TETRA Technologies(TTI) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The fourth quarter adjusted EBITDA margins improved to 17% from 16.6% in the third quarter and 15.8% in the fourth quarter of 2023, despite lower revenue quarter on quarter and year on year [8] - The company achieved a record volume of 89 million barrels of treated and recycled produced water for frac reuse in the fourth quarter [10] - For the first half of 2025, the company projects net income before taxes between $19 million and$ 34 million and adjusted EBITDA between $55 million and$ 65 million, approaching or exceeding a ten-year record high [21][22] Business Line Data and Key Metrics Changes - The Water and Flowback segment achieved EBITDA margins of 13.8%, impacted by a year-end completion slowdown, with rig count and frac fleet count down more than double digits from last year [10] - The Completion Fluids and Products segment revenue was down 1% for the full year but grew EBITDA by 2% year over year, with total revenue of $311 million, the second highest since 2015 [11] - The industrial chemicals business achieved its highest revenue and adjusted EBITDA in the company's history, with 2024 revenue growth over 2023 of over 9% [12] Market Data and Key Metrics Changes - The company noted a decline in rig count and frac fleets by 17% and 30%, respectively, over the past two years, while the volume of produced water continues to increase [16] - The company expects to ramp up meaningful volumes of zinc bromide-based electrolyte, which is anticipated to increase its contribution to total revenue [12] Company Strategy and Development Direction - The company is focusing on solutions for produced water treatment and recycling, including desalination for beneficial reuse, as part of its capital allocation strategy [10][14] - Strategic investments in Brazil and the Gulf of America are expected to support increased deepwater activity and contribute to strong free cash flow in the first half of 2025 [14][34] - The company is exploring capital-light solutions for bromine production and lithium opportunities, aiming to fund projects through free cash flow without taking on debt [24][26][37] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the performance of the U.S. business, driven by strong activity in the Gulf of Mexico and the growing long-duration battery electrolyte business [30] - The company anticipates a strong start to 2025, projecting significant year-over-year increases in both revenue and EBITDA in the first half of 2025 [21][22] - Management highlighted the importance of addressing the industry's challenge of produced water disposal and the potential for regulatory restrictions [18][19] Other Important Information - The company eliminated the valuation allowance for deferred taxes, reflecting confidence in utilizing net operating loss carryforwards in the coming years [30] - Cash on hand at the end of December was$ 37 million, with total liquidity of almost $207 million as of the conference call date [38] Q&A Session Summary Question: Insights on 2025 growth opportunities - Management indicated that the first half of 2025 will benefit from longer-term projects, with a focus on the CS Neptune pipeline and increased electrolyte volumes from Eos [49][50] Question: Guidance for second half of 2025 - Management expressed caution regarding visibility for the second half of 2025 but noted confidence in ongoing deepwater projects and electrolyte sales [58] Question: Capacity for pilot projects in desalination - Management confirmed the ability to place orders for additional pilot units in 2025, with ongoing discussions for several pilots [66] Question: Revenue contribution from Brazil deepwater program - Management stated that the Brazil deepwater program is expected to contribute significantly over the next two years, with a focus on heavier brine completion projects [68] Question: Bromine project timeline - Management indicated that the lead time for the bromine project is longer than a few months, with significant progress already made in engineering and site preparation [72] Question: Demand for recycled water and customer discussions - Management noted increasing momentum for the Oasis solution, with ongoing discussions with operators and the need to address regulatory and logistical challenges [80][82]