• Sequential Revenue Growth: 14% increase.
• Adjusted EBITDA Growth: 32% increase.
• Completion Fluids and Products Adjusted EBITDA Margin: 28.9%.
• Water and Flowback Adjusted EBITDA Margin: 15.2%, a sequential improvement of 560 basis points from 9.6% in the first quarter.
• Year-over-Year Revenue Change: Down 2%.
• Adjusted EBITDA: $30.2 million, 17.6% of total revenue, including $1.1 million of foreign exchange losses.
• Free Cash Flow from Base Business: $19 million, a sequential improvement of $45 million from the first quarter.
• Liquidity: Approximately $187 million, including a $75 million delay draw feature.
• Net Leverage Ratio: 1.6 times.
• Return on Net Capital Employed: 17.4% for the 12-month period ending June 2024.

• Warning! GuruFocus has detected 8 Warning Signs with SRI.

Release Date: August 01, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Tetra Technologies Inc (NYSE:TTI) reported a 14% sequential revenue growth and a 32% increase in adjusted EBITDA for the second quarter of 2024.
• The company secured a significant three-well deepwater Gulf of Mexico CS Neptune fluids project, marking a milestone with a super major oil and gas operator.
• Adjusted EBITDA margins for the completion fluids and products segment reached 28.9%, and the water and flowback segment rebounded to 15.2%.
• Tetra Technologies Inc (NYSE:TTI) is advancing strategic initiatives, including water desalination for beneficial reuse and zinc bromide electrolyte for energy storage, which are expected to provide material financial benefits.
• The company has a strong liquidity position of approximately $187 million, with no outstanding debt on its asset-based loan facility, providing flexibility for growth initiatives.

Negative Points

• The second-quarter adjusted EBITDA was negatively impacted by $1.1 million in foreign exchange losses.
• Revenue was down 2% year-over-year, reflecting a decline in US onshore rig activity by approximately 16%.
• The company faced operational challenges due to a strike by port workers in Finland and harsh winter conditions, affecting the calcium chloride business.
• The delay in launching the first commercial water desalination project in South Texas was unexpected, linked to regulatory requirements.
• There is uncertainty in the timing of key strategic initiatives, such as the CS Neptune project and the Arkansas bromine and lithium projects, due to emerging market conditions and regulatory challenges.

Q & A Highlights

Q: Can you provide more details on the CS Neptune projects in the Gulf of Mexico and potential future projects? A: Brady Murphy, CEO, explained that Tetra has a robust pipeline of projects with multiple operators. While they are pleased with the current award, discussions with other operators are ongoing, and some projects may materialize before the end of the year or into the next year.

Q: How have the discussions around beneficial reuse progressed, and have any NDAs been backed out? A: Brady Murphy, CEO, stated that no NDAs have been backed out, and the number of NDAs has increased throughout the year. The NDAs allow for deep discussions with operators about specific requirements for produced water treatment, leading to potential pilot programs.

Q: What is the potential market opportunity for Sandstorm in the Middle East if the deployment is successful? A: Brady Murphy, CEO, noted that there is increasing activity in the Middle East, particularly in the unconventionals market. While it's too early to quantify the market, Sandstorm is well-suited for these applications, and they will provide updates as the market develops.

Q: How does the margin profile for the Gulf of Mexico Neptune project compare to traditional projects? A: Elijio Serrano, CFO, explained that the margin for Neptune projects depends on several variables, including fluid volume and duration in the well. These projects typically have higher margins than traditional offshore completion fluids projects and can significantly impact the segment.

Q: What are the drivers behind the water recycling and reuse market, and how is it supported by regulators? A: Brady Murphy, CEO, highlighted that seismicity events in West Texas, linked to over-pressuring disposal wells, are a major driver. Regulatory agencies are closely monitoring this, and Tetra's technology offers a cost-effective solution for treating produced water, which is gaining regulatory interest.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.