a form of a convertible note.
This will allow us to participate and the equity upside as carbon free continues to make progress in commercializing and sky cycle proprietary technology, and we continue to advance our learn and long term business relationship jointly working on plans to source and provide substantial volumes of calcium chloride.
Carbon free recently announced a strategic engagement with floor, a leading engineering construction company to help management manufacturer at Sky cycle plants and industrial plants around the globe.
And closing overall, we had a solid quarter with sequential improvements and all our segments and with the increased activity, we're seeing for our international and offshore fluids business and continued pricing improvements from water and flowback services. We fully expect this to continue into the second half of the year. Our base business is showing clear signs of improvement and what we believe will be a multi year recovery.
On top of that our multiple low carbon energy opportunities are moving at speeds faster than what we had been anticipating.
Potentially putting us in a position and the near future to communicate to the market the potential revenue EBITDA and cash flow from these initiatives with that I'll turn it over to Alicia I'll provide some additional and then we will open it up for questions.
And you Brady.
And the second quarter, we incurred $4.7 million of nonrecurring charges net charges include $2.7 million of non cash stock warrant fair value adjustment expense.
$714000 of noncash stock appreciation right expense.
$627000 and expenses related to long term compensation.
And $688000 net restructuring and other expenses.
The second quarter also included a $1.6 million gain and mark to market adjustments to the common unit and we own and CSI compressco.
And to the 1.6 million shares that we own and standard lithium.
We will continue to see mark to market adjustments from the equity there William of these 2 publicly traded entities.
The market value of these investments and some of the close of the market yesterday.
Was $17.8 million.
And we do not have any restrictions that might prohibit us from monetizing this holdings and CSI compressco or standard lithium.
From the beginning of the year to the end of June the value of this equity holdings have increased by $5.6 million or 51%.
As you evaluate our balance sheet and.
Liquidity and cash position and 1 must recognize that we have almost $18 million.
Marketable securities available to us to monetize at the appropriate time.
And July the value of these investments increased another $1.8 million does not reflected and the numbers I just mentioned.
Given this our marketable and cleaning this mark to market adjustments in our adjusted EBITDA.
Second quarter adjusted free cash flow from continuing operations and if they use of cash of 4 and a half million dollars.
And compares to $5.4 million of adjusted free cash flow that we generated from continuing operations and the first quarter.
Despite the rapid run up and revenue this year, we our free cash flow positive on a year to date basis.
We saw a buildup in working capital and the second quarter, mainly accounts receivable and towards the end of the quarter.
To give you some perspective.
Revenue in the month of June was 25% higher and then.
And the month of April.
We have reduced our term loan by $36.3 million from $220 million and September 32020.
$284 million as of June 32021, and.
And have reduced it by another $8.2 million in July.
This reduction of 44, and a half million dollars and the recent months will save us approximately $3.2 million of cash interest expense per year on an annualized basis.
In July we amended our ABL.
Extending the maturity by over 2 years to May 2025, and increase our availability on our ABL by approximately $9.4000.
In the next month, we expect to further increase the availability is part of the amendment pending and post closing and requirements.
With this amendment, we did not have any maturities until may 2025.
Other than and potential payments on the term loan based on excess free cash flow.
Total debt outstanding was $171.8 million at the end of June before the $8.2 million Paydown and July while net debt was $121.4 million.
Again, all of this is excluded excluding the value of our investments and CSI Compressco and standard lithium.
Liquidity at the end of the second quarter with ADT Millen.
And we define liquidity as unrestricted cash available.
Plus borrowing under the revolving credit facility.
And again this is before the ABL amendment that increased our borrowing base by $9.4 million.
And before the $8.2 million dollar further pay down and I just mentioned.
At the end of the second quarter, we had unrestricted cash of $53 million available under our credit facility was 31.7.
Brady mentioned earlier that we're making an investment to increase capacity and our cocoa facility. We do not expect this capex to be significant.
And our calcium chloride production operations and northern Europe consistently produce predictable steady cash streams to tetra.
Also last week, we received a $547000 payment from Spartan for the sale of our controlling interest and CSI Compressco earlier this year.
This payment was scheduled and the 6 month anniversary of the transaction.
We have an additional payment due to tetra in 2022 of $3.1 million from Spartan upon the attainment of CSI compressco, achieving a trailing 12 month EBITDA.
$107 million and after the refinancing other notes due in 2020.2.
And also Brady mentioned earlier that we had agreed to make a $5 million investment and carbine fleet. We expect this payment to be made before the end of the third quarter of this year.
This provides us an opportunity to participate in the equity upside as they commercialize their sky Sky cycle carbon capture technology. In addition to providing territory and opportunity to potentially sell significant volumes of calcium chloride jointly.
Jointly developed that with currency.
And finally consistent with what we have been communicating on June 25th we were added back to the Russell 2000, and we have since then and a positive impact to our stock price. We welcome all our new stock holders many of which were previously stockholders.
Including the passive index space holders and taking positions and tetra.
I encourage you to read our press release that we issued yesterday and the 10-Q that we filed last night for all the supporting details and additional financial and operational metrics.
Kate with that we'll open it up for questions.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone zone. If you are using a speakerphone. Please pick up your handset before pressing the keys to withdraw from the question queue. Please press Star then 2.
The first question is from Stephen <unk> of Stifel. Please go ahead.
Thanks, and good morning, gentlemen.
Good morning.
I have a few things if you don't mind and.
What I would like to start with you.
You talked about.
The.
Expectations are both I guess fluids, and and water and flow back for the second half of the year and you and.
And I think particularly on the on the water and.
And flow back margin front.
And you expect a pretty good step up but can you give us.
A sense maybe.
And maybe with maybe with a range around it on the other.
Kinds of revenue and margin expansion, you expect and a third and fourth quarters and I know you don't like to give precise guidance, but.
It just seems like there's a lot of moving pieces here that are.
Impacted the second quarter and should have positive impacts on the third and can you help with some parameters around those 2 segments.
Sure.
And we do have some pretty good line of sight of the third quarter what.
What we see and from water and flow back is again.
Double digit growth for our water and flowback business and <unk> and the third quarter over the second quarter and.
And we also feel potentially doubling or close to doubling the EBITDA margins from from where we ended Q2 and what we see and Q3 again a lot of moving parts associated with that that we had spoken about but we feel fairly confident in that and that range for the third quarter.
Hold off on the fourth quarter for now, but but we think we'll continue to make progress as we go through the year.
On the completion fluid side, we talked about the 2 of the 2 awards that we've had for the Gulf of Mexico Award, we will definitely see material impact and our positive impact for us and Q3 and Q4.
For the rest of this year and throughout the 3 year period.
Brazil Award will most likely not see and impact until Q1 of next year.
But I can tell you that the the Gulf of Mexico Award plus the increased and activity that we see for our completion fluids business.
Combined we will overcome the reduction that we will see and our seasonality from Europe as we go through the rest of the year if that helps.
Yeah.
That does help and speaking to that seasonality, whereas the second quarter, a normal sort of European chemicals quarter or was it was it was there anything cause.
And the margins look pretty good day.
Yeah, we've done a lot to improve our profitability and margins and that business, Steven and so it was pretty much a normal quarter.
Our Q2, our European business.
Great. Thank you.
The other thing I was I was curious about and.
And I know, we spoke a little bit about this when we were together recently, but when you think about what you announced and the release last night and.
When I think about the timing of some of the low carb and initiatives and how they sort of unfold.
Unfold on the income statement over the next <unk>.
Several quarters to a couple of years can you give us any any guidance on how we should think about that.
The 3 main components of the low carbon initiatives.
Sure.
And we will speak to them and in general terms, we're not we're not prepared to give any.
And specific guidance on revenue or EBITDA at this point, we hope to be able to do that shortly.
But in general terms, we'll we'll walk through that I think it is important to note that the standard lithium agreement.
Seeing meaningful benefit to that today, and we will continue to see.
We've accumulated a 1.6 million shares at yesterday's close price, that's and $11 million value to tetra over the next 3 years, we have the potential to acquire another $1.8 million shares. If we just take that that closed price yesterday, that's another 12, and a half million dollars of value plus the million 1.
And $1.2 million and cash we get for the next 3 years. That's another 3.6 so if I if I add up what we've already accumulated and what we see over the next 3 years, assuming it takes standard lithium that amount of time to get ready for production.
And about up to $28 million of potential value to tetra before they start producing lithium.
And then of course, when they start producing lithium those numbers escalate meaningfully.
On the on the pure flow side, that's the advanced as we've mentioned now and to cause much quicker than we've anticipated it would.
We believe talking to the energy storage companies based on their demands that we will see a meaningful and material orders start to come in and Q1 of 2022.
And again that could be very material to us for our business in 2022 and carried into 2023 with additional ramp.
It's at that point that we will really need to have secured additional bromine supply, which is why we've announced the strategic opportunities both with our own leases mineral leases and Arkansas as well as the agreement with anthem.
As we get to that 2023 period, we will clearly need.
That additional bromine supply our plant capacity still has capacity to build you know.
And well above that but the actual bromine itself is where we will need the additional capacity.
And then as we look at carbon free.
Demonstrated the pilot plant to the specifications and they've selected floor as they're a contractor.
We expect them to be signing the first plant construction project.
Between now and the end of the year.
And with potential startup operations by the end of next year or the first quarter of 2023.
And again, if as that rollout plan.
Looking forward if theyre successful as we fully expect that they will because of the unique solution that they offer.
And within the next 2 to 3 years after that our calcium chloride production and sales could could double.
So again, a material types of opportunities for us.
As these low carbon energy projects play out and CEVA and add a couple of data points that I think are relevant number 1 and now we have communicated previously that <unk>.
We produce and sell about $100 million of revenue from calcium chloride. So that'll give you some context to brady's earlier comment.
And then also what other things and talking to investors that I think is still not fully understood and appreciated is.
In Arkansas, we got leased acreage.
Not all of it is under the standard lithium agreement and the press release that we issued yesterday morning indicated that we've got between 85000 and 286000.
<unk> of lithium carbonate equivalent outside the standard lithium agreement of which Tetra owns a 100 per cent of those rights that we could mine and sell into the future and a 12005 hundred a tonne that's.
Significant value that I think is not understood are yet fully appreciate it.
Okay, Great. That's very helpful I'll get I'll get back in line. Thank you.
The next question is from Samantha Hoh of Evercore ISI. Please go ahead.
Hey, guys and.
Thanks for providing the EBITDA margin guidance on the volume for that segment Brady.
And maybe asked another way and I'm just wondering what the impact.
And you know from moving some of your assets from <unk> and the sensors from sites.
And Tina.
And your cheek here, if you have that handy.
Just impact your revenue and EBITDA margin.
But the main impact Samantha was obviously followed the equivalent was in transit and then clearing customs and getting set up with their customers and that lead.
And last about 2 months of revenue.
For a significant number of units and then backfill those units.
And we believe that for the month.
For the quarter third quarter, we will have all of those units back and full production.
Okay, Great and then just.
And I loved it and lender.
And thanks, I mean, Oh, Okay, and so you got your first order and the Bulks.
Steve mechanics in terms of getting that from L. D.
We have that yeah, some inventory and that available that you can actually just start delivering on that range.
And time.
Alright lag before you see that hitting revenue.
Thanks, Samantha So you know the first order was significant because first it confirms the technical qualification of our pure flow for their energy storage systems and it also sets a benchmark commercial terms for delivery.
We're pleased with.
And as obviously at this point just a bit of a smaller order to get things started and into both of our systems.
But it sets.
And that's where we think we will be as the as they ramp up their larger order quantities, starting and what we believe at this point will be the first quarter of next year and.
<unk> adjusted.
Make sure that it's understood and appreciate it the day, we produce and sell significant volumes of zinc bromide into the oil and gas sector.
The benefit that we have is that we apply our patented process to take that zinc bromide and converted into pure flow to meet some of the immediate opportunity.
And do you have to change the chemistry, where and tried to different customers.
No. We don't expect the chemistry will change there there is a change and the purity level as the Lille highlighted between what we supply to the oil and gas market and what we supply to the energy storage and the energy storage specifications for purity are significantly higher than what's required for oil and gas.
Okay and for the carbon free and that.
And how does that change the.
Discussion around D and O U.
And you guys still think that Youll have terms.
And of the year.
Yeah, we do that the collaboration with carbon free as it is excellent.
The Mou set some some kind of guidelines and parameters that we would work towards and some general concepts of what we want to work towards and I would say other collaborations at this point.
And working with carbon free understanding their specifications understanding their volumes.
On the Tetra side, making sure we are.
And source of the volumes of calcium chloride and they're gonna be provided and various places around the world to our specification so their specifications.
As all working very well so we would we would fully expect the way things are progressing to have a definitive agreement in place certainly before the end of the year.
And then maybe just to stay on and your energy topics and tried to share.
And then lift game piece or even actually on the Arkansas reserves and which.
The next step in terms and you know.
And your.
And.
But you have and what it would take true chassis and develop them yourself right right. So you'll notice. It was the exploration target estimates that were provided the next step for US based on these results as we will go ahead and move to an inferred resource.
Effort with the the geological company that we have.
Deployed that's going to require some sampling of some of the fluids and and the wells and our leases so be a little bit of time involved with that but not extensive.
And then.
They will execute the inferred resource report for both the bromine and our leases as well as the lithium and the leases that we have outside of the standard lithium agreement and I recall that.
Within the standard lithium agreement for the acreage that they have they've already completed.
Hey, inferred resource report, which is the 890000 tons of lithium of step substantial.
Amount of lithium.
And they are moving into the economic feasibility study, which we expect to have and the third quarter. So there are a little bit ahead of us.
At least in terms of progressing down that development path, but we're excited to see them moving.
You know sooner rather than certainly the agreement would expire.
Okay, Great and maybe just 1 final 1 and.
And the calcium chloride plant expansion and gentlemen, and.
You said that it was very small Kathryn that's net.
And can we assume that your Capex day at about this magazine and you have to include that and then and what you have that incremental capacity.
Available in time for next summer.
Right.
Capex will not be significant it will be spread between this year and next year.
And we expect to have that fully operational by about this time next year to be able to participate and the peak season and the subsequent year.
So it's not going to be I'm going to move the needle on the Cape export Tetra.
And we will see it and really poor and.
And then in 'twenty 3 numbers.
Alright.
Thank you so much guys.
Samantha.
And next question is a follow up from Stephens, Inc. Garro of Stifel. Please go ahead.
Thanks.
2 more if you don't mind 1 is.
And I know you referenced it a bit but how should we think about free cash generation and the back half of the year and and going forward just kind of based on.
And the different moving pieces.
And I know that.
Working capital has been a bit of a drain year to date I think I know receivables are up but how do we think about that.
So as Stephen and Brady mentioned with the awards and the offshore side and some of the opportunities that we've got in terms of pricing on the onshore site, we expect EBITDA to continue to ramp up.
During the year.
And then depending on the rate of growth if activity continues to spike all the way until the end of the year and December remains strong we might not have an opportunity to monetize all of that before we close December.
Is it full stack pulls back modestly and December that's occurred in prior years, it'll allow us to monetize some of that.
So some of it will depend on the speed of the ramp up and that time and at the end of the year to determine the magnitude of how much of that are weak and monetize we have demonstrated that we can invoice timely collect quickly.
Very strong customer base out there that doesn't per cent concerns from our site. So it really depends on the speed of the uptick and activity.
Okay, Thanks, and when you.
When we think and I'm going back to the fluids margins here I know, but when we think about.
The prior quarter's when you'd have CS Neptune jobs, you'd obviously have these these.
These sharp rises in and margins per quarter and I know the job that you referenced that you completed in July wasn't of that magnitude and I know I think these deepwater projects that you've announced and Brazil and the Gulf are.
All are bit different but we see.
A meaningful jump in fluids margins.
Be sustained here over the next year plus because of these deepwater contracts.
Yes, so I think for the quarter we reported.
$27, 7 almost 28% EBITDA margins.
Our guidance really Steve and at this point is to certainly maintain over our target of 25% EBITDA margin.
We could see some spikes where world over our Q2 numbers of 27, 7%.
But we wont see until we deliver some other Gulf of Mexico, Wells, which right now and the schedule looks like more 2022.
Don't see that jumped to mid thirties.
We've seen and prior large Neptune type of jobs.
Okay Alright.
We're still thinking mid twenties, plus ish and the back half of the year, and then and maybe improvement from there based on the timing of Iris.
And the Gulf I felt the Gulf Wars, and we're gonna start helping in the third quarter.
I don't believe we committed any Neptune jobs for the year, we had visibility of a couple of projects, Steven but but at this point.
I would say first quarter of next year is most likely for.
The Gulf of Mexico, Neptune opportunities, okay, but but but.
The Gulf Deepwater project that you Joseph awarded does help is just not is it just not as eye opening of op margin impact and it's not a net 3 GAAP, yeah, I'm, sorry, I haven't clarified and I was speaking about Neptune specific got it.
Such a big impact on our margins, we will definitely see and we're already seeing the impact of the awards and the Gulf of Mexico, and our Q3, and Q4 results, which will which will maintain our mid twenties type type EBITDA numbers.
Okay, and then 1 more and I'm not sure if you're willing to take a shot at this or not but.
And if you and.
And you give or take you do $50 million plus issued EBITDA and adjusted EBITDA This year and Im.
And that's kind of based on my model, but we're still working on that but net net if you use that as a as a reference point.
In 'twenty 'twenty 4.
Could these new carbon initiatives match that.
Potential I E.
If everything else stayed the same could EBITDA double just based on them.
Sure.
And my way off is that reasonable or is that too low.
So Steven let me reiterate a couple of data points that I think Brady made that are important he indicated that if the low carbon initiatives with carbon and we take off and we can double.
Our calcium chloride profitability.
You can see that we've been generating consistently mid 20% type EBITDA margins and our fluids business and and the path. We've indicated that the calcium chloride business is in that ballpark, that's a significant step up.
He also advocate.
2 the opportunity to gain value from the standard lithium agreement.
And then the opportunity to sell quite a bit of pure flow into the battery storage market there.
And there so I think when you add up all of those collectively there's a significant opportunity there for us.
Yes.
I would agree with that.
And the pure flow projections right now.
<unk> will be pretty material by 2024.
I think it would be hard pressed to say, we're actually getting any lithium royalties by 2024, although its although its possible, but the main 2 components that will be we think will be contributing pretty meaningfully will be carbon free.
And pure flow by 2024, we have a model.
And all the numbers yet from our forecast and we're not.
I'm not prepared to.
And with lay those out yet, but I don't think you're too far off what's possible and I have.
And it's a long way out it does help you.
You you've given a lot of a lot of good color around and so that's very helpful.
Okay. Thank you alright.
Alright, thank you.
Yeah.
Okay.
Okay and if you have a question. Please press Star then 1.
There are no other questions at this time. This concludes our question and answer session I would like to turn the conference back over to Mr. Murphy for closing remarks.
Thank you Kate we appreciate everyone's attention and interest and Tetra.
And for now we will close the call. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.