Q2 2024 TETRA Technologies Inc Earnings Call

Good morning and welcome to Tetra Technologies' second quarter 2024 results conference call.

Unknown Executive: Quarter 2024 results conference call. All participants will be in listen-only mode. Should you need assistance, signal a conference specialist by pressing the star key followed by zero.

Operator: for the 2024 Results Conference Call. All participants will be in listen-only mode.

Operator: Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I will now turn the conference over to Julian Higuera.

Speaker Change: 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.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded.

To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I will now turn the conference over to Julian Higuera. Please go ahead.

Julian Higgara: I will now turn a conference over to Julian Higgara. Please go ahead.

Brady Murphy: Good morning, and thank you for joining Tetra's second quarter 2024 results call.

Julian Higuera: Good morning, and thank you for joining Tetra's second quarter 2024 results call. The speakers for today's call are Brady Murphy, Chief Executive Officer, and Elijio Serrano, Chief Financial Officer.

Julian Higuera: Good morning and thank you for joining Tetra's second quarter 2024 results call.

Unknown Executive: The speakers for today's call are Brady Murphy, Chief Executive Officer, and Elijio Serrano, Chief Financial Officer.

Julian Higuera: I would like to remind you that this conference call may contain statements that may be deemed to be forward-looking, including projections, financial guidance, profitability, and estimated earnings. These statements are based on certain assumptions and analysis made by Tetra and are based on several factors. These statements are subject to several risks and uncertainties, many of which are beyond the control of the company. We are cautioned that such statements are not guarantees of future performance and that the actual results may differ materially from those projected in the forward-looking statement.

Speaker Change: The speakers for today's call are Brady Murphy, Chief Executive Officer, and Elijio Serrano, Chief Financial Officer.

Unknown Executive: I would like to remind you that this conference call may contain assistance that are or may be deemed before we're looking. Including projections, financial guidance, profitability, and estimated earnings. These statements are based on certain assumptions and analysis made by Tetra and are based on several factors. These statements are subject to several risks and uncertainties, many of which are beyond the control of the company. You're cautioned that such statements are not guaranteed to be performed and that the actual results may differ materially from those projecting the forward-looking statements.

Speaker Change: I would like to remind you that this conference call may contain statements that are or may be deemed to be forward-looking, including projections, financial guidance, profitability, and estimated earnings. These statements are based on certain assumptions and analysis made by Tetra and are based on several factors.

Julian Higuera: These statements are subject to several risks and uncertainties.

Julian Higuera: Many of which are beyond the control of the company. We are cautioned that such statements are not guarantees of future performance and that the actual results may differ materially from those projected in the forward-looking statements.

Unknown Executive: In addition, in the course of the call, we may refer to Ibiza, adjusted Ibiza, adjusted Ibiza margins, pre-catchable net debt, net leverage ratio, liquidity, returns on net capital employed, or other non-GAAP financial measures. Please refer to yesterday's press release or to our public website for reconciliation of non-GAAP financial measures to the nearest GAAP measures. These reconciliations 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.

Julian Higuera: In addition, in the course of the call, we may refer to EBITDA, adjusted EBITDA, adjusted EBITDA margins, pre-cash flow, net debt, net leverage ratio, liquidity, returns on net capital employed, or other non-GAAP financial metrics. 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 reconciliations 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-Q that we filed yesterday. I will now turn it over to Brady.

Julian Higuera: In addition, in the course of the call, we may refer to EBITDA, Adjusted EBITDA, Adjusted EBITDA Margins, Pre-Cash Flow, Net Debt, Net Leverage Ratio, Liquidity, Returns on Net Capital Employed, or other non-GAAP financial measures.

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 measures.

Julian Higuera: These reconciliations 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.

Unknown Executive: In addition to our press release announcement, we encourage you to refer to our 10-Q that we also filed yesterday.

Julian Higuera: In addition to our press release announcement, we encourage you to refer to our 10-Q that we also filed yesterday. I will now turn it over to Brady.

Brady Murphy: I will now turn it over to Braden. Thanks, Julian.

Brady Murphy: Thanks, Julian. Good morning, everyone, and welcome to Tetra's second quarter 2024 earnings call. I'll summarize some highlights from our second quarter results and provide an update on our strategic initiatives before turning the call over to Elijio to discuss second quarter financials and additional perspectives on our third quarter. Our second quarter results can be characterized as mostly consistent with the overall trending oil and gas markets during the second quarter, which was lower U.S. completion activity with increasing activity in the international offshore market.

Brady Murphy: Good morning, everyone, and welcome to Tetra's second quarter 2024 earnings call. I'll summarize some highlights from our second quarter results and provide an update on our strategic initiatives before turning into a call over to Alihio to discuss second quarter financials and additional perspectives on our third quarter. Our second quarter results can be characterized as mostly consistent with the overall trending oil and gas markets during the second quarter, which was lower U.S. completion activity with increasing activity in the international offshore market. This combined with our seasonal second quarter peak for our European industrial chemicals business and lower deep water project activity in the Gulf of Mexico contributed to our results of 14% sequential revenue growth and 32% increase adjusted EBITDA.

Brady: Thanks, Julian. Good morning, everyone, and welcome to Tetra's second quarter 2024 earnings call. I'll summarize some highlights from our second quarter results and provide an update on our strategic initiatives before turning the call over to Elijio to discuss second quarter financials and additional perspectives on our third quarter.

Speaker Change: Our second quarter results can be characterized as mostly consistent with the overall trending oil and gas markets during the second quarter, which was lower U.S. completion activity with increasing activity in the international offshore market.

Brady Murphy: This, combined with our seasonal second-quarter peak for our European Industrial Chemicals business and lower deep water project activity in the Gulf of Mexico, contributed to our results of 14% sequential revenue growth and 32% increased adjusted EBITDA. Our completion fluids and products and water and flow back segments achieved adjusted EBITDA margins of 28.9% and 15.2%, respectively. Water and flow-back adjusted EBITDA margins of 15.2% were anticipated to rebound from 9.6% in the first quarter, a sequential improvement of 560 basis points. However, year-over-year revenue was down 2% compared to U.S. onshore rig activity down approximately 16%. Adjusted EBITDA of $30.2 million, or 17.6% of total revenue, and inclusive of $1.1 million of foreign exchange losses.

Elijio: This, combined with our seasonal second-quarter peak for our European industrial chemicals business and lower deep-water project activity in the Gulf of Mexico, contributed to our results of 14% sequential revenue growth and 32% increased adjusted EBITDA.

Brady Murphy: Our completion fluids and products and water and flow back segments achieved adjusted EBITDA margins of 28.9% and 15.2%, respectively. Water and flow back adjusted EBITDA margins of 15.2% was an anticipated rebound from 9.6% in the first quarter. A sequential improvement of 560 basis points. Your over-year revenue was down 2% compared to U.S. onshore rig activity down approximately 16%. Adjusted EBITDA of 30.2 million was 17.6% of total revenue and inclusive of 1.1 million of foreign. During the second quarter, we secured a three well deep water Gulf of Mexico, CSNeptune Fluids Project, for a super major oil and gas operator.

Elijio: Our completion fluids and products and water and flow back segments achieved adjusted EBITDA margins of 28.9% and 15.2% respectively.

Elijio: Water and flow back adjusted EBITDA margins of 15.2% was an anticipated rebound from 9.6% in the first quarter, a sequential improvement of 560 basis points.

Julian Higuera: Year-over-year revenue was down 2% compared to U.S. onshore rig activity down approximately 16%.

Julian Higuera: Adjusted EBITDA of $30.2 million, or 17.6% of total revenue, and inclusive of $1.1 million of foreign exchange losses.

Brady Murphy: During the second quarter, we secured a three-well deepwater Gulf of Mexico CS-Neptene fluids project for a supermajor oil and gas operator. This is an important milestone as this is the second supermajor operator in the Gulf of Mexico to select CS Neptune for their completions program and the first Gulf of Mexico deepwater CS Neptune fluids project since the fourth quarter of 2019. Following a dramatic impact on the timing of potential CS Neptune Deepwater projects due to the COVID pandemic in 2020 and 2021, we have since seen our pipeline of projects move forward, and we are pleased we have been successfully awarded this project.

Elijio: During the second quarter, we secured a three-well deepwater Gulf of Mexico CS-Neptene fluids project for a supermajor oil and gas operator.

Brady Murphy: This is an important milestone as this is the second super major operator in the Gulf of Mexico to select CSNeptune for their completions program, and the first Gulf of Mexico deep water CSNeptune Fluids Project since the fourth quarter of 2019. Following a dramatic impact to the timing of potential CSNeptune deep water projects due to the COVID pandemic in 2020 and 2021, we have since seen our pipeline of projects move forward and are pleased we have been successfully awarded this project. The first well is not expected to begin the completion phase until the fourth quarter of this year, and the timing of the entire project is expected to be between Q4, 2024, and the second quarter of 2025.

Elijio: This is an important milestone as this is the second supermajor operator in the Gulf of Mexico to select CS Neptune for their completions program and the first Gulf of Mexico deepwater CS Neptune fluids project since the fourth quarter of 2019.

Elijio: Following a dramatic impact to the timing of potential CS Neptune Deepwater projects due to the COVID pandemic in 2020 and 2021, we have since seen our pipeline of projects move forward and are pleased we have been successful awarded this project.

Brady Murphy: The first well is not expected to begin the completion phase until the fourth quarter of this year, and the timing of the entire project is expected to be between Q4 2024 and the second quarter of 2025. Unlike our prior CS Neptune Fluid Gulf of Mexico projects, which were single wells spread out across several years, this program is a three-well batch, drill, and complete program, with the completion phase expected to start in the fourth quarter. As a result, it is likely that the three wells will be completed within a six- to nine-month period, assuming things go as planned.

Elijio: The first well is not expected to begin the completion phase until the fourth quarter of this year, and the timing of the entire project is expected to be between Q4 of 2024 and the second quarter of 2025.

Brady Murphy: Unlike our prior CSNeptune Fluid Gulf of Mexico projects, which were single wells spread out across several years, this program is a three-well batch drill and complete program, with the completion phase expected to start in the fourth quarter. As a result, it is likely that the three wells will be completed between six to nine month period, assuming things go as planned. As demonstrated from the past, CSNeptune Gulf of Mexico projects, these wells represent a material revenue increase over our typical deep water completions. Because of the back-to-batch completion program, there are some efficiencies on the inventory side planned for the project, but the overall project revenue numbers will also be very dependent on the fluid losses from each well.

Elijio: Unlike our prior CS Neptune fluid Gulf of Mexico projects, which were single wells spread out across several years,

Brady Murphy: As demonstrated from the past CS Neptune Gulf of Mexico projects, these wells represent a material revenue increase over our typical deepwater completion. Because of the back-to-back batch completion program, there is some efficiency on the inventory side planned for the project, but the overall project revenue numbers will also be very dependent on the fluid losses from each well.

Brady Murphy: Obviously, we are excited for this award, and we continue to have productive discussions with other operators for CSNeptune programs in the Gulf of Mexico. For water flow back, we previously announced that we expected second quarter margins to recover in the mid teens, and despite lower operator completion activity levels in the second quarter, we are pleased we achieved adjusted even on margins of 15.2%, of 560 basis points sequential improvement. Our strategy for water flow back continues to be a two-pronged approach. Automation of every service aspect from blue-linked automated movement and transfer of water to the automated sandstorm, automated and automated drillout systems. And secondly, the treatment operator produced water for frag reuse and desalination for beneficial reuse.

Brady Murphy: Obviously, we are excited about this award, and we continue to have productive discussions with other operators for CS Neptune programs in the Gulf of Mexico. For Water and Flow Back, we previously announced that we expected second-quarter margins to recover in the mid-teens, and despite lower operator completion activity levels in the second quarter, we are pleased we achieved adjusted EBITDA margins of 15.2%, a 560 basis points sequential improvement. Our strategy for bringing water flow back continues to be a two-pronged approach.

Elijio: Obviously, we are excited for this award and we continue to have productive discussions with other operators for CS Neptune programs in the Gulf of Mexico.

Elijio: For Water and Flow Back, we previously announced that we expected second quarter margins to recover in the mid-teens.

Elijio: And despite lower operator completion activity levels in the second quarter, we are pleased we achieved adjusted EBITDA margins of 15.2%, a 560 basis points sequential improvement.

Elijio: Our strategy for water flow back continues to be a two-pronged approach.

Brady Murphy: Automation of every service aspect, from BlueLynx automated movement and transfer of water to the automated sandstorm, automated and automated drill-out systems, and secondly, the treatment of operator-produced water for frack reuse and desalination for beneficial reuse. Collectively, these strategies will reduce HSE exposure for our employees and our customers, lower labor costs per job, and provide an environmental benefit of less freshwater usage while reducing seismicity risk and providing a valuable water resource for agriculture and industrial applications.

Elijio: Automation of every service aspect, from Blue Link's automated movement and transfer of water, to the automated sandstorm, automated and automated drill-out systems, and secondly, the treatment of operator-produced water for frack reuse and desalination for beneficial reuse.

Brady Murphy: Collectively, these strategies will reduce HSC exposure for our employees and our customers, lower labor costs per job, and provide an environmental benefit of less fresh water usage while reducing seismicity risk and providing a valuable water resource for agriculture and industrial applications. While this strategy is well underway with blue-links and water transfer, the number of automated systems deployed for sandstorm and auto drillout is only just beginning, but so far with exceptional results and customer acceptance. We are also deploying a first sandstorm to the Middle East market for a major national oil customer. If a successful trial is completed as anticipated, this could be a major new market opportunity for the company.

Elijio: Collectively, these strategies will reduce HSE exposure for our employees and our customers, lower labor costs per job, and provide an environmental benefit of less freshwater usage while reducing seismicity risk and providing a valuable water resource for agriculture and industrial applications.

Brady Murphy: While this strategy is well underway with Blue Links and water transfer, the number of automated systems deployed for sandstorm and auto drill-out is only just beginning, but so far with exceptional results and customer acceptance. We're also deploying our first sandstorm system to the Middle East market for a major national oil customer. If a successful trial is completed as anticipated, this could be a major new market opportunity for the company. With regard to water desalination and beneficial reuse, I would like to provide some color on where we are.

Elijio: While this strategy is well underway with Blue Links and water transfer, the number of automated systems deployed for sandstorm and autodrill is only just beginning, but so far with exceptional results and customer acceptance.

Elijio: We're also deploying our first sandstorm to the Middle East market for a major national oil customer. If a successful trial is completed as anticipated, this could be a major new market opportunity for the company.

Brady Murphy: With regards to water desalination and beneficial reuse, I would like to provide some color on where we are. We previously communicated that a South Texas commercial production facility was imminent. One expected late, our customer was told that the permitting would be unhauled and linked to results from a West Texas pilot program where urgency for a solution is a bigger priority. This is highlighted by the most recent earthquakes to hit West Texas, the largest of which hit 5.1 on the Richter scale and prompted the Texas Railroad Commission to open an investigation. Accordingly, we are working closely with our customer on the commercial terms for a beneficial reuse pilot project in the Permian Basin.

Elijio: With regards to water desalination and beneficial reuse, I would like to provide some color on where we are.

Brady Murphy: We previously communicated that a South Texas commercial production facility was imminent. However, unexpectedly, our customer was told that the permitting would be on hold and linked to results from a West Texas pilot program where urgency for a solution is a bigger priority. This is highlighted by the most recent earthquakes to hit West Texas, the largest of which hit 5.1 on the Richter scale and prompted the Texas Railroad Commission to open an investigation.

Elijio: We previously communicated that a South Texas commercial production facility was imminent.

Elijio: Unexpectedly, our customer was told that the permitting would be on hold and linked to results from a West Texas pilot program where urgency for a solution is a bigger priority.

Elijio: This is highlighted by the most recent earthquakes to hit west Texas, the largest of which hit 5.1 on the Richter scale, and prompted the Texas Railroad Commission to open investigation.

Brady Murphy: Accordingly, we are working closely with our customer on the commercial terms for a beneficial reuse pilot project in the Permian Basin. In addition, we have ongoing discussions with three other major customers for pilot projects that, in addition to West Texas and South Texas, include the Mid-Continent and Appalachian regions. We currently have non-disclosure agreements with seven customers and have had many of them visit our functioning pilot units at our research facility in Conroe, TX.

Elijio: Accordingly, we are working closely with our customer on the commercial terms for a beneficial reuse pilot project in the Permian Basin.

Brady Murphy: In addition, we have ongoing discussions with three other major customers for pilot projects that, in addition to West Texas and South Texas, include Made Continent and Appalachia regions. We currently have non-disclosure agreements with seven customers and have had many of them visiting our functioning pilot unions at our research facility in Conroe, Texas. While the delay of a launch of our first commercial project was unexpected, we realize our customers have to work with the regulatory bodies and focus on areas with the biggest impact to the environmental challenges the industry faces. We've demonstrated that our technology is able to treat on gas well-produced water to the regulatory environmental specifications required and oftentimes to be of higher quality than to what it's found in rivers and in water wells, with the ability to scale for commercial applications.

Elijio: In addition, we have ongoing discussions with three other major customers for pilot projects that, in addition to West Texas and South Texas, include Mid-Continent and Appalachia regions.

Elijio: We currently have non-disclosure agreements with seven customers and have had many of them visiting our functioning pilot units at our research facility in Conroe, Texas.

Brady Murphy: While the delay in the launch of our first commercial project was unexpected, we realize our customers have to work with regulatory bodies and focus on areas with the biggest impact on the environmental challenges the industry faces. We have demonstrated that our technology is able to treat oil and gas well-produced water to the regulatory environmental specifications required, and oftentimes, it is of higher quality than what is found in rivers and in water wells, with the ability to scale for commercial applications. Since utilizing operator oil and gas, well-produced water, for agricultural purposes has been occurring in California for several years, we are optimistic that Texas and New Mexico will soon follow suit.

Elijio: While the delay of the launch of our first commercial project was unexpected, we realize our customers have to work with the regulatory bodies and focus on areas with the biggest impact to the environmental challenges the industry faces.

Elijio: We have demonstrated that our technology is able to treat oil and gas well-produced water to the regulatory environmental specifications required, and oftentimes to be of higher quality than what is found in rivers and in water wells, with the ability to scale for commercial applications.

Brady Murphy: So utilizing operator oil and gas well-produced water for agricultural purposes has been occurring in California for several years. We are optimistic that Texas and New Mexico will soon follow suit.

Elijio: Since utilizing operator oil and gas well-produced water for agricultural purposes has been occurring in California for several years, we are optimistic that Texas and New Mexico will soon follow suit.

Brady Murphy: Moving on for strategic initiatives following our very recent visit with the EOS executive management to their plant in Turtle Creek, Pittsburgh, we are confident EOS is on the verge of materially higher production volumes requiring materially higher volumes for their electrolyte. EOS recently completed a recapitalization that allowed them to source the capital to complete the first line and have the working capital required. Seeing the automated line working at EOS facility is a vast improvement from what we have seen in our prior visits. As EOS ramps and brings the automated line up, the volumes of pure flow and electrolyte they require will increase materially over the minimal volumes that we have shipped them so far this year.

Brady Murphy: Moving on to our strategic initiatives, following our very recent visit with the EOS Executive Management to their plant in Turtle Creek, Pittsburgh, we are confident EOS is on the verge of materially higher production volumes, requiring materially higher volumes for their electrolytes. Elijio and I were very encouraged by what we saw firsthand with their automated line and the excitement of their employees working to automate the line from start to finish. He recently completed a recapitalization that allowed them to raise the capital to complete the first line and have the working capital required.

Speaker Change: Moving on to our strategic initiatives, following our very recent visit with the EOS Executive Management to their plant in Turtle Creek, Pittsburgh, we are confident EOS is on the verge of materially higher production volumes, requiring materially higher volumes for their electrolyte.

Elijio Serrano: Elijio and I were very encouraged with what we saw firsthand with their automated line and the excitement of their employees working to automate the line from start to finish. He was recently completed a recapitalization that allowed them to source the capital to complete the first line and have the working capital required.

Brady Murphy: Seeing the automated line working at Edeo's facility is a vast improvement from what we have seen in our prior visits. As EOS ramps up and brings the automated line up, the volumes of pure flow and electrolyte they require will increase materially over the minimal volumes that we have shipped them so far this year. We've increased our capacity in West Memphis to meet the expected EOS demand. We also continue to advance discussions with a second zinc bromide customer using PureFlow for their electrolyte technology. On the Arkansas-Broming side, we're on the final review of an SK-1300 Definitive Feasibility Report, or DFS.

Speaker Change: Seeing the automated line working at EO's facility is a vast improvement from what we have seen in our prior visits.

Speaker Change: As EOS ramps and brings the automated line up, the volumes of pure flow and electrolyte they require will increase materially over the minimal volumes that we have shipped them so far this year. We have increased our capacity in West Memphis to meet the expected EOS demand.

Brady Murphy: We have increased our capacity in West Memphis to meet the expected EOS demand. We also continue to advance discussions with a second zinc bromide customer using pure flow for their electrolyte technology.

Speaker Change: We also continue to advance discussions with a Second Zinc bromide customer using PureFlow for their electrolyte technology.

Brady Murphy: On the Arkansas bromine side, we are on the final review of an SK 1300 Defensive Feasibility Report or DFS. The economic analysis is prepared based on the assumption that the bromine project is completed independent of the planned lithium project. As a reminder, the bromine project will allow us to achieve the following benefits. First, vertical integration for supply of elemental bromine at a lower cost than buying it from third parties, making this a margin enhancement project. Second, it gives us more volumes to meet the continued growth in oil and gas demand for high-end, high-value completion fluids and the growing zinc bromide, long-duration battery market requirements.

Elijio: On the Arkansas-Broming side, we're on the final review of an SK-1300 Definitive Feasibility Report, or DFS.

Elijio Serrano: The economic analysis is prepared based on the assumption that the bromine project is completed independent of the planned lithium project. As a reminder, the bromine project will allow us to achieve the following benefits. First, vertical integration for the supply of elemental bromine at a lower cost than buying it from third parties, making this a margin enhancement project. Second, it gives us more volumes to meet the continued growth in oil and gas demand for high-end, high-value completion fluids and the growing zinc bromide long-duration battery market requirements, and third, it positions us for the long term, utilizing our Arkansas bromine leases as to be able to provide over 80 years of resource supply as our current long-term elemental supply agreement comes to an end at the end of 2029.

Elijio: The economic analysis is prepared based on the assumption that the bromine project is completed independent of the planned lithium project.

Elijio: As a reminder, the Bromine Project will allow us to achieve the following benefits. First, vertical integration for supply of elemental bromine at a lower cost than buying it from third parties, making this a margin enhancement project.

Elijio: Second, it gives us more volumes to meet the continued growth in oil and gas demand for high-end, high-value completion fluids and the growing zinc bromide long-duration battery market requirements.

Brady Murphy: And third, positions is for the long-term utilizing our Arkansas bromine leases. Estimate to be over 80 years of resource supply as our current long-term elemental supply agreement comes to an end at the end of 2029. On the lithium side, we're continuing the feed engineering effort and are targeting a major milestone for the plus-minus 10% project cost and economics by the fourth quarter of this year. At that time, we will also be able to quantify the cost synergies for having both lithium and bromine production from the same plant and upstream brand new. Inc.

Elijio: and third positions us for the long term utilizing our Arkansas bromine leases estimated to be over 80 years of resource supply as our current long-term elemental supply agreement comes to an end at the end of 2029

Elijio Serrano: On the lithium side, we're continuing the feed engineering effort and are targeting a major milestone for the plus-minus 10% project cost and economics by the fourth quarter of this year. At that time, we will also be able to quantify the cost synergies for having both lithium and bromine production from the same plant and upstream brine unit. Summarizing on the strategic initiative side of things, the desalination of produced water for beneficial reuse, pure flow electrolyte for long-duration energy storage, Arkansas bromine, and future lithium supply are all material financial benefits to the company that we will quantify as we complete key milestones for each throughout the year.

Elijio: On the lithium side, we're continuing the feed engineering effort and are targeting a major milestone for the plus-minus 10% project cost and economics by the fourth quarter of this year. At that time, we will also be able to quantify the cost synergies for having both lithium and bromine production from the same plant and upstream brine unit.

Brady Murphy: Summarizing on the strategic industry side of things, the desalination of produced water for benefit will show reuse, pure flow, electrolyte for long-duration energy storage, Arkansas, bromine, and future lithium supply are all material financial benefit to the company that we will quantify as we complete key milestones for each throughout the year. Collectively, they are transformational for the company. It's also important to understand that the desalination of produced water, zinc bromine-based electrolyte for energy storage, and direct lithium extraction are not only new businesses for Tetra, but for the most part are new and emerging markets for the United States.

Elijio: Summarizing on the strategic initiative side of things, the desalination of produced water for beneficial reuse, pure flow electrolyte for long-duration energy storage, Arkansas bromine and future lithium supply are all material financial benefit to the company that we will quantify as we complete key milestones for each throughout the year.

Elijio Serrano: Collectively, they are transformational for the company. It's also important to understand that the desalination of produced water, zinc bromide based electrolyte for energy storage, and direct lithium extraction are not only new businesses for Tetra but, for the most part, are new and emerging markets for the United States. So predicting accurate timing for key events is more challenging than for existing and established businesses. Our processes have been very methodical, and our focus is to get it right and not get it out before we're highly confident with our work and our analysis. With that, I'll turn it over to Elijio to provide some additional commentary on our financial results, and then we'll take some time for questions. Thank you, Brady.

Elijio: Collectively, they are transformational for the company. It's also important to understand that the desalination of produced water, zinc bromide-based electrolyte for energy storage, and direct lithium extraction are not only new businesses for Tetra, but for the most part are new and emerging markets for the United States.

Brady Murphy: So predicting accurate timing when key events is more challenging than for existing and established businesses. Our processes have been very methodical and are focused to get it right and not get it out before we're highly confident with our work in our analysis.

Elijio: So predicting accurate timing on key events is more challenging than for existing and established businesses.

Elijio: Our processes have been very methodical, and our focus is to get it right and not get it out before we're highly confident with our work and our analysis. With that, I'll turn it over to Elijio to provide some additional commentary on our financial results, and then we'll take some time for questions.

Elijio Serrano: Without, I'll turn it over to Lee; he would provide some additional commentary on our financial results, and then we'll take some time for questions. Thank you, Brady. Second quarter adjusted a bit of $30.2 million was negatively impacted by 1.1 million dollars of foreign exchange losses. Nonetheless, this was below our expectations. As the US onshore market was progressively weaker during the quarter, especially around water transfer. We are focused on the quality of our earnings and will not be chasing work at low margins. With our focus on returns on capital and free cash flow, we are not prepared to chase lower-margin opportunities.

Elijio Serrano: Second quarter adjusted EBITDA of $30.2 million was negatively impacted by $1.1 million of foreign exchange losses. Nonetheless, this was below our expectations as the U.S. onshore market was progressively weaker during the quarter, especially around water transfer. We are focused on the quality of our earnings and will not be chasing work at low margins. With our focus on returns on capital and precast flow, we are not prepared to chase lower margin opportunities.

Elijio Serrano: Thank you, Brady. Second quarter adjusted EBITDA of $30.2 million was negatively impacted by $1.1 million of foreign exchange losses.

Speaker Change: Nonetheless, this was below our expectations as the U.S. onshore market was progressively weaker during the quarter, especially around water transfer.

Speaker Change: We are focused on the quality of our earnings and will not be chasing work at low margins.

Elijio: With our focus on returns on capital and free cash flow, we are not prepared to chase lower margin opportunities.

Elijio Serrano: We had committed to improve water and flow back adjusted a bit down margins to the mid-teens in the second quarter and achieved that with a 560 basis point improvement to 15.2%. We believe that revenue in the third and fourth quarters will be flat to the second quarter, and we expect to continue our efforts on keeping our EBITDA margins above 15% in an environment where onshore activity is flat. Brady mentioned that our efforts of leveraging technology and automation are pivotal towards gaming market sharing and declining market without compromising margins. Completion fluids and products revenue saw the expected higher revenue and earnings from the peak industrial chemical season in Europe.

Elijio Serrano: We have committed to improve water and flow back adjusted EBITDA margins to the mid-teens in the second quarter and achieve that with a 560 basis point improvement to 15.2%. We believe that revenue in the third and fourth quarters will be flat to the second quarter. And we expect to continue our efforts on keeping our EBITDA margins above 15% in an environment where onshore activity is flat. Brady mentioned that our efforts of leveraging technology, technology, and automation are pivotal towards the gaming market sharing a declining market without compromising margins.

Speaker Change: We have committed to improve water and flow back adjusted EBITDA margins to the mid-teens in the second quarter and achieve that with a 560 basis point improvement to 15.2%.

Elijio: We believe that revenue in the 3rd and 4th quarters will be flat to the 2nd quarter. And we expect to continue our efforts on keeping our EBITDA margins above 15% in an environment where onshore activity is flat.

Speaker Change: Brady mentioned that our efforts of leveraging technology and automation are pivotal towards gaining market share in a declining market without compromising margins.

Elijio Serrano: Completion fluids and products revenue saw the expected higher revenue and earnings from the peak industrial chemical season in Europe. Recall that a few years ago, we expanded production capacity in Northern Europe and took advantage of this and the available higher volumes this peak season. Our second quarter could have been even stronger if we had managed to overcome a few challenges. The first was a strike by port workers in Kokkala, Finland, that restricted our ability to offload limestone to produce calcium chloride and also restricted our ability to load and ship products. This strike started in the first quarter and ended early in the second quarter.

Speaker Change: Completion Fluids and Products Revenue saw the expected higher revenue and earnings from the peak industrial chemical season in Europe .

Elijio Serrano: We called it a few years ago; we expanded production capacity in Northern Europe and took advantage of this and of the available higher volumes this peak season. Our second quarter could have been even stronger as we managed to do a few challenges. The first was a strike by port workers in Coca-Cola Finland that restricted our ability to offload limestone to produce calcium chloride and also restricted our ability to load and ship product. This strike started in the first quarter and ended early in the second quarter. Additionally, the quarter started with winter conditions harder than normal, with a frozen harbor making the movement of vessels in and out of challenge.

Speaker Change: We called it a few years ago, we expanded production capacity in Northern Europe and took advantage of this and of the available higher volumes this peak season.

Elijio: Our second quarter could have been even stronger if we managed to do a few challenges.

Elijio: The first was a strike by port workers in Kokkola, Finland, that restricted our ability to offload limestone to produce calcium chloride.

Elijio: and also restricted our ability to load and ship product.

Elijio: This strike started in the first quarter and ended early in the second quarter.

Elijio Serrano: Additionally, the quarter started with winter conditions harsher than normal, with a frozen harbor making the movement of vessels in and out a challenge. Despite all this, our calcium chloride business continues to perform very well. The industrial calcium chloride business is just below $140 million in revenue on a trailing 12-month basis and represents a stable revenue, EBITDA, and cash flow stream. While the onshore oil and gas industry has been slowing for now what appears to be a short period of time, the offshore oil and gas market continues to do well.

Elijio: Additionally, the quarter started with winter conditions harsher than normal with a frozen harbor making the movement of vessels in and out a challenge.

Elijio Serrano: Despite all this, our calcium chloride business continues to perform very well. The industrial calcium chloride business is just below 140 million dollars in revenue on a 12-month basis and represents a stable revenue, EBITDA, and cash flow stream. While the onshore oil and gas industry has been slowing for now but appears to be a short period of time, the offshore oil and gas market continues to also do well. As Brady mentioned, we have a nice sequential improvement in Europe and Latin America that were partially offset by the timing of projects in the Gulf of Mexico. Due to the timing of deep water completion activity, we expect the third quarter revenue and EBITDA to be comparable to what we saw in the first quarter for the completion fluid and product segment.

Elijio: Despite all this, our calcium chloride business continues to perform very well.

Elijio: The industrial calcium chloride business is just below 140 million dollars in revenue on a trailing 12-month basis and represents a stable revenue EBITDA and cash flow stream.

Elijio: While the onshore oil and gas industry has been slowing for now what appears to be a short period of time, the offshore oil and gas market continues to also do well.

Elijio Serrano: As Brady mentioned, we had a nice sequential improvement in Europe and Latin America that was partially offset by the timing of projects in the Gulf of Mexico. Due to the timing of Deepwater Completions activities, we expect the third quarter revenue and EBITDA to be comparable to what we saw in the first quarter for the completion fluids and product segment. But the fourth quarter should then see a meaningful step up from the third quarter, taking into account the first of the three CS Neptune wells.

Elijio: As Brady mentioned, we had a nice sequential improvement in Europe and Latin America that were partially offset by the timing of projects in the Gulf of Mexico.

Brady Murphy: Due to the timing of Deepwater Completions activity, we expect the third quarter revenue and EBITDA to be comparable to what we saw in the first quarter for the Completion Fluids and Products segment.

Elijio Serrano: But the fourth quarter should be a should then see a meaningful step up from the third quarter. Taken into account the first of the three CS Neptune wealth, based on all the information we are hearing from our client and assuming no delays in the work schedule, we should complete the first of the three CS Neptune wealth in the fourth quarter. But there is a possibility it could move to the first quarter. We call that we are in the middle of the hurricane season in the Gulf of Mexico that could impact project timing. The three well CS Neptune project is a major achievement for Tetra and is one of many projects that we have been following for a long period.

Elijio: But the fourth quarter should be a should then see a meaningful step up from the third quarter taken into account the first of the three TS Neptune wells.

Elijio Serrano: Based on all the information we are hearing from our client, and assuming no delays in the work schedule, we should complete the first of the three CS Neptune wells in the fourth quarter, but there is a possibility it could move to the first quarter. Recall that we are in the middle of the hurricane season in the Gulf of Mexico, which could impact project timing.

Elijio: Based on all the information we are hearing from our client and assuming no delays in the work schedule, we should complete the first of the three DS Neptune wells in the fourth quarter, but there is a possibility it could move to the first quarter.

Elijio: We call that we are in the middle of the hurricane season in the Gulf of Mexico that could impact project timing.

Elijio Serrano: The 3Well CS Neptune project is a major achievement for Tetra and is one of many projects that we have been following for a long period. Recall that we previously completed a five-well project for ExxonMobil in the Julia Field between 2015 and 2019. These types of projects are hard, I hired, and are high revenue per well, given the technical environmental challenges that Neptune can address, including, in this case, downhole conditions as high as 340 degrees Fahrenheit.

Elijio: The Three Whales CS Neptune project is a major achievement for Tetra and is one of many projects that we have been following for a long period.

Elijio Serrano: We call that we previously completed a five well project for Exxon Mobil in the Julia field between 2015 and 2019. These types of projects are high revenue per well, given the technical environmental challenges that Neptune can address, including, in this case, downhole conditions as high as 340 degrees Fahrenheit. For the second quarter, we are also committed to an improvement in free cash flow. In this press release, we are breaking up free cash flow between the base business and cash flow from our Arkansas investments. Free cash flow from a base business in the second quarter was $19 million, a sequential improvement of $45 million from the first quarter.

Elijio: Recall that we previously completed a five-well project for ExxonMobil in the Julia Field between 2015 and 2019.

Elijio: These types of projects are high revenue per well, given the technical and environmental challenges that Neptune can address, including, in this case, downhole conditions as high as 340 degrees Fahrenheit.

Elijio Serrano: For the second quarter, we are also committed to an improvement in free cash flow. In this press release, we are breaking up pre-tax cash flow between the base business and cash flow from our Arkansas investment. Free cash flow for my base business in the second quarter was $19 million, a sequential improvement of $45 million from the first quarter. We further expect the third quarter pre-cash flow from the base business to again be strong as we monetize the inventory and receivables from the Northern Europe industrial peak season.

Elijio: For the second quarter, we are also committed to an improvement in free cash flow.

Elijio: In this press release, we are breaking up pre-cash flow between the base business and cash flow from our Arkansas investments.

Elijio: Free cash flow for my base business in the second quarter was $19 million, a sequential improvement of $45 million from the first quarter.

Elijio Serrano: We further expect the third quarter free cash flow from the base business to again be strong as we monetize the inventory and receive a most from the Northern Europe industrial peak season. During the second quarter, we invested $9.8 million for engineering, reservoir analysis, and other studies in Arkansas. This $9.8 million is net of what we were reimbursed by Salt Works consistent with our memorandum of understanding. We continue to jointly invest in Arkansas and advance towards formalizing a more formal agreement. This investments are necessary to allow us to quantify the required capital for future bromine and lithium production.

Elijio: We further expect the third quarter pre-cash flow from the base business to again be strong as we monetize the inventory and receivables from the Northern Europe Industrial Peak season.

Elijio Serrano: During the second quarter, we invested $9.8 million in engineering, reservoir analysis, and other studies in Arkansas. This $9.8 million is net of what we were reimbursed by Saltworks, consistent with our memorandum of understanding. We continue to jointly invest in Arkansas and advance towards formalizing a more formal agreement. These investments are necessary to allow us to quantify the required capital for future bromine and lithium production. Once those economics are fully understood, we can move to a more formal arrangement.

Elijio: During the second quarter, we invested $9.8 million for engineering, reservoir analysis, and other studies in Arkansas.

Elijio: This $9.8 million is net of what we were reimbursed by Saltworks, consistent with our Memorandum of Understanding.

Elijio: We continue to jointly invest in Arkansas and advance towards formalizing a more formal agreement.

Elijio: These investments are necessary to allow us to quantify the required capital for future bromine and lithium production.

Elijio Serrano: One source economics are fully understood. We can move to a more formal arrangement. Liquidity as of this week was approximately $187 million, inclusive of the $75 million delayed draw feature that is available to Tetra for the bromine project. In addition to the noted equity, we're also holding slightly over $14 million of marketable securities in Standard Lithium and Kodiak, and this can be monetized at our convenience. In May, we refinanced, extended, and expanded our asset-based loan facility, or ABL, at an equally attractive interest rate in our prior ABL facility. This further strengthens our balance sheet and provides us a flexibility to execute on our growth initiatives.

Elijio: Once those economics are fully understood, we can move to a more formal arrangement.

Elijio Serrano: Liquidity as of this week was approximately $187 million, inclusive of the $75 million delay draw feature that is available to Tetra for the Bromine project. In addition to the noted equity, we're also holding slightly over $14 million of marketable securities, in standard lithium and Kodiak, and this can be monetized at our convenience. In May, we refinanced, extended, and expanded our Asset-Based Loan Facility, or ABL, at an equally attractive interest rate than our prior ABL facilities. This further strengthens our balance sheet and provides us with the flexibility to execute on our growth initiatives. The maturity of the ABL is May of 2029. There is nothing outstanding on this facility.

Elijio: Liquidity as of this week was approximately 187 million dollars.

Elijio: inclusive of the 75 million dollar delay draw feature that is available to Tetra for the Bromine project.

Elijio: In addition to the noted equity, we're also holding slightly over 14 million dollars of marketable securities.

Elijio: in Standard Lithium and Kodiak.

Elijio: and this can be monetized at our convenience.

Elijio: In May, we refinanced, extended, and expanded our Asset-Based Loan Facility, or ABL, at an equally attractive interest rate than our prior ABL facility.

Elijio: This further strengthens our balance sheet and provides us the flexibility to execute on our growth initiatives.

Elijio Serrano: The maturity of the ABL is May of 2020. Nothing is outstanding on this facility. All our debt is now 2029 or 2030 maturity dates. At the end of the second quarter, our net average ratio was 1.6 times. Return on that capital employed for the 12-month period ending June 2024. It's a very healthy 17.4% materially above our cost of capital. The CS Neptune project, which we believe to be the first of several in the coming years, plus a continued recovery of the tea powder market that can be a death with calcium bromide and zinc bromide.

Elijio: The maturity of the ABL is May of 2029. Nothing is outstanding on this facility.

Elijio Serrano: All are dead is now 2029 or 2020 30 maturity date. At the end of the second quarter, our net leverage ratio was 1.6 times return on net capital employed for the 12 month period ending June 2024. It's a very healthy 17.4%, materially above our cost of capital. The C.S. Neptune project, which we believe to be the first of several in the coming years, plus a continued recovery of the deep water market that can be addressed with calcium bromide and zinc bromide.

Elijio: All our debt is now 2029 or 2030 maturity dates.

Elijio: At the end of the second quarter, our net average ratio was 1.6 times.

Elijio: Return on Net Capital Employed for the 12-month period ending June 2024 is a very healthy 17.4% materially above our cost of capital.

Speaker Change: The CS Neptune Project, which we believe to be the first of several in the coming years, plus the continued recovery of the tea potter market that can be addressed with calcium bromide and zinc bromide.

Elijio Serrano: Our market leading position in the calcium chloride market and the expected requirements for zinc bromide battery electrolyte is positioned as for what we believe to be a very solid 2025.

Elijio Serrano: Our market-leading position in the calcium chloride market and the expected requirements for zinc bromide battery electrolyte are positioning us for what we believe to be a very solid 2025. Let me turn it over to Brady for closing comments, and we'll open it up for questions. Thanks, Elijio.

Elijio: Our market leading position in the calcium chloride market and the expected requirements for zinc bromide battery electrolyte is positioning us for what we believe to be a very solid 2025

Brady Murphy: Let me turn it over to Brady for closing comments, and we'll open it up for questions. Thanks, Elijio. In closing, we're pleased that we are achieving the goals that we've set up for the company. The CS Neptune Award is reflective of our strong market position in the deep water market and will have a material impact on our financials over the next six to nine months. We're on track with our water and flowback business to continue margin progression through new technology, with the desalination for beneficial reuse continuing to gain momentum. We have a solid balance sheet close to $180 million of liquidity, and we expect to continue to generate strong free cash flow from our base business to fund our strategic growth initiatives.

Elijio: Let me turn it over to Brady for closing comments, and we'll open it up for questions.

Brady Murphy: Thanks, Elijio. In closing, we're pleased that we are achieving the goals that we set out for the company. The C.S.

Brady Murphy: Thanks Elijio. In closing we're pleased that we are achieving the goals that we've set out for the company. The C.S. Neptune Award is reflective of our strong market position in the deepwater market and will have a material impact on our financials over the next six to nine months.

Operator: The Neptune Award is reflective of our strong market position in the deepwater market and will have a material impact on our financials over the next six to nine months. We're on track with our water and flow back business to continue margin progression through new technology with the desalination for beneficial reuse continuing to gain momentum. We have a solid balance sheet, close to $180 million of liquidity, and we expect to continue to generate strong free cash flow from our base business to fund our strategic growth initiatives. We expect a strong finish to the end of the year, but just as importantly, significant momentum heading into 2025 and beyond. With that, we'll now open it up for questions.

Elijio: We're on track with our water and flow back business to continue margin progression through new technology with the desalination for beneficial reuse continuing to gain momentum

Brady Murphy: We have a solid balance sheet, close to $180 million of liquidity, and we expect to continue to generate strong free cash flow from our base business to fund our strategic growth initiatives.

Brady Murphy: We expect a strong finish to the end of the year, but just as important, significant momentum and heading into 2025 and beyond.

Elijio: We expect a strong finish to the end of the year, but just as important, significant momentum and heading into 2025 and beyond. With that, we'll now open it up for questions.

Unknown Executive: With that, we'll now open it up for questions.

Unknown Executive: Thank you, presenters. We will now begin the question and answer session. To ask a question, you may press star, then one on your touchstone phone. If you were using a speaker phone, please pick up your handset before pressing any keys. To withdraw your question, please press star, then two.

Operator: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster, and your first question comes from the line of Bobby Brooks of Northland Capital Markets. Please go ahead. Your line is open.

Speaker Change: Thank you presenters. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you are using a speakerphone, please pick up your handset before pressing any keys.

Unknown Executive: At this time, we will pause momentarily to assemble a roster.

Speaker Change: To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Bobby Brooks: And your first question comes from the line of Bobby Brooks off Northland Capital Markets. Please go ahead. Your line is open. Hey guys, good morning. Thank you for taking my question.

Speaker Change: And your first question comes from the line of Bobby Brooks of Northland Capital Markets. Please go ahead. Your line is open.

Bobby Brooks: Hey guys, good morning.

Bobby Brooks: Thank you for taking my question. My first question is just on the CS Neptune outlook. So great that you guys got the three projects nailed down with the one supermajor. But if I recall, in the first quarter, you guys talked about how the level of discussions for CS Neptune projects within the Gulf of Mexico was at the highest that you'd ever seen. And that was happening with multiple different operators. So I just wanted to get a sense of how those conversations, obviously, these three you got. Is there potential for more from this operator?

Brady Murphy: You know, my first question is just on the CS Neptune outlook, right? So great that you guys got the three projects nailed down with the one super major. But if I recall, in the first quarter, you guys talked about how the level of discussions for CS Neptune projects within the Gulf of Mexico was at the highest that you've ever seen and that was occurring with multiple different operators. So I just wanted to get a sense of what, you know, how those conversations, obviously these three you got, is their potential for more from this operator. And then maybe just any how have discussions went with those other ones.

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

Bobby Brooks: And then maybe just how the discussions went with those other ones? I know Elijio, at the end there, talked about these might be the first of several in the coming years. So just kind of more detail on that.

Speaker Change: First question is just on the CS Neptune Outlook, right? So great that you guys got the three projects nailed down with the one super major.

Speaker Change: But if I recall, in the first quarter you guys talked about how the level of discussions for CS Neptune projects within the Gulf of Mexico was at the highest that you've ever seen and that was occurring with multiple different operators.

Speaker Change: So I just wanted to get a sense of what, you know, how those conversations, obviously these three you got, is there potential for more from this operator? And then maybe just any, how have discussions went with those other ones? I know Elijio at the end there talked about

Brady Murphy: I know we heal at the end there, talked about these might be the first of several in the coming years. So just kind of more detail on that.

Elijio Serrano: These might be the first of several in the coming years, so just kind of more detail on that.

Brady Murphy: Yeah, Bobby. So we have a pretty extensive pipeline of projects with operators that we've been tracking for many years. I think I mentioned before that these types of projects come a long lead time in terms of the types of testing that's required. Last for testing, formation testing, fluid compatibility with everything the operator is doing with their completion. And so, you know, we've got a very healthy list of pipeline of projects. Obviously, we're pleased with this award, but we are having multiple discussions with multiple operators that are part of that pipeline. Some of those could materialize before the end of the year in terms of new awards.

Brady Murphy: Yeah, Bobby, so we have a pretty extensive pipeline of projects with operators that we've been tracking for many years. I think I've mentioned before that these types of projects have a long lead time in terms of the types of testing that's required, elastomer testing, formation testing, fluid compatibility with everything the operator's doing with their completion.

Elijio: Yeah, Bobby, so we have

Bobby: a pretty extensive pipeline of projects with operators that we've been tracking for many years.

Speaker Change: These types of projects come a long lead time in terms of the types of testings that's required. You know, elastomer testing, formation testing, fluid compatibility with everything the operator is doing.

Brady Murphy: And so we've got a very healthy list of pipeline projects. Obviously, we're pleased with this award, but we are having multiple discussions with multiple operators that are part of that pipeline. Some of those could materialize before the end of the year in terms of new awards. Some of them may carry into the next year or beyond. It's difficult to say until, you know, you actually get the award. We want to be, you know, careful of how we communicate that. But I can tell you we are having multiple discussions with multiple operators regarding additional projects beyond just these first three.

Speaker Change: with their completion. And so, you know, we've got a very healthy list of pipeline of projects. Obviously, we're pleased with this award, but we're having multiple discussions with multiple operators that are part of that pipeline. Some of those

Elijio: Some of those could materialize before the end of the year in terms of new awards.

Brady Murphy: Some of may carry into to next year or beyond. It's difficult to say until you know; you actually get the award. We want to be, you know, careful of how we communicate that, but I can tell you we are having multiple discussions with multiple operators regarding additional projects beyond just these sort of these first three. and just to clarify, that is specifically for the CF Neptune project in the Gulf of Mexico, which obviously are very revenue-intensive and high EBITDA margins for you, right? That's correct. The Gulf of Mexico wells are quite unique just from the pure volume of the fluid that's involved in the completions and the technical requirements of the fluid to meet these ultra-deep water temperature and pressure conditions.

Elijio: Some of them may carry into next year or beyond. It's difficult to say until you actually get the award.

Elijio: you know, careful of how we communicate that, but I can tell you we are having multiple discussions with multiple operators regarding additional projects beyond just these first three.

Brady Murphy: And just to clarify, that is specifically for these CS Neptune projects in the Gulf of Mexico, which obviously are very revenue-intensive and have high EBITDA margins for you, right?

Speaker Change: And just to clarify, that is specifically for these CS Neptune projects in the Gulf of Mexico, which obviously are very revenue intense and high EBITDA margins for you, right?

Brady Murphy: That's correct. The Gulf of Mexico wells are quite unique just from the pure volume of the fluid that's involved in the completions and the technical requirements of the fluid to meet these ultra-deep water temperature and pressure conditions.

Speaker Change: That's correct. The Gulf of Mexico wells are quite unique just from the pure volume.

Speaker Change: of the fluid that's involved in the completions and the technical requirements of the fluid to meet these ultra-deep water temperature and pressure conditions.

Elijio Serrano: And Bobby, just to add, this is on top of our traditional completion fluids business in the Gulf of Mexico. Some of the bigger projects that can be addressed with the basic calcium bromide or zinc bromide could range anywhere from $2 to $5 million per well for the basic completion fluids before we move to a Neptune-type well.

Brady Murphy: And Bobby, just to add, this is on top of our traditional completion fluid business in the Gulf of Mexico. Some of the bigger projects that can be addressed with the basic calcium bromide or zinc bromide could range anywhere from two to five million dollars per well for the basic completion fluid before we move to a Neptune type well.

Speaker Change: And Bobby, just to add, this is on top of our traditional

Bobby: Some of the bigger projects that can be addressed with a basic calcium bromide or zinc bromide could range anywhere from $2 to $5 million per well for the basic completion fluids before we move to a neptune type well.

Bobby Brooks: Got it. Thanks for that color.

Bobby Brooks: Got it, thanks for that color. And then jumping over to beneficial reuse, as I mentioned, you signed seven different NDAs with seven different operators, right? I think it could be helpful to just help frame that a little more, maybe contrast that with how many NDAs were signed at the beginning of the year versus now. Were any of the NDAs that you had signed at the beginning of the year withdrawn?

Brady Murphy: And then jumping over to the beneficial reuse, as mentioned, how you signed seven different NDAs with seven different operators, right? I think it could be helpful to just help frame that a little more. Maybe you can trust that with how many NDAs were signed at the beginning of the year versus now, were any of the, you know, were any NDAs that you had signed at the beginning of the year to those back out? Yeah, we have not had any NDAs back out, and there is, I don't know the exact number, Bobby, but I would tell you they have definitely increased as we've gone through the year.

Speaker Change: And then jumping over to the beneficial reuse, as mentioned, how the

Speaker Change: You've signed seven different NDAs with seven different operators, right? I think it could be helpful to just help frame that a little more, maybe contrast that with how many NDAs were signed at the beginning of the year versus now.

Speaker Change: Were any of the NDAs that you had signed at the beginning of the year, did those back out?

Brady Murphy: Yeah, we have not had any NDAs come back out, and there is, I don't know the exact number, Bobby, but I would tell you they have definitely increased as we've gone through the year. The nature of these discussions, obviously, we have some proprietary technology, some of which we have filed some patents for, but obviously, until we're issued the patents, we want to be very protective of the proprietary nature of our technology. That's the reason for the NDAs, and that allows us to have very deep discussions with the operators, the customers, about their very specific requirements for the water they produce and the treatment procedures and technologies we will use for their program, which, obviously, we hope, evolves into a pilot program, which we've already done with the first customer we've been discussing for some time, but now we're in multiple serious pilot commercial discussions with multiple operators.

Speaker Change: Yeah, we have not had any NDAs back out and there is, I don't know the exact number Bobby, but I would tell you they have definitely increased as we've gone through the year.

Bobby Brooks: Got it. Thanks for that caller.

Brady Murphy: The nature of these discussions, obviously, we have some proprietary technology, some of which we have filed some patents for, but obviously, you know, until we're issued the patents, we want to be very protective of the proprietary nature of our technology. That's the reason for the NDAs, and that allows us to have very deep discussions with the operators, the customers, for their very specific requirements around their produced water and the treatment procedures and technologies we will use for that for their program, which obviously we hope evolves into a pilot program, which we've already done with, you know, the first customer that we've been discussing for some time, but now we're in multiple serious, you know, pilot commercial discussions with multiple operators.

Speaker Change: The nature of these discussions, obviously, we have some proprietary technology.

Speaker Change: some of which we have filed some some patents for but obviously you know until we're issued the patents we want to be very protective of the proprietary nature of our of our technology that's that's the reason for the for the NDAs

Speaker Change: And that allows us to have very deep discussions with the operators, the customers, for their very specific requirements around their produced water.

Speaker Change: and the treatment procedures and technologies we will use for that, for their program, which obviously, we hope, evolves into a pilot program.

Speaker Change: which we've already done with, you know, the first customer we've been discussing for some time. But now we're in multiple, serious, you know, pilot commercial discussions with multiple operators.

Bobby Brooks: Thanks for that, Carla.

Bobby Brooks: And then just last one for me is, could you please, you know, 9.8 million in CapEx towards Arkansas, right? That's net of reimbursement from the partner. Are you able to disclose how much the reimbursements total?

Bobby Brooks: And then just last one for me is, could you so, you know, 9.8 million in CAPEX towards Arkansas, right? That's net of reimbursement from the partner. Are you able to disclose how much, how much of the reimbursement is total? Yeah, those are covered by our NDA, so we'll obviously only report what impacts Tetris' financial statement, but a thing that our partner continues to work side by side with us on all the initiatives around Arkansas. Fair enough.

Speaker Change: Got it. Thanks for that caller. And then just last one for me is could you so, you know, 9.8 million in CapEx towards Arkansas, right? That's net of reimbursement from the partner. Are you able to disclose how much the reimbursements total?

Elijio Serrano: Yeah, those are covered by our NDA, so we'll obviously only report what impacts Tetra's financial statement but assume that our partner continues to work side by side with us on all the initiatives around our Fair enough.

Speaker Change: Yeah, those are covered by our NDA, so we'll obviously only report what impacts Tetra's financial statement, but assume that our partner continues to work side-by-side with us on all the initiatives around Arkansas.

Bobby Brooks: Fair enough. Congratulations on a solid quarter, and I'll return to the queue. Thanks, guys.

Unknown Executive: Congrats on the solid quarter, and I'll return back to the queue. Thanks, guys. Thank you.

Speaker Change: Fair enough. Congrats on the solid quarter and I'll return back to the queue. Thanks guys.

Operator: Thank you. And your next question comes from Josh Jayne of Daniel Energy Partners. Please go ahead. Your line is open.

Josh Jayne: And your next question comes from Josh Jane of Daniel Energy Partners. Please go ahead; your line is open. Thanks. Good morning. First one I wanted to ask just on Sandstorm being deployed to the Middle East market. Did you talk about the total addressable market and what it looks like for you if this is successful? Maybe over the next couple of years as the starting point? Yeah, I mean, we're clearly seeing some activity increase in the Middle East, several markets for the unconventional markets that are developing, and clearly there's an addressable more market today. You know, I don't want to give specifics about the numbers in today's market, but as that unconventional activity continues to increase in several of the Middle East countries, it's a perfect application for Sandstorm.

Speaker Change: Thank you. And your next question comes from Josh Jane of Daniel Energy Partners. Please go ahead, your line is open.

Josh Jayne: Thanks. Good morning. The first question I wanted to ask was just about Sandstorm being deployed to the Middle East market. Could you talk about the total addressable market and what it looks like for you if this is successful, maybe over the next couple of years as a starting point?

Speaker Change: Thanks, good morning. First one I wanted to ask just on Sandstorm being deployed to the Middle East market, could you talk about the total addressable market and what it looks like for you if this is successful maybe over the next couple of years as the starting point?

Brady Murphy: Yeah, I mean, we're clearly seeing some activity increase in the Middle East, in several markets for the unconventional markets that are developing. And clearly, there's an addressable market today. I don't want to give specifics about the numbers in today's market, but as that unconventional activity continues to increase in several Middle East countries, it's a perfect application for Sandstorm. So we'll keep you posted as that market develops and we can quantify it, but it's a little early for us to do that at this point.

Speaker Change: You know, I don't want to give specifics about the numbers in today's market.

Speaker Change: But as that own conventional activity continues to increase in several of the Middle East countries It's it's a perfect application for sandstorms So we'll we'll keep you posted as that market develops and we can quantify it But a little early for us to do that at this point

Brady Murphy: So we'll keep you posted as that market develops, and we can quantify it, but a little early for us to do that at this point.

Brady Murphy: Okay, and switching gears a little bit to offshore completions fluid activity, you noted that it was stronger in Q2 and Q1. Maybe you could just walk through the markets outside of the Gulf of Mexico and how you're seeing those markets shape up over the next 12, 24 months would be helpful. Yeah, so, you know, we clearly outside the Gulf of Mexico, we have strong market positions in Brazil, in the North Sea and, to a lesser degree, you know, West Africa and Asia Pacific, but certainly we see a very good growth going into 2025 in the Brazil market and we are extremely well positioned in the Brazil market for that growth.

Brady Murphy: Okay, and switching gears a little bit to offshore completions and fluid activity, you noted that it was stronger in Q2 than Q1. Maybe you could just walk through the markets outside of the Gulf of Mexico and how you're seeing those markets shape up over the next 12, 24 months would be helpful.

Speaker Change: Okay, and switching gears a little bit to offshore completions, fluid activity, you noted that it was stronger in Q2 than Q1. Maybe you could just walk through the markets outside of the Gulf of Mexico and how you're seeing those markets shape up over the next 12-24 months.

Brady Murphy: So, you know, outside the Gulf of Mexico, we have strong market positions in Brazil, in the North Sea, and to a lesser degree, you know, West Africa and, and Asia Pacific, but certainly, we see very good growth going into 2025 in the Brazilian market, and we're extremely well positioned. [inaudible] of the size of projects, clearly not as large as in the Gulf of Mexico, but they are very profitable opportunities for us as that market continues to evolve.

Speaker Change: would be helpful.

Speaker Change: Yeah, so, you know, we clearly, outside the Gulf of Mexico, we have strong market positions in Brazil.

Speaker Change: in the North Sea, and to a lesser degree, you know, West Africa and Asia-Pacific. But certainly we see a very good growth going into 2025 in the Brazil market, and we are extremely well positioned.

Brady Murphy: Again, outside the Gulf of Mexico, North Sea, we continue to see steady improvement, steady progress, not just in the typical completion activity, but also opportunities for us for Neptune opportunities in the North Sea. And then, you know, we have spot markets around the world that we work with the major service providers on providing completion fluid technology for those, you know, for those markets. But overall, the international offshore market we see is continuing trend, you know, improving.

Speaker Change: in the Brazil market for that growth, again, outside the Gulf of Mexico. North Sea, we continue to see steady improvement, steady progress, not just in the typical

Speaker Change: completion activity but also opportunities for us for Neptune opportunities in the North Sea. Now typically they're not as large

Speaker Change: of a size of projects, clearly not as large as in the Gulf of Mexico. But they are very profitable opportunities for us as that market continues to evolve. And then, you know, we have spot markets around the world that we work with the major service providers on providing.

Brady Murphy: And then we have spot markets around the world that we work with the major service providers on providing completion fluid technology for those markets. But overall, the international offshore market we see is a continuing trend, you know, improving. And that obviously includes the Gulf of Mexico.

Speaker Change: Completion Fluid Technology for those, you know, for those markets. But overall the international offshore market we see is a continuing trend, you know, improving and that obviously includes the Gulf of Mexico.

Brady Murphy: And that obviously includes the Gulf of Mexico.

Josh Jayne: Okay, thanks. And then maybe just one last one to ask the Gulf of Mexico Neptune question a little bit differently. When we think about the margin uplift from this specific project that's going to happen for you in Q4 and early into 2025, is the margin profile different. There are better for this project than we might see from traditional projects because not only maybe the pricing environment a little more constructive, but also just the fact that the wells are stacked back to back. I was just curious if you could elaborate on that a little bit more to help frame your expectations for the first half of 2025, and then I'll turn it back.

Josh Jayne: Okay, thanks. And then maybe just one last one to ask the Gulf of Mexico Neptune question a little bit differently. When we think about the margin uplift from this specific project that's going to happen for you in Q4 and early into 2025, is the margin profile different for this project than we might see from traditional projects because not only maybe is the pricing environment a little more constructive but also just the fact that the wells are stacked back to back? I was just curious if you could elaborate on that a little bit more and to help frame your expectations for the first half of 2025, and then I'll turn it back. Josh said,

Speaker Change: Okay, thanks. And then maybe just one last one to ask the Gulf of Mexico Neptune question a little bit differently. When we think about the margin uplift from this specific project that's going to happen for you in Q4 and early into 2025, is the margin profile different?

Speaker Change: are better for this project than we might see from traditional projects because

Speaker Change: Not only is the pricing environment a little more constructive, but also just the fact that the wells are stacked back-to-back. I was just curious if you could elaborate on that a little bit more to help frame your expectations for the first half of 2025. And then I'll turn it back. Thanks.

Elijio Serrano: Josh, good question. The margin that we make on a Neptune... project has many variables that go into it. It depends on how many volumes, how many thousands of volumes of fluid barrels we inject into the well. It depends on the duration of the fluid in the well, whether it's in there for a few weeks or many, many weeks, and also on how much fluid is lost in the well. In the prior project that we did, the losses of the fluid in the well were quite significant. At this point, we're making an estimate as to how much fluid might be recovered from the well, but it will be higher than traditional offshore completion fluid projects, and they can move the entire segment meaningfully.

Brady Murphy: Josh, good question. The margin that we make on a Neptune project has many variables that go into it. It depends on how many volumes, how many thousands of volumes of fluid barrels we inject into the well. It depends on the duration of the fluid in the well whether it's in there for a few weeks or many, many weeks, and also on how much fluid is lost in the well. So the prior project that we did, the losses of the fluid in the well were quite significant. At this point, we're making an estimate as to how much fluid might be recovered from the well, but they will be higher than traditional offshore completion fluids projects, and they can move the entire segment meaningfully.

Speaker Change: Josh, good question. The margin that we make on a Neptune...

Josh Jayne: Okay, thanks. I'll turn it back on.

Speaker Change: project has many variables that go into it. It depends on how many volumes, how many thousands of volumes of fluid, barrels we inject into the well.

Speaker Change: It depends on the duration of the fluid in the well, whether it's in there for a few weeks or many, many weeks.

Speaker Change: and also on how much fluid is lost in the well.

Speaker Change: The prior project that we did, the losses of the fluid in the well were quite significant. At this point, we're making an estimate as to how much fluid might be recovered from the well.

Speaker Change: but they will be higher than traditional offshore completion fluid projects and they can move the entire segment meaningfully.

Josh Jayne: Okay, thanks.

Unknown Executive: I'll turn it back.

Speaker Change: Okay, thanks. I'll turn it back.

Kurt Hallead: Thank you. And your next question comes from Kurt Hallead of Benchmark. Please go ahead. Your line is open. Hey, good morning, everybody. Good morning, Kurt.

Operator: Thank you, and your next question comes from Kurt Hawley of Benchmark. Please go ahead, your line is open. Hey, good morning, everybody.

Speaker Change: Thank you. And your next question comes from Kurt Holley of Benchmark. Please go ahead. Your line is open.

Kurt Holley: Hey, good morning, everybody.

Kurt Hawley: Hey, you know, I think I'm gonna come back around to that, the water opportunity, recycling, reuse, and so on. And it's awesome to see that you guys are getting some traction with a number of different EMPs around that.

Kurt Hallead: Hey, you know, I think I'm gonna just come back around to that the water opportunity recycling we use and so on and. It's awesome to see that you guys are getting some traction with a number of different MPs around it. I think probably speaks to the value proposition. Now I'm kind of curious. It's, you know, when you think about the dynamics of play and you think about how the customer base may be pursuing this. Could you give us some sense as to is this. Is this being like, you know, supported by the, you know, the governmental and regulators in in Texas.

Speaker Change: Good morning, Kurt.

Speaker Change: I think I want to come back around to that, the water opportunity, recycling, reuse, and so on.

Kurt Holley: It's awesome to see that you guys are getting some traction with with a number of different EMPs around it. I think probably speaks to the value proposition. Now I'm kind of curious

Speaker Change: When you think about the dynamics at play and you think about how the customer base.

Kurt Hawley: I think that probably speaks to the value proposition. Now, I'm kind of curious, you know, when you think about the dynamics at play, and you think about how the customer base may be pursuing this. Could you give us some sense as to, is this, um,

Speaker Change: may be pursuing this. Could you give us some sense as to, is this...

Speaker Change: Is this being like, you know, supported by the, you know, the governmental and regulators in in Texas, and is that a key element of the driver, or is it?

Brady Murphy: And is that a key element of the driver, or is it a combination of that and maybe the MPs wanting to reduce their environmental exposure? Just kind of curious what the underlying drivers of this market will be that will help it make a reality. Right.

Speaker Change: you know a combination of that and maybe the EMPs wanting to reduce their environmental exposure just just kind of curious what the underlying drivers of this

Speaker Change: market will be that will help it make a reality.

Brady Murphy: So the largest fundamental driver behind this chart is the fact that the seismicity events in West Texas are clearly linked to overpressuring the disposal wells and formations in the region. I think we've seen the Railroad Commission put restrictive injection profiles around certain areas. I think there's three or four in effect today in terms that are starting to restrict the amount of water that operators can dispose into these formations. There was just recently, as I mentioned in our comments, a number of fairly sizable earthquakes. One of them were hitting a 5.1 Richter scale just last week that there was an article out that the Railroad Commission was going to be investigating that.

Speaker Change: Right.

Speaker Change: So, uh, th-th-th-th-

Speaker Change: The largest fundamental driver behind this skirt is the fact that the seismicity events in West Texas are clearly linked to overpressuring.

Speaker Change: the disposal wells and formations in the region.

Brady Murphy: I think we've seen the Railroad Commission put restrictive injection profiles around certain areas. I think there's three or four in effect today that are starting to restrict. You know, looking at those options relative to their alternatives that we're offering has been in place. I just think it's a matter of time before Texas and New Mexico, quite frankly, you know, get caught up with getting their regulatory issues.

Speaker Change: I think we've seen the Railroad Commission put restrictive injection profiles around certain areas. I think there's three or four in effect today that are starting to restrict.

Speaker Change: The amount of water that operators can dispose into these formations

Speaker Change: There was just recently, as I mentioned in our comments, a number of fairly sizable earthquakes. One of them hitting a 5.1 Richter scale just last week.

Speaker Change: that there was an article out that the Railroad Commission was going to be investigating that and so this problem is not going to go away.

Brady Murphy: And so this problem is not going to go away until there is a solution to address the overpressuring of disposal wells and lack of force base to inject additional disposal water. You know, there's a couple of solutions to that, and the operators can truck water from the areas where it's being produced to other areas farther away that are not under pressure. That gets pretty expensive, you know, pretty quickly. We think that the best solution is to treat that water and turn it into a resource, you know, right on the end of the general vicinity of where that water is being produced.

Speaker Change: until there is a solution to address the overpressuring of disposal wells and lack of pore space, you know, to inject additional disposal water.

Speaker Change: [inaudible]

Speaker Change: You know, there's a couple solutions to that, and operators can truck water from the areas where it's being produced to other areas farther away that are not under pressure. That gets pretty expensive, you know, pretty quickly.

Speaker Change: We think that the best solution is to treat that water and turn it into a resource right in the general vicinity of where that water is being produced.

Brady Murphy: And so, you know, operators are definitely looking at those options relative to their alternatives. And we think at the price point that we can achieve, the cost point that we can achieve with our technology, that it's going to be a sizable market opportunity for us. But that's really the drivers. The regulatory agencies are definitely tracking this extremely closely. They've actually visited our facilities, looked at our technology, and given us very encouraging feedback as to the solutions that we're offering. But clearly, there's, you know, there's a lot that goes into permitting, you know, produced water that potentially has a lot of organics and nasty elements in it to allow for beneficial reuse.

Speaker Change: Operators are definitely

Speaker Change: looking at those options relative to their alternatives.

Speaker Change: and we think at the price point that we can achieve, the cost point that we can achieve with our technology.

Speaker Change: that it's going to be a sizable market opportunity for us. But that's really the drivers. The regulatory agencies are definitely tracking this extremely closely. They've actually visited our facilities, looked at our technology, given us very encouraging feedback as to the solutions.

Speaker Change: that we're offering, but clearly there's a lot that goes into permitting.

Speaker Change: you know, produced water that has potentially has a lot of organics and nasty elements in it to allow it for beneficial reuse. And as I mentioned in our comments, that's already happening in California today.

Brady Murphy: And, as I mentioned in our comments, that's already happening in California today. That's been going on for several years now, or treating produced water for agricultural purposes has been in place. I just think it's a matter of time before Texas and New Mexico, quite frankly, you know, get caught up with getting their regulatory guidelines and specifications in place.

Speaker Change: That's been going on for several years now. We're treating produced water for agriculture purposes.

Speaker Change: has been in place. I just think it's a matter of time before Texas and New Mexico, quite frankly, you know, get caught up with getting their regulatory guidelines and specifications in place.

Kurt Hallead: Okay, that's a really good color.

Kurt Hallead: So maybe shifting a bit in, you know, in the context of, you know, the opportunity that you have going on and Arkansas on the best since they've been making. I know you referenced there's a final review that's kind of underway right now. I guess my commentary is this right you, yeah, you guys have a royalty agreement with Standard Lithium. You know, for what they produce, it looks like Ecuador has made an investment in what Standard Lithium is doing that follows on with the joint venture that you have with X on your acreage. So, you know, what should we think about this dynamic and play now with X on an Ecuador? You know, are these, you know, firm interest levels or do you think that, you know, this is more of a formal company standpoint? You know, we got to, you know, get a sense of what's going on here, but we're really not fully committed.

Speaker Change: Okay, that's really good color.

Speaker Change: So, um...

Speaker Change: Maybe shifting a bit in, you know, in the context of, you know, the opportunity that you have going on in Arkansas and the investments that you've been making. I know you referenced there's a

Speaker Change: final review that's kind of underway right now.

Speaker Change: I guess my commentary is this, right? You guys have a royalty agreement with Standard Lithium.

Speaker Change: you know, for what they produce. It looks like Equinor has made an investment in what Standard Lithium is doing that follows on with the joint venture that you have with Exxon on on your acreage. So.

Speaker Change: Should we think about this dynamic at play now with Exxon and Ecuador?

Speaker Change: You know, are these, you know, firm?

Speaker Change: interest levels or do you think that you know this is more of hey from an oil company standpoint you know we got a

Brady Murphy: And I know I know what the answer is on X on, but I'm just kind of curious what you take is, you know, with respect to, you know, Ecuador's investment in standard lithium project and you think that makes that more, more real, the outcomes there more real. Yeah, we, I mean, we know that when we're quite well from our dealings with them in the only gas world, and we've met our project team that's based here in Houston for that project. And, you know, my perspective is there ever is committed, you know, as any other, you know, operator would be for this type of a project that's invested in this.

Speaker Change: You know get a sense of what's going on here, but we're really not fully committed And and I know I know what the answer is on Exxon, but I'm just kind of curious what your take is

Brady Murphy: I mean, obviously, things can change, but from what we can tell, they're very much committed. I don't want to speak for them, but that's just our observation.

Brady Murphy: I think at this point in time, we're still going through the engineering process and don't want to get our head of ourselves until we get the final engineering and the economics of the project in place that we can publish and talk about. We expect to have that completed before the end of the year, and then we'll be able to publish hopefully the results of that, both in terms of the capex, the op-ex, the financial returns. Like we're getting ready to release, hopefully as soon as next week, on the bromine, defend to feasibility study. But until we have all those numbers kind of pulled together and each of whether it's ourselves, whether it's Ecuador and stand in lithium and ourselves with salt works and ex on mobile, we don't want to get ahead of ourselves until we have some economics to speak about.

Elijio Serrano: I think at this point in time, you know, we're still going through the engineering process and don't want to get ahead of ourselves until we get the final engineering and the economics of the project in place that we can publish and talk about. We expect to have that completed before the end of the year, and then we'll be able to publish, hopefully, the results of that, both in terms of the CapEx, the OpEx, the financial returns, like we're getting ready to release, Hopefully as soon as next week on the Bromine Definitive Feasibility Study, but until we have all those numbers kind of pulled together and each of, whether it's ourselves, whether it's Equinor and Standard Lithium, ourselves with Saltworks and Exxon Mobil, we don't want to get ahead of ourselves until we have some economics to speak about.

Speaker Change: I think at this point in time, you know, we're still going through the engineering process and don't want to get ahead of ourselves until we get the final engineering and the economics of the project in place that we can publish and talk about.

Speaker Change: We expect to have that completed before the end of the year, and then we'll be able to publish, hopefully, the results of that, both in terms of the CapEx, the OpEx, the financial returns, like we're getting ready to release.

Speaker Change: But until we have all those numbers kind of pulled together

Kurt Hallead: Yeah, that's all fair.

Kurt Hallead: All right, and then maybe just to get a wrap on this one, you guys are, you know, have an electrolyte supply agreement, you know, for, you know, battery energy storage systems as reference. I think there was some opportunity or possibility, you know, to start delivering those electrolyzers and volumes in volume before the end of the year. Do you have any updates for us on the timing of that? Yeah, so Kurt, just as a reminder, we did ship and we have sold electrolyte to EOS in prior years. A lot of what they sold in 2022 and 2023 included our electrolyte.

Speaker Change: All right, and then maybe just to kind of wrap on this one, you guys have an electrolyte supply agreement for battery energy storage systems, as you referenced.

Speaker Change: Yeah, so Kurt, just as a reminder, we did

Elijio Serrano: That's part of what's out in the market right now, both charging in this charging battery. We called that last year they made a decision to transition to their latest version of the technology and then suspended activity as they were making that transition. Brady and I, a little over a week ago, made another trip to Turtle Creek and visited with the EOS management team, and it was very encouraging to see how they progress the automation of the latest version of the battery. How they are now fully automating the assembly and production of the batteries. When Brady and I were there, we saw how the electrolyte was automatically being injected into every battery.

Speaker Change: Brady and I, a little over a week ago, made another trip to Turtle Creek and visited with the EOS Management Team.

Elijio Serrano: When Brady and I were there, we saw how the electrolyte was automatically being injected into every battery. The expectation is we're going to start shipping the electrolyte in tanker trucks versus totes, and the volumes are going to increase meaningfully. And the impact, we think, is going to be quite significant in 2025.

Elijio Serrano: We think we're going to go from shipping them electrolyte and totes to full tanker trucks, and just as an example, one tote can contain around 4,200 pounds of electrolyte. A tanker truck can contain 45,000 pounds of electrolyte, and what EOS was doing was modifying their facility to take tanker trucks instead of totes. We believe based on what we saw that they were up in full production in Q4, and at that point, the expectation is we're going to start shipping electrolyte in tanker trucks versus totes. And the volumes increase meaningfully, and the impact we think to us is going to be quite significant in 2025.

Speaker Change: The expectation is we're going to start shipping electrolytes in tanker trucks versus totes, and the volumes increase meaningfully, and the impact, we think, to us is going to be quite significant in 2025.

Kurt Hallead: Okay, that's awesome. Appreciate that. That's it for me. Thanks, Kurt. Thank you.

Kurt Hawley: Okay, that's awesome. I appreciate that. That's it for me. Thanks, Kurt.

Unknown Executive: Again, if you would like to ask the question, please press *1 on your touchstone phone. One.

Patrick Ouellette: And your last question comes from Patrick Ouellette of FIFO. Please go ahead; the line is open. Hey, good morning. It's Pat on for Stephen Gengaro. Thanks for taking the questions. Morning. Hey, good morning.

Pat: Hey, good morning. It's Pat. I'm for Stephen Jaguero. Thanks for taking the questions

unknown: Morning. Hey, good morning. I believe you mentioned a potential second customer for the zinc bromide electrolyte. Could you just talk about your ability to meet that sort of demand or how margin changes if you need to source bromine from the open market?

Elijio Serrano: I believe you had mentioned the potential second customer for the director of the zinc bromide electrolyte. Could you just talk about your ability to meet that sort of demand or how margin changes if you need to source bromine from the open market? Well, first of all, the question: we've been working with the second customer for some time. I think they're clearly in terms of their ramp up manufacturing capacity, just really getting started in terms of developing that manufacturing capacity here in the United States. So, well, time will tell how fast they're able to ramp up, but I don't see a big impact pack to us in terms of our overall bromine supply in 2025 or potentially into 2026. But it just depends on how fast they scale up their manufacturing, certainly relative to what EOS has done, who put up an entire automated assembly line with a battery coming off the line every 10 seconds or so.

Speaker Change: Morning. Hey, good morning. I believe you had mentioned a potential second customer for the zinc bromide electrolyte. Could you just talk about your ability to meet that sort of demand or how margin changes if you need to source bromine from the open market?

Elijio Serrano: So, it's not really comparable yet at this point, but the fact that they're using zinc bromide, the technology works. They've got commercial installations at a pretty small scale. It gives us a lot of good confidence in the technology itself, as we have with EOS. So, I don't think it's really going to be much of an impact for any third-party purchases that we would need over the next year or so to support that activity.

Speaker Change: So, I don't think it's really going to be much of an impact for any third-party purchases that we would need over the next year or so to support that activity.

Patrick Ouellette: Okay, great, that's that.

unknown: Okay, great. That's all. And then, for the third quarter, could you just remind us of any seasonal impacts on completion fluids from Europe or maybe what you're expecting to see there?

Elijio Serrano: And then, so, for the third quarter, could you just remind us of any seasonal impacts in completion fluids from Europe or maybe what you're expecting to see there? No seasonality beyond what we see in the second quarter for the calcium chloride business in Northern Europe. Obviously, we're hoping that there's no hurricanes in the Gulf of Mexico that disrupt activity, but that would be the only seasonality that might be out there.

Speaker Change: Okay, great. Thanks for that.

Elijio Serrano: No seasonality beyond what we see in the second quarter for the calcium chloride business in northern Europe.

Speaker Change: Obviously, we're hoping that there's no hurricanes in the Gulf of Mexico that disrupt activity, but that would be the only seasonality that might be out there.

Patrick Ouellette: Okay, great. That's all from me. Thank you.

Unknown Executive: This includes our question and answers.

Brady Murphy: Lesson, I would like to turn the conference back over to Mr. Murphy for any closing remarks. Well, thank you very much. Appreciate you joining us and appreciate your interest in Tetra Technologies. We look forward to our next discussion with you. Thank you.

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

Mr. Murphy: Well, thank you very much. Appreciate you joining us and appreciate your interest in Tetra Technologies. We look forward to our next discussion with you. Thank you.

Unknown Executive: Ladies and gentlemen, this includes today's conference. We thank you for participating in asset-to-please disconnect your lines.

Speaker Change: Ladies and gentlemen, this concludes today's conference. We thank you for participating and ask that you please disconnect your lines.