Q4 2022 Tetra Technologies Inc Earnings Call
Good morning, and welcome to Tetra technologies fourth quarter 2022 results conference call.
Your speakers for today's call are Brady Murphy, Chief Executive Officer, and Terry Serrano.
After todays presentation, there will be an opportunity to ask question to ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please.
I will now turn the conference over to Mr. Serrano. Please go ahead Sir.
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.
These statements are subject to several 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 that actual results may differ materially from those projected in the forward looking statements.
In addition in the course of the call we may refer to EBITDA adjusted EBITDA adjusted EBITDA gross margins free cash flow net debt.
Net leverage ratio liquidity or other non-GAAP financial measures.
Please refer to yesterday's press release or to our public website for reconciliations of this non-GAAP financial measures.
Okay, I'll turn it over to you.
Thanks, Alicia good morning, everyone and welcome to Tetra as fourth quarter of 2022 earnings call I'll summarize some highlights for the fourth quarter comment on the current outlook as well as provide an update on our strategic initiatives before turning it back to you to discuss cash flow working capital on the balance sheet liquidity and add some color to the SK <unk>.
Second 19, economic economic analysis that we issued last night.
We closed out a strong year in 2022 with a strong fourth quarter growing revenue sequentially, 9% over the third quarter and 42% for the full year over 2021.
Adjusted EBITDA of $20 3 million increased from $18 6 million in the third quarter and for the full year, excluding mark to market gains in 2021, our adjusted EBITDA for 2022 more than doubled increasing by 112% over 2021.
With almost a 30% fall through on incremental EBITDA to incremental revenue.
Despite some headwinds during the fourth quarter that we mentioned on our last quarterly call, including the postponement of pure flow order orders and the need to purchase additional bromine at spot market prices, we more than overcame these challenges by capturing multiple high margin completion fluids sales at an increasingly and strengthening offshore market for the combined markets.
The Gulf of Mexico, and our international offshore businesses, we increased quarterly sequential revenue by 20% and more than 50% year on year.
The completion of our first UK Neptune job, along with continued improvements to the disrupted supply chain for our European chemicals business contributed to our successful Q4 results were scheduled for another north Sea Neptune job in the second quarter. This time in Norway.
As a result of the offshore deepwater market concentration over the past eight years certain oilfield services segments already in a tight supply situation. This well Raj that energy services is projecting a 25% increase in deepwater floater rigs by 2025.
In the fourth quarter, we took steps to further strengthen and expand our offshore completion fluids business with two key investments with the acquisition of the North Sea completion fluids business and acquiring new parks completion fluids inventory and deepwater base and Port Fushun, Louisiana servicing the Gulf of Mexico. These.
These investments will increase such as fluid capacity by 70% in the UK sector of the North sea and by almost 15% in deepwater Gulf of Mexico operations.
Both operations contributed financially upon close and approximately 40% of the acquired New Park inventory has already been sold.
The segment results for completion fluids in products' fourth quarter 2022 revenue of $66 million increase from the third quarter of 2022 by 12% adjusted EBITDA of $16 million increased $1 $3 million sequentially, while adjusted EBITDA margins improved by 40 basis points sequentially, when excluding unrealized gains and losses from <unk>.
Both periods.
Shifting to our water and flowback segment revenues of 81 million grew 52% year on year, and 7% quarter on quarter and a flat to slightly down active frac fleet market in the fourth quarter somewhat due to yearend weather.
This marks the seventh consecutive quarter of sequential revenue increases and the highest quarterly revenue since the second quarter of 2018.
Adjusted EBITDA of $12 1 million improved by $5 2 million or 75% year on year, although adjusted fourth quarter EBITDA margins of 14, 9% fell slightly from Q3, mainly due to a mix of lower margin services.
For the full year water and flowback revenue for 2022 grew by 66% and adjusted EBITDA increased by 191% for a fall through of slightly over 25%.
We achieved our target set for 2022, a 15% adjusted EBITDA margin with adjusted EBITDA of $43 4 million or 15, 5% of revenue.
Growth was driven by capital investments made in technology to expand our fleet et cetera, sandstorms through international expansion from the deployment of the early production facilities in Argentina, and leveraging our investments in automation by reducing operations personnel at the job site.
We expect adjusted EBITDA margins to rebound in the first quarter and beyond for the full year of 2023.
International contribution is also expected to increase in 2023 as we bring online an additional EPS in Argentina in the second quarter to.
For 2023, we will continue to Opportunistically invest in new capital projects with short term returns, but our focus will be on EBITDA margin expansion and cash generation unless all new growth as we've achieved over the last couple of years.
As previously announced in December were very pleased with our results with the results of our first field pilot project for desalination of produced water for beneficial reuse in Texas for a major oil and gas operator.
The results yielded as high as 92% decile of the native water from the produced water with total dissolved solids.
Finally in the fourth quarter, we continued to advance our strategic initiatives, including the technical and financial analysis for the development of our bromine and lithium brine resources in the smack over formation in southwest, Arkansas, We issued a press release yesterday announcing the progress on our bromine project within SK <unk> Hundred's section 19 rich.
Available now on our website for review.
Our current long term bromine supply agreement has plenty of runway. So we will be very methodical about our evaluation and investment decision.
As a reminder, the inferred resource report provides estimates for both bromine and lithium within our targeted 5000 acres and although our SK <unk> hundred section 19 report focuses on bromine, 35% of the estimated project Capex in our section 19 report would be for wells and pipelines for Brian production that would.
Proposed bromine plant as part of the Hartgrove feed study will initially support 45% to 50% more volume than our current long term supply agreement.
However, the bromine tower itself is designed to accommodate up to 150% of our current supply agreement.
Although methodical on our evaluation, we are committed to putting up the right effort and resources to fully explore the significant opportunity.
Finally progress of our Woodlands, Texas R&D Center continues on lithium extraction technology as we're establishing pilot units to address each stage of the process, starting with our raw smack over Brian from a well in Arkansas to successfully producing lithium carbonate, which we've already demonstrated at lab scale, we will continue to <unk>.
Indicate our progress as this work advances.
With that I'll turn it over to Leo to provide some additional commentary then we'll open it up for some questions. Thank you Brady.
Cash from operating activities was a use of $7 million in the fourth quarter.
While adjusted free cash flow from continuing operations, let's say use of $14 million in the quarter.
Accounts receivable increased by $24 million from the end of the third quarter to the end of the fourth quarter.
Reflecting the strong ramp up in activity by the end of the quarter RASM by some large fluid sales in December it's really previously mentioned.
Working capital at the end of the year was $101 million and compares to 87 and a half billion dollars. It ended the third quarter.
Working capital consumed $18 $8 million of cash in the fourth quarter as compared to a use of cash up $8 $6 million in the third quarter.
Capital expenditures were $7 $2 million and compared to $12 million in the third quarter.
Total year capital expenditures were $38 million and reflect the investments made with quick payback investments such as our Tetra Sandstorm then filtration technology.
And to strengthen our long term position in international and offshore markets through the investment in early production facilities in Argentina.
And increased capacity for offshore completion fluids business.
The payback on this on the SaaS storms and the early production facilities was very evident if our quarterly EBITDA margin increased materially in the second half of the year compared to the first half of 2022.
These combinations will result in significant free cash flow generation in 2023.
Capital expenditures in 2023, Arctic I expect it to be below what we expended in 2022.
As of yesterday liquidity had improved by the end of the year by $10 million to $95 million with no borrowings under our existing asset base lending facility.
Long term debt with a September 2025 maturity.
$756 million, while net debt of $143 million.
Outstanding borrowings under our term loan had been reduced by over $57 million from 220 million September 32020.
In addition to the liquidity and cash I mentioned earlier, we are holding some significant marketable securities where our COO.
We expect to receive another 400000 shares had made.
And our investment in carbon free is currently valued at approximately $6 million.
We called it in late 2021, we sold the one 6 million shares that we had accumulated and standard lithium is slightly under $11 per share.
Generating almost $18 million of cash proceeds.
Also as a reminder, we have accumulated approximately $411 million.
In addition to the 411 involves our federal net operating loss carry forwards.
We also have significant state income tax loss carry forwards and some international tax loss carryforwards.
This will become very important as we continue to improve our profitability, allowing a higher conversion of net income to cash flow.
These tax loss carry forwards will also be available to us as we look for profits from our Arkansas bromine and lithium investments in the future.
Like not to spend a few minutes on the other press release that we issued last night.
Brady mentioned that some of the work that we have been focused upon using a significant amount of internal and external resources have been accomplished.
We are taking a very methodical and measured process to assess our Arkansas assets.
I want to be sure that our investor base fully understands this process as there are no imminent significant investments to be made.
We will aim to be very transparent as we go through the various gates.
We previously announced that we had completed any FERC resource study the estimated the potential amount of bromine and lithium on our leased acreage.
An inferred resource is one that is based on limited sampling.
Samples might include data that is publicly available.
Previous geological map and well data from the surrounding area allow for reasonable assumptions about the size and scope of this resource.
We drilled a test well in 2022 that allowed us to capture incremental data points.
Other than to make some expenditures to further assess this asset we would not make any significant investment decisions simply on the basis of any FERC resource study.
One step up from an inferred resource is an indicated resource study.
Or the quantity, great and quality shape size and continue with the <unk> can be more continental reported.
Then the next step is a major measured resource. This represents the highest level of geological knowledge and confidence in our resource.
At this stage the resource characteristics are well established as detailed and reliable exploration work.
My name and production planning can give more detailed estimate of economic viability.
The economic analysis, we published in our website yesterday from the inferred resource analysis.
From the reservoir modeling that we have done.
From a front end engineering design study, we did with a third party engineering firm.
The economics are preliminary and there is no certainty that the economics contained in that report will be realized.
However, the outcome of such that it gives us confidence to invest approximately $5 million to get to the next stage inclusive of the second test well and further economic assessments.
Note that the stages that I just mentioned all arrive at estimated resource each with a greater degree of confidence and each with incremental data points.
To move from resources to reserves.
To move from resources to reserves, we now need to do further engineering and economic assessment to demonstrate that we can take this one resources.
And commercialize them successfully.
Inferred mineral resources are considered to have the lowest level of geological confidence about mineral resources inferred.
Mineral resources have a high degree of uncertainty as their existence.
And two whether they can be economically or legally commercialized.
The difference between a resource and a reserve it comes down to a feasibility study.
It takes into account non geological factors. These include technical factors, which include extract into Bryan and processing the bromine.
This also includes additional economic planning such as a detailed engineering design and the environmental and permitting analysis.
Our reserve.
Defined as proven when economic extraction is justified.
Our next step is together incremental data points to move from inferred to indicated and to complete a feasibility study this will take several months.
From an economic point of view placebo, they invest many wells pipelines and a processing plant.
The fact that links us into all of them already are doing exactly what we are evaluating because it gives us confidence that we are likely to have that successful project, if and when we make a decision to move forward.
And as a reminder, the processing knowledge hasn't been in practice for many years.
And no new technologies or processes need to be developed to accomplish what we're after.
The feed study, we completed with the engineering firm estimated that the cost of the wells the source of Brian .
The pipeline and construct the Brian to bromine processing facility could be approximately $280 million.
Inclusive of $35 million of contingencies.
And inclusive of an estimated $20 million of work to allow us to upsize the facility in the future for potentially higher volumes of bromine processing.
And as Brady mentioned earlier, the $99 million identified poor wells and pipelines to.
To extract and well move to Brian can also be used for lithium in the future.
Investments to lay the groundwork to increase production in the future.
And as well as in pipeline that can leverage future.
Future lithium project production.
The bromine plant as we mentioned in our press release has a multipurpose focus.
The first is to increase the amount of cost effective bromine available to tetra above the volume is currently available to us from a long term agreement to address and expect that multiyear growth in the offshore oil and gas market, assuming commodity prices remain relatively constant.
Tetra is already experiencing an increase in demand that exceeds volume available under long term supply agreement.
The second is to address emerging demand for zinc bromide based battery storage.
Which may be significant daedalus pufahl customers are successfully ramping up their operations.
The third is to reduce debt just dependents and offer hope their market purchased third party purchases of bromine.
Producing bromine potentially materially lower production costs.
And the fourth and final objective will be to control our own supply chain for the longer term and beyond the life of our current multi year agreement, we still have several years to go.
We also mentioned that we have engaged an investment banking firm to help us identify potential strategic partners shall we make the decision to potentially proceed after completing an indicated resource study with a feasibility study to move from resources to reserves.
At this point, we have not made a decision to proceed with this investment the economics based on preliminary work look attractive for us only to move to the next phase of analysis and to reach out to identify potential partners.
The decision to partner with someone will be based on whether we identify potential partners with the structure. We believe is appropriate for tetra and our investors.
Given that the size of the investment required and realizing we will not put too much leverage on Texas balance sheet, we believe identifying potential strategic partners will be the best path forward.
We are also in preliminary discussions with the department of energy discussing opportunities for loans and grants for our bromine project.
The final item I'd like to add is that we'll be participating at the Scotia Howard Weil Conference next Tuesday, hosting one on ones and making the presentation Tuesday afternoon, they will be webcast.
If you'd like to participate please.
Talk to me or legal.
Again, I encourage everyone to read our news release that we issued yesterday.
Please call me, if you would like to discuss any of these items further.
Turning it back over to Brady for closing comments.
Thank you Alicia.
<unk> 2022, not only that our base business performed very well, but we've also made significant investments in our business to expand our earnings base in the coming years over the last several quarters, we've nearly doubled our fleet of Tetra Sandstorm advanced cyclone technology, which remain at a very high utilization.
<unk> also invested in international markets due to the deployment of EPS as well as our completion fluids business expansion.
And we have invested to boost our capacity in the Gulf of Mexico to support increasing deepwater activity will.
While increased offshore activity is already contributing very meaningful meaningfully to our earnings.
<unk> upside remains with deepwater projects do Rcs Neptune offering.
As Leo mentioned, we expect to achieve strong growth in 'twenty three over 2022 that coupled with our focus on margin expansion and cash generation should drive meaningful cash flow generation in 2023.
We're excited and committed to fully evaluating the Arkansas, Brian resource and we'll continue to communicate updates as appropriate.
That will open it up to questions.
Thank you we will now begin the question and answer a question to ask a question you May Press Star then one on your Touchtone phone if.
If youre using a speakerphone please pick up your handset before pressing the key.
Covid John Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question comes from Martin Malloy with Johnson Rice. Please go ahead.
Yeah. Good morning, I wanted to ask you about the.
Offshore completion fluids market and it certainly seems like there's a.
Inflection point here and activity going on could you maybe talk about the pipeline and the visibility.
As you talk with customers and maybe in particular on the Neptune product.
Yeah, Martin So as we mentioned we covered our first UK Neptune job. We've previously performed that some job both in the Gulf of Mexico and in Norway.
We have another Norway project that we plan to be executing in the second quarter.
And really our objective has been to get.
Projects.
In our business as opposed to the Lumpiness that we've seen in the past and I think we're getting some traction with that certainly in the north sea.
And I think we expect to have more repetitive jobs.
In the North Sea business the Gulf of Mexico. Obviously these are these are much larger projects. Those four pipelines. We're we're very engaged with our customers on those projects, but we may see.
Some projects come forward in the.
Before the end of this year, but it's more and more likely that we won't see a meaningful uptick in our Neptune opportunities until we get into 'twenty four and beyond.
Great. Thank you and my second question wanted to ask about pure flow.
And.
Ability to ramp up assuming that your customers.
We're able to increase capacity and throughput and get the.
Government funding.
They're looking for could you maybe talk about your ability to ramp pure flow in any additional capex would be required.
Yeah, more nor our ability to.
Ramp up production of pure flow through our west Memphis facility, we need we need very little to no capital at our West Memphis production facility.
We have plenty of capacity at that plant.
The issue really for pure flow longer term.
As.
The ramp up in energy storage, if our customers are successful as you noted and ramping up the demand levels.
We're pretty dramatically exceed.
Our current supply agreement for bromine, which is one of the reasons why we're looking so carefully at our Arkansas project and the timing of that Arkansas project as it relates to the success potential success of our of our pure flow customers because the.
If they are successful based on the demand.
Opportunities that or are there it will have a meaningful impact to the to the bromine market.
Okay.
The next question comes from Stephen <unk> with Stifel. Please go ahead.
Thanks, and good morning, everybody.
Good morning.
Two things from me and pardon if you hear background noise, because ethanol lobbies herself, so I'm sorry about that.
When we think about the.
The quarter was obviously very good on the top line and I was.
Think about the progression going forward.
Was there anything in the quarter that I should be kind of contemplating as they think about sequential performance in.
In the first quarter 2023.
And maybe in addition to that how should we think about.
The water and flowback business, yes.
Given sort of a plateauing in north American activity right now.
Yes, Steve I'll cover the water and flowback first we'd mentioned we've had significant growth.
In this business for us quite frankly, the pace of growth that we achieved in 2022, well well exceeded.
The market.
When you grow like that.
You typically take on some some costs and it's difficult to be as efficient as you would like to be with your business and that caught up a little bit with us in the fourth quarter. Some of it was a mix issue, where we dropped slightly on our.
On our margins, but we fully see a rebound to back to increasing.
Margins as we go forward in Q1.
I think from a margin expectation, we would build on the second half of the margins for our water and flow business.
Activity that you saw.
So we feel pretty good about that as well as getting additional contribution from international, particularly Argentina as.
At the end of the second quarter started the third quarter.
So we fully expect to grow in 2023 basis of the investments that we made in 2022 contributions from international but also get back to expanding our margins.
As we have them.
Youll probably.
With the completion fluid side of the business in Q1 that then when the market remains strong there is always a little bit more lumpiness in larger projects that come and go on the completion fluid side, but we are we.
We feel extremely well positioned to take advantage of this market as we go through the full year of 2023 and there is nothing exceptional.
Exceptional about this that the Q1.
Relative to our Q4 that I've that I would note we do plan.
To ramp up in our typical second quarter with our TCE European chemicals business.
That business has recovered very nicely not back to 100% yet due to the supply chain disruption that we had but we are well on our way to getting back to that just in time for our second quarter ramp.
Thank you and then.
Two other things one one pretty straightforward do you think.
The target for $100 million of EBITDA in 'twenty three is reasonable.
But not your target the street targets I mean is that in the ballpark do you think.
So Martin we're going to refrain from providing I'm sorry.
I will refrain from providing full year guidance, we believe that there are still too many economic factors that moved.
Around that aren't predictable such as the recent drop in the price of gas.
It's out there so we won't be commenting I'm told in your guidance.
Okay.
Thanks, Tom and then one.
When we think about.
Your opportunities and obviously.
You have a couple of really exciting things going on right now.
If we're sitting down.
24 months.
Where would you where do you see the company like what do you think are the biggest.
Key drivers of earnings and how do you what do you envision protest for two years down the road.
Yeah, Stephen I think you know.
We're very pleased with the current position of our two business segments, I think are water and flowback business, even though frac activity may have have plateaued. Some we still have a.
Considerable growth opportunities on the produced water side, particularly with our desalination and beneficial reuse and mineral extraction I think that's a whole a whole new market that no one.
You know is is benefiting from today.
We think we have a really.
Good leadership position.
In that space too.
Benefit from whether its 24 months, whether it's 48 months that will be mainly to be determined but the opportunities are there and we feel good about our ability to lead in that effort.
On a completion fluid side as I've said I think were the early stages of a really strong offshore market.
Our Neptune projects will be hitting with a higher cadence certainly in that period of time.
And I'm hopeful that our Arkansas project will be fully evaluated.
And we will have met the criteria that we've listed as to move forward with that project, which.
If we're successful with that and that projects approved we'll be somewhat game changing for the company.
Thank you I'll get back in line.
The next question comes from Tim Marvin.
Please go ahead.
Thanks, and it was nice to see the detailed preliminary economic assessment on the bromine project.
My first question.
I mean, how should we think about free cash flow generation possibilities are for this year that you could you won't have as much working capital drain or capital expenditures as you lap the Latin America projects.
But maybe you could have a little bit more calcium chloride supply buildup.
Just kind of wondering you know is 30 million free cash flow in the realm of possibility given all the puts and takes.
So we expect EBITDA of 23 to be above 24, we expect capital expenditures to be lower 23 versus <unk> 22.
Well, we will be pleased to see a spike in year end activity.
At the end of 'twenty to me like we saw at the end of 'twenty. Two we don't think that's going to happen. So we think.
<unk> capital being neutral at worst case a positive.
Best case, so we expect that we will be strongly free cash flow positive in 2023.
Good.
Paul.
Could you give us any rough sense of maybe how much lower your cost of bromine could be after the project time, you know I don't know a year out after it's Christian.
Operating well compared to your supply now I mean are we talking like a 30% savings.
Yeah, Tim we for competitive reasons, we're not giving the specifics on that.
Hopefully you can tell from the financial information that we included in our economic assessment.
What the what the profitability of the project could be if we're successful, but we're not we're not giving specific details on bromine COO.
<unk> or purchase prices that we pay.
Understood.
To try but.
I heard I heard your comments earlier.
Does it really he has mentioned.
Maybe I misunderstood. This did you expect to spend 5 million more for kind of a second speeds drilling and any sense of maybe what your exploration and pre development costs could be this year and I believe they were $6 6 million.
Last year.
Yes, so we're going to drill an exploration well, that's probably going to run into two and a half.
The $3 million range, but we have some other efforts that we plan to kick off this year potentially a pre feasibility study some additional engineering you.
Is accounted for in our full budget for this year for Arkansas. Our intention is clearly to to ensure we get to an indicated resource report.
We've got one well plan for that and we're hopeful that that will be enough information to get us to an indicated resource report.
But until we drilled that well and get the results.
Always be another well, we may have to get that to finally get there but that's.
Our expectations.
That's helpful. Thanks for that color.
Curious Tom.
How does the new automated drill out technology going in when do you think maybe those sales could be material figure or do they kick in more spring or summer.
Yeah, we actually have a lot of interest in the in that unit.
We are at this point because of the capital associated with the Tim we're probably only going to do take or pay or long term contracts for that unit. We are in discussions with with several operators in that regard.
But that's an area, we're going to be ensuring we have long long term commitments before we start putting additional capital into it and we think we'll get there, but those are ongoing discussions.
Okay. That's helpful. And then just lastly, my last question is on the desalination that produced water I'm always curious about this.
I've got a two part question is there any update on you know the regulatory agencies.
Possible approval timing and then it also sounds like you've learned a few things doing that pilot I'm. Just wondering if you can elaborate on that as you refine the membrane sizes for pre treatment or do any.
Tweaks that are showing better efficiency.
Right.
So on the regulatory side, it's apparent that each operator of the produced water is going to have to get there their own permits for their produced water projects. The projects that we worked on with our.
Both our pilot project is in process, we've seen the requirements for the regulatory.
And we feel very confident that our technology will meet those requirements, but each operator is going to have to go through a permitting process before we can deploy.
Desalination unit to the to the project.
As far as the pilot goes itself.
<unk>.
The membrane technologies, whether it's the <unk> or the high wrecked that we have negotiated agreements with performed extremely well the hierarchy of interim in this case the.
Pretreatment also performed well, but we've got to do some field.
We're into this and kind of long term plant design upgrades to the both the primarily the pre treatment.
That's pretty critical to the process and that's the stage that we're that we're performing right now before we would be ready to take them on a long term plan.
So.
Good enough. Thanks that seems like that's progressing well that's it for my questions.
Thanks, Tim.
Your next question comes from Samantha Hoh with Evercore.
Evercore ISI. Please go ahead.
Hey, guys. So most of my questions been answered, but I wanted to maybe drill.
Drill down a little bit more on the produced water.
You should ask them.
So you mentioned that you know each operator needs their own permit for their own projects.
And I'm wondering how you're thinking about that in terms of as you you know do you start to deploy this technology.
Are you taking a similar.
Our model is like how you deploy the sandstorm technology, where you're just going to lease it or do you need to partner up with a large producer.
You have more scale.
Okay.
Sure.
Yeah, Samantha good morning.
So each project I think is going to be.
Very specific to that operator.
I think youre going to see projects range from 10000 barrel, a day, which would be a smallish.
Project, but again. This is this is a 10 15 year 20 year potentially type of plant.
<unk>.
Up to potentially 100000 barrels a day or more and so the capital costs associated with each of those are going to be very different.
Whether the customers will fund the capital for the projects.
We will fund them, if they're smaller we're going to take that on a case by case basis cement based on on how we see the opportunity and the operators.
That kind of partnership agreement.
Okay, and then you kind of mentioned that there's still a lot of uncertainty out there mostly with gas activity.
Wondering where your exposure is on the U S land side forecast.
Is that pretty consistent like maybe some of that sandstorm sleep and intelligence around that.
I guess the only basin.
Yeah. So we do have a good operation in the Marcellus touch has been there a long time with a strong water business and our flowback business.
We have not seen any meaningful results changes yet, but it's something we've got we're going to keep an island. The good news is that our demand for all of our assets, whether it's water flowback or sandstorms are all very high in the Permian or south, Texas or mid <unk>.
<unk>.
Again, we have strong market positions.
I'm not concerned at all about the about moving those assets, if we need to but so far we haven't seen.
Any material change that would warrant that type of movement, we don't have a big presence in the haynesville.
So.
Less exposure on that but we have plenty of other market outside of the Marcellus that if we do see some feedback will be we think we'll be in great shape.
Okay, and then if I could just squeeze one more in I'm kind of curious on.
The deepwater completion crews.
You guys have been so kind to provide the breakout of that.
For example for it.
The margin trends I guess it is it a similar type of profitability depending on the three different end markets that you guys apply to you on the fluids business.
And then how do you feel like your market share in long cycle offshore deepwater makes example.
Can you provide any sort of like share.
Sure based on the data flash.
Yes.
For deepwater.
We gave an example in our press release yesterday.
<unk> estimates about.
70% of the deepwater wells in the Gulf of Mexico. As an example require a bromine based completion fluids and we have we estimate we have a roughly a 30% market share of the what we call high value completion fluids.
Which typically contain bromine and that that would be.
North Sea deep water that would be Gulf of Mexico, deepwater that would be Brazil deepwater.
Little less so than in other markets, but overall, we think we have a very strong position.
With our what we call high value completion fluids business if that's helpful.
On the margin side.
Not sure we would share the details of our breakdown family breakdown.
Of our products.
If I understood the question correctly.
Is that was that the question. So no that's super helpful. Thanks, So much.
Okay.
The next question is a follow up from Martin Malloy with Johnson Rice. Please go ahead.
Hi, Thank you just had one follow up.
Carbon free.
I saw the announcement that.
They made with respect to collaborating with BP.
Developing <unk>.
Solutions for industrial facilities.
And anything to report there in terms of potential demand for calcium chloride from Brian from a trip for these type of projects.
Yes, we saw the announcement as well and we know new the carbon free had been working with BP.
For some time is actually more of their investors in carbon free.
And we continue to engage very carefully with carbon free as they look for the deployments of their plants.
And <unk> I know you have a stay in touch with our CFO quite a bit any update from your side, yeah. So carbon free.
From our dialogue with them continues to make progress with our pilot plant where there are some.
Surely the announcement with BP is further endorsement of the technology. We believe that their next step is to secure the proper capital then launch there.
Program and once they get to that stage, we expect to participate from them with them, but practically speaking we think that any cigna.
Significant calcium chloride sales to them, there's still quite a bit out a minimum of a year before they have any significant impact.
Again, if you have a question. Please press star then one can be joining the queue.
Yeah.
Yeah.
This concludes our question and answer session I would like to turn the conference back over to Mr. Murphy for any closing remarks.
Well, thank you very much for joining us on our call on that.
Concludes our Q4 earnings call. Thank you.
The conference has now concluded. Thank you for attending today's presentation you may all now disconnect.
Okay.