TETRA Technologies, Inc. Announces Third Quarter 2021 Income Before Discontinued Operations Of $2.5 Million And Adjusted EBITDA Of $15.0 Million

THE WOODLANDS, Texas, Nov. 1, 2021 /PRNewswire/ -- TETRA Technologies, Inc. ("TETRA" or the "Company") (NYSE:TTI) today announced third quarter 2021 results.

Third quarter 2021 revenue increased 30% from the same quarter a year ago, to $95 million.  Compared to the second quarter of 2021, revenue declined 7% as the second quarter reflects the seasonal peak in our Europe industrial calcium chloride business. Excluding the $14 million of incremental revenue from this seasonal peak, revenue increased sequentially by 8% on stronger Water & Flowback Services activity.  The Company estimates that third quarter revenue was negatively impacted by approximately $11 million due to Hurricane Ida in the Gulf of Mexico and delayed international completion fluids deliveries due to global logistics and shipping challenges.  

Net income before discontinued operations was $2.5 million, including the benefit of $6.2 million of mark-to-market gains from TETRA's equity ownership in Standard Lithium Ltd. and CSI Compressco LP and including $1.3 million of non-recurring credits, net of charges.  This compares to a net loss before discontinued operations of $6.7 million in the second quarter, including $4.7 million of non-recurring charges and expenses.  Net income per share from continuing operations in the third quarter was $0.02.  Excluding the non-recurring credits, net income per share from continuing operations was $0.01 in the third quarter. 

Adjusted EBITDA was $15.0 million, inclusive of the mark-to-market gains of $6.2 million and excluding non-recurring credits, net of charges of $1.3 million.  The mark-to-market gains were largely offset by lower earnings resulting from delays on completion fluid projects in the Gulf of Mexico due to Hurricane Ida, delays on international deliveries due to global shipping issues, and inflationary costs on our chemicals production which are expected to continue at least into the fourth quarter.  Third quarter adjusted EBITDA increased $2.1 million, or 16%, over the second quarter of 2021 reflecting higher mark-to-market gains and stronger operational performance from Water & Flowback Services. 

Cash flow from operating activities was $2.8 million in the third quarter of 2021, compared to $1.8 million in the second quarter of 2021.  Adjusted free cash flow from continuing operations was $1.0 million.  This compares to a use of cash of $4.5 million of adjusted free cash flow from continuing operations in the second quarter of 2021.

Brady Murphy, TETRA's Chief Executive Officer, stated, "Our third quarter results reflect continued success in executing our strategies in an improving oil and gas market and the rapidly evolving low carbon energy markets.  Our 30% year-on-year revenue growth would have been even higher without the impact of Hurricane Ida and the well-known global logistics challenges that delayed multiple completion fluid deliveries to international customers.  With the third quarter product deliveries delayed into the fourth quarter, in addition to the return of Gulf of Mexico activity plus the recent Brazil offshore awards, we expect materially higher fourth quarter revenues for Completion Fluids & Products.  Despite the challenges presented by Hurricane Ida and the global logistics issues, we were able to generate $15 million of adjusted EBITDA – the highest since the start of the global pandemic in the first quarter of 2020, and $1.0 million of positive adjusted free cash flow.  Adjusted free cash flow improved sequentially by $5.5 million reflecting aggressive working capital management and the stronger earnings from Water & Flowback Services.  We again reduced long term debt, by $8 million in the third quarter.  We do not have any amounts drawn on our asset-based loan (ABL) facility.  Furthermore, we amended our ABL to increase availability by more than $10 million and extended the maturity to 2025, both to create financial flexibility to capitalize on a recovering oil and gas market and our low carbon initiatives.

"As anticipated, Water & Flowback Services adjusted EBITDA margins improved sequentially from 5.3% in the second quarter to 10.9% in the third quarter - an improvement of 560 basis points on a sequential revenue increase of 24%.  Multiple factors contributed to this improvement, including fully mobilized and operational TETRA SandStorm^TM projects in Argentina, pricing improvements from many of our U.S. operations and customers, and profitable market penetration through our integrated water management projects – which reached a record high in the third quarter of 55 projects for 27 different customers.  This reflects the continued acceptance of this highly efficient and differentiated offering.  During the third quarter we were awarded additional work in Argentina with an early production facility and additional TETRA SandStorm^TM units, which we will build and operate on a multi-year contract starting in early 2022.  

"Completion Fluids & Products adjusted EBITDA margins were 35.1% in the third quarter including the benefit of mark-to-market gains from our equity holdings in Standard Lithium.  Excluding the mark-to-market gains, adjusted EBITDA margins were 21.9% reflecting the impact of Hurricane Ida during the quarter and inflationary pressures in certain raw materials and logistics costs.   We were awarded another deepwater completion fluids project in Brazil with a major integrated service company, which is in addition to the project we previously mentioned in our last earnings press release.  Despite a pause in Gulf of Mexico activity from Hurricane Ida, we continue to benefit from the recently announced three-year completion fluids and services contract for a super major oil and gas operator.  These market share gains reflect our consistently strong services levels across the globe, differentiated offerings for high value complex wells and competitive advantages from our vertically integrated business model which is especially important in today's challenging supply chain environment.   

"We continue to make good progress with our low carbon energy initiatives.  In the third quarter we received and shipped our second TETRA PureFlow^TM high purity zinc bromide order to a publicly traded energy storage technology company.  We anticipate having a long-term strategic supplier agreement in place with this customer before year-end, which is expected to include material orders for 2022 and collaborative planning for longer term product supply and demand based on the significant compound annual growth rate (CAGR) anticipated for energy storage. Standard Lithium completed the preliminary engineering assessment (PEA) study to extract lithium from brine from our acreage in the Smackover Formation in Arkansas.  As a reminder TETRA maintains a royalty stream from the commercial production of lithium by Standard Lithium after they exercise the option and all the mineral rights to the bromine on this acreage, which we estimate to have exploration targets of 2.54 million to 8.58 million tons of bromine.  The Standard Lithium PEA indicates very attractive economics as the acreage has an estimated 1,317,262 tons of Lithium Carbonate Equivalent at the inferred resource category, which is 49% higher from what was previously estimated.  In addition to the Standard Lithium option agreement, TETRA has previously communicated that we estimate an exploration target between 85,000 and 286,000 tons of lithium on acreage not included in the Standard Lithium agreement, where TETRA holds 100% of the lithium rights not subject to any option.  We intend to drill a well in the fourth quarter on our dedicated acreage to obtain lithium and bromines samples, allowing us to move from an exploration target to an inferred resources target phase.  We then intend to move towards a PEA study in early 2022 and believe there is significant value in our mineral rights in the Smackover Formation in Arkansas from a combination of our option agreement with Standard Lithium, our bromine assets to meet the growing demands for completion fluids and energy storage, and our 100% TETRA lithium assets that are not subject to any option.  We will continue to evolve these assets to create shareholder value.

"We have reduced our term loan by over $44 million from $220 million on September 30, 2020 to $176 million as of September 30, 2021. We repaid $8 million in the third quarter of 2021 and expect to repay at least an additional $10 million in the fourth quarter of 2021.  During the third quarter of 2021, we recorded mark-to-market gains of $6.2 million on our equity holdings of CSI Compressco LP and Standard Lithium.  As of September 30, 2021, the market value of these investments was $22 million, with no holding restrictions on our ability to monetize these investments. 

This press release includes the following financial measures that are not presented in accordance with generally accepted accounting principles in the United States ("GAAP"): Adjusted earnings per share from continuing operations, Adjusted EBITDA, and Adjusted EBITDA Margin (Adjusted EBITDA as a percent of revenue) on consolidated and segment basis, Adjusted income/(loss) before tax, adjusted free cash flow from continuing operations, and net debt.  Please see Schedules E through H for reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures.

Third Quarter Results and Highlights

A summary of key financial metrics for the third quarter are as follows: 

Completion Fluids & Products third quarter 2021 revenue of $48.7 million declined 25% from the second quarter of 2021 reflecting the seasonal high from Europe calcium chloride sales in the second quarter, in addition to an estimated $11 million negative revenue impact from Hurricane Ida in the Gulf of Mexico plus loop currents and international shipping delays.  Completion Fluids & Products income before taxes was $14.7 million in the third quarter (30.1% of revenue) compared to $16.4 million (25.4% of revenue) in the second quarter of 2021. Adjusted EBITDA of $17.1 million decreased $0.8 million sequentially.  Third quarter Adjusted EBITDA includes $6.4 million favorable mark-to-market adjustment from TETRA's investment in Standard Lithium.

Water & Flowback Services revenue was $46.8 million in the third quarter of 2021, an increase of 24% from the second quarter of 2021, and loss before taxes was $1.8 million. Adjusted EBITDA of $5.1 million (10.9% of revenue) increased 156% sequentially due to stronger domestic activity and some pricing improvements helping offset ongoing inflationary pressures.

Free Cash Flow and Balance Sheet

Cash from operating activities was $2.8 million in the third quarter while adjusted free cash flow from continuing operations was $1.0 million. Liquidity at the end of third quarter was $90 million.  Liquidity is defined as unrestricted cash plus availability under the revolving credit facility. At the end of the third quarter unrestricted cash was $42 million and availability under our credit facility was $48 million. Debt was $164 million after the $8.2 million pay down in July, while net debt was $122 million.

Non-recurring Charges and Expenses Items

Non-recurring charges and expenses are reflected on Schedule E and include $3.2 million of non-cash stock warrant fair value adjustment income, $1.6 million of legal, settlement and other expenses and $0.2 million of cumulative adjustments to long-term incentives and appreciation right expenses.

Conference Call

TETRA will host a conference call to discuss these results tomorrow, November 2, 2021, at 10:30 a.m. Eastern Time. The phone number for the call is 1-888-347-5303. The conference call will also be available by live audio webcast and may be accessed through the Company's investor relations website at http://ir.tetratec.com/events-and-webcasts. A replay of the conference call will be available at 1-877-344-7529 conference number 10161269, for one week following the conference call and the archived webcast will be available through the Company's website for thirty days following the conference call.

Investor Contact

For further information: Elijio Serrano, CFO, TETRA Technologies, Inc., The Woodlands, Texas, Phone: (281) 367-1983, www.tetratec.com

Financial Statements, Schedules and Non-GAAP Reconciliation Schedules (Unaudited)

Schedule A: Consolidated Income Statement
Schedule B: Condensed Consolidated Balance Sheet
Schedule C: Consolidated Statements of Cash Flows
Schedule D: Statement Regarding Use of Non-GAAP Financial Measures
Schedule E: Non-GAAP Reconciliation of Adjusted Income (Loss) From Continuing Operations
Schedule F: Non-GAAP Reconciliation of Adjusted EBITDA
Schedule G: Non-GAAP Reconciliation of Net Debt
Schedule H: Non-GAAP Reconciliation to Adjusted Free Cash Flow From Continuing Operations

Company Overview and Forward-Looking Statements

TETRA Technologies, Inc. is an industrial and oil & gas products and services company operating on six continents focused on bromine-based completion fluids, calcium chloride, water management solutions, frac flowback and production well testing services.  Calcium chloride is used in the oil and gas, industrial, agricultural, road, food and beverage markets.  TETRA is evolving its business model by expanding into the low carbon energy markets with its chemistry expertise, key mineral acreage and global infrastructure.  Recently announced initiatives include commercialization of TETRA PureFlow^TM an ultra-pure zinc bromide for stationary batteries and energy storage; advancing an innovative carbon capture utilization and storage technology with CarbonFree to capture CO2 and mineralize emissions to make commercial, carbon-negative chemicals; and development of TETRA's lithium and bromine mineral acreage to meet the growing demand for oil and gas products and energy storage.  Visit the Company's website at www.tetratec.com.

Cautionary Statement Regarding Forward Looking Statements         

This news release includes certain statements that are deemed to be forward-looking statements. Generally, the use of words such as "may," "see," "expectation," "expect," "intend," "estimate," "projects," "anticipate," "believe," "assume," "could," "should," "plans," "targets" or similar expressions that convey the uncertainty of future events, activities, expectations or outcomes identify forward-looking statements that the Company intends to be included within the safe harbor protections provided by the federal securities laws. These forward-looking statements include statements concerning economic and operating conditions that are outside of our control, including statements concerning the anticipated recovery of the oil and gas industry; the effects of curtailments in completion fluid projects in the Gulf of Mexico related to Hurricane Ida; customer delays for international completion fluids related to global shipping and logistics issues; potential revenue associated with prospective energy storage projects or our pending carbon capture partnership; exploration targets of lithium and bromine, the potential extraction of lithium and bromine from the leased acreage, the economic viability thereof, and the timing and costs of such activities; statements regarding debt reduction, projections concerning the Company's business activities, financial guidance, estimated earnings, earnings per share, and statements regarding the Company's beliefs, expectations, plans, goals, future events and performance, and other statements that are not purely historical. The potential quantity and grade of the exploration targets included in this news release is conceptual in nature, there has been insufficient exploration to estimate a mineral resource, and it is uncertain if further exploration will result in the estimation of a mineral resource. The exploration targets expressed should not be misrepresented or misconstrued as an estimate of a mineral resource or mineral reserve. These forward-looking statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate in the circumstances. Such statements are subject to a number of risks and uncertainties, many of which are beyond the control of the Company. Investors are cautioned that any such statements are not guarantees of future performances or results and that actual results or developments may differ materially from those projected in the forward-looking statements. Some of the factors that could affect actual results are described in the section titled "Risk Factors" contained in the Company's Annual Reports on Form 10-K, as well as other risks identified from time to time in its reports on Form 10-Q and Form 8-K filed with the Securities and Exchange Commission.

Schedule D: Statement Regarding Use of Non-GAAP Financial Measures

In addition to financial results determined in accordance with U.S. GAAP, this press release may include the following non-GAAP financial measures for the Company: net debt; adjusted consolidated and segment income (loss) before taxes, special charges and discontinued operations; adjusted diluted earnings (loss) per share from continuing operations; consolidated and segment adjusted EBITDA; adjusted free cash flow and free cash flow from continuing operations; and segment adjusted EBITDA as a percent of revenue ("Adjusted EBITDA margin"). The following schedules provide reconciliations of these non-GAAP financial measures to their most directly comparable U.S. GAAP measures. The non-GAAP financial measures should be considered in addition to, not as a substitute for, financial measures prepared in accordance with U.S. GAAP, as more fully discussed in the Company's financial statements and filings with the Securities and Exchange Commission.

Management believes that the exclusion of the special charges from the historical results of operations enables management to evaluate more effectively the Company's operations over the prior periods and to identify operating trends that could be obscured by the excluded items.

Adjusted income (loss) from continuing operations is defined as the Company's income (loss) before noncontrolling interests and discontinued operations, excluding certain special or other charges (or credits), and including noncontrolling interest attributable to continued operations. Adjusted income (loss) from continuing operations is used by management as a supplemental financial measure to assess financial performance, without regard to charges or credits that are considered by management to be outside of its normal operations.

Adjusted diluted earnings (loss) per share from continuing operations is defined as the Company's diluted earnings (loss) per share excluding certain special or other charges (or credits), discontinued operations and noncontrolling interest attributable to discontinued operations. Adjusted diluted earnings (loss) per share is used by management as a supplemental financial measure to assess financial performance, without regard to charges or credits that are considered by management to be outside of its normal operations.

Adjusted EBITDA (and Adjusted EBITDA as a percent of revenue) is defined as earnings before interest, taxes, depreciation, amortization, impairments and certain non-cash charges, non-recurring adjustments and discontinued operations. Adjusted EBITDA (and Adjusted EBITDA margin) is used by management as a supplemental financial measure to assess the financial performance of the Company's assets, without regard to financing methods, capital structure or historical cost basis and to assess the Company's ability to incur and service debt and fund capital expenditures.

Adjusted free cash flow from continuing operations is defined as cash from operations less discontinued operations EBITDA and discontinued operations capital expenditures, less capital expenditures net of sales proceeds and cost of equipment sold and including cash distributions to TETRA from CSI Compressco LP and cash from other investments. Management uses this supplemental financial measure to:

• assess the Company's ability to retire debt;
• evaluate the capacity of the Company to further invest and grow; and
• to measure the performance of the Company as compared to its peer group.

Adjusted free cash flow from continuing operations do not necessarily imply residual cash flow available for discretionary expenditures, as they exclude cash requirements for debt service or other non-discretionary expenditures that are not deducted.  Net debt is defined as the sum of the carrying value of long-term and short-term debt on its consolidated balance sheet, less cash, excluding restricted cash on the balance sheet. Management views net debt as a measure of TETRA's ability to reduce debt, add to cash balances, pay dividends, repurchase stock, and fund investing and financing activities.

Net debt is defined as the sum of the carrying value of long-term and short-term debt on its consolidated balance sheet, less cash, excluding restricted cash on the balance sheet. Management views net debt as a measure of TETRA's ability to reduce debt, add to cash balances, pay dividends, repurchase stock, and fund investing and financing activities.

SOURCE TETRA Technologies, Inc.

Related Links

http://www.tetratec.com