Q4 2023 TETRA Technologies Inc Earnings Call

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Operator: Good morning, and welcome to Tetra Technologies' first fourth quarter 2023 results conference call. All participants will be in listen only mode.

Good morning, and welcome to the Tetra technologies first fourth quarter 2023 results conference call all participants will be in listen only mode shifting.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press the star key, then 1 on your touchtone phone.

Should you need assistance. Please signal a conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May Press Star then one on your Touchtone phone.

Operator: To withdraw your question, please press star then two. Please note this event is being recorded. I will now turn the conference over to Rigo Gonzalez.

To withdraw your question. Please press Star then two please note. This event is being recorded I will now turn the conference over to Rico Gonzales go ahead.

Rigo Gonzalez: Thank you, Joelle. Good morning, and thank you for joining us for Tetra's fourth quarter 2023 results. Speakers for today's call are Brady Murphy, Chief Executive Officer, and Elijio Serrano, Chief Financial Officer. I would like to remind you that this conference call may contain statements that are or may be deemed to be forward-looking, including projections, financial guidance, profitability, and estimated earnings. These statements are based on certain assumptions and analysis made by Tetra and are based on several factors. These statements are subject to several risks and uncertainties, many of which are beyond the control of the company. We caution that such statements are not guarantees of future performance and that actual results may differ materially from those projected in the forward-looking statement.

Thank you Joelle good morning, and thank you for joining tetra as fourth quarter 2023 results call.

Speakers for today's call are Brady Murphy, Chief Executive Officer, Alicia Secor, Chief Financial Officer I.

I would like to remind you that this conference call may contain statements that may be deemed to be forward looking including projections financial guidance profitability and estimated earnings.

These statements are based on certain assumptions and analysis made by Tetra and are based on several factors. 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.

Brady M. Murphy: In addition, in the course of the call, we may refer to EBITDA, Adjusted EBITDA, Adjusted EBITDA Gross Margin, Free Cash Flow, Net Debt, Net Leverage Ratio, Liquidity, Returns on Net Capital Employed, or other non-GAAP financial measures. Please refer to yesterday's press release or to our public website for reconciliations of non-GAAP financial measures to the These reconciliations are not a substitute for financial information prepared in accordance with GAAP and should be considered within the context of complete financial results for the period. In addition to our press release announcement, we encourage you to refer to our 10-K, which we also filed yesterday. I will now turn it over to Brady. Thank you, Rigo.

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 returns on net capital employed or other non-GAAP financial measures.

Please refer to yesterday's press release or to our public website for reconciliations of non-GAAP financial measures to the nearest GAAP measures. These reconciliations are not substitute for financial information prepared in accordance with GAAP and should be considered within the context of our complete financial results for the period in.

In addition to our press release announcement, we encourage you to refer to our 10-K that we also filed yesterday.

I will now turn it over to Brady.

Thank you Rocco good morning, everyone and welcome to <unk> fourth quarter earnings call.

Brady M. Murphy: Good morning, everyone, and welcome to Tetra's fourth-quarter earnings call. 2023 was a historic year for the company, and despite higher-than-usual year-ending activity slowdowns in a few of our segments, we were seeing good activity recovery in the first half of 2024 and expect another year of growth. For 2023, we achieved numerous historical financial highs but also achieved some strategic milestones that will benefit the company for many years to come. Our full-year 2023 adjusted EBITDA, excluding mark-to-market, of $106 billion grew by 37% from 2022 and was nearly three times higher than that of 2021, as both of our segments posted another year of strong returns. Our full year of 2023 Adjusted Free Cash Flow of $41.1 million was 61.6% higher than 2022 and was slightly above our guidance from the beginning of the year, representing approximately a 40% conversion rate of Adjusted EBITDA to Adjusted Free Cash Flow.

23 was a historical year for the company and despite higher than usual year ending activity slowdowns in a few of our segments. We're seeing good activity recovery in the first half of 2024 and expect another year of growth.

For 2023, we achieved numerous historical financial highs.

That's also achieve some strategic milestones that will benefit the company for many years to come.

Our full year 2023, adjusted EBITDA, excluding mark to market of 106 billion grew by 37% from 2022 and nearly three times higher than that of 2021 as both of our segments posted another year of strong returns are.

Our full year 2023, adjusted free cash flow of $41 1 million or 61.6 higher than 2022 and was slightly above our guidance from the beginning of the year, representing approximately a 40% conversion rate of adjusted EBITDA to adjusted free cash flow.

Brady M. Murphy: This was achieved despite significant investments made in Arkansas and investments made to finalize the engineering design for our first ever Commercially Produced Water for Beneficial Reuse project, a solution that we believe will be disruptive for the industry in transforming oil and gas well-produced water from a waste into an important resource. Our strong 2023 adjusted EBITDA growth was achieved despite little contributions from Tetra CS Neptune and Tetra PureFlow, which we believe will be catalysts for further growth in 2024. For the full year, our Completion Fluids and Products segment grew revenue by $40 million, or 15%, while Adjusted EBITDA grew $22 million, or 32%, representing an EBITDA fall-through of nearly 55%, driven by a strong performance in our industrial chemicals business and growth in our international offshore Completion Fluids operation.

This was achieved despite significant investments made in Arkansas and investments made to finalize the engineering design for our first ever commercial produced water for beneficial reuse project.

<unk> solution that we believe will be disruptive for the industry and transforming oil and gas well produced water from our waste into an important resource.

Our strong 2023, adjusted EBITDA growth was achieved despite little contributions from Tetra, CS Neptune and touch a pure flow, which we believe will be catalysts for further growth in 2024.

For the full year, our completion fluids and product segment grew revenue by $40 million or 15%.

Adjusted EBITDA grew 22 million or 32%, representing an EBITDA fall through of nearly 55% driven by strong performance in our industrial chemicals business and growth in our international offshore completion fluids operations.

Brady M. Murphy: Total year completion fluids and products revenue of $313 million was the highest since 2015 when we completed two large Tetraseus-Neptune projects in the Gulf of Mexico. Our industrial chemicals business had a record year, achieving its highest revenue and adjusted EBITDA in our history. With 2023 revenue growth of over 18%, our industrial chemicals business is now 22% of the company's total revenue. And as we ramp up deliveries of zinc bromide-based electrolytes in the coming years, we expect this percentage to continue to increase. Our diversity in product offering, including grades for technology and food, and superior product quality, allows us to participate in a wide range of markets and applications.

Total year completion fluids in products revenue of $313 million was the highest since 2015, we completed two large tetra CS Neptune projects in the Gulf of Mexico.

Our industrial chemicals business posted a historical year, achieving its highest revenue and adjusted EBITDA in our history with.

With 2023 revenue growth over 20% over 22 of over 18% are industrial chemicals business is now 22% of the company's total revenue and as we ramp up deliveries of zinc bromide based electric light in the coming years, we expect this percentage to continue to increase.

Our diversity in product offering, including grades for technology, and food and superior product quality allows us to participate in a wide range of markets and applications as evidenced by our recent entry into the lithium production process in South America, and the chip manufacturing process in the United States, our leading market positions in northern Europe and U.

Brady M. Murphy: As evidenced by our recent entry into the lithium production process in South America and the chip manufacturing process in the United States. Our leading market positions in Northern Europe and the U.S. give us stable markets in which to operate with predictable revenue and earnings and strong free cash flow, allowing us to reinvest in our new high growth opportunities. For energy services, total revenue attributed to offshore projects increased 11% year-over-year, and we anticipate another double-digit top-line growth in 2024 as our pipeline of offshore projects continues to build. We have already recovered the investments made in recent years where we strategically expanded capacity in key deep water offshore markets and expect to continue to generate positive momentum in those markets. We have intentionally built our inventory levels to capture the upcoming growth in deepwater activity. Although floater utilization shows increasing rig availability through 2024, RiceNet expects operators will continue to exercise outstanding options and or continue to recontract rigs currently under contract.

<unk> gives us stable markets in which to operate with predictable revenue and earnings and strong free cash flow, allowing us to reinvest in our new high growth opportunities.

For energy services total revenue attributed to offshore projects increased 11% year over year, and we anticipate another double digit topline growth in 2024 as our pipeline of offshore projects continues to build.

We have already recovered the investments made in recent years, where we strategically expanding capacity in key deepwater offshore markets and expect to continue to generate positive momentum in those markets. We.

We have intention to build our inventory levels to capture the upcoming growth in deepwater activity, although floater utilization shows increasing rig availability through 2024.

<unk> expects operators will continue to exercise outstanding options and we'll continue to re contract rigs currently under contract.

Brady M. Murphy: Marketed utilization is expected to peak in 2028 at 91% due to steady growth in project development activity. Tetra is well-positioned to benefit from this multi-year growth trajectory. Our outlet for Tetra SEIS Neptune continues to improve, and we've secured a second-quarter job in the North Sea, and we are in early discussions with two different supermajors for projects in the Gulf of Mexico that are scheduled for late 2024 or early 2025. Earlier this month, the executive team and I visited EOS's state-of-the-art automated manufacturing line at the Akros, Wisconsin, facility and came away with high Earlier this year, EOS announced that it expanded its partnership with Tetra and designated the company as its preferred strategic supplier for the full electrolyte of its Z3 long-duration energy storage cube. The company was previously only providing our Tetra PureFlow Zinc Bromide solution, which was only a portion of the full electrolyte.

Marketed utilization is expected to peak in 2028 at 91% due to steady growth in project development activity, such as well positioned to benefit from this multi year growth trajectory.

Our outlook for Tetra CS Neptune continues to improve and we've secured a second quarter job and the North Sea and we are in early discussions with two different supermajors for projects in the Gulf of Mexico that are scheduled for late 2024 or early 2025.

Earlier this month, the executive team and I visited <unk> state of the art automated manufacturing line at the Acuras, Wisconsin facility and came away with high confidence they will deliver to <unk> requirements.

Earlier, this year <unk> announced that it expanded its partnership with Tetra and designated the company as its preferred strategic supplier for the for electrolyte a bit Dizzy three long duration energy storage cube.

The company was previously only providing our touch a pure flows zinc bromide solution, which was only a portion of the full electric load.

The evolution of increasing Texas participation with iOS for moly.

Brady M. Murphy: The evolution of increasing Tetra's participation with the U.S. from only Tetra Pure Flow to the full electrolyte will be accomplished without the need for incremental bromine and is a good fit within our chemistry expertise. Tetra is expected to supply a minimum of 75% of the total electrolyte product demand going forward, and we anticipate deliveries to be meaningfully higher than 2023, mostly in the second half of the year. This relationship and the timing of their expected growth also dovetails nicely with our Arkansas bromine production plan. According to our Water and Flowback Services segment, despite declining rig activity and active freight fleets for most of 2023, all four-year revenue was up $33 million, or 12%, and adjusted EBITDA was up $10 million, or 23%.

That's a pure flow through the full electric life will be accomplished without the need for incremental bromine and is a good fit within our chemistry expertise.

Metro is expected to supply a minimum of 75% of the total electric light product demand going forward and we anticipate deliveries to be meaningfully higher than 2023, mostly in the second half of the year.

This relationship and the timing of their expected growth also dovetails nicely with our Arkansas bromine production plants.

Turning to our water <unk> flowback services segment, despite declining rig activity and active frac.

Frac fleets for most of 2023, all four year revenue was up $33 million or 12% and adjusted EBITDA was up $10 million or 23%. The majority of the growth was driven by continued market share gains in high utilization within our fleet of Petro Sandstorm and an increasing part of our business dealing with produced water, which despite declining U S drilling.

And completion activity in 'twenty, three is only increasing along with oil and gas production.

The market share gains and benefits of shifting our focus to production rather than drill bit can be seen by our 2023 revenue exceeding that of our previously year high in 2018, but with 50% less rig activity. These market share gains were achieved as we improved our adjusted EBITDA margins were 15, 5% to 17% in 2023.

Brady M. Murphy: The majority of the growth was driven by continued market share gains and high utilization within our fleet of Tetra Sandstorms and an increasing part of our business dealing with produced water, which despite declining U.S. drilling and completion activity in 2023, is only increasing along with oil and gas production. The market share gains and benefits of shifting our focus to production rather than drilling can be seen by our 2023 revenue exceeding that of our previous year high in 2018, but with 50% less rig activity. These market share gains were achieved as we improved our adjusted EBITDA margins from 15.5% to 17% in 2023. International business, mainly Argentina, also drove some of the revenue increase, and although we strategically sold one of our EPFs in the fourth quarter, we anticipate earnings to be flat year-over-year in that region. As previously mentioned, these projects are longer-term contracts with established pay rates, which also provide a steady stream of cash flows.

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International business, mainly Argentina also drove some of the revenue increase and although we strategically sold one of our EPS in the fourth quarter, we anticipate earnings to be flat year over year in that region. As previously mentioned these projects are longer term contracts with established day rates, which also provide a steady stream of cash flows.

Over the last several years, we have deployed significant growth capital in this segment to build out our fleet for Petro Sandstorms introduced new technology to help drive efficiencies and increase our capacity for water treatment and recycling and investments in EPS to grow beyond North America.

These investments are paying off as demonstrated by our prudent and return on net capital employed as we expect they will continue to drive higher returns as.

As we move forward with this segment, we will continue to invest in technology and automation, but will maintain our focus on returns rather than additional growth as we plan to divert much of the growth capital to Arkansas, and our produced water for beneficial reuse projects.

Brady M. Murphy: Over the last several years, we have deployed significant growth capital in this segment to build out our fleet for Tetra sandstorms, introduce new technology to help drive efficiencies, increase our capacity for water treatment and recycling, and invest in EPS to grow beyond North America. These investments are paying off, as demonstrated by our improvement in Return on Net Capital employed, as we expect that they will continue to drive higher returns. As we move forward with this segment, we will continue to invest in technology and automation but will maintain our focus on returns rather than additional growth, as we plan to divert much of the growth capital to Arkansas and our Produced Water for Beneficial Reuse project. In November, a 5.2-magnitude earthquake was recorded in the Permian Basin, marking the fourth strongest recorded in Texas. Just in the past few weeks, earthquakes over 4.0 magnitude have been reported in New Mexico, South Texas, and Oklahoma.

In November of $5 two magnitude earthquake was recorded in the Permian basin, marking the fourth strongest recorded in Texas.

Just within the past few weeks earthquakes over 4.0 magnitude were reported in new Mexico, South, Texas and Oklahoma.

As our twice become more frequent and more intense in areas of produced water disposal regulators have increased sense of urgency to limit volumes of produced water disposal and find alternative solutions.

All agencies across multiple states are now very active in defining regulatory specifications for using produced water for industrial farming and other applications et.

Tetra is engaging with the regulatory agencies as well as operators to ensure our solutions will meet these requirements. We met our year end target date to complete the engineering design for our first commercial produced water for beneficial reuse projects.

We are currently in advanced negotiations with one of the largest U S oil producers for their beneficial reuse project and have entered commercial discussions for a second high salinity Permian Basin demonstration project. We are on track to deploy our first commercial project in the second half of this year.

Brady M. Murphy: As earthquakes become more frequent and more intense in areas of produced water disposal, regulators have an increased sense of urgency to limit volumes of produced water disposal and find alternative solutions. Multiple agencies across multiple states are now very active in defining regulatory specifications for using produced water for industrial, farming, and other applications. Tetra is engaging with regulatory agencies as well as operators to ensure our solutions will meet these requirements.

Lastly in 2023, we significantly advanced our Arkansas, lithium and bromine Brian project.

In June we announced an Mou with Salt works out well see a wholly owned subsidiary of Exxonmobil to pull both of our acreage to form the evergreen Brian unit, which was subsequently subsequently unanimously approved by the agency in September.

Brady M. Murphy: We met our year-end target date to complete the engineering design for our first commercially produced water for beneficial reuse project. We are currently in advanced negotiations with one of the largest U.S. oil producers for their beneficial reuse project and have entered commercial discussions for a second high salinity Permian Basin demonstration project. We are on track to deploy our first commercial project in the second half of this year. Lastly, in 2023, we significantly advanced our Arkansas lithium and bromine brine project. In June, we announced an MOU with Saltworks LLC, a wholly owned subsidiary of ExxonMobil, to pull both of our acreage to form the Evergreen Brine Unit, which was subsequently unanimously approved by the AOGC in September. In the fourth quarter, we launched and completed a technical resources study for the Evergreen Brine Unit, which advanced our prior inferred resources to include the measured and indicated category, reflecting higher confidence The study highlighted the highest lithium concentrations to date of any lithium brine resource in the US for which an SK1300, NI43-101, or JORC compliant technical report summary has been published.

In the fourth quarter, we launched and completed a technical resource of starting study for the Evergreen Brian unit, which advanced our prior inferred resources to include the measured and indicated category, reflecting higher confidence in the resources evaluated by the study.

Saudi highlighted the highest lithium concentrations to date of any lithium brine resource in the U S for which an SK <unk> hundred Ni 43, 101, or JRC compliant Technical report summary has been published.

I'm also pleased to announce that yesterday, we closed on 120 acre plant site.

It is ideally located just south of stamps, Arkansas that is within our 35000 leased acres in one mile North of our Evergreen Brian unit. We're currently performing soil sampling before planning to break ground later this year.

Finally, we are currently focused on completing the lithium feed study as well as finalizing the negotiations for operating joint venture <unk> joint development agreements relating to the development of the Evergreen Brian unit based on that report plus the engineering studies that were previously completed we were able to secure the remaining finances required to complete the bromine process.

The facility once we get the <unk>, which we expect to be later this year.

Now I'll turn it over to Leo to provide some additional commentary on our successful financing in our financial results. Then we'll open it up for questions. Thank you Brady and good morning, everybody.

Elijio V. Serrano: I'm also pleased to announce that yesterday we closed on a 120-acre plant site that is ideally located just south of Stamps, Arkansas, that is within our 35,000 leased acres and one mile north of our Evergreen brine unit. We're currently performing soil sampling before planning to break ground later this year. Finally, we're currently focused on completing the lithium feed study, as well as finalizing the negotiations for operating joint venture and or joint development agreements relating to the development of the Evergreen Brine Unit. Based on that report, plus the engineering studies that were previously completed, we were able to secure the remaining finances required to complete the bromine processing facility once we get to FID, which we expect to be later this year. Now I'll turn it over to Elijio to provide some additional commentary on the successful financing and our financial results. Then we'll open it up for questions. Thank you, Brady, and good morning, everybody.

2023 was a strong year for cancer adjusted EBITDA was up 37% and operating income was up 183%.

Adjusted EBITDA margin of 17, 1% increase.

300 basis points year over year.

And more importantly, we generated over $40 million of free cash flow in 2023.

We also significantly improved our balance sheet ended the year with a net leverage ratio of one one time and a 27% reduction in net debt.

As of February 26 liquidity with $212 million.

Inclusive of the $75 million delayed draw feature that is available to tetra for the bromine project.

In addition, based on Friday's closing price our holdings of standard lithium and CSI Compressco combined for a total market cap.

Of approximately $12 million.

And these investments can be monetized if necessary.

Subsequent to the end of the quarter, we refinanced extended and expanded our term loan and a more attractive interest rate and our prior term loan.

Elijio V. Serrano: 2023 was a strong year for Tetra. Adjusted EBITDA was up 37%, and operating income was up 183%, adjusted even for the margins of 17.1% increase, 300 basis points year-over-year. And more importantly, we generated over $40 million of free cash flow in 2023. We also significantly improved our balance sheet, ending the year with a net leverage ratio of 1.1 times and a 27% reduction in net debt.

Further strengthening our balance sheet and providing us the flexibility to execute on our growth initiatives.

We were very pleased with the reception we got on the refinancing.

We reached out to a significant number of potential capital providers, including those in the oil and gas mining and chemical sector and received interest from over 60 capital providers.

We received 11 term sheets and fiber both one that on their own to help us we find this entire terminal without partners.

Providing us with capital to help us with the bromine initiative.

Elijio V. Serrano: As of February 26, liquidity was $212 million, inclusive of the $75 million delay draw feature that is available to Tetra for the Bromine project. In addition, based on Friday's closing prices, our holdings in Standard Lithium and CSI Compresco combined for a total market cap of approximately $12 million, and these investments can be monetized as necessary. Subsequent to the end of the quarter, we refinanced, extended, and expanded our term loan at a more attractive interest rate than our prior term loan, further strengthening our balance sheet and providing us the flexibility to execute on our growth initiatives. We were very pleased with the reception we got on the refinancing.

And indicate a strong interest in supporting us with the required capital for the lithium initiative.

And talking to those in the industry.

Getting five term sheets from capital providers willing to take on the entire opportunity on their own.

Plus another six willing to be part of a consortium is rare for a small or mid cap oilfield services company in today's environment.

We believe this demonstrates the value of a company like Tetra.

With over $100 million of adjusted EBITDA.

Leverage ratio of one one times.

Free cash flow level over $40 million.

And working with a partner like Exxonmobil plus in industrial chemicals revenue base of $130 million not subject to the fluctuations of the oil and gas industry plus.

Elijio V. Serrano: We reached out to a significant number of potential capital providers, including those in the oil and gas, mining, and chemical sectors, and received interest from over 60 capital providers. We received 11 term sheets, and five of those wanted to help us refinance the entire term loan without partners, providing us with the capital to help us with the brooming initiative and indicate a strong interest in supporting us with the required capital for the Lithium Initiative. Talking to those in the industry, getting five term sheets from capital providers willing to take on the entire opportunity on their own, plus another six willing to be part of a consortium, is rare for We believe this demonstrates the value of a company like Tetra, with over $100 million of adjusted EBITDA and a leverage ratio of 1.1 times.

Plus our history of being free cash flow and EBITDA positive in the last two downturns Nathan.

It makes us an attractive partner to raise capital.

Our terminal, we financed 50 basis points below our prior term loan and the maturity is now January of 2030.

Our balance sheet nicely set to invest in lithium and bromine in Arkansas.

In our current liquidity.

Expected free cash flow in 2024, and 2025, plus the $75 million delayed draw feature available to US. We believe we have the capital necessary to complete the bromine project without having to issue equity.

Our focus will now shift towards finding the capital for our 49% of the expected lithium joint venture.

With Exxonmobil jumped.

Just like we did with the bromine project. Our objective is to source of capital for lithium without relying on the equity market.

We will evaluate project financing at the JV level and government loans and grants for a portion of the lithium project.

Elijio V. Serrano: Pre-cash flow of over $40 million, and working with a partner like ExxonMobil plus an industrial chemicals revenue base of $130 million, not subject to the fluctuations of the oil and gas industry. Plus, our history of being free cash flow and EBITDA positive in the last two downturns makes us an attractive partner to raise capital. Our term will refinance at 50 basis points below our prior term loan, and the maturity is now January of 2030.

From an outlook perspective, we expect 2020 for revenue.

Adjusted EBITDA and free cash flow to be about 2023.

And as mentioned earlier 2023 cash flow was $41 million.

Our base business free cash flow in 2024 is expected to be better than 2023 before the investments in bromine.

The lithium project in Arkansas.

We don't expect our Arkansas investments in 2020 for it to be more than the free cash flow, we generated from our base business and we don't expect to use our delayed draw revolver until 2025.

Elijio V. Serrano: Our balance sheet is nicely set to invest in lithium and bromine in Arkansas. Between our current liquidity, which expects a pre-cash flow in 2024 and 2025, plus the $75 million delay draw feature available to us, we believe we have the capital necessary to complete the bromine project without having to issue equity. Our focus will now shift towards finding the capital for 49% of the expected lithium joint venture with ExxonMobil. Just like we did with the bromine project, our objective is to source the capital for lithium without relying on the equity market. We will evaluate project financing at the JV level and government loans and grants for a portion of the lithium project.

We believe we remain on plan to be generating revenue and EBITDA from the bromine and lithium projects in 2026.

We also expect a ramp up in electrolyte sales.

This stationary battery storage market in the second half of 2024.

We also expect to be generating revenue in EBITDA from the first desalination project in second half of 2020.

3024.

These will be the catalyst for 2024 being stronger than 2023.

In the first quarter, we expect water management to be stronger than the fourth quarter due to the ramp up in fracking activity that we saw early this quarter.

We expect flowback services to be weaker in the first.

First quarter relative to the fourth quarter as the flowback lags water management and fracking by two to three months.

Elijio V. Serrano: From an outlook perspective, we expect 2024 revenue, adjusted EBITDA, and free cash flow to be above 2023. And, as mentioned earlier, 2023 cash flow was $41 million. Our base business free cash flow in 2024 is expected to be better than 2023 before investments in bromine and the lithium project in Arkansas. We don't expect our investments in Arkansas in 2024 to be more than the free cash flow we generate from our base business. And we don't expect to use our delayed draw revolver until 2025.

The sum total of this is it Q1 water management and flowback services EBITDA should.

It should be comparable to Q4, but then stronger in the second quarter as flowback services rebound from a stronger first quarter fracking activity.

Yes.

Also remember that in the second quarter, we see a seasonal peak in industrial chemicals business in northern Europe.

Has historically added approximately $50 million in revenue Q2 over Q1 and has added between four and $6 million in EBITDA Q2 over Q1.

We expect our second quarter of 2024 to be at or above the.

The second quarter of last year.

From an Investor Relations perspective, we have several events coming up to help us further communicate our initiatives.

Elijio V. Serrano: We believe we remain on plan to be generating revenue in EBITDA from the bromine and lithium projects in 2026. We also expect a ramp-up in electrolyte sales into the stationary battery storage market in the second half of 2024. We also expect to be generating revenue in EBITDA from the first desalination project in the second half of 2023-2024. These will be the catalysts for 2024 being stronger than 2023. In the first quarter, we expect water management to be stronger than the fourth quarter due to the ramp-up in fracking activity that we saw early this quarter. However, we expect flow-back services to be weaker in the first quarter relative to the fourth quarter as flow-back lags water management and fracking by two to three months.

We will be hosting one on ones tomorrow at the Scotia conference in Miami.

Northland capital initiated coverage on Tetra last month, we will be hosting a for a virtual fireside chat on March 14.

And Kurt I'll lead with benchmark, who also recently initiated coverage on Tetra will be hosting its for a non deal Roadshow in New York City, Philadelphia and Boston in the first week of April.

This will include a group launched on April 1st in New York City, with Brady myself, and our chairman of the Board Jay Glick. Please.

Please reach out to me if you would like to participate in any of these events.

The strong performance by our base business are long duration battery storage opportunity.

Our lithium arrangements with Exxonmobil have created strong industry interest in tetra.

We now have six research analyst covering tetra up from just a couple of years ago.

I'll turn this back to Brady for closing comments.

We open up the call to questions.

Thanks Leo.

We're entering 2024 with a strong and growing base business, a solid balance sheet over $210 million liquidity with a constructive outlook for our products and services. We anticipate further growth in 'twenty four and we expect to continue to generate strong free cash flow from our base business to fund our strategic growth investments combination of these plus advances in our produced water.

Elijio V. Serrano: The sum total of this is that Q1 Water Management and Flowback Services EBITDA should be comparable to Q4, but then stronger in the second quarter as flowback services rebound from the stronger first quarter fracking activity. Also, remember that in the second quarter, we see a seasonal peak in industrial chemical business in northern Europe that has historically added approximately $50 million in revenue, Q2 over Q1, and has added between $4 and $6 million in EBITDA, Q2 over Q1. We expect the second quarter of 2024 to be at or above the second quarter of last year. From an investor relations perspective, we have several events coming up to help us further communicate our initiative.

Beneficial reuse solutions, our Arkansas resource position and strategic partnerships provides us with the opportunity to continue to drive long term shareholder value. While 23 was a historical year for the company. We anticipate 24 would be both historic and transformational with that we'll now open up to questions.

Yes.

We will now begin the question and answer session Task. A question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing any soon try.

Elijio V. Serrano: We will be hosting one once tomorrow at the Scotia Conference in Miami. Northland Capital, who initiated coverage on Tetra last month, will be hosting us for a virtual fireside chat on March 14, and Kurt Hallead with Benchmark, who also recently initiated coverage on Tetra, will be hosting us for a non-deal road show in New York City, Philadelphia, and Boston in the first week of April. This will include a group lunch on April 1st in New York City with Brady, myself, and our Chairman of the Board, Jay Glick. Please reach out to me if you'd like to participate in any of these events.

Your question. Please press Star then queue at this time, we will pause momentarily to assemble our roster.

The first question comes from Martin Malloy with Johnson Rice. Please go ahead.

Yes.

Good morning, and congratulations on the strong 23 in the free cash flow generation.

Thanks, Mike Good question.

My first question just wanted to see if maybe you could go over.

I heard of idea of the bromine project later this year, but could you go over maybe the timing.

Of the <unk>.

Elijio V. Serrano: The strong performance by our base business, our long-duration battery storage opportunity, and our lithium arrangements with ExxonMobil have created strong industry interest in Tetra. We now have six research analysts covering Tetra, up from just a couple of years ago. I'll turn this back to Brady for closing comments before we open up the call to questions.

Capex requirements for the bromine project and also.

The associated.

And I guess, the amount and the associated wells in pipes.

Sure Marty I'll take the first part of that and then maybe ask <unk> to talk about.

The capital outlay, but as far as timing goes as you know we completed the bromine feed study last year.

And we have been layering over.

Brady M. Murphy: We're ending 2024 with a strong and growing base business, a solid balance sheet, over 210 million in liquidity, and a constructive outlook for our products and services. We anticipate further growth in 2024 and expect to continue to generate strong free cash flow from our base business to fund our strategic growth investments. The combination of these plus advances in our produced water beneficial reuse solution, our Arkansas resource position, and strategic partnerships provides us with the opportunity to continue to drive long-term shareholder value. While 23 was a historic year for the company, we anticipate 24 to be both historic and transformational.

That feed study with the lithium feed study because they will be on the same plant site and obviously there are some synergies that we can gain by having two plants on the same.

<unk>, which we mentioned we just closed on yesterday 120 acres, just south of stamps Arkansas.

And so we hope to have the.

The lithium or sorry, the bromine cost analysis completed within the next couple of months to where we can take that proposal to the board with updated economics and get approval to move forward with with the bromine as a portion of that project. The lithium as you know is is with our JV partner or hope.

Operator: With that, we'll now open up to questions. We will now begin the question-and-answer session. To ask a question, you may press star, then the number on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing it.

To be JV partner.

That one we think will follow after the bromine.

Martin Whittier Malloy: To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. The first question comes from Martin Malloy with Johnson Rice. Please go ahead. Good morning and congratulations on Strong23 and the free cash flow generation. My first question. My first question is, just wanted to see if maybe you could go over, and I think I heard FIDA, the bromine project later this year, but could you go over maybe the timing of the CapEx requirements for the bromine projects and also the associated... and I guess the amount in the associated wells and pipes. Sure, sure, Marty.

Probably late Q3 potentially Q4.

And then we're obviously working with with them once we get our final agreements in place to decide how the funding of that will be handled and with that I'll ask <unk> to give some more comments.

With respect to the capital for the bromine side will start placing orders for long lead items will be will begin and finished the detailed engineering design and then we will begin doing a lot of the civil work.

During this year, we don't expect a significant amount of the construction to begin until.

Brady M. Murphy: I'll take the first part of that and maybe ask Elijio to talk about the capital outlay, but as far as timing goes, as you know, we completed the bromine feed study last year, and we have been layering over that feed study with the lithium feed study because they will be on the same plant site, and obviously there's some synergies that we can gain by having two plants on the same site, which we mentioned we just closed, And so we hope to have the lithium, or sorry, the bromine cost analysis completed within the next couple of months to where we can take that proposal to the board with updated economics and get approval to move forward with the bromine portion of that project. The lithium, as you know, is with our JV partner, or hopefully to be JV partner. That one we think will follow after the bromine FID, probably late Q3, potentially Q4.

Next year.

On the lithium side once we and our partner agree.

To approve the project and move forward any investments that we make remember are going to be shared between us and our partner.

The sum total of all those is that expenditures. This year, we believe will be below the free cash flow debt at or below the free cash flow that we generate from this business keeping us from borrowing on the delayed draw or our ABL facility. This year.

Thank you Anne.

My follow up question wanted to ask about the desalination or water reuse plant.

The first one could you maybe talk about ownership and capex related to it.

And what.

The finished.

Water after it comes out as planned what it is.

<unk> to be used for.

Sure. So a couple a couple of pieces of that question.

Elijio V. Serrano: And then we're obviously working with them once we get our final agreements in place to decide how the funding of that will be handled, and with that, I'll ask Elijio to make some more comments. Yeah, Marty, with respect to the capital, on the bromine side, we'll start placing orders for long-lead items, we'll begin and finish doing the detailed engineering design, and then we'll begin doing a lot of the We don't expect a significant amount of the construction to begin until next year. On the lithium side, once we and our partner agree to approve the project and move forward, any investments that we make, remember, are going to be shared between us and our partner. The sum total of all these is that expenditures this year, we believe, will be ever below the free cash flow that we generate from base business, keeping us from borrowing any on the delay draw or ABL facility this year.

In terms of this particular project our first project.

<unk>, we are outlining responsibilities for the project, we will own the decile technology and equipment that is on location our partner will be providing the capital for the civil works and the site.

Construction costs, so it'll be a.

A bit of a combined offering but this is a multi year targeted for over five years types of project.

Targeting between 20% and 25000 barrels per day.

Produced water for desalination now the specifications of that water. If you remember Marty we completed last year, a pilot project using the same technology, where we were able to.

Desalinate, 92%.

Of the brine.

Our produced water inflow to freshwater specifications.

That ourselves and the regulators would meet the current regulatory environment and ourselves and our customer very happy with so that's the the commercial design that we have now built and as I said will be will be shared will be owning the equipment and technology and our partner will be owning the site and the civil works for that.

Elijio V. Serrano: Thank you. And my follow-up question, we wanted to ask about the desalination or water reuse plant, and the first one, could you maybe talk about ownership and CapEx related to it and what the finished water, after it comes out of this plant, is expected to be used for? Sure, so a couple of pieces to that question. In terms of this particular project, our first project, the way we are outlining responsibilities for the project, we will own the desal technology and equipment that is on location. Our partner will be providing the capital for the civil works and the site construction costs.

That particular location.

Great. Thank you I'll turn it back.

Your next question comes from popping Brooks with Northland Capital markets. Please go ahead.

Hey, good morning, guys. Thanks for taking my question, so kind of wanted to stick with the beneficial produced water project. So it.

Brady M. Murphy: There will be a bit of a combined offering, but this is a multi-year, targeted for over five years type of project, targeting between 20 and 25,000 barrels of produced water per day for desalination. Now specifications of that water, if you remember Marty, we completed last year a pilot project using the same technology where we were able to desalinate 92% of the brine produced water inflow to freshwater specifications that ourselves and the regulators would meet the current regulatory environment, and ourselves and our customers are very happy with. So that's the commercial design that we have now built. And as I said, we'll be shared. We'll be owning the equipment and the technology, and our partner will be owning the site and the civil works for that particular location. Great, thank you. I'll turn it back. Your next question comes from Bobby Brooks with Northline Capital Markets. Please go ahead. Hey, good morning, guys.

It seems to continue to progress really nicely.

That's the most near term is the emerging revenue opportunities, you're pursuing and I know you've kind of just touched on it but maybe you could give some more color could you remind those of maybe some of those key milestones achieved so far obviously you already touched on those a.

Our preliminary results last year, and then secondly, maybe could you talk about the next steps investors should be watching for on this project and so maybe just talk about the size of the opportunity and how you would anticipate you scale into it.

Sure. So let me, let me recap and highlight kind of.

The path that we've taken to get us to where we are if you remember.

Last year, maybe year and a half ago, we announced two strategic partnerships.

That are.

Kind of integral to the old total desalination solution that we have.

Hi, Rick.

Was identified as a reverse osmosis technology that met.

Bobby Brooks: Thanks for taking my question. So I kind of want to stick with the Beneficial Produced Water Project. So it seems to continue to progress really nicely, and that's the most near term of the emerging revenue opportunities you're pursuing. And I know you kind of just touched on it, but maybe to give some more color, could you remind them of maybe some of those key milestones achieved so far? Obviously, you already touched on those preliminary results last year.

Our requirements along with our pre treatment technologies proprietary pre treatment technology. We felt that was the optimum solution for what I'll call lower Tds lower.

Total dissolved solids solutions, 60000, or so parts per million and below.

Brady M. Murphy: And then secondly, maybe could you talk about the next steps investors should be watching for on this project? And maybe just talk about the size of the opportunity and how you would anticipate growing it. Sure, so let me recap and highlight kind of the path that we've taken to get us to where we are. If you remember, last year, maybe a year and a half ago, we announced two strategic partnerships that are kind of integral to the old, to the total desalination solution that we have. HIREC was identified as a reverse osmosis technology that met our requirements, along with our pre-treatment technologies, proprietary pre-treatment technology. We felt that it was the optimum solution for what I'll call lower TDS, lower total dissolved solids solutions, 60,000 or so parts per million and below. Appropriate for South Texas, Colorado, many different environments here in the U.S., but not for the Permian

Appropriate for South, Texas, Colorado, many different environments here in the U S, but not for the Permian Permian is very high total dissolved solids Tds for that partnership we had chosen KNX or.

Both of those relationships that we have and that uses a backroom a vacuum distillation technology.

For both of those relationships, we have exclusive applications for the oil and gas produced water beneficial reuse and have tailored our pre treatment.

Which remember this is very different than Desalinating Ocean water. This has a lot of very complex minerals org.

Organic in the fluid and so that pre treatment is very critical to the ultimate solution.

So those two partnerships we've progressed, we've done significant testing of produced water samples from customers.

Across the U S at our research facility.

And entered into negotiations with.

Brady M. Murphy: The Permian is very high in total dissolved solids, TDS. For that partnership, we chose KMX. Both of those relationships that we have and that use vacuum distillation technology. For both of those relationships, we have exclusive applications for the oil and gas-produced water beneficial reuse, and we have tailored our pretreatment. Which, remember, this is very different than desalinating ocean water. This has, you know, a lot of very complex minerals and organics in the fluid, and so that pretreatment is very critical to the ultimate solution.

Again, a large oil producer more of the largest in North America.

To.

Put together a commercial project design and proposal for an application in South, Texas and that is the first commercial project that we are in commercial discussions discussions with today that we expect to deploy during the second half of the year that same customer is also very aware of what we're doing on the higher <unk>.

<unk> levels in the Permian basin with the <unk> technology, and we are now in commercial discussions with them for a pilot unit using that technology and our pre treatment for the Permian basin.

That project, we expect to also have launched this year. So we are hoping to have a full commercial.

Brady M. Murphy: So those two partnerships have progressed; we've done significant testing of produced water samples from customers across the U.S. at our research facility and entered into negotiations with, again, a large oil producer, one of the largest in North America, to put together a commercial project design and proposal for an application in South Texas. And that is the first commercial project that we're in commercial discussions with today that we expect to deploy during the second half of the year. That same customer is also very aware of what we're doing at higher TDS levels in the Permian Basin with KMX technology. And we are now in commercial discussions with them for a pilot unit using that technology and our pretreatment for the Permian Basin.

Production unit.

<unk> as well as I demonstrated pilot commercial unit in place for the Permian.

And then the customer interest as you can imagine given the current environment.

<unk> is quite significant.

For us to keep pace with but those are two near term.

Focuses.

Got it thanks and then.

And then.

So.

Turning to <unk>.

The industrial chemical segment.

So destocking was a headwind in the fourth quarter, but then you mentioned in the press release.

Don.

In the second quarter, 'twenty, four you're expecting to see that traditional northern European.

Industrial chemical demand ramp up I know you also R&D.

I know you also mentioned you have already seen a smart sharp rebound to start 2024.

Brady M. Murphy: That project we expect to also have launched this year. So we are hoping to have a full commercial production unit in place, as well as a demonstrated pilot commercial unit in place for the Permian, and then the customer interest, as you can imagine, given the current environment, is quite significant for us to keep pace with, but those are two near-term focuses. Got it. Thanks. And then, you know, so.

Aside from that is there any more color on why you expect that rebound and maybe just talk about the visibility you have on that trend in terms of destocking headwinds.

Yes.

Yes, so last year as we've mentioned was a historical high.

For our industrial chemicals business I think we said it grew 18% year on year.

Highest revenue and EBITDA numbers, we have seen in that in that business, but we did we did see some year end destocking as customers kind of rebalanced their.

Brady M. Murphy: Turning to the industrial chemicals segment, so destocking was a headwind in the fourth quarter. But then you mentioned in the press release that in the second quarter, you're expecting to see that traditional Northern European industrial chemical demand ramp up. I know you also mentioned you've already seen a sharp rebound in start 2024. But aside from that, is there any more color on why you expect that rebound?

Purchases that they had made with with year end targets.

Higher level than probably we have seen in past years, but we're very pleased to see the start of the year reverse that trend quite sharply.

And the order flow has been has been very consistent.

And in the upward direction and as Leo said, we expect our Q2 to be very much in line with with expectations, but were also seeing again continued offshore completion fluids activity churn.

Brady M. Murphy: And maybe just talk about the visibility you have on that trend in terms of destocking headwinds. Yeah, so the last year, as we mentioned, was was an historical high for our industrial chemicals business. I think we said it grew 18% year on year. The highest revenue and EBITDA numbers we have seen in that business, but we did see some year-end destocking as customers kind of rebalanced their purchases that they had made with year-end targets to a higher level than probably we have seen in past years, but we're very pleased to see that the start of the year reversed that trend quite sharply and the order flow has been very consistent in the upward direction, and as Elijio said, we expect our Q2 to be very much in line with expectations, but we're also seeing again continued offshore completion fluids activity churn, and it's a little lumpier obviously than our industrial chemicals business so we can see more fluctuations quarter by quarter but we expect the first half of 2024 in our completion services business to be above the first half of 2023 at a double-digit pace and then combined with our industrial chemists gives us a strong you know first half of the year outlook. So first half 24 for completion fluids, above first half 23 at a double-digit pace. Did I hear that correctly?

It's a little Lumpier, obviously, there are industrial chemicals business. So we can see more fluctuations quarter by quarter, but we expect the first half of 2024 in our completion services business to be above the first half of 2023.

At a double digit pace and then combined with our industrial cameras scale. It gives us a strong first half of the year outlook.

Okay.

So first first half 'twenty four for completion fluids above first half 'twenty three on a double digit pace.

Yes, that's correct.

And then last one from me.

And sticking with the completion fluids business.

Highest revenue highest EBITDA.

Since I think it's I think you mentioned since 2015 when there you go.

Just completed two large.

Not two projects in the Gulf of Mexico could you, maybe just remind us how many C. If not two projects you did in.

2023, and maybe just give some directional color on where that goes in 'twenty 'twenty four and you mentioned already already got one in the North Sea and then talking to two super majors in the Gulf of Mexico, but maybe just frame that up a little more.

Brady M. Murphy: Yeah, that's correct. OK. And then the last one for me, you know, and sticking with the completion fluids business, you know. Highest Revenue, Highest EBITDA, I think you mentioned in 2015 when you guys completed two large CS Neptune projects in the Gulf of Mexico. Could you maybe just remind us how many CS Neptune projects you did? and maybe just give some directional color on where that goes in 2024. I know you mentioned that you already have one in the North Sea and then talking to two supermajors in the Gulf of Mexico. Maybe I will just frame that.

Yes, sure so so.

The Neptune jobs.

We did have some jobs in the north sea, but they are typically smaller volume jobs and sometimes it's difficult to actually.

Youll see the.

The impact of those jobs from from the North Sea perspective relative to a normal large.

Calcium bromide job for instance, in the Gulf of Mexico. So.

But we're very pleased with the trend that we're seeing in terms of our outside of the Gulf of Mexico Neptune. It's just that their typical typically smaller jobs than what we see in the Gulf of Mexico. The jobs in the mix in the Gulf of Mexico are just are just really quite quite different just due to the volume of the fluid.

Brady M. Murphy: Yeah, sure. So the Neptune jobs, we did have some jobs in the North Sea, but they are typically smaller volume jobs. And sometimes it's, you know, it's difficult to actually see the impact of those jobs from the North Sea perspective relative to a normal, large calcium bromide job, for instance, in the Gulf of Mexico.

The jobs that we referenced in 2015.

I think they were on the order of $15 million to $20 million apiece type types of jobs. Those are the types of jobs that.

Brady M. Murphy: But we're very pleased with the trend that we're seeing in terms of our outside of the Gulf of Mexico Neptune, it's just that they're typically smaller jobs than what we see in the Gulf of Mexico. The jobs in the Gulf of Mexico are just really quite different just due to the volume of the fluid. I think they were on the order of $15 to $20 million apiece, types of jobs.

We have in the Gulf of Mexico.

We don't know what the jobs that we're currently in discussions with will be.

Of that size or magnitude because we're still in early discussions with those customers, but it just gives you a sense of.

Brady M. Murphy: Those are the types of jobs that, You know, we have in the Gulf of Mexico. We don't know if the jobs that we're currently in discussions with will be of that size or magnitude because we're still in early discussions with those customers, but it just gives you a sense of the size and scale of those jobs versus the North Sea, but we're just very pleased to see the traction we're getting with the technology, and we I got it. I appreciate it, Brady, and look forward to, you know, looking forward to hosting you guys on the 4th. Yeah, thank you, Bobby.

The types of.

Size and scale of those jobs versus versus the North sea, but we're just we're just very pleased to see the traction we're getting with the technology and we know that.

The activity will will follow over the over the years.

Got it I appreciate it and look forward looking forward to hosting you guys.

Yes. Thank you Bobby very much look forward to it as well.

Awesome.

Withdrawn.

Okay.

Your next question comes from.

Kurt I'll lead.

With benchmark. Please go ahead.

Hey, good morning, guys.

Good morning.

Okay.

Appreciate all that detail and info.

Bobby Brooks: Very much. Look forward to it as well. Awesome. I'll withdraw. Your next question comes from... Kurt Hallead, with Benchmark. Please go ahead. Hey, good morning, guys. Good morning.

So just.

You gave some indications here that.

The first quarter may start off a little bit light, particularly in the water and flow back part of your business.

Kurt Kevin Hallead: I appreciate all that detail and info. So, just Elijio, you gave some indications here that, you know, the first quarter may start off a little bit light, particularly in the water, and then flow back into, you know, part of your business. But as you look out for the rest of the year, and you kind of look at where, I guess, the consensus EBITDA numbers are out there at 120 million dollars plus. Do you have a good line of sight as to the progression so that you feel confident that you can get to at least 120 million dollars in EBITDA for the year? Yeah, I won't comment on the actual total year number because six months down the road is a long way down the road. I did say earlier that the combination of Electrolyte sales into the stationary battery market plus desalination, and the deepwater activities, especially the projects that Brady made reference to. Give us confidence that 2024 is going to be stronger than 2023 for us. Okay. All right.

But as you look out for the rest of the year and you kind of look at where I guess.

Sensus EBITDA numbers out there at $120 million plus.

You have good line of sight as to the progression that you feel confident that you can get to at least under $20 million EBITDA for the year.

Yes, I won't comment on the actual total year number because six months down the road is a long way down the road.

Earlier that the combination of.

Electrolyte sales into the stationary stationary battery market plus the desalination.

In the deepwater activity, especially the projects that Brady made reference to.

Give us confident that 2024 is going to be stronger than 2023 for us.

Okay.

Right.

So, yes, im kind of curious in the context of.

Brady M. Murphy: So, yeah, I'm kind of curious in the context of your report that you had here on the lithium front that indicated that resource potential was, you know, 3x your prior report, and just kind of, can you put that into the context for us in the dynamic of, you know, how does that alter, you know, how much you think you might have to invest to ramp up production or get your facility going and, you know, is it significantly larger in the context So I'll speak to the resource and then touch on the capital and see if Elijio wants to add any more. So if you recall, initially, Kurt, we had applied to the Arkansas Oil and Gas Commission or were preparing to apply to the Arkansas Oil and Gas Commission for our own acreage that Tetra had held. It was, I think, between 4,500 and 5,000 acres that we had applied for a unit. And right before that, our partnership evolved with ExxonMobil, and we decided to combine acreage for a larger unit. Right now, that unit is the Evergreen Unit, which is 6,138 acres.

Your.

Report that you had here on the lithium front that indicated that.

The resource potential is for three X your prior report.

And.

Just kind of.

But can you put them into context for us in that dynamic.

How does that alter how much you think you might have to invest.

To ramp up production or get your facility going.

Is it.

Significantly larger in the context of its going to require more capital.

So I'll speak to the resource and then touch on the capital and the <unk> wants to add any more so if you recall initially curve, we had applied to the Arkansas oil and gas, we're preparing to apply for the Arkansas oil and gas for our own <unk>.

Akridge that tetra handheld is I think between 4500 5000 acres that we had applied for a unit.

And right before that.

Sure.

Our partnership evolves with Exxonmobil, and we decided to combine acreage.

Or a larger unit right now that unit is the evergreen unit.

<unk> 138 acres and so there was an expansion of the original lithium in place, but also more importantly, the lithium concentrations. After we completed the evergreen number one well.

Brady M. Murphy: And so there was an expansion of the original lithium in place. But also, more importantly, the lithium concentrations after we completed the Evergreen number one well were well above expectations in terms of the concentration. And then the reservoir rock quality turned out to be exceptional as well.

Was well above expectations in terms of the concentration and then the reservoir rock quality turned out to be exceptional as well. So all of those all those factors combined when you look at the resource report for lithium today.

Brady M. Murphy: So all those factors combined, when you look at the resource report for lithium today versus what it was initially when we did our inferred study a couple of years ago, it was nearly 3x the volume. And obviously, the volume of lithium translates into how much brine has to be processed, which also translates into financials. So again, we're quite encouraged by what we see.

Versus what it was initially winded our inferred study a couple of years ago was was.

Nearly three X the volume and obviously volume of lithium.

Translates into how much Brian has to be processed which also translates into financials. So again, we're quite encouraged by.

Brady M. Murphy: In terms of capital, that's still under evaluation. We don't have a firm number to be able to provide yet. That's part of the feed analysis that's ongoing.

But what we see in terms of the capital that's still under evaluation, we don't have a firm number.

To be able to provide yet that's part of the feed analysis, that's that's ongoing.

Elijio V. Serrano: But again, we think the synergies of having a bromine plant and a lithium plant on site managed by, you know, one partnership are going to show some very attractive financials on both sides of the equation there. And Kurt, I'll add that the upstream work, the work that we're doing with the source wells, the disposal wells, and the pipelines to move the brine from the wells to and from, is shared So pulling brine is going to feed both the lithium and the bromine projects, also creating significant synergies on the upstream. Gotcha. Yeah.

Again, we think the synergies of having a bromine plant and our lithium plant on site managed by one.

The partnership is going to.

It shows some very attractive financials on both side of the equation there Curt I'll add that the upstream work.

Work that we're doing with the source wealth of disposal wells in the pipelines to move that Brian from the wells to and from the processing facility.

Sure. So Pauline Brian is going to feed both the lithium and bromine project.

Also cleaning significant synergies on the upstream side.

Okay got you.

Kurt Kevin Hallead: And then, you know, again focusing on the emerging growth opportunities you have, again, on lithium desalination slash reuse and, you know, supplying those electrolytes into the battery energy storage systems, right? It looks like you have some revenue opportunities on the battery storage front coming. You got, this year, you got some desal revenue opportunities starting this year. What do you think the first revenue could be for lithium? Um, first revenue for lithium is more likely in early 2027, late 2026, or early 2027. Okay, gotcha. All right, thank you. Your next question comes from Patrick Ouellette on Stiefel, please go ahead. Hey, good morning. This is Pat Owen with Stephen Gengaro.

Yes.

Again, focusing on the emerging growth opportunity you have again on lithium desalinization slash bring you some.

Youre applying those electric lights into the battery energy storage system, sorry, it looks like revenue.

<unk>.

Battery storage front coming this.

This year, yes.

Revenue opportunity starting this year.

What do you think.

When you think first revenue could be for.

For lithium.

First first revenue for lithium is more likely a early 2027.

<unk> 2026 or early 2027 at this point.

Okay got you alright, thank you.

Thank you. Your next question comes from Patrick <unk> with Stifel. Please go ahead.

Hey, good morning, its pattern for Stephens, Hey, Gary Thanks for taking my questions.

Patrick Ouellette: Thanks for taking the question. [inaudible] This is a high-margin business going forward, or more around level C in the fourth quarter. Yeah, so I'll take that and ask Elijio to add some color.

Good morning, Good morning, Joe.

Hey, good morning, given the U S land outlook right now do you think you can grow the water business.

<unk> then activity and then on the margin side during 2023 and had strong margin progression in the water business, obviously fourth quarter dropped off a bit just curious how we could think about.

Brady M. Murphy: So if you look at our business... As I mentioned, relative to rig count, we exceeded our revenue in 2023 over 2018, which was our previous high, by 12% on 50% less recount. So that shows an ability to continue to grow in a period of declining completion activity, and a lot of that has to do with technology that we've deployed. The sandstorm has gained significant market share, and continues to gain market share in North America, so that continues to be a growth catalyst for us, but we also focus on produced water rather than the basic water transfer type services, which is more of a completion-related activity, in our water and flow back segment in 24 over 2023. And then, hopefully, as things progress with our desal, we will see a step change in desalination revenue in And Pat, I'll add on the margins to your question on the margins.

This is a high teens margin business going forward or more around the levels seen in the fourth quarter.

Yeah, So I'll take that and escalate <unk> to add some color. So if you look at our business.

I'd mentioned relative to rig count.

We exceeded our revenue.

In 2023 over 2018, which was our previous high.

By 12% on 50% less rig count so that shows.

<unk> ability to continue to grow.

In a period of declining completion activity and a lot of that has to do with.

The technology that we've deployed the sandstorm has gained significant market share continues to gain market share in North America. So that continues to be a growth catalyst for us, but also focus on produced route of water.

Rather than the basic water transfer type services, which is more of a completion related activity.

Clearly, we won't get the benefit of significant benefit of the <unk> project in 2024, but we still do expect growth.

In our water and flowback segment and 24 over 2023.

And then hopefully as things progressed with our D cell, we would see a step change in.

Desalination revenue in 2025.

And Pat.

I'll add on the margin to your question on the margins. We have spent quite a bit of time on automation and reducing the number of personnel at the at the well site. We've also focused aggressively on introducing technology that we believe create some.

Elijio V. Serrano: We have spent quite a bit of time on automation and reducing the number of personnel at the well site. We've also focused aggressively on introducing technology that we believe creates some barriers to entry against some of our local and regional competitors, such as with the sandstorm. And just to give you a sense, a couple of weeks ago, I was out in the Permian Basin, and we had one of the largest produced water treatment jobs going on, and we're operating it with one person on site. And the amount of revenue that we're generating relative to the amount of personnel that we have today versus what we had several years ago is a step change. The combination of those is what we think will make this It will be a high team. All right, thanks both of you.

Barriers to entry against some of our local and regional competitors such as with Sandstorm.

Technology and just to give you a sense a couple of weeks ago I was out in the Permian Basin and.

And we had one of the largest.

Produced water treatment jobs going on.

And we're operating at with one person on site.

And the amount of revenue that we're generating relative to the amount of personnel that we have to date versus what we had several years ago is a step change there.

The combination of those is what we think will make this EBITDA margin business it will be high teens.

Alright, Thanks, Paul that's helpful.

Elijio V. Serrano: That's helpful. This relates to an earlier question. So apologies if you had explicitly laid this out. I was just struggling to make out what you were saying.

This relates to an earlier question. So apologies if you explicitly laid this out I was struggling to make out what you were saying.

Patrick Ouellette: As we think about the global deepwater market, you noted that revenue attributable to offshore projects increased 11% year over year and that expectations for continued expansion are high. Just curious, can the completions business deliver mid-teens growth in 2024 similar to that of 2023? Yeah, we believe that it can. Brady mentioned some Neptune opportunities, but we only saw a handful of smaller opportunities in the North Sea.

We think about the global deepwater market you'd noted that revenue attributable offshore projects increased 11% year over year and expectations for continued expansion just curious kind of completions business.

Deliver mid teens growth in 2024 similar to that of 2023.

So yes, we believe that it can Brady mentioned.

Some neptune opportunities, we only saw a handful of smaller opportunities in the north sea the opportunities that we're engaged with customers on are now in the Gulf of Mexico, and because of the depth and the volume of fluid that those projects take that can be a significant contributor.

Timothy M. Moore: The opportunities that we're engaged with customers on are now in the Gulf of Mexico. And because of the depth and the volume of fluid that those projects take, that can be a significant contributor. Also, a lot of the new rigs that are being introduced that are coming online in the Gulf of Mexico are for customers that we've got contracts in place with. So we think the combination of those will allow double-digit growth year-over-year on completion fluid. Great, thanks for the call. Again, if you have a question, please press star, then 1. Your next question comes from Tim Moore with E.F. Hutton. Please go ahead.

So a lot of the new rigs that are being introduced that are coming online in the Gulf of Mexico are for customers that we've got.

The contracts in place with but we think the combination of those will allow a double digit growth year over year and efficient fluid tight.

Great. Thanks for the color.

Again, if you have a question. Please press Star then one.

Next question comes from Tim Moore with Es. Please.

Please go ahead.

Timothy M. Moore: Thanks and congratulations on the overall 2023 organic sales growth and EBITDA margin expansion. It's really nice to see the free cash flow too, and I'm glad Saltworks is helping out with that. Most of my questions have already been asked, but maybe let me just start off with...

Thanks, and congratulations on the overall 2023 organic sales growth and EBITDA margin expansion, it's really nice to see the free cash flow to them.

Salt works is helping out with that most of my questions have already been asked but maybe let me just start off with.

Brady M. Murphy: Completion sales, you know, it seems like double-digit growth is possible this year depending on the Gulf of Mexico Neptune project if it falls in the December quarter or not. But just switching gears back to water and flow back sales growth this year. I know Brady just mentioned the expectation is that it'll grow.

Completion sales it seems like double digit growth is possible this year.

Depending on the Gulf of Mexico, Neptune project, if it falls on the <unk>.

December quarter, or not but just switching gears back to water and flowback sales growth this year.

I know, Brian you just mentioned.

Expectation is that it will grow do you think it could be mid single digit growth and is that dependent on kind of the earlier comments Brady mentioned about youre reallocating some growth capex to our.

Brady M. Murphy: Do you think it could be mid-single-digit growth? And is that dependent on the kind of earlier comments Brady mentioned about you're reallocating some growth CapEx to Arkansas and desalination? So even if it is mid-single-digit growth this year, could the opportunity have been bigger if you reinvested more and didn't have those other projects? Yeah, so I think strategically, we will continue to invest in automation technology and selective sandstorm customers where we're getting the pricing, the premium pricing that we want. So we are focused more on returns. As far as your question is concerned, can we achieve, you know, single-digit growth? Yes, we feel that it's achievable in 2024. But again, we're really more focused on returns and margin enhancement with that business. We could grow more. But that's a strategic decision that we're taking at this point to use the free cash flow that we had discussed for what we think will be, you know, longer term, higher return and growth businesses for us. That makes sense, Brady. I love the ROI aspect and the self-help.

Arkansas desalination, so even if it is mid single digit growth this year.

Opportunity have been bigger you reinvested warrant and have those other projects.

Yes, so I think strategically.

We will continue to invest in automation and technology and in selective sandstorm customers, where we're getting the pricing the premium pricing that we want so we are focused more on returns as far as your question can we achieve.

Single mid digit growth, yes, we feel thats achievable in 2024.

But again.

Really more focused on returns and margin enhancement with that business, we could grow more.

But that's a strategic decision that we're taking at this point to to use the free cash flow that we have discussed for what we think will be long.

Longer term.

Higher return.

And growth businesses for us.

That makes sense pretty I love the ROI aspect.

The self help.

Timothy M. Moore: Yeah, I enjoyed seeing all the sandstorms when I was down in the Permian a year and a half ago, on site, but I'm actually just switching gears to my favorite topic, you know, they've been publishing on for maybe, I've been putting an EBITDA estimate out there for over a year, but I know that it's more second half loaded. What about the progress being made, perhaps, with the Railroad Commission and the Commission on Environmental Quality? Have they, you know, established the purity levels of the TDS? I mean, I know you have the 92% desalination level reefs, but have they zoned in on and finalized the purity level TDS hurdle? Yeah, so that's a great question. I mean, I think with the recent earthquake activity and

Yes enjoyed seeing all the sand storms when I was down in the Permian.

Year, and a half ago.

On site.

Just switching gears to my favorite topic <unk> been publishing on for me.

15 months of desalination of produced water opportunity and have been putting on EBITDA estimate out there for it for over a year, but.

I know that it's more second half loaded and.

What about the progress.

Being maybe with the Railroad Commission and the commission environmental quality.

They establish the.

<unk> levels of the Tds I mean, I know you have the 92%.

Desalination level arena, but.

Zoned in and finalize the purity level Tds hurdle.

Yes, so great question, I mean, I think with the.

The more recent earthquake activity.

<unk> been looking at this now for several years, but I think I get working with these agencies the sense of urgency has really ratcheted up.

And as far as overall Tds were well below the overall Tds level now we're in the very discrete.

Parts per million of certain minerals.

Organics those types of things and we are working to understand the final regulatory requirements for each of those applications is going to have a different I think different.

Levels for industrial applications different levels for farming.

<unk> got very discrete now beneficial reuse applications that are being defined and the agencies are working with the operators and <unk>.

Companies like ourselves who have the technology.

To help get those specifications.

Become a very collaborative process more so than I've ever seen certainly within the last six months, we've had several meetings with our.

New Mexico produced water consortium for instance, the Railroad Commission.

And our customers to really nail down. These these requirements and it's coming it's coming together quite rapidly at this point.

Great that's really helpful.

Excited about back in when I was on site and so what you can do with the pre treatment.

My last question is around the business I think investors really arent, giving you any credit for them.

It's awfully stable, if not growing quite nicely in industrial calcium chloride business.

And had a banner year last year I think you said it was up 18%.

Yes, yes, a little bit of that was lapping that that supply chain raw material impact in Finland.

And a year before but even when you strip that out I mean, it's still double digits.

Is there anything else Youre doing now with the <unk>.

Supply agreements.

That's really keep that up I mean, its something almost like 30 or EBITDA. So just love to hear a little bit more about that business.

Yes that that business is running very very well for us some combination of.

Good solid management teams that we have great infrastructure that we have in place but also.

Finding new markets as I mentioned, we penetrated two new markets in 2023 that.

Not significant but they have significant growth potential for us.

The calcium chloride usage and the lithium processing in Latin America.

Continues to have some traction although lithium obviously right now pricing wise.

Is down, but we still see a longer term view very positive very constructive for lithium and we see a role for calcium chloride with those operations and then the other one is chip manufacturing.

Here in the United States, which.

Im not sure we fully appreciated.

Until a lot of these chip manufacturers started coming online they use a very high purity water in their process. They actually have to recalcified are actually re mineralize that water before it can be put back.

Into various applications and that's a great opportunity for us on our calcium chloride business as well so.

Just a very well run business for US right now and some new market opportunities that we think has some high growth potential.

Green premium that that business is overlooked gem from investors.

Thanks, a lot and I hope it.

Catch up on sleeping are awfully busy year.

Nexon so thankful.

Hopefully you get rent soon after these trips.

Thanks, Tim.

This concludes our question and answer session I would now like to turn the conference back over to Mr. Murphy for any closing remarks.

Well again, thank you very much.

Very proud and pleased with what we accomplished in 2023.

Fantastic employee base management team and great strategic partnerships that we're very excited about with our our current business performing extremely well and a great outlook going forward. So thank you for listening and thank you for your interest.

This concludes our conference call for today, you may now disconnect.

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