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Item 2. Properties

2022-02-28 compared with 2021-03-05 · 50 added, 15 removed, 9 unchanged (88% of the section changed)

Our properties consist primarily of our corporate headquarters facility, chemical plants, processing plants and distribution facilities.

The following information describes facilities that we leased or owned as of December 31, 2020.

Our facilities consist primarily of our corporate headquarters facility, chemical plants, processing plants and distribution facilities.

We believe our facilities are adequate for our present needs.

We also hold brine leases on acreage which contains bromine and lithium.

The following information describes facilities that we (i) leased or owned and (ii) leased acreage as of December 31, 2021.

Completion Fluids & Products Division

1 unchanged sentence

The two California locations consist of 29 square miles of leased mineral acreage and solar evaporation ponds, and related owned production and storage facilities.

As an inducement to locate our El Dorado calcium chloride production plant in Union County, Arkansas, we received certain ad valorem property tax incentives.

Our facility is located just outside the city of El Dorado, Arkansas, on property that is leased from Union County, Arkansas.

We have the option of purchasing the property at any time during the term of the lease for a nominal price.

The term of the lease expires in 2035, at which time we also have the option to purchase the property at a nominal price.

Under the terms of the lease, we are responsible for all costs incurred related to the facility.

In April 2020, in response to market conditions, we began the process of discontinuing chemical production operations at this facility.

In April 2020, in response to market conditions, we began the process of discontinuing chemical production operations at our El Dorado calcium chloride facility in Arkansas.

We continued to manufacture and deliver products through early June 2020, at which time we began a sequenced shutdown of the manufacturing facility.

As of December 31, 2020, the plant is not operational.

As of December 31, 2020 and continuing through December 31, 2021, the plant was no longer operational.

In addition to the production facilities described above, the Completion Fluids & Products Division owns or leases multiple service center facilities in the United States and in other countries.

The Completion Fluids & Products Division also leases several offices and numerous terminal locations in the U.S.

and in other countries.

We lease over 27,000 acres of brine leases in Magnolia, Arkansas, which contain bromine and lithium.

This acreage is leased for possible future development and as a source of supply for our bromine and other raw materials.

The Completion Fluids &

Products Division also leases several offices and numerous terminal locations in the United States and in other countries.

Water & Flowback Services Division

The Water & Flowback Services Division conducts its operations through production testing service centers (most of which are leased) in the U.S., located in Arkansas, Colorado, Louisiana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Texas, West Virginia, and Wyoming.

In addition, the Water & Flowback Services Division has leased facilities in Mexico and certain countries in Europe, the Middle East and South America.

The Water & Flowback Services Division conducts its operations through production testing and water management service centers (most of which are leased) in the United States, located in Colorado, Louisiana, New Mexico, North Dakota, Oklahoma, Pennsylvania, Texas and Wyoming.

In addition, the Water & Flowback Services Division has leased facilities in Mexico, Argentina and certain countries in Asia, Europe, and the Middle East.

Our headquarters is located in The Woodlands, Texas, in a 153,000 square foot office building, which is located on 2.6 acres of land, under a lease that expires in 2027.

In addition, we own a 28,000 square foot technical facility in The Woodlands, Texas, to service our Completion Fluids & Products and Water & Flowback Services Divisions’ operations.

Bromine and Lithium Exploration Targets

Our Completion Fluids & Products Division leases approximately 31,100 net acres of brine leases in Magnolia, Arkansas, which contain bromine and lithium.

This acreage is leased for possible future development and as a source of supply for our bromine and other raw materials.

In August 2021, we announced the completion of a preliminary technical assessment by an independent geological consulting firm, APEX Geoscience Ltd.

to assess lithium and bromine exploration targets in our approximately 31,100 net acres of brine leases in the Smackover Formation in Southwest Arkansas.

We have rights to the brine, including rights to the bromine and lithium contained in the brine underlying this acreage, pursuant to certain brine leases and brine deeds with various landowners.

With respect to approximately 27,500 acres of that total acreage, we have granted Standard Lithium an option to acquire the lithium rights.

The agreements governing this option contemplate a 2.5% royalty.

The exploration targets were estimated for two separate areas within the property based on our brine lease rights.

The scope of the exploration target assessment was for bromine in all of the approximately 31,100 net acres and lithium for the acreage where we hold the lithium rights not subject to the Standard Lithium Ltd.

option that cover roughly 3,600 net acres.

For bromine, the technical assessment identified a brine exploration target estimated to contain between 2.54 and 8.58 million tons of elemental bromine.

For lithium, the technical assessment identified an exploration target estimated to contain between 16,000 and 53,000 tons of elemental lithium.

Using an elemental to Lithium Carbonate Equivalent ("LCE") conversion ratio of 5.323, which is accepted in the industry, the estimates of the amounts of lithium present within these acres range from 85,000 to 286,000 tons of LCE.

As of February 2022, the market price for lithium is approximately $71,600 per ton and the market price for bromine is approximately $3,100 per metric ton.

The exploration target's estimated quantity and grade is conceptual in nature, as there has been insufficient exploration to estimate a mineral resource on this property, and it is uncertain if further exploration will result in the estimation of a mineral resource.

The exploration targets expressed should not be understood to represent or misconstrued as an estimate of a mineral resource or mineral reserve.

The basis for the lithium and bromine exploration targets is that hypersaline formation water, or brine, associated with some of the world’s oilfields and/or geothermal fields contains confined reservoirs, or aquifers, that are known to contain anomalous concentrations of lithium, bromine and other elements of interest.

We propose to assess stratigraphically deep (more than 2,250 meters or 7,450 feet below surface) brine from oil and gas aquifers associated with the Late Jurassic Smackover Formation.

The brine is currently pumped from the aquifer to the earth’s surface as a wastewater product associated with hydrocarbon production (e.g., oil, gas, and condensate).

We expect that we will be able to develop or utilize evolving commercial technologies to economically remove the bromine and lithium from the brine underlying our acreage before the brine is reinjected back down into the subsurface aquifer.

The volume of the Upper and Middle areas of the Smackover Formation within each exploration target was calculated by wireframing the Smackover Formation aquifer domain to create a 3-D geological model.

The model utilized oil and gas well data from the AOGC and AGS Information Circular IC-14, which includes an electronic reprint of Vestal (1950) and a stratigraphic horizon pick file with 3,904 records.

Historical information was used to estimate mean porosity and mean bromine and lithium concentrations.

For the conceptual exploration target

estimates, the range of elemental bromine and lithium was derived by multiplying the mean volume, porosity, and bromine/lithium concentrations of the exploration targets by plus or minus 20%.

While we continue to evaluate the next steps regarding the potential development of our brine leases, we have only recently started to conduct exploration work on the leases, and we are not currently able to determine the economic viability of the extraction of the lithium and bromine from the leased acreage.

In addition, the extraction of lithium and bromine from these brine leases will likely require a significant amount of time and capital, which we are not able to estimate at this time.

The exploration targets are based on historical oil and gas well data and historical Smackover Formation brine geochemical analyses.

To advance the exploration targets to the mineral resource estimation and classification stage, we anticipate the implementation of a work program that will comprise some or all of the following activities:

• validating the historical brine geochemistry and attempting to obtain a greater understanding of the distribution of the bromine and lithium concentrations within the Smackover Formation brine underlying our acreage,

• conducting stratigraphic and hydrogeological studies to advance the geological domain boundaries and hydro-parameters of the Upper and Middle areas of the Smackover Formation, and

• conducting mineral processing test work to explore and develop the bromine and lithium extraction processes.

The timing for progressing the recommended work program will depend on the approach for obtaining Smackover Formation brine samples and conducting mineral processing test work.

We anticipate achieving brine access through agreements with current oil and gas operators to conduct appraisal drilling within the first half of 2022.

As of February 25, 2022, we are in the process of drilling an exploratory brine well on our dedicated acreage in the Smackover Formation in Arkansas.

The results of the well, which is expected to be completed in the first quarter of 2022, are expected to advance our exploratory target lithium and bromine assets to more refined resources targets.

Upon completion of the inferred resources target, we intend to move towards a preliminary economic assessment (“PEA”) to determine the economics of developing our dedicated acreage for the bromine to meet our growing zinc bromide opportunities and to meet the lithium battery market demands.

The PEA is expected to be completed during 2022.

We anticipate that validation of the estimates for geology, mineralization, and mineral processing, would advance the confidence level of the deposit toward mineral resource estimations and a potential preliminary economic assessment study.

This work is anticipated to commence and be completed in 2022 and it is possible that the exploration target tonnage and grade could change as these proposed exploration activities are completed and evaluated.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 2. Properties