TETRA Technologies(US:TTI)2023-02-28 21:16Financial Data and Key Metrics Changes - The company reported a sequential revenue growth of 9% in Q4 2022 compared to Q3 2022 and a 42% increase for the full year over 2021 [4] - Adjusted EBITDA for Q4 2022 was $20.3 million, up from $18.6 million in Q3 2022, with a full-year adjusted EBITDA increase of 112% over 2021 [4][5] - Cash from operating activities was a use of $7 million in Q4, while adjusted free cash flow from continuing operations was a use of $14 million [15] Business Line Data and Key Metrics Changes - Completion fluids and products segment revenue for Q4 2022 was $66 million, a 12% increase from Q3 2022, with adjusted EBITDA of $16 million [7] - Water and Flowback segment revenues reached $81 million, growing 52% year-on-year and 7% quarter-on-quarter, marking the highest quarterly revenue since Q2 2018 [8][9] - The Water and Flowback segment achieved a full-year revenue growth of 66% and adjusted EBITDA increased by 191% [9] Market Data and Key Metrics Changes - The combined markets of the Gulf of Mexico and international offshore businesses saw a 20% sequential revenue increase and over 50% year-on-year growth [5] - The company expects a 25% increase in deepwater floater rigs by 2025, indicating a strengthening offshore market [6] Company Strategy and Development Direction - The company is entering a multiyear growth cycle for offshore markets, supported by increased floater day rates and contract durations [6] - Investments were made to strengthen the offshore completion fluids business, including acquisitions that will increase fluid capacity by 70% in the UK and 15% in the Gulf of Mexico [6][7] - The company is focused on margin expansion and cash generation while continuing to invest in capital projects with short-term returns [10] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the offshore market's growth and the potential for increased demand for completion fluids [6][31] - The company is committed to evaluating the Arkansas brine resource and expects to provide updates as the project progresses [31][32] Other Important Information - The company holds significant marketable securities, including shares of Standard Lithium and CSI Compressed Gas, valued at approximately $15 million [19] - The company has accumulated approximately $411 million of tax loss carryforwards, which will be beneficial as profitability improves [20] Q&A Session All Questions and Answers Question: Can you talk about the offshore completion fluids market and visibility with customers? - Management noted that they are seeing traction in the North Sea and expect more repetitive jobs in the offshore business, with a meaningful uptick in Neptune opportunities likely in 2024 and beyond [33] Question: How do you view the ability to ramp up production of PureFlow? - Management indicated that there is plenty of capacity at the West Memphis facility to ramp up production with little to no capital required [34] Question: What should be considered for sequential performance in Q1 2023? - Management expects a rebound in margins for the Water and Flowback business and plans to ramp up in Q2 with the European chemicals business recovering [37][39] Question: Is the target for $100 million EBITDA in 2023 reasonable? - Management refrained from providing full-year guidance due to unpredictable economic factors [41] Question: Where do you see the company in 24 months? - Management highlighted growth opportunities in produced water and completion fluids, with expectations for the Arkansas project to be fully evaluated [42][43] Question: How should we think about free cash flow generation for this year? - Management expects to be strongly free cash flow positive in 2023, with lower capital expenditures compared to 2022 [45] Question: Any updates on the regulatory review for desalination and produced water? - Management stated that each operator will need their own permits, and they are confident their technology will meet regulatory requirements [50] Question: How do you view your market share in the deepwater completion fluids market? - Management estimated a 30% market share in high-value completion fluids, with 70% of deepwater wells in the Gulf of Mexico requiring bromine-based fluids [56]