Q1 2024 TETRA Technologies Inc Earnings Call

Operator: Good morning and welcome to Tetra Technologies' first quarter 2024 results conference call. All participants will be in listen-only mode. 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 star, then 1 on your touchtone phone. To withdraw your question, please press star, then the number 2. Please note that this event is being recorded. I will now turn the conference over to Julian Higuera. Please go ahead.

Good morning, and welcome to Tetra technologies first quarter 'twenty 'twenty four results conference call.

Participants will be in listen only mode 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. So I'll ask a question you May Press Star then one on your Touchtone phone. So withdraw your question. Please press Star then the number two please.

Please note this event is being recorded.

I'll now turn the conference over to Julian who Darrell. Please go ahead.

Julian Higuera: Thank you, Konstanthin. Good morning, and thank you for joining Tetra's first quarter 2024 results call. The 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 analyses made by Tetra and are based on several factors.

Julian: Thank you Konstantinos.

Julian: Thank you for joining tetra as first quarter 2020, so to speak.

Julian: Speakers for today's call are Brady Murphy, Chief Executive Officer, and Alicia Serrano Chief Financial Officer.

Julian: 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.

Julian Higuera: These statements are subject to several risks and uncertainties, many of which are beyond the control of the company. We are cautioned that such statements are not guarantees of future performance, and that actual results may differ materially from those projected in these 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, returns on net capital employed, or other non-GAAP financial measures.

Elijio V. Serrano: 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.

Elijio V. Serrano: Cautions that such statements are not guarantees of future performance and that actual results may differ materially from those projected in these forward looking statements.

Elijio V. Serrano: 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 and 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.

Julian Higuera: Please refer to yesterday's press release or to our public website for reconciliations of non-GAAP financial measures to the nearest GAAP measure. These revisions are not a 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 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.

Elijio V. Serrano: The issuance of non-GAAP financial measures to the nearest GAAP measures.

Elijio V. Serrano: Installations are not as a 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 addition to our press release announcing we encourage you to refer to our 10-K that we filed that we also filed yesterday.

Elijio V. Serrano: I will now turn it over to Brady.

Brady M. Murphy: Thanks, Julian. Good morning, everyone, and welcome to Tetra's first quarter 2024 earnings call. I'll summarize some highlights for the first quarter and provide an update on our strategic initiatives before turning the call over to Elijio to discuss first quarter financials and provide an update on our balance sheet and second quarter outlook. Overall, first quarter results were in line with our expectations, with strong completion fluids and products results, all setting an anticipated weaker start to the year in our water and flow backs.

Elijio V. Serrano: Julien Good morning, everyone and welcome to <unk> first quarter 2024 earnings call I'll summarize some highlights for the first quarter and provide an update on our strategic initiatives before turning the call over to lead you to discuss first quarter financials and provide an update on our balance sheet and second quarter outlook.

Brady M. Murphy: Year over year, our revenue grew 3% and adjusted EBITDA grew 11%, while the U.S. land rig count was down 18% in the first quarter of 2024 versus the first quarter of 2023. Adjusted EBITDA was $22.8 million, with strong completion fluids and products adjusted EBITDA margins at 28.1%, driven by 15 offshore deepwater operations that we serviced during the quarter. The outlook for offshore and deepwater continues to point to a longer-duration upcycle, and Tetra is well-prepared to benefit from our recent strategic capacity investments in Brazil, the Gulf of Mexico, and the North Sea.

Brady M. Murphy: For the water and flowback segment, the year-end 2023 customer activity slowdown, which impacted our water services business in the fourth quarter, had a carryover effect to the first quarter for our flowback services, which operationally lags one quarter behind our water services. At the same time, our higher-margin sandstorm services were slower in the first quarter.

Elijio V. Serrano: Overall first quarter results were in line with our expectations with strong completion fluids and products results offsetting an anticipated weaker start to the year and our water and flowback segment.

Elijio V. Serrano: Year over year, our revenue grew 3% and adjusted EBITDA grew 11%, while U S land rig count was down 18% in the first quarter of 2024 versus the first quarter of 2023.

Elijio V. Serrano: Adjusted EBITDA was $22 8 million strong completion fluids <unk> products adjusted EBITDA margins at 28, 1% driven by 15 offshore deepwater operations that we serviced during the quarter.

Elijio V. Serrano: The outlook for offshore and deepwater continues to point to a longer duration up cycle etcetera is well prepared to benefit through our recent strategic capacity investments in Brazil Gulf of Mexico, and the North Sea.

Elijio V. Serrano: For the waterflood flowback segment, the year end 2023 customer activity slowdown, which impacted our water services business in the fourth quarter had a carryover effect to the first quarter for our flowback services, which operationally lags one quarter behind our water services.

Elijio V. Serrano: At the same time, our higher margin Sandstorm services were slower in the first quarter. We did experience some water services ramp up costs as activity levels rebounded looking to the second quarter, both water services and flowback, including Sandstorm will be operating at a more normalized activity levels with margins expected to recover to the mid teens.

Brady M. Murphy: We did experience some water services ramp-up costs as activity levels rebounded. Looking to the second quarter, both water services and flowback, including sandstorm, will be operating at more normalized activity levels, with margins expected to recover to the mid-teens. Before discussing more details on each of the segments, I'd like to highlight the progress that we've made with regard to our strategic initiatives. 2024 will be a key year for us to complete milestones that will allow us to quantify the financial benefits of each initiative.

Elijio V. Serrano: Before discussing more details on each of the segments I'd like to highlight the progress that we've made with regards to our strategic initiatives two.

Elijio V. Serrano: 2024 will be a key year for us to complete milestones that will allow us to quantify the financial benefits of each initiative.

Brady M. Murphy: On the energy storage side, we remain in close contact with Eos and are very encouraged by the progress they are making on automating their first production line. We fully expect Eos to be up and running with their Z3 zinc bromine battery automation line in the second half of this year, which is expected to result in material sales of electrolyte from Tetra. In the coming weeks, we're hopeful to have our first commercial desalination for beneficial reuse contract in place that should be operational by the first part of 2025. This is planned to be a 24,000-barrel-a-day South Texas facility.

Elijio V. Serrano: Energy storage side, we remain in close contact with Eos are very encouraged with the progress that we're making on automating. Their first production line, we fully expect the yields to be up and running there is <unk> zinc bromine battery automation line in the second half of this year, which is expected to result in material sales of electrolyte from Tetra.

Elijio V. Serrano: In the coming weeks, we're hopeful to have our first commercial desalination for beneficial reuse contract in place that should be operational by the first part of 2025.

Elijio V. Serrano: This was planned to be at 24000 barrel a day, South Texas facility.

Brady M. Murphy: We're also in discussions for a one-year commercial pilot project in the New Mexico area of the Delaware Basin using Tetra's proprietary pre-treatment technology and our solution for higher total dissolved solids. We're in the process of tying the legal terms and conditions together for these two projects, which has delayed our first project slightly, but we're optimistic that we can close on both of these opportunities in the near term. The demand for beneficial reuse projects continues to build as this solution is the ultimate answer to over-pressured disposal wells in areas like the Permian Basin that need usable water resources. There was a very informative article in this weekend's version of the Wall Street Journal that highlighted the challenges of continuing to dispose of so much produced water. I would encourage you to read that article.

Elijio V. Serrano: We're also in discussions for a one year commercial pilot project in the New Mexico area of the Delaware Basin, using tetra as proprietary pre treatment technology and our solution for higher total dissolved solids.

Elijio V. Serrano: We're in the process of tying the legal terms and conditions together for these two projects, which as of late our first project slightly but we're optimistic to close on both of these opportunities in the near term.

Elijio V. Serrano: The demand for beneficial reuse projects continues to build as this solution is the ultimate answer to over pressured disposal wells in areas like the Permian basin that need usable water sources.

Elijio V. Serrano: There was a very informative article in this weekend's version of the Wall Street Journal that highlighted the challenges of continuing to dispose so much produced water.

Elijio V. Serrano: I'd encourage you to read that article.

Brady M. Murphy: By the end of June, we hope to publish our Arkansas Bromine Definitive Feasibility Report, which will include updated financials, taking into account the shared CapEx investment and OpEx sharing with our planned lithium joint venture, ExxonMobil. Because of this sharing with the lithium project, we expect the bromine economics to reflect a material improvement from what we previously published, and with financing in place for bromine, we expect board approval to move forward with this project.

Elijio V. Serrano: But at the end of June we hope to publish our Arkansas bromine definitive feasibility report, which will include updated financials taking into account the shared capex investment in Opex sharing with our planned lithium joint venture Exxonmobil.

Elijio V. Serrano: Those are the sharing with the lithium project, we expect the bromine economics to reflect material improvement from what we've previously published and with financing financing in place for bromine, We expect board approval to move forward with this project.

Brady M. Murphy: We're targeting the first half of 2026 to be operational with our bromine plant, which will give us the needed capacity to meet our growing deepwater completion fluids demand and the significant EOS electrolyte requirement. Finally, on the lithium side, we continue advancing the FEED study as well as finalizing the negotiations for the Joint Venture-Joint Development Agreements and operating the Evergreen Brine Unit. We continue to work with ExxonMobil on many fronts to advance our project.

Elijio V. Serrano: We're targeting the FERC first half of 2026 to be operational with our bromine plant, which will give us the needed capacity to meet our growing deepwater completion fluids demand.

Elijio V. Serrano: And the significant iOS electrolyte requirement.

Elijio V. Serrano: Finally on the lithium side, we continue advancing the feed study as well as finalizing the negotiations for the joint venture joint development agreements and operating the Evergreen Brian unit will continue to work with Exxon Mobil on many fronts to advance our projects before the end of this year, we expect to have our joint venture in place.

Brady M. Murphy: Before the end of this year, we expect to have our joint venture in place, and the Evergreen Lithium Feed and Financial Evaluation completed. Individually, these initiatives represent a material benefit to the company that we will quantify as we complete key milestones throughout the year. Collectively, they are transformational for the company. Now turning to the segments, our completion fluids and product segment first quarter 2024 revenue of $77 million increased 7% sequentially, driven by stronger activity in the Gulf of Mexico and the Middle East.

Elijio V. Serrano: And the evergreen lithium feed and financial evaluation completed.

Elijio V. Serrano: Individually these initiatives represent a material benefit to the company that we will quantify as we complete key milestones throughout the year.

Elijio V. Serrano: Secondly, they are transformational for the company.

Elijio V. Serrano: Now turning to the segments.

Elijio V. Serrano: Our completion fluids and product segment first quarter 2020 for revenue of $77 million increased 7% sequentially driven by stronger activity in the Gulf of Mexico, and the Middle East <unk>.

Brady M. Murphy: Adjusted EBITDA of $22.6 million increased 20% sequentially, representing an EBITDA fall-through of nearly 79%. Adjusted EBITDA margins of 29.3% compared to 26% in the fourth quarter of 2023. Adjusted EBITDA margins improved by 330 basis points sequentially when excluding unrealized gains and losses from both periods, driven by solid performance in our industrial chemicals business and growth in our offshore completion fluids operations, particularly in the Gulf of Mexico. As a reminder, we estimate that 70% of the deepwater wells completed in the Gulf of Mexico use bromine-based completion fluids.

Elijio V. Serrano: Adjusted EBITDA of $22 6 million increased 20% sequentially, representing EBITDA fall through of nearly 79% adjusted EBITDA margins of 29, 3% compared to 26% in the fourth quarter of 2023.

Elijio V. Serrano: Adjusted EBITDA margins improved by 330 basis points sequentially, when excluding unrealized gains and losses from both periods driven by solid performance, our industrial chemicals business and growth in our offshore completion fluids operations, particularly in the Gulf of Mexico.

Elijio V. Serrano: As a reminder, we estimate that 70% of the deepwater wells completed in the Gulf of Mexico use bromine based completion fluids. So the deepwater activity increase that we're seeing globally is resulting in higher demand for our high value bromine based completion fluids, which includes set you'll see us Neptune.

Brady M. Murphy: So the deepwater activity increase that we're seeing globally is resulting in higher demand for our high-value bromine-based completion fluids, which include Tetra-CS-NEP. Regarding CS Neptune, our outlook continues to improve. As in addition to another job for a supermajor in the North Sea that is confirmed in June, discussions with two different supermajors for two different projects in the Gulf of Mexico continue to evolve for projects that are scheduled for the fourth quarter of 24 or early 25.

Elijio V. Serrano: Regarding CS Neptune, our outlook continues to improve as in addition to another job for a super major in the North Sea that is confirmed in June discussions with two different supermajors for two different projects in the Gulf of Mexico continue to evolve for projects that are scheduled for the fourth quarter of 'twenty four or early 'twenty five.

Brady M. Murphy: The level of discussions with operators in the Gulf of Mexico for CS Neptune projects has been the highest in several years as many of the anticipated projects in our pipeline are moving forward. Shifting to our water and flowback services segment, revenues of $74 million decreased by 5% year-on-year, while adjusted EBITDA of $7.1 fell by $5.8 million year-on-year. Although water services revenue rebounded from the fourth quarter slowdown, the non-recurring EPF sale and lower flowback activity in the first quarter resulted in revenue lower by $6.9 million, or 9% quarter-over-quarter. The combination of water project startup costs and lower activity for higher-margin sandstorm activities resulted in lower adjusted EBITDA margins of 9.6%.

Elijio V. Serrano: The level of discussions with operators in the Gulf of Mexico for <unk> projects has been the highest in several years as many of the anticipated projects in our pipeline are moving forward.

Elijio V. Serrano: Shifting to our water and flowback services segment revenues of $74 million decreased by 5% year on year, while adjusted EBITDA of $7. One fell by $5 8 million year on year, although water services revenue rebounded from the fourth quarter slowdown the nonrecurring EPS sales and lower flowback activity in the first quarter resulted in revenue lower.

Elijio V. Serrano: $6 9 million or 9% quarter over quarter.

Elijio V. Serrano: The combination of water project startup costs and lower activity for higher margin sandstorm activity resulted in lower adjusted EBITDA margins of nine 6%.

Brady M. Murphy: Despite a slow start to the year, we're very encouraged about the outlook for the rest of the year as we expect water and flow back services margins to rebound to the mid-teens. We also remain encouraged by the resiliency of activity and continue to expect single-digit revenue growth for our overall segment in 2024. As operators continue to transfer and utilize more and more produced water in their frac operations through treatment and recycling, the risk profile of produced water management and water spills increases, and the value of automation and technology increases.

Speaker Change: Despite a slow start to the year, we're very encouraged about the outlook for the rest of the year as we expect water and flowback services margins to rebound to the mid teens.

Speaker Change: We also remain encouraged in the resilience of that resiliency of activity and continue to expect single digit revenue growth for our overall segment in 2024.

Speaker Change: As operators continue to transfer and utilize more and more produced water in their frac operations through treatment and recycling the risk profile of produced.

Speaker Change: Water management and water spills increases in the value of automation and technology increases.

Brady M. Murphy: Over time, we're confident these customer trends will work in our favor. Additionally, while Tetra does not have significant exposure to gas markets, we believe the softness in those markets will be balanced by our continued market share gains in produced water services, led by water recycling and sand management with Tetra Sandstorm.

Speaker Change: Over time, we're confident these customer trends will work in our favor.

Speaker Change: <unk> does not have significant exposure to gas markets. We believe the softness in those markets will be balanced by our continued market share gains and produced water services led by water recycling and sand management with Tetra Sam stores our strategic.

Elijio V. Serrano: Our strategic priority for 2024 is to continue driving margin expansion with operational efficiencies and automation that will allow us to maximize returns on capital and generate meaningful cash flow. Now, I'll turn it over to Elijio to provide some additional commentary on our results, and then we'll open it up for questions. Thank you, Brady.

Speaker Change: We're already for 2020 for us to continue driving margin expansion with operational efficiencies and automation that will allow us to maximize returns on capital and generate meaningful cash flow now.

Speaker Change: Now I'll turn it over to <unk> to provide some additional commentary commentary on our results then we'll open it up for questions. Thank you Brady first quarter adjusted free cash flow from continuing operations was a use of cash of $29 6 million.

Elijio V. Serrano: First quarter adjusted free cash flow from continuing operations was the use of cash of $29.6 billion, and this included the impact of $4 million of capital investments for Arkansas bromine and lithium projects. And it also included an accounts receivable increase of almost $21 million sequentially due to the timing of revenue, as sales increased progressively through the quarter. Also, the inventory drawdown resulting from the stronger deepwater activity was offset by our build of calcium chloride inventory for the seasonal peak in northern Europe.

Speaker Change: And this included the impact of $4 million of capital investments for our Arkansas, bromine and lithium projects.

Speaker Change: And it also included an accounts receivable increase of almost $21 million sequentially due to the timing of revenue.

Speaker Change: As sales increased progressively through the quarter.

Speaker Change: Also the inventory drawdown, resulting from the stronger deepwater activity was offset.

Speaker Change: Our buildup of calcium chloride inventory for the seasonal peak in northern Europe.

Elijio V. Serrano: We expect working capital to come down materially in the coming quarters as we monetize a calcium chloride inventory in Northern Europe. We remain of the opinion that free cash flow from the base business in 2024 will be in excess of $40 million. We further expect that the free cash flow from the base business will fulfill our cash capital requirements for Arkansas this year and that we will not need to draw on our revolver nor the delayed draw feature from our term loan in 2024. This is consistent with our plans to self-fund as much as possible our capital requirements for the BROMI project. We have no intentions of issuing equity to fund our Arkansas investment.

Speaker Change: We expect working capital to come down materially in the coming quarters.

Speaker Change: As we monetize the calcium chloride inventory in northern Europe.

Speaker Change: We remain of the opinion that free cash flow from the base business in 2024 will be in excess of $40 million.

Speaker Change: We further expect that the free cash flow from the base business will fulfill our.

Speaker Change: Our cash capital requirements for Arkansas, this year and that we will not need to draw on our revolver.

Speaker Change: Delayed draw feature from our term loan in 2024.

Speaker Change: This is consistent with our plans of self funding as much as possible our capital requirements for the bromine project, we have no intentions of issuing equity to fund our Arkansas investments.

Elijio V. Serrano: Liquidity, as of the end of this week, was approximately $202 million, inclusive of the $75 million delay draw feature that is available to Tetra for the Bromine project. In addition to the noted liquidity, we are also holding slightly over $13 million of marketable security. This includes our holdings of Standard Lithium and Kodiak Gas Services, which recently acquired CSI Compresco. The acquisition of CSR Compressible by Kodiak was very, very favorable to Tetra.

Speaker Change: Liquidity is at the end of this week with approximately $202 million inclusive of the $75 million delayed draw feature set available to tetra for the bromine project.

Speaker Change: In addition to the noted liquidity.

Speaker Change: We are also holding slightly over $13 million of marketable securities.

Speaker Change: This includes our holdings in standard lithium and Kodiak gas services.

Speaker Change: Which recently acquired CSI Compressco.

Speaker Change: The acquisition of CSI Compressco by Kodiak, what's a very very favorable to tetra.

Elijio V. Serrano: Kodiak has a market cap of $2.5 billion with good global trading volumes, that would allow us to quickly monetize our shareholdings without having to spread this over many weeks or putting pressure on the Kodiak share price, as would have been the case with CSI Compresco. The mark-to-market gains that we are recognizing can quickly be converted into cash given the trading volumes these two entities are seeing. Therefore, we believe that reported market-to-market gains are very appropriate, as monetizing those is completely and easily within our control.

Speaker Change: Kodiak have a market cap of $2 5 billion.

Speaker Change: With good global trading volumes.

Speaker Change: That would allow us to quickly monetize our shareholdings without having to spread this over many weeks are putting pressure on the kodiak share price.

Speaker Change: That would have been the case with CSI compressco.

Speaker Change: The mark to market gains that we are recognizing can quickly be converted into cash given the trading volumes. These two entities are seeing.

Speaker Change: Therefore, we believe that reported mark to market gains are very appropriate as monetizing those are completely and easily within our control.

Elijio V. Serrano: In January, we refinanced, extended, and expanded our term loan at more attractive interest rates than our prior term loan, further strengthening our balance sheet and providing us with the flexibility to execute on our growth initiative. This includes the $75 million delay draw feature for the Bromine project that we don't anticipate utilizing until 2025. The maturity of the term loan is now January 2030.

Speaker Change: In January we.

Speaker Change: We refinanced extended and expanded our term loan at more attractive interest rates and our prior term loan.

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

Speaker Change: This includes the $75 million delayed draw feature for the bromine project that.

Speaker Change: We don't anticipate utilizing until 2025.

Speaker Change: The maturity of our term loan is now January 2030.

Elijio V. Serrano: At the end of the first quarter, our net leverage ratio was 1.5 times. Let me close by summarizing what I believe to be the key items everyone should focus on from our first quarter results. First, completion fluids and product segments performed very well, with adjusted EBITDA margins of 29.3% without the mark-to-market loss. We are going into the second quarter when we see a seasonal peak from our calcium chloride business. This will be the catalyst to getting Tetra's second quarter adjusted EBITDA above $30 million. Brady talked about the increasing visibility of CFNeptune projects, especially in the Gulf of Mexico. This visibility and level of discussion are the best that we've seen in a long time.

Speaker Change: At the end of the first quarter, our net leverage ratio was one five times.

Elijio V. Serrano: Second, we fully expect free cash flow this year to be, like I said earlier, about $40 million, consistent with our prior message. The first quarter was a use of pre-cash flow activities towards the end of the quarter that didn't allow us to invoice and collect before the quarter end. As a data point, March revenue was 15% higher than January revenue.

Speaker Change: Let me close out by summarizing what I believe to be the key items every once you're focused on from our first quarter results.

Speaker Change: First completion fluids and product segments performed very well adjusted EBITDA margin of 29, 3% without the mark to market losses.

Speaker Change: We are going into the second quarter, when we see a seasonal peak from our calcium chloride business. This.

Speaker Change: This will be the catalyst to getting tetra second quarter, adjusted EBITDA above $30 million.

Speaker Change: Brady talked about the increase in visibility Ses napkin projects, especially in the Gulf of Mexico.

Speaker Change: This visibility and level of discussion is the best that we've seen in a long time.

Speaker Change: Second we fully expect free cash flow this year to be like I said earlier about $40 million consistent with our prior message.

Speaker Change: The first quarter was a use of free cash flow activity spike towards the end of the quarter that didn't allow us to invoice and collect before the quarter end.

Speaker Change: As a as a data point March revenue was 15% higher than January revenue.

Elijio V. Serrano: We remain confident that between our borrowing capacity and free cash flow, we can fund our bromine project requirements and have no plans to issue any equity-linked securities. And I previously mentioned that we have around $30 million of very marketable securities completely at our discretion as to when we monetize those. I'll remind everyone that the last time we did this, we raised $18 million by selling our prior holdings in Standard Lithium. I'm not concerned about our free cash flow generation from our base business to cover our investments in Arkansas this year.

Speaker Change: We remain confident that between our borrowing capacity and free cash flow. We can fund our bromine project requirements and have no plans to issue any equity linked security.

Speaker Change: And as previously mentioned that we have around $30 million of very marketable securities completely at our discretion as to when we monetize those.

Speaker Change: I'll remind everyone that the last time, we did this we raised $18 million by selling our prior holding some standard lithium.

Speaker Change: I'm not concerned about our free cash flow generation from our base business to cover our investments in Arkansas This year.

Elijio V. Serrano: Third, the water and flow back services adjusted EBITDA margins, which we fully expect to rebound to the mid-teens in the second quarter. The costs that we had in the first quarter have been addressed, and those are under control. And lastly, all the expected work with deals for the zinc bromide electrolyte remains as expected for higher volumes in the fourth quarter. Our work on the bromine project with updated economics to reflect sharing of Capex with ExxonMobil continues as expected, and our negotiations and discussions on the JV with ExxonMobil also remain as expected.

Speaker Change: Third the water and flowback services adjusted EBIT adjusted EBITDA margins, we fully expect to rebound to the mid teens in the second quarter.

Speaker Change: The cost that we had in the first quarter had been addressed those are under control.

Speaker Change: Yeah.

Speaker Change: Yes.

Speaker Change: And lastly, all the expect that work with deals for the zinc bromide electrolyte remains as expect therefore higher volumes in the fourth quarter. Our work on the bromine project with updated economics to reflect sharing of Capex with Exxonmobil continues as expected and in negotiations and discussions on the JV with Exxonmobil also remain as expected.

Elijio V. Serrano: Nothing in the quarter changed the tone or direction of our initiatives but instead gave us further clarity and confidence in executing on those. With that, let me turn it back to Brady for closing comments. OK. Thanks, Elijio.

Speaker Change: Nothing in the quarter changed the tone or direction of our initiatives and instead gave us further clarity and confidence on executing on those.

Speaker Change: With that let me turn it back to Brady for closing comments, okay. Thanks, a lot.

Brady M. Murphy: Okay, thanks Elijio. In closing, we're off to a good start with our completion fluids and chemicals business with a great outlook for the rest of the year and an anticipated slower start for our water and flow back segment, but we do anticipate a strong second quarter for both segments. The outlook remains strong for the markets in which we operate. We have a solid balance sheet, and close to $200 million in liquidity. 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.

Brady M. Murphy: So in closing.

Brady M. Murphy: We're off to a good start with our completion fluids and chemicals business with a great outlook for the rest of the year and then anticipated slower start for our water and flowback segment, but we do anticipate a strong second quarter for both segments.

Speaker Change: <unk> outlook remains strong for the markets in which we operate.

Speaker Change: Solid balance sheet close to $200 million of liquidity, 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.

Speaker Change: With our produced water beneficial reuse solution, our Arkansas resource position and strategic partnerships provides us the opportunity to continue to drive long term shareholder value with that we'll now open it up for questions.

Brady M. Murphy: The combination of these plus advances, with our Produced Water Beneficial Reuse Solution, our Arkansas Resource Position, and Strategic Partnerships provides us the opportunity to continue to drive long-term shareholder value. With that, we'll now open it up for questions.

Operator: We will now begin the question and answer session. To ask questions, you may press star, then the number 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the key. To withdraw your question, please press the star, then the number 2. At this time, we will pause momentarily to assemble our roster. Your first question comes from the line of Martin Malloy from Johnson Rice. Please go ahead.

Speaker Change: We will now begin the question and answer session.

Speaker Change: Ask questions you May press Star then the number one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the key so.

Speaker Change: We draw your question. Please press Star then the number two at this time, we will pause momentarily to assemble our roster.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Your first question comes from the line of Martin Malloy from Johnson Rice. Please go ahead.

Martin Whittier Malloy: Good morning.

Martin Whittier Malloy: Good morning. I wanted to ask about the lithium project, and it seems like the feed may have slipped somewhat from where you previously discussed it being completed by and maybe the timing of this project reaching FID. Could you maybe provide us with some more information about what's going on there? Yeah, the...

Martin Whittier Malloy: Hi.

Martin Whittier Malloy: I wanted to ask about.

Martin Whittier Malloy: The lithium project and it seems like that may have slipped.

Martin Whittier Malloy: Some from where you previously discussed it is being completed by.

Martin Whittier Malloy: And.

Martin Whittier Malloy: Maybe.

Martin Whittier Malloy: Timing of those projects, reaching FID could you maybe provide us with some more information about what's going on there.

Brady M. Murphy: Yeah, the plus or minus 20% feed efforts for both bromine and lithium, first of all, they've been done individually, standalone, but as you know, Marty, we're actually combining those two operations into a single plant site. And so, although the individual feeds have mostly been completed to a plus or minus 20%, we're now doing an integrated feed study that will allow us to realize the savings and the benefits to both sides of those operations.

Martin Whittier Malloy: Yes.

Martin Whittier Malloy: Plus or minus 20% fee.

Martin Whittier Malloy: Efforts for.

Martin Whittier Malloy: For both bromine and lithium first of all they've been done individually stand alone, but as you know we're actually.

Martin Whittier Malloy: Binding those two operations into a single plant site and so although the individual feeds have mostly been completed to a plus bond is 20%. We're now doing an integrated feed study.

Martin Whittier Malloy: That will allow us to realize the savings and the benefits to both both sides of those operations.

Brady M. Murphy: So I wouldn't say that the lithium feed is necessarily behind schedule, but we do have to work through this integrating the two feed studies and get to a plus-minus 10 percent, which is our next objective, before we can really get into an FID-type discussion. And clearly, we want to get our joint venture negotiated and completed in place before we would announce that type of decision.

Martin Whittier Malloy: So I wouldn't say that the lithium feed is necessarily.

Martin Whittier Malloy: Behind schedule.

Martin Whittier Malloy: But we do have to work through this integrated integrating the two feed studies and get to a plus minus 10%, which is our next objective before we can really get into a <unk> type discussion and clearly we want to get our joint venture negotiated and completed in place before we would.

Martin Whittier Malloy: Good.

Martin Whittier Malloy: So that type of a decision.

Speaker Change: Okay, Great and then my follow up question just wanted to ask about working capital.

Martin Whittier Malloy: And then my follow-up question, just wanted to ask about working capital during 2Q. You know, typically, Northern Europe chemical sales are very strong, but I would guess you might have some inventory bill associated with the EOS business and then collecting on the receivables that ramped up at the end of 1Q. Could you maybe talk about some of the drivers of working capital usage during 2Q? Yeah, good.

Speaker Change: During <unk> typically the northern Europe chemical sales are very strong.

Martin Whittier Malloy: But I would guess you might have some inventory build associated with the iOS.

Martin Whittier Malloy: Business.

Martin Whittier Malloy: And then collecting on Europe.

Martin Whittier Malloy: Receivables that ramped up at the end of <unk> could you maybe talk about some of the drivers of working capital usage during <unk>.

Elijio V. Serrano: Good question, Marty. As soon as the seasonal peak ends in Europe, almost immediately, we begin building inventory for the coming seasonal peak. So last year, as soon as June was over, from July onwards, we started building inventory. And we built inventory all the way through March and then started shipping it in April. So during the second quarter, we convert the inventory into receivables, and then at the tail end of the second quarter and into the third quarter, we convert that receivable into cash.

Speaker Change: Yes, good question Marty as soon as the seasonal peak in Europe, almost immediately we begin building inventory for the coming six.

Speaker Change: Peak, so last year as soon as June with Silver from July onwards, we started building inventory and we build inventory all the way through March and then start shipping it in April so during the second quarter, we convert the inventory to receivables.

Martin Whittier Malloy: And then in the tail end of the second quarter and into the third quarter, we convert that receivables into cash that's the <unk>.

Elijio V. Serrano: That's the peak and the seasonality that we'll expect, the free cash flow that we expect in the coming quarters. We expect it to be very strong to the point of putting us over $40 million for the year.

Martin Whittier Malloy: Peak and the seasonality that we will expect so therefore the.

Martin Whittier Malloy: Our free cash flow that we expect in the coming quarters, we expect to be very strong to the point of putting us over $40 million for the year.

Martin Whittier Malloy: Thank you. I'll turn it back.

Thank you.

Speaker Change: I'll turn it back.

Kurt Kevin Hallead: Your next question comes from the line of Kurt Hallead from Benchmark. Please go ahead.

Martin Whittier Malloy: Your next question comes from the line of Kurt <unk> from benchmark. Please go ahead.

Kurt: Hey, good morning, everybody.

Kurt: Morning, Lauren and Kurt.

Kurt Kevin Hallead: Morning. Um, so, um... Hey, I'm kind of getting my attention here on this water desalination dynamic. And I know when we had you guys on the road a month ago, you talked about having something in place, hopefully around the time of your earnings release now. But it seems like that seems like that's good to go. But the problem is with the customer wanting to include this other Permian project.

Sam: So Sam.

Kurt Kevin Hallead: Sam kind of caught my attention here on the on this water detail dynamic and I know.

Kurt Kevin Hallead: Cowboy had you guys on the road a month ago, you talked about having something in place.

Kurt: Hopefully around the time of your earnings release now.

Martin Whittier Malloy: It seems like that seems like thats good to go but.

Kurt Kevin Hallead: Thank you is what the customer wanting to include this other Permian projects. So maybe you can kind of flesh that out a little bit more for us and just talk about.

Kurt Kevin Hallead: So maybe you can kind of flesh that out a little bit more for us and just talk about, you know, it looks like the scaling of this dynamic is happening sooner than you guys were even talking about a month ago.

Martin Whittier Malloy: It looks like the scaling of this dynamic is happening sooner than what you guys are even talking about a month ago.

Brady M. Murphy: We're very pleased with the progress that we're making, Kurt. We've essentially, I think..., mostly agreed on the financial terms and conditions as it relates to the South Texas project. This recent introduction of the Permian, we see, as you know, very important for us.

Martin Whittier Malloy: Yes.

Martin Whittier Malloy: Very pleased with the progress that we're making Kurt.

Martin Whittier Malloy: Essentially I think.

Brady M. Murphy: Mostly of agreed on the financial terms and conditions as it relates to the South Texas project.

Martin Whittier Malloy: This recent introduction of the Permian, we see us.

Martin Whittier Malloy: Very important for us ultimately, that's where the we think the biggest.

Brady M. Murphy: Ultimately, that's where we think the biggest produced water market will be, so getting an actual commercial pilot that's going to run for a full year is a very positive first step. We're not aware of anybody else having those types of discussions or projects in place. So we see it as positive. We are tying the legal terms and conditions between the two projects together. And as you can imagine, that starts to involve some regulatory agencies as it relates to how the water is used and the specifications of the water.

Martin Whittier Malloy: Produced water for beneficial reuse market will be so getting.

Martin Whittier Malloy: An actual commercial pilot that's going to run for a full year.

Martin Whittier Malloy: We see as a very positive first step we're not aware of anybody else have and those types of discussions or projects in place.

Martin Whittier Malloy: So we see it is positive we are tying the legal terms and conditions between the two projects together and as you can imagine.

Brady M. Murphy: That starts to involve some of the regulatory.

Martin Whittier Malloy: <unk>.

Brady M. Murphy: As it relates to how the water is used in the specifications of the water so that.

Brady M. Murphy: You know, that is taking a little more time than maybe we had hoped, had we just done the first project. But overall, we see it as a very big positive for where we're at and where we're going.

Brady M. Murphy: That is taking a little more time than maybe we had hoped had we've just done the first project, but overall, we see it as a very big positive for where we're at and where we're going.

Brady M. Murphy: Okay. And then maybe just to follow up on that, in the context of you referenced the pilot, you know, taking place in the Permian, and then you kind of just referenced something about a year timeframe. Does that mean, you know, you're going to have to wait a year to kind of get these contracts signed, or is it something that can, I know you mentioned in the near term, so, hard to pin down, I get it, but just, you know, just, it's not going to take another year to get going, is it?

Speaker Change: Okay, and then maybe just a follow up on that.

Speaker Change: In the context of you referenced.

Brady M. Murphy: The pilot taking place in the in the Permian and then you kind of just referenced something about a year timeframe does that mean youre going to have to wait a year or two to kind of get these contracts signed or is it something that can I know you mentioned in the near term so.

Brady M. Murphy: Hard to pin down.

Martin Whittier Malloy: I get it but just.

Martin Whittier Malloy: Is it if I could take another year to get going is it.

Brady M. Murphy: No, no, no. Well, we do have the pilot equipment pretty much available to us to start delivering the Permian pilot project. When I said a year, the actual duration of the pilot is for a year once we get started, but we will definitely be starting well ahead of that. We have essentially the pilot equipment that we need. This would involve the KMX vacuum membrane distillation technology that we've actually been running produced water through here at our research center for some time now.

Speaker Change: No no.

Speaker Change: Well.

Speaker Change: We do have the pilot equipment pretty much pretty much available to us to start delivering the Permian.

Martin Whittier Malloy: Islet project, what I said a year the actual duration of the pilot is for a year. Once we get started but we will definitely be starting well ahead of well ahead of that we have we have essentially the pilot equipment that we need this would involve the capex vacuum membrane distillation technology that that we've actually been running produce.

Brady M. Murphy: The water through here at our research center for some time now so no I would expect to have both of these.

Brady M. Murphy: So no, I would expect to have both of these. Contractual arrangements finalized, the legal terms and conditions, you know, completed within the next few weeks. And we're off to the races from there.

Brady M. Murphy: Contractual arrangements are finalized the legal terms and conditions.

Brady M. Murphy: Completed within the next few weeks.

Martin Whittier Malloy: And in off to the races from there and Brady just for the sake of clarity. This is this is.

Elijio V. Serrano: And Brady, just for the sake of clarity, this is a pilot project where we will get paid. Yeah, this is a commercial.

Martin Whittier Malloy: As a pilot project to where we will get paid.

Elijio V. Serrano: Yeah, this is a commercial pilot project. To Elijio's point, essentially all of our pilot projects now are at the point where we are fully expecting commercial success.

Elijio V. Serrano: Yes. This is a commercial pilot project.

Martin Whittier Malloy: So <unk> point.

Martin Whittier Malloy: Essentially all of our pilot projects now are at the point, where we are fully expecting commercial.

Martin Whittier Malloy: Benefits from.

Kurt Kevin Hallead: Okay, gotcha. I appreciate that color.

Brady: Okay got you.

Martin Whittier Malloy: I appreciate that color now maybe just.

Martin Whittier Malloy: Also following up you talked about the integrated.

Kurt Kevin Hallead: Now, maybe just also following up, you talked about, you know, the integrated facility now for the bromine expansion as well as the lithium opportunities. And again, I think when you guys were out in front of investors, you talked about the prospect of maybe, you know, having a, you know, share some element of shared dynamics and with reduced, potentially reduced CapEx requirements. Is there anything incremental you could flesh out on that for us as well?

Kurt Kevin Hallead: Facility now for the bromine expansion as well as the.

Martin Whittier Malloy: Lithium opportunities and again I think when you guys were out in front of the investors you talk about the prospect of maybe having a.

Speaker Change: Sure, So now I'm going to share dynamics and with the reduced potential.

Elijio Serrano: Potentially reduced capex requirements is there anything incremental you could flesh out on that for us as well.

Brady M. Murphy: No, Kurt, I think the message is still the same. We've done the individual feeds, and we now have a first pass of the integrated feed-in process, which, as I've mentioned, we want to get our definitive feasibility for bromine definitively finalized and published, hopefully, by the end of June. In that DFS report, you will see the benefits of having an integrated lithium and bromine facility both in terms of sharing of CAPEX as well as sharing of OPEX.

Speaker Change: No Gary I think the message is still the same the we've done the individual feeds and we now have a first pass of the integrated feed and process that.

Brady M. Murphy: As I've mentioned, we want to get our bromine definitive feasibility finalized.

Martin Whittier Malloy: And published hopefully by the end of June and that DFS report you will see the benefits of having an integrated lithium and bromine facility. Both in terms of of sharing of Capex.

Martin Whittier Malloy: As well as sharing of Opex and so as we mentioned in our comments.

Brady M. Murphy: And so, as we mentioned in our comments, we're optimistic that that financial summary that we published will be materially improved from the first roaming feed that we did as a standalone early last year. And then the next step we would like to do is get our JV agreements finalized, that's most likely in the third quarter. That's what we're targeting. And then the feed for the lithium piece would follow on to that, and hopefully FID before the end of the year is what we're targeting.

Martin Whittier Malloy: Think.

Martin Whittier Malloy: We're optimistic that that financial summary that we published will be materially improved from the last the first bromine feed that we did as a standalone early last year.

Brady M. Murphy: And then the next step we would like to do is get our JV agreements.

Martin Whittier Malloy: Finalized that's most likely in the third quarter, that's what we're targeting and then the feed.

Brady M. Murphy: For the lithium piece would follow on to that and hopefully.

Martin Whittier Malloy: Before the end of the year is what we're targeting.

Kurt Kevin Hallead: Okay, thanks. And then maybe just one more if I can follow up on your water business, right? They started off the year slow, but you referenced in your commentary that you still expect single-digit percentage growth in that. So is this a dynamic where there's going to be a pretty meaningful bounce in revenue in the second quarter and then it kind of flatlines from there, or is there going to be potentially a steady increase in revenue for the remainder of the year to get you that single-digit percentage growth rate?

Speaker Change: Okay. Thanks, and then maybe just one more if I can follow up on on your water business right. It.

Speaker Change: Started off the year slow, but you referenced in your commentary that you still expect single digit percentage growth in that.

Speaker Change: So is this a dynamic where there is going to be a pretty meaningful bounce in revenue in the second quarter and then it kind of flat lines from there or is there going to be potentially a steady increase in revenue for the remainder of the year to get you that.

Speaker Change: I will get you a percentage growth rate.

Brady M. Murphy: It's going to be a steady increase. We don't, We're not relying on significantly stronger fracking or completions activity to drive our profitability. We think it's continuing to manage our costs, continuing to rely on automation to reduce personnel at the well site and also to continue to deploy higher margin technology such as the sand storm systems that we have. Appreciate it.

Speaker Change: It's going to be a steady increase we don't we're not relying on significantly stronger tracking or completions activity to drive our profitability. We think it's continuing to manage our costs continuing to rely on the <unk>.

Speaker Change: <unk> to reduce personnel at the well site and also to continue to deploy the higher margin technology such as the.

Brady M. Murphy: Storm systems that we have.

Kurt Kevin Hallead: I appreciate that, Keller. Thanks. Thanks, Kurt.

Speaker Change: Okay I appreciate that color. Thanks, Thanks, Kurt.

Josh Jane: Your next question comes from the line of Josh Jane from Daniel Energy Partners. Please go ahead.

Speaker Change: Your next question comes from the line of Josh Jayne from Danielle Energy Partners. Please go ahead.

Josh Jane: Thanks, Good morning.

Josh Jane: Good morning.

Josh Jane: Perhaps first, you mentioned in your prepared remarks strategic investments in Brazil, the Gulf of Mexico, and the North Sea as you prepare for an offshore multi-year upcycle. Could you talk about those a bit more and just your ultimate expectations for what you expect to see offshore over the next couple of years?

Josh Jayne: Maybe first you mentioned in your prepared remarks strategic investments.

Josh Jane: Brazil Gulf of Mexico, North Sea as you prepare for an offshore multiyear up cycle, but you talk about those a bit more and just your ultimate expectations for what you expect to see offshore over the next couple of years.

Brady M. Murphy: Yeah, we've mentioned in our prior earnings calls that we've actually acquired additional capacity. These are previous investments, so not in our 2024 cash flow impact.

Speaker Change: Yes, we mentioned in our prior earnings calls that we've actually acquired additional capacity.

Speaker Change: These are previous investments so so not in our 2024 cash flow impact, we've expanded Brazil by a meaningful percentage of our capacity, which we see that market continuing to.

Brady M. Murphy: We've expanded Brazil by a meaningful percentage of our capacity, and we see that market continuing to grow significantly. We have a very strong position there for what we call the high value or higher density completion fluids market. Same in the Gulf of Mexico.

Brady M. Murphy: To grow significantly we have a very strong position there for the what we call the high value or higher.

Brady M. Murphy: Density completion fluids market same in Gulf of Mexico, We acquired new parks.

Brady M. Murphy: We acquired new parks, plant, and completion plant facilities and have added those to our own to prepare again for what we see as a longer-term growth. And then we made a smaller acquisition in the North Sea. So each of those were prior period investments that we anticipated the cycle that we're seeing. And fortunately, as we look forward, we're very bullish on a continued growth outlook for the deep water market. I think Rysted and Evercore both are seeing another 20-30% growth over the next 4-5 years in deep water drilling rig activity.

Speaker Change: Completion plant facilities.

Speaker Change: And have added those to our own to prepare again for what we see as a longer term growth and then we made a smaller acquisition in the North Sea.

Brady M. Murphy: So each of those were prior.

Brady M. Murphy: Period investments that we anticipated the cycle that we're seeing.

Brady M. Murphy: Fortunately.

Speaker Change: We look forward.

Brady M. Murphy: Very bullish on our continued growth outlook for the for the deepwater market I think I think rice did in Evercore both.

Speaker Change: Are seeing another 20% to 30% growth over the next four to five years in the deepwater drilling rig activity and Josh I would also add that in addition to the incremental storage and blending capacity, we moved inventory into some of those regions, we move quite a bit of inventory into Brazil last year that allowed us to capture some significant projects and we.

Elijio V. Serrano: And Josh, I would also add that, in addition to the incremental storage and blending capacity, we moved inventory into some of those regions. We moved quite a bit of inventory into Brazil last year that allowed us to capture some significant projects, and we still have inventory to address some of the upcoming opportunities in Brazil, as an example.

Speaker Change: Still have inventory to address some of the upcoming opportunities.

Elijio V. Serrano: Brazil as an example.

Speaker Change: Okay.

Josh Jane: And then to sort of follow up on that, you also mentioned in your prepared remarks that there were a couple of opportunities in Q4 of 24, early 25 in the Gulf of Mexico with two operators. How would you say the scope of those opportunities compares to projects you've completed over the last couple of years? Pretty in line, is there anything different about those, and maybe just talk about those a little bit more?

Elijio V. Serrano: And then to sort of follow up there you also mentioned in your prepared remarks, there were a couple of opportunities in Q4 of 'twenty for early 'twenty, five and the Gulf of Mexico with two operators.

Josh Jane: Or would you say the scope of those opportunities compares to projects you've you've completed over the last couple of years.

Josh Jane: Pretty in line is there anything different about those and maybe just talk about those a little bit more.

Brady M. Murphy: Yeah, as we've mentioned before, your typical Gulf of Mexico Neptune job is materially above our normal deepwater completion. I think if you've seen numbers in the past when we've announced Neptune jobs, we've seen $15 million-type of revenues with good margin progression on each of those projects. Those, I would say, are somewhat typical of your deepwater CS Neptune job in the Gulf of Mexico. But when we get outside the Gulf of Mexico, like the North Sea, where we're continuing to do Neptune jobs, you know, they're quite a bit smaller, but still, you know, still quite profitable for us.

Josh Jane: Yes.

Speaker Change: And before you typical Gulf of Mexico Neptune job is.

Brady M. Murphy: As materially above our normal completions deepwater completion.

Brady M. Murphy: <unk> seen numbers in the past.

Brady M. Murphy: We've announced Neptune jobs, we've seen.

Speaker Change: $15 million type of.

Brady M. Murphy: Revenues with good margin progression all each of those on those projects.

Speaker Change: Those those I would say somewhat typical of your deepwater sea as Neptune job in the Gulf of Mexico, and we get outside of the Gulf of Mexico, like North Sea, where we're continuing to do Neptune jobs, there are quite a bit smaller.

Brady M. Murphy: But still still quite profitable for us.

Josh Jane: And maybe just one more, if I may. One of the things you also talked about in your prepared remarks was driving margin expansion through automation. Could you expand on that a bit more? How much margin could ultimately expand based on what you're doing? And is this something we will continue to see the benefit of, you know, not only across 2024 but as we move into 2025? Yeah, absolutely. That's a key part of our

Speaker Change: And maybe just one more.

Josh Jane: One of the things you also talked about in your prepared remarks was driving margin expansion through automation.

Speaker Change: Could you expand on that a bit more how much margins can ultimately expand based on what youre doing.

Speaker Change: And is this something we will continue to see that benefit forward.

Josh Jane: Not only across 2024, but as we move into 2025.

Brady M. Murphy: Yeah, absolutely, that's a key part of our strategy. The water services business and flow back are both fairly manpower intensive, and we've been working on the automation of every aspect of the water services side for a few years. We're still only at around 50% of our operations with automated services where we can reduce up to 30-40% of the manpower on a water job, but our objective is to be 100% by the end of this year on the water services side.

Josh Jane: Yes, absolutely Thats, a key part of our strategy the water services business and flowback are both fairly manpower intensive.

Brady M. Murphy: And we've been working on automation of every aspect of the water services side now for a few years, we're still only at around the 50% of our operations with automated services, where we can reduce up to 30, 40% of the manpower on a water job, but our objective is to be 100% by the end of this year.

Brady M. Murphy: On the water services side, the flowback side is similar.

Brady M. Murphy: The flowback side is similar, somewhat manpower intensive, a bigger part of our costs, and we're in the early days now of introducing new flow-back automation technology that, again, we believe is a great way to enhance our margins. We fully expect to be above the 20 percent margin levels by the end of 2025 as we roll out our automation technology.

Brady M. Murphy: What manpower intensive.

Brady M. Murphy: A bigger part of our cost.

Brady M. Murphy: And we're in early days now of introducing new flowback automation technology.

Brady M. Murphy: That again, we believe is a great way to enhance our margins.

Brady M. Murphy: We would fully expect to be above the 20%.

Speaker Change: Margin levels by by end of 2025, as we rollout our automation technology.

Speaker Change: Thank you.

Patrick Oldgate: Your next question comes from the line of Patrick Oldgate from Stiefel; please go ahead.

Speaker Change: Your next question comes from the line of Patrick <unk> from Stifel. Please go ahead.

Patrick Oldgate: Hey, good morning. I'm Pat. I'm on behalf of Stephen Gengaro. Thanks for taking the question.

Patrick Oldgate: Hey, good morning, Pat on for Stephen Jay Karen Thanks for taking the questions. Good.

Patrick Oldgate: Good morning. When thinking about 2Q, I believe you mentioned this, but can we assume that CS Neptune's job falls there, and then given the seasonality in the European industrial chemicals business, how can we think about the overall margin profile in the second quarter?

Patrick: Good morning, Joe.

Patrick: Good morning, when thinking about <unk> I believe you had mentioned this but can we assume that CS Neptune job falls, there and then given the seasonality in the European industrial chemicals business. How can we think about the overall margin profile in the second quarter.

Brady M. Murphy: So I'll take the Neptune job. We do have a planned Neptune job in June that is scheduled for a super major, but this is a North Sea Neptune job. This is not a Gulf of Mexico Neptune job. But we are optimistic that we will secure, know a deepwater Gulf of Mexico job, if not before the end of this year, the fourth quarter, but early in 2025, and potentially multiple wells, in that time period. Maybe not necessarily all in 24, but between 24 and early 25, we have that type of visibility and optimism. And then, with respect to our

Stephen David Gengaro: So I'll take the Neptune job, we do have a.

Speaker Change: Our planned Neptune job in June that is scheduled for a super major but this is a north sea Neptune job. This is this is not a Gulf of Mexico Neptune job.

Speaker Change: But we are optimistic that we will secure.

Brady M. Murphy: No a deepwater Gulf of Mexico job.

Brady M. Murphy: If not before the end of this year, the fourth quarter, but early into 2025 and potentially multiple wells.

Brady M. Murphy: In that time period, maybe not necessarily all in 'twenty four but between 24 and early 'twenty five we have the we have that type of visibility and optimism.

Elijio V. Serrano: And then with respect to our margins, Patrick, we've got a couple of things working in our favor in the second quarter. The first one is that we start monetizing our inventory that we've been building up with the fall through in northern Europe being very attractive.

Brady M. Murphy: And then with respect to our margins Patrick we've got a couple of items working in our favor in the second quarter. The first one is that we start monetizing our inventory that we've been building up with the fall through in northern Europe being very attractive.

Elijio V. Serrano: Brady talked about the North Sea Neptune project that also has high margins. And then we also expect the second quarter cost structure on the US onshore water management and flow back services side to be quite strong. Therefore, that puts the EBITDA margins that we're expecting in the second quarter consistent with what we were seeing in the third quarter of last year before we got into the year-end slowdown.

Elijio V. Serrano: <unk> talked about the North Sea Neptune project that also has high margins.

Elijio V. Serrano: And then we also expect our second quarter cost structure on the U S onshore water management and flowback services site to be quite strong.

Elijio V. Serrano: Therefore that puts the <unk>.

Patrick: EBITDA margins that we're expecting in the second quarter consistent with what we're seeing in the third quarter of last year before we got into the year end slowdown.

Patrick Oldgate: Alright, thanks a lot. I think, so, given the drop in the water margin and the mid-team guide you gave for the second quarter, is it reasonable to think that margin holds here the rest of the year, or do you have visibility on how this landscape's playing out in the back half?

Speaker Change: Alright, Thanks, a lot.

Elijio V. Serrano: So given the drop in the water margin.

Patrick: And the mid Teen Guide you gave for the second quarter is it reasonable to think that margin hold share the rest of the year or give visibility on how this landscapes.

Now in the back half.

Brady M. Murphy: We said the second quarter would be mid-teens. We would fully expect to build on that as we go through the year, but some of that's going to depend on getting the automation equipment that we need in place, but that would be our expectation of slowly improving that as we go through the rest of the year.

Speaker Change: Yes, we probably will take a more.

Brady M. Murphy: Said, the second quarter would be mid teens, we would fully expect to build on that as we go through the year.

Brady M. Murphy: But.

Brady M. Murphy: Some of that is going to depend on getting automation equipment that we need in place, but that would be our expectation is slowly slowly improving that as we go through the rest of the year.

Patrick Oldgate: All right, thanks a bunch. I'll turn it back.

Speaker Change: Alright, thanks, so much I'll turn it back.

Patrick Oldgate: Okay.

Bobby Brooks: Your next question comes from the line of Bobby Brooks from Northland Capital Markets. Please go ahead.

Patrick Oldgate: Your next question comes from the line of Bobby Brooks from Northland Capital markets. Please go ahead.

Bobby Brooks: Hey, good morning, guys. Thanks for taking my question.

Bobby Brooks: Hey, good morning, guys. Thanks for taking my question.

Bobby Brooks: So really strong year over year growth in the United States completion fluids business, but I was kind of surprised by the small decrease in the international completion fluids piece of it.

Bobby Brooks: Especially when given that Theres 15, deepwater completions in the quarter. So could you just discuss why the international completion fluids slowed year over year. Despite those 15 deepwater completions and maybe it would help just to contrast contrast that with how many deepwater completions. There will you guys did.

Bobby Brooks: So really strong year-over-year growth from the United States completion fluids business. But you know, I was kind of surprised by the small decrease in the international completion fluids piece of it, especially when given that there were 15 deep water completions in the quarter. So could you just discuss why the international completion fluids, you know, slowed year over year despite those 15 deep water completions? And maybe it would help just to contrast that with how many deep water completions you guys did in the first quarter of this year? Yeah, I remember.

Bobby Brooks: In the first quarter of 'twenty three.

Brady M. Murphy: Yeah, I remember Bobby saying that if you're looking at the segment results in the 10Q, the fluids include both the calcium chloride and the offshore bit. We have not seen a slowdown in the international offshore oil and gas fluids business, and we expect that this year it will continue to be strong. Now maybe ask the question separately, but there's no indication from our side that the international side is slower.

Speaker Change: Yes, I remember Bobby that if youre looking at the segment results in the 10-Q that the fluids includes both the calcium chloride in the offshore.

Brady M. Murphy: Business, we have not seen a slowdown in the international offshore oil and gas fluids business.

Brady M. Murphy: And we expect that this year it will continue to be strong.

Brady M. Murphy: Now maybe I asked the question separately, but theres no indications from our site at the international side is slower.

Brady M. Murphy: Okay.

Bobby Brooks: Got it, and then Kind of just going back to that Deepwater Outlook, you guys have specifically highlighted a growing pipeline in the North Sea and Gulf of Mexico and the excitement there. And I know Brady kind of touched on the Brazil piece a bit in the Q&A, but, you know, I was just wondering if there was any mention of the, you know, LATAM market in your prepared remarks or in the press release.

Speaker Change: Got it and then.

Bobby Brooks: Kind of just Steve going back to that deepwater outlook.

Bobby Brooks: You guys have specifically highlighted our growing pipeline in the north sea and Gulf of Mexico, and excitement, Dan I know Brady kind of touched on the Brazil piece a bit in the Q&A, but I was just.

Bobby Brooks: There is no mention of the Latam market.

Bobby Brooks: In your prepared remarks or in the press release, and obviously that is a growing piece given what's gone on in Guyana, and Suriname, and so I just I'm just curious to hear maybe a little bit more detail of how the prospects are looking in the Latin American region, and then maybe just contrast that with.

Bobby Brooks: And obviously, that is a growing piece given, you know, what's going on in Guyana and Suriname. And so I just, I'm just curious to hear maybe a little bit more detail of how the prospects are looking in the, you know, Latin American region and then maybe just contrast that with, you know, the strength that you guys have noted in the Gulf of Mexico and in the North Sea.

Bobby Brooks: The strength that you guys have noted in the Gulf of Mexico, and North Sea.

Brady M. Murphy: Yeah, so our base in Brazil is where we have our services operations, and so that's where we've added additional capacity to grow with what we're seeing the growing market coming in Brazil. So that's fully part of our anticipated growth that we see in the deep water markets. In Guyana, we do not currently have our own operations in place, but we do have opportunities to sell completion fluids to the major service providers.

Speaker Change: Yes so.

Bobby Brooks: Our base in Brazil, where we have our services operations and.

Brady M. Murphy: So that's where we've added additional capacity to grow with what we're seeing.

Brady M. Murphy: <unk> market coming in Brazil, So that's fully part of our anticipated growth that we see in the deepwater markets in Guyana, we do not currently have our own operations in place, but we do have opportunities to sell completion fluids through the major service providers. They are customers in some of our biggest customers and so so we.

Brady M. Murphy: They are our customers, some of our biggest customers, and so we will be participating in those markets through sales to the likes of Halliburton, Slumber Jays, and Baker, who have bases and operations in place, which is normal for us around the world where we don't have our own service operation.

Brady M. Murphy: We'll be.

Brady M. Murphy: Participating in those markets through sales too.

Brady M. Murphy: The likes of the Halliburton Schlumberger and bakers.

Brady M. Murphy: Who have bases and operations in place, which is which is normal for us around the world, where we don't have our own service operations.

Bobby Brooks: Got it. Makes sense. And then, you know, I was just wanting to confirm. So going over to the beneficial reuse program, reuse project, it seems like the you know it's now a 2020 that getting up and running, the first, commercial one seems like that's not uh, you know summer 2024 event more something happening in 2025. Did I hear that right or was I missing something?

Speaker Change: Got it makes sense and then.

Bobby Brooks: Just wanted to confirm so going over to the beneficial reuse program.

Bobby Brooks: Reuse project.

Bobby Brooks: It seems like.

Bobby Brooks: It seems like that's now at 2020 that getting up and running the first the first commercial one it seems like thats not.

Bobby Brooks: Summer 2024 events more something happening in 2025 did I hear that rider was I missing something.

Brady M. Murphy: Yeah, I think we had always articulated that we would first get the contract in place, and there would be a period of time where there's going to be some civil construction work. This is a fixed plant, a five-year fixed plant, so this is not like a service operation we can deploy in a few weeks' time. So there would be a lead time of six to eight months to actually get this facility up and running.

Speaker Change: Yes, I think we had always articulated that we would first get the contract in place and.

Brady M. Murphy: There will be a period of time, where there's going to be some civil construction work. This is this is a fixed plant five year fixed plant. So so this is this is not like a service operation we can deploy.

Brady M. Murphy: In a few weeks' time, so there would be a lead time.

Brady M. Murphy: Six months to eight months to actually get this facility up in ratings, that's always been in our plan. So the impact on 2024.

Brady M. Murphy: So the impact on 2024, in terms of our financials, was never really part of our plan. With the latest developments, as we've mentioned, tying these projects together with the commercial pilot and the Permian, we see now that, most likely, this project will be up and running in the first quarter of 2025. So we will see the financial benefits in 2025, but we never planned on that for 2024.

Brady M. Murphy: In terms of our financials was never really part of our plan.

Brady M. Murphy: With the latest developments as we've mentioned tying these projects together with the commercial pilot in the Permian.

Brady M. Murphy: We see now that most likely this project will be up and running in the first quarter of 2025. So we will see the benefit financially in 2025.

Brady M. Murphy: We've never planned on that for 'twenty, four and also to repeat what we mentioned earlier the South Texas project is about 24000 barrel a day project Cigna.

Brady M. Murphy: And also to repeat what we mentioned earlier, the South Texas project is about a 24,000 barrels a day project, significant in scale. The project that we've talked about in the Permian Basin on a commercial pilot scale will begin generating revenue on that one this year, but obviously on a much smaller scale.

Brady M. Murphy: Significant in scale.

Brady M. Murphy: The project that we've talked about in the Permian basin on a commercial pilot scale will begin generating revenue on that one this year by obviously on a much smaller scale.

Bobby Brooks: Okay, got it. Um, and then I just just stick them with beneficial reuse.

Speaker Change: Okay got it.

Brady M. Murphy: And then I just just sticking with.

Bobby Brooks: You know, I might be reading too much into this, but I couldn't help but kind of see a verbiage change in the discussion for that second beneficial reuse. On the fourth-quarter call, I know you guys stated how it was the same operator, and I know that you're kind of reiterating that. But in the press release, it mentioned that you were in discussion with operators, plural. So I was just wondering, could you maybe just dive into that a little bit more and kind of help me understand the tie-in to the South Texas and First Permian projects and then how it seems to be now that you guys are opening the door to more operators, setting this up, and using this technology in a more near-term way?

Bobby Brooks: Beneficial reuse it.

Bobby Brooks: I might be reading too much into this but I couldn't help to kind.

Bobby Brooks: Kind of see a verbiage change on the discussion for that second beneficial reuse.

Bobby Brooks: On the fourth quarter call I know you guys David.

Bobby Brooks: The same operator, and I know that youre kind of reiterating that but on.

Bobby Brooks: The press release.

Bobby Brooks: You mentioned that you are in discussion with like with operators plural. So I was just.

Bobby Brooks: Wondering is.

Speaker Change: Okay. So is that.

Bobby Brooks: Could you, maybe just dive into that a little bit more and kind of help.

Bobby Brooks: Help me understand the tie into the South, Texas and first Permian projected nine how there is it seems to be now you guys are opening the door to more operators.

Bobby Brooks: Setting this up and using this technology in a more near term way.

Brady M. Murphy: Yeah, so the South Texas and Permian projects are with the operator that we've been running our pilot with now two years ago, our successful pilot that we published the results of in South Texas, and so we have a very, you know, pretty deep working relationship with this operator, and as we've mentioned, we're expanding that relationship beyond South Texas to now include the Permian. But there are many operators, you know; I would say almost every operator that operates in the Permian Basin is interested in finding a beneficial reuse solution.

Bobby Brooks: Yes, so so the south, Texas, and Permian project or with the operator that we've been that we ran a pilot with now two years ago. Our successful pilot that we published our results in South, Texas, and so we have a very.

Brady M. Murphy: Pretty deep working relationship.

Brady M. Murphy: With this operator and so as we've mentioned, we're expanding that relationship beyond the South Texas to now include the Permian.

Brady M. Murphy: But there are there are many operators.

Brady M. Murphy: I would say almost every operator that operates in the Permian basin.

Brady M. Murphy: That is interested in finding a beneficial reuse solution.

Brady M. Murphy: There are other pilots that are being discussed, you know, that will be, I'm sure, tested over the coming years. You know, we feel we've got a leading edge position because we did our pilot successfully over two years ago, and now we're into the, you know, kind of commercial discussions. But we have a lot of customers that we are in discussions with about, you know, future projects for this technology.

Brady M. Murphy: There are other pilots that are being discussed.

Brady M. Murphy: That will be.

Brady M. Murphy: Im sure tested over the coming years.

Brady M. Murphy: We feel we've got.

Brady M. Murphy: A leading edge position because we did our pilot successfully over two years ago and now we're into.

Brady M. Murphy: Commercial discussions, but we have we have a lot of customers that are we are in discussions with.

Brady M. Murphy: <unk>.

Brady M. Murphy: Future projects or for this technology.

Bobby Brooks: Okay, that's great. Thank you guys for the call, and I'll jump back in the queue.

Speaker Change: Okay. That's great. Thank you guys for the color I'll jump back in the queue.

Speaker Change: Thank you.

Timothy M. Moore: Again, if you have any questions, please press star followed by the number one on your telephone keypad. Your next question comes from the line of Tim Moore from EF Hutton; please go ahead.

Speaker Change: Again, if you have any questions. Please press star followed by the number one on your telephone keypad.

Timothy M. Moore: Your next question comes from the line of team more from Es Hutton. Please go ahead.

Timothy M. Moore: Thanks. I'm just following up on the bromine development project. The board vote timing, you know, if it's approved, which it seems like, you know, it should be, do you think you could probably break ground on that by, you know, January or February? Because I think I heard in your prepared remarks, Brady, that you mentioned the plant could be operational in the first half of 2026.

Timothy M. Moore: Thanks, just following up on the bromine development project.

Timothy M. Moore: <unk> timing.

Timothy M. Moore: If it's approved which it seems like it should be.

Timothy M. Moore: Do you think you could probably break ground on that buying in January or February because I think I heard in your prepared remarks screening that you mentioned the plant to be operational in the first half of 2026.

Speaker Change: Right, yes so.

Brady M. Murphy: You know, obviously, before we approve the full project, we will have our definitive feasibility study, plus or minus 10%, completed and have a FID discussion approval with our board, but we have the Green Light from our board to continue to look at long-lead items, preparing the plant site location, many of those things we are already doing. So we're anticipating the first half of 2026, and we are, you know, maintaining our eye on those long-lead items and civil works that we want to get a jump start on, even ahead of FID, and we have full board approval support to do that.

Timothy M. Moore: Obviously.

Timothy M. Moore: Before we approve the full project, we will have our.

Brady M. Murphy: Definitive feasibility study plus or minus 10%.

Brady M. Murphy:

Brady M. Murphy: Completed and have a discussion and approval with our with our board, but what we have.

Brady M. Murphy: Green light from our board to continue to look at long lead items prepared.

Brady M. Murphy: Preparing the plant site location.

Brady M. Murphy: Many of those things we're already doing so we're anticipating the first half of 2026.

Brady M. Murphy: And we are.

Brady M. Murphy: Maintaining our eye on those long lead items and civil works that we want to get a jumpstart on even ahead of that and we have full board approval support too to do that.

Timothy M. Moore: That's great color, and nice to hear the board support for those long-lead items, getting ahead of that. Next question is for Elijio. You know, it was really nice to hear that the working capital should improve. You know, the first quarter was a one-off. You explained that.

Speaker Change: That's great color and thanks to hear the board's support for those long lead items are getting ahead of that.

Elijio: Next question is for <unk>.

Elijio: It was really nice to hear that the working capital should improve in our first quarter was a one off you explained that the council alright inventory.

Elijio V. Serrano: You know, the calcium chloride inventory seasonality bill should unwind. So, Elijio, I'm just wondering, can you maybe give us a rough range of what you think capital expenditures for this year would be, including project development spending? Would it be $35 to $40 million this year?

Elijio: Seasonality built should unwind.

Elijio: I'm just wondering.

Elijio: Can you maybe give us a rough range of what you think capital expenditures for this year would be including the project development spending could it be $35 million to $40 million this year.

Timothy M. Moore: So the base business capex could be in the range of 40 to 50 million dollars, and then anything that we spend in Arkansas, we intend to cover with that free cash flow from the base business.

Elijio: So the base business Capex, we believe could be in the range of $40 million to $50 million.

Elijio: And then anything that we spend in Arkansas, we intend to cover with that.

Timothy M. Moore: Free cash flow from the base business.

Elijio V. Serrano: Great, great. And so when we think about, you know, you were very clear about, you know, free cash flow commentary, you know, it sounded like above $40 million for the base business. That's, that's stripping out or excluding Arkansas spending, right?

Elijio: Great Great and so when we think about you were very clear about free cash flow commentary it sounded like about $40 million for the base business.

Elijio V. Serrano: That stripping out or excluding the Arkansas spending right.

Timothy M. Moore: That's correct. And then from there, we'll fund any of the eight Arkansas investments, including long-lead items. You saw that in the first quarter, we spent around four million dollars on engineering, design, and work that we're doing on both lithium and bromine.

Elijio V. Serrano: And then from there we will fund any of the.

Timothy M. Moore: Arkansas investments, including long lead items.

Timothy M. Moore: You saw that in the first quarter, we spent around $4 million for engineering design in work that we're working on both lithium and bromine.

Timothy M. Moore: And just lastly, since most of my questions were already addressed, for my second favorite topic, the desalination of produced water, it sounds like you probably have optimized the pretreatment on your side to reduce the total organic compounds before they move to the filtration stage to really protect those membranes' life in units longer. So I guess what I'm wondering, as Brady mentioned earlier, how capacity-constrained are you to take on additional commercial pilots besides the one you mentioned?

Speaker Change: Okay. That's helpful.

Timothy M. Moore: Just lastly, since most of my question is already addressed.

Timothy M. Moore: For my second favorite topic, the desalination of produced water it sounds like you'd probably by now or optimize the pretreatment on your side to reduce the total organic organic compounds before they move to the filtration stage and how to really get protect those membranes volume can units longer.

Timothy M. Moore: Guess, what I'm wondering in that Brady mentioned earlier.

Timothy M. Moore: How capacity constrained are you to take on additional commercial pilots. Besides the one you mentioned.

Timothy M. Moore: You know, you could pass around the KMX equipment, but do you get duplicates of that KMX equipment and HyRIC stuff and do more than one or two pilots at once, you know, as you look out to next year?

Timothy M. Moore: Can you pass around the <unk> equipment, but.

Timothy M. Moore: You'll get duplicate so that can amex equipment and hiring staff.

Timothy M. Moore: And to do more than one or two pilots once as you look out to next year.

Brady M. Murphy: Yeah, I mean that's a subject we're having discussions on every day, Tim, and we are getting pulled on a lot of demands for pilots. Even some of the contracts that we're discussing where we have pilots.

Speaker Change: Yes, I mean, thats a subject, we're having discussions on everyday Tim and we are getting pulled on a lot of demands for.

Brady M. Murphy: Pilots.

Brady M. Murphy: Even even some of the contracts that were discussing where we have pilots we are also including.

Brady M. Murphy: We are also including, you know, taking samples from our other customers that want to process that water through our pilot unit and giving them those results. So we're trying to maximize the utilization of the units that we have. We will look at expanding our pilot fleet. Those are discussions that we're having, engineering work that we've already done. We feel we're full of the commercial. Great.

Brady M. Murphy: Doing taking samples from our other customers that want to process that water through our pilot unit and giving them. Those results. So so we're trying to maximize the utilization of the units that we have.

Brady M. Murphy: We will look at expanding our pilot fleet.

Brady M. Murphy: But those are discussions that we're having.

Brady M. Murphy: But obviously our main priority right now is to get our commercial contracts moving because.

Brady M. Murphy: Certainly for the South Texas site.

Brady M. Murphy: Engineering work that we've already done.

Brady M. Murphy: We feel were for the commercial.

Timothy M. Moore: Great. Well, that's really good explanation. Well, thanks a lot for operating, Elijio. I'm sure you'll be busy for the rest of the year, and thanks.

Speaker Change: Great that's really good elaboration well thanks operating we have I'm sure it will be busy for the rest of the year. Thanks.

Speaker Change: Thank you.

Stephen David Gengaro: Your next question comes from the line of Stephen Gengaro from Stifel. Please go ahead.

Speaker Change: Your next question comes from the line of Stephens and Gara from Stifel. Please go ahead.

Stephen David Gengaro: Thanks. Good morning, everybody. So you've covered a lot. I guess two things for me. I'm not sure you want to comment directly on this, but I'll ask. The second quarter consensus has a pretty wide range, and the average is about $35 million. Can you just talk about any thoughts that you have around that?

Stephen David Gengaro: Thanks, Good morning, everybody.

Speaker Change: Hey, good morning, Stephen.

Stephen David Gengaro: Covered a lot I guess two things from me.

Stephen David Gengaro: I'm not sure you want to comment directly on this but I'll ask.

Stephen David Gengaro: Second quarter consensus has a pretty big range and the average is about $35 million can you just talk about any thoughts you have around that.

Elijio V. Serrano: Yeah, so we've made it a habit of not giving guidance either for the year or specific quarters unless there's something materially different out there. We've indicated that there are three items that are working in our favor, both the cost coming down in the onshore business, the ramp up of the calcium chloride Northern Europe business, and the Neptune project in the North Sea. And I mentioned earlier that we think that propels us to be north of $30 million in the second quarter.

Speaker Change: Yes, so we've made it a habit of not given.

Elijio V. Serrano: Guidance, either in the year or specific quarters, unless there something materially different out there.

Stephen David Gengaro: Okay, thanks. And then the other one in this, this might be a little longer term as it pertains to the bromine side.

Stephen David Gengaro: We've indicated that there is three items that are working in our favor.

Stephen David Gengaro: The cost coming down in the onshore business the ramp up of the calcium chloride Northern Europe business.

Stephen David Gengaro: And the Neptune project in the North Sea.

Stephen David Gengaro: Those I mentioned earlier that we think that propels us to be north of $30 million in the second quarter.

Stephen David Gengaro: Is there when you look at your fluids expectations, both for your core business and for what EOS likely takes as they ramp up. How are your brooming needs served until you get to that point of the new facility being operational in 2026? Any impact on margin? Are the volumes available?

Stephen David Gengaro: Okay.

Stephen David Gengaro: Thanks, and then the other one and this might be a little longer term as it as it pertains to the bromine side.

Stephen David Gengaro: Is there when you look at your fluids expectations, both for your core business and for what Eos likely takes as they ramp.

Stephen David Gengaro: How are your bromine need served.

Stephen David Gengaro: And until you get to that point of the new facility being operational in 2026 are there.

Brady M. Murphy: How should we think about that?

Stephen David Gengaro: Any impact on margin.

Brady M. Murphy: Or are the volumes available how should we think about that.

Stephen David Gengaro: We have a long-term supply agreement, as you know, with Lanxess that runs until the end of this decade. We have favorable pricing terms on that, but we also have to supplement that supply with spot market prices. Fortunately, you know, bromine prices have stabilized. They were rising quite rapidly a few years ago. With the Chinese economy slowing a bit, spot market pricing has been more reasonable, so we're able to get additional bromine from the spot market to meet at least our current needs.

Brady M. Murphy: Yes, so we have a long term supply agreement as you know with <unk> as that.

Stephen David Gengaro: Progress is still the end of this end of this decade.

Stephen David Gengaro: We have favorable pricing terms on that.

Stephen David Gengaro: But we also have to supplement.

Stephen David Gengaro: That supply with spot market pricing.

Stephen David Gengaro: Fortunately.

Stephen David Gengaro: Bromine prices have stabilized there were rising quite rapidly a few years ago with the Chinese economy slowing a bit spot market pricing has been more reasonable. So we're able to get additional bromine from the spot market to meet at least our current needs now as <unk> starts to ramp up and the deepwater.

Stephen David Gengaro: Now as EO starts to ramp up and the deep water market continues to progress, we will need our Arkansas bromine, and that will also boost our margins considerably, as we hope to release our DFS report will show. So that's an additional volume and an additional margin benefit, obviously, when we get to that point. Okay, great. Thanks for the

Stephen David Gengaro: The market continues to progress.

Stephen David Gengaro: We will need our Arkansas bromine.

Stephen David Gengaro: That will also boost our margins considerably as we hope to.

Stephen David Gengaro: Release, our DFS report, we will show.

Stephen David Gengaro: So that's an additional volume and an additional margin benefit obviously, when we when we get to that point.

Stephen David Gengaro: Okay, great. Thanks to the caller.

Speaker Change: Okay, great. Thanks for the color.

Speaker Change: Thanks, Dave.

Stephen David Gengaro: Okay.

Brady M. Murphy: There are no further questions at this time. This concludes our question and answer session. I would like to hand the call back to Mr. Murphy for closing remarks.

Stephen David Gengaro: There are no further questions at this time. This concludes our question and answer session I would like to hand, the call back to Mr. Murphy for closing remarks.

Operator: Thank you very much for your participation. As we've reiterated several times, we feel very good about where we are with our business and as we progress through 2024. And we will be continuing to quantify and keep you updated with our strategic initiatives as we go through 2024. Thank you very much.

Brady M. Murphy: Well. Thank you very much for your participation as we've reiterated several times, we feel very good about where we're at with with our business and as we progressed through 2024, and we will be continuing to quantify and keep you updated with our strategic initiatives as we go through 2020 for you. Thank you very much.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

Operator: Okay.