What changed in this filing

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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-03-05 · 212 added, 210 removed, 141 unchanged (75% of the section changed)

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Risk Factors” for additional discussion of these factors and risks.

For discussion of 2020 compared to 2019, see disclosures titled “Results of Operations” set forth in Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Rep ort on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 5, 2021.

Business Overview

We are a geographically diversified oil and gas services company, focused on completion fluids and associated products and services, comprehensive water management, frac flowback, production well testing and offshore rig cooling services.

Prior to the closing of the GP Sale on January 29, 2021, we operated in three reporting segments organized into three Divisions.

Following the closing of the GP sale, we operate through two reporting segments organized into two Divisions - Completion Fluids & Products and Water & Flowback Services.

Demand for products and services of our Completion Fluids & Products Division remained resilient during 2020 despite the unprecedented effect of the COVID-19 pandemic on the oil and gas industry.

The impact of lower US activity was partially offset by strong international sales in the Middle East and Europe.

While significant macro-economic uncertainty remains, oil prices have returned to pre-pandemic levels and activity is expected to continue to rebound from its recent lows.

Lower commodity prices during 2020 particularly affected domestic onshore demand for our Water & Flowback Services Division.

However, although water management services activity dropped significantly during the second and third quarters, we began to see some recovery in activity levels during the fourth quarter as oil and gas prices stabilized above $40.

Our former Compression Division provided compression services for natural gas and oil production, gathering, artificial lift, transmission, processing, and storage.

Our former Compression Division operated primarily through CCLP, of which we owned 35% of the common equity and controlled through our ownership of its general partner as of December 31, 2020.

On January 29, 2021, we entered into the Purchase and Sale Agreement with Spartan pursuant to which we sold the general partner of CCLP, including IDRs in CCLP and approximately 23.1% of the outstanding limited partner interests in CCLP, in exchange for a combination of $13.4 million in cash paid at closing, $0.5 million in cash payable on the six-month anniversary of the closing and $3.1 million in contingent consideration in the form of cash and/or CCLP common units if CCLP achieves certain financial target on or before December 31, 2022.

We were required to use all net cash proceeds received at closing from the sale to repay borrowings under our Term Credit Agreement.

Following the closing of the transaction, we retained approximately 11.1% of the outstanding CCLP common units.

We are an industrial oil and 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.

We operate through two reporting segments - Completion Fluids & Products Division and Water & Flowback Services Division.

After declining to historic lows due to depressed oil prices resulting from Russia and Saudi Arabia’s price war and the COVID-19 pandemic last year, customer activity levels in the North America onshore business began to recover during the first half of 2021.

Customer activity levels continued to improve through the second half of 2021 as oil prices continued to improve, averaging over $70 per barrel for the third and fourth quarters, while natural gas prices averaged over $4 per million Btu.

Completions Fluids & Products Division revenues were lower than the prior year due to lower Gulf of Mexico and international oil and gas activity and global shipping delays, partially offset by an increase in industrial chemicals product sales.

In July 2021, we completed our first International TETRA CS Neptune ® fluids job, reflecting acceptance of this proprietary technology into new markets.

We also saw a significant rebound in our international business, particularly in completion fluid sales during the fourth quarter of 2021.

Our Water & Flowback Services revenues increased significantly compared to the prior year, due to a combination of higher overall customer activity levels and significant price recovery, particularly in the United States land business.

Our international production testing business also improved during the fourth quarter of 2021.

We also deployed our TETRA SandStorm TM technology for two major long-term projects in Latin America.

Revenue growth was a result of a record increase in the number of integrated projects and customers, and TETRA SandStorm TM high utilization and market share gains with private oil and gas operators.

We are also committed to pursuing low-carbon energy initiatives that leverage our fluids and aqueous chemistry core competencies, our significant bromine and lithium assets (including our approximately 31,100 net acres of brine leases in Arkansas) and technologies, and our leading calcium chloride production capabilities.

In May 2021, we signed a MOU with CarbonFree.

During the one-year MOU period, both Companies will work towards a definitive agreement that might include investments by TETRA into CarbonFree, a joint venture, or other commercial arrangements.

In December 2021, we invested $5.0 million in a convertible note issued by CarbonFree.

In August 2021, we announced completion of a preliminary technical assessment by an independent geological consulting firm to assess lithium and bromine exploration targets in our Southwest Arkansas brine leases.

Bromine has been identified as a key mineral resource in zinc-bromide energy storage systems and our TETRA PureFlow™ high purity zinc bromide has been qualified by several battery technology companies.

The lithium battery market is a rapidly growing market, affording us the opportunity to participate in a meaningful way.

We will assess the next steps towards determining whether we can develop these key minerals to augment our current global infrastructure and chemistry expertise, allowing us to further expand beyond the oil and gas market.

In December, 2021, we announced a strategic agreement with Eos involving a long-term supply and collaboration agreement to supply our high purity zinc bromide solution, TETRA PureFlow TM .

TETRA and Eos expect to collaborate for improved battery performance, cost and system life including an end-of-life solution using TETRA's extensive experience with reclaiming and recycling zinc bromide.

Substantially all of our former Compression Division’s operations were conducted through our partially-owned CSI Compressco subsidiary.

On January 29, 2021, we entered into the Purchase and Sale Agreement pursuant to which we sold the general partner of CSI Compressco, including IDRs in CSI Compressco and

approximately 23.1% of the outstanding limited partner interests in CSI Compressco, in exchange for a combination of $13.9 million in cash and $3.1 million in contingent consideration in the form of cash and/or CSI Compressco common units if CSI Compressco achieves certain financial target on or before December 31, 2022.

As of December 31, 2021, we held an interest in CSI Compressco consisting of approximately 3.8% of the outstanding common units.

We recorded a book gain of $120.1 million during 2021 in connection with the GP Sale.

This gain, most of which was non-cash, was a function of CSI Compressco having a negative carrying value within our consolidated balance sheet due to our share of cumulative losses and distributions.

We have reflected the operations of our former Compression Division as discontinued operations for all periods presented.

See Note 3 - “Discontinued Operations” and Note 18- “Subsequent Event” in the Notes to Consolidated Financial Statements for further information.

We actively managed our flexible cost structure as a proactive response to the changing market conditions throughout 2020.

We implemented temporary and permanent cost actions in 2020, including reduced capital expenditures, workforce reductions, salary reductions, suspension of 401(k) matching contributions for our employees and negotiated reductions in expenditures with many of our suppliers.

While we are not able to predict how long market disruptions resulting from the COVID-19 pandemic will continue, or what impact it will ultimately have on our business, we saw activity levels begin to stabilize starting at the end of the third quarter 2020 and increase since then.

See Note 3 - “Discontinued Operations” in the Notes to Consolidated Financial Statements for further information.

During the first quarter of 2021, we used proceeds from the GP sale and available cash on hand, including $14.2 million of proceeds from the fourth quarter 2020 compressor unit sales to Spartan, to pay down $29.3 million on our term loan, which matures in September 2025.

During the fourth quarter of 2021, we sold the 1.6 million Standard Lithium Ltd.

shares we owned for approximately $17.6 million, before broker and transaction fees.

We repaid an additional $8.2 million of our term loan in July 2021 and $13.0 million of our term loan in December 2021.

Our liquidity at the end of the fourth quarter was $67.7 million consisting of $31.6 million of unrestricted cash plus $36.1 million of availability under the ABL Credit Agreement.

Results of Operations

The following data should be read in conjunction with the Consolidated Financial Statements and the associated Notes contained elsewhere in this report.

2020 Compared to 2019

Consolidated Comparisons

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Gross profit as a percentage of revenue

15.3 % 17.9 %

General and administrative expense 75,049 76,697 (1,648) (2.1) %

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19.3 % 20.3 %

Goodwill impairment — 25,784 (25,784)

Interest expense, net 16,377 18,926 (2,549) (13.5) %

Gain on sale of assets (1,040) (2,878) 1,838 (63.9) %

Warrants fair value adjustment (251) (1,624) 1,373 (84.5) %

Other (income) expense, net 135 (301) 436 (144.9) %

Other income, net (16,428) (116) (16,312) NM (1)

Loss before taxes and discontinued operations (14,721) (25,086) 10,365 (41.3) %

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Loss before discontinued operations (16,805) (26,844) 10,039 (37.4) %

Loss from discontinued operations, net of taxes (72,089) (29,580) (42,509) 143.7 %

Net loss (98,933) (160,500) 61,567 (38.4) %

Loss attributable to noncontrolling interest 47,790 13,087 34,703 265.2 %

Income (loss) from discontinued operations, net of taxes 120,407 (72,089) 192,496 (267.0) %

Net income (loss) 103,602 (98,933) 202,535 (204.7) %

(Income) loss attributable to noncontrolling interest (269) 47,790 (48,059) (100.6) %

Net loss attributable to TETRA stockholders $ 103,333 $ (51,143) $ 154,476 (302.0) %

Consolidated revenues for 2020 decreased compared to the prior year primarily due to lower activity in our Water & Flowback Services Division, where revenue decreased by $146.9 million.

The decreased for this division was driven by a significant reduction in capital spending by our customers in response to the decline in oil prices associated with the COVID-19 pandemic.

(1) Percent change is not meaningful

Consolidated revenues for 2021 increased compared to the prior year primarily due to higher activity in our Water & Flowback Services division, where revenue increased by $33.6 million.

The increase in our Water & Flowback Services division is primarily due to increasing customer activity levels from recent lows in response to an improving commodity price environment in 2021 and recovery from industry downturn in 2021 related to the COVID-19 pandemic.

The increase in consolidated revenue was offset by decreased revenue in our Completion

Fluids & Products division of $23.0 million, primarily due to lower Gulf of Mexico and international oil and gas activity.

See “Divisional Comparisons” section below for additional discussion.

Consolidated gross profit increased during 2020 compared to the prior year primarily due to a $91.8 million impairment charge at our El Dorado plant, which reduced gross profit for the Completion Fluids and Products Division in 2019.

Despite lower activity levels, this division continued to deliver strong margins during 2020 and generated gross profit that was in line with the prior year gross profit before impairments.

The increased gross profit for the Completion Fluids and Products Division in 2020 was partially offset by results for the Water & Flowback Services Division, where lower revenues impacted gross profit, despite aggressive management of costs.

Consolidated gross profit as a percentage of revenue declined primarily due to a change in revenue mix, with a higher portion of revenues generated from our Water & Flowback Services division.

See Divisional Comparisons section below for additional discussion.

General and Administrative Expense

Consolidated general and administrative expenses decreased during 2020 compared to the prior year primarily due to decreased salary related expenses of $19.1 million, decreased general expenses of $1.9 million and decreased professional services fees of $1.7 million.

These decreases were partially offset by increased bad debt expenses of $3.3 million.

Decreased general and administrative expenses were primarily driven by our

Corporate Division.

Most of the decrease in general and administrative expenses resulted from restructuring and headcount reductions in response to the decline in activity levels, particularly in our U.S.

onshore operations.

Despite the significant cost reduction, general and administrative expense as a percentage of revenues increased compared to the prior year due to lower revenues.

Consolidated general and administrative expenses decreased during 2021 compared to the prior year primarily due to a $6.1 million decrease in bad debt expense.

This was offset by a $1.6 million increase in salary related expenses, primarily due to a phased reinstatement of reduced salaries and 401K match;

a $1.9 million increase in legal, settlement and other expenses, and a $1.0 million increase in general expenses.

Interest Expense, Net

Consolidated interest expense, net, decreased in 2020 compared to the prior year primarily due to a decrease in Corporate interest expense.

Corporate interest expense decreased due to lower borrowings under the ABL Credit Agreement.

Interest expense during 2020 and 2019 includes $1.6 million and $1.4 million, respectively, of finance cost amortization.

Consolidated interest expense, net, decreased in 2021 compared to the prior year primarily due to $50.5 million of repayments on our term credit facility during the current year.

Gain on Sale of Assets

Consolidated gain on sale of assets increased during 2020 compared to the prior year primarily due to increased sales of assets during the year .

The warrants are accounted for as a derivative liability in accordance with ASC 815 and therefore they are classified as a long-term liability on our consolidated balance sheet at their fair value.

Increases (or decreases) in the fair value of the warrants are generally associated with increases (or decreases) in the trading price of our common stock, resulting in adjustments to earnings for the associated valuation losses (gains), and resulting in future volatility of our earnings during the period the warrants are outstanding.

Loss from Discontinued Operations

The loss from discontinued operations increased during 2020 compared to 2019 primarily due to lower revenues from our former Compression Division as well as increased impairments recognized during 2020 as a result of the recent market conditions, partially offset by lower operating costs from our former Compression Division.

The loss from discontinued operations also decreased $9.0 million from loss reserves recorded during 2019 related to the exit from the Offshore Division.

Consolidated gain on sale of assets decreased during 2021 compared to the prior year primarily due to decreased asset sales during the year.

Other Income, net

Consolidated other (income) expense, net increased during 2021 compared to the prior year primarily due to an $11.7 million increase in income from our investment in Standard Lithium due to an increase in the Standard Lithium stock price and additional shares received in May 2021.

All Standard Lithium shares were sold in the fourth quarter of 2021.

Additionally, we benefited from favorable foreign exchange fluctuations of $4.1 million.

Income (Loss) from Discontinued Operations

Income from discontinued operations, net of taxes, was $120.4 million compared to a loss of $72.1 million for the prior year, including $20.8 million of asset impairments.

The current year income includes a $120.1 million primarily non-cash accounting gain from the deconsolidation of CSI Compressco.

This gain is net of a $0.01 million tax provision after taking into consideration utilization of net operating loss and credit carryforwards.

Provision for Income Tax

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Interest (income) expense, net (596) (666) 70 (10.5) %

Other (income) expense, net (2,314) (335) (1,979) 590.7 %

Income (loss) before taxes and discontinued operations $ 55,334 $ (33,969) $ 89,303 (262.9) %

Income (loss) before taxes as a percentage of revenue 22.8 % (12.2) %

The decrease in Completion Fluids & Products Division revenues during 2020 compared to the prior year was primarily due to lower activity related to the decline in oil and gas prices resulting from the COVID-19 pandemic.

Completion Fluids & Products Division gross profit during 2020 increased compared to the prior year primarily due to a $91.8 million impairment charge at our El Dorado plant, which reduced gross profit for the prior year.

Despite lower activity levels, the division continued to deliver strong margins and generated gross profit that was broadly in line with the prior year gross profit before impairments.

Completion Fluids & Products Division profitability in future periods will be continue to be affected by the mix of its products and services, including the timing of TETRA CS Neptune completion fluid projects.

The Completion Fluids & Products Division reported a pretax income during 2020 compared to pretax loss in the prior year primarily due to the increase in gross profit discussed above.

Completion Fluids & Products Division administrative cost levels increased compared to the prior year, primarily due to increased bad debt of $3.5 million and increased salary and employee related expenses of $1.3 million.

Other income, net (16,373) (2,314) (14,059) NM

Income before taxes $ 54,981 $ 55,334 $ (353) (0.6) %

Income before taxes as a percentage of revenue 25.0 % 22.8 %

Revenues for our Completion Fluids & Products Division decreased primarily due to lower Gulf of Mexico and international oil and gas activity and global shipping delays, partially offset by an increase in industrial chemicals product sales.

In addition, the prior year period benefited from two large international orders.

The ramp down in activity due to the COVID-19 pandemic and associated reduction in oil prices lagged North America onshore, and did not have a significant impact on offshore Gulf of Mexico and international activity until the third and fourth quarters of 2020.

Completion Fluids & Products Division gross profit during 2021 decreased compared to the prior year due to lower revenue and was also negatively impacted by continued inflationary pressures in certain raw materials and higher logistics costs due to the global shipping crisis.

Completion Fluids & Products Division profitability in future periods will continue to be affected by the mix of its products and services, market demand for our products and services, drilling and completions activity and commodity prices.

Pretax income for our Completion Fluids & Products Division remained relatively stable during 2021 compared to the prior year primarily due to the decrease in gross profit discussed above being offset by an increase in other income and a decrease in general and administrative expenses.

The division had an $11.7 million increase in income from our investment in Standard Lithium compared to the prior year.

Additionally, the Completion Fluids & Products Division bad debt expense decreased $4.1 million due to several bankruptcy-related reserves recorded in the prior year and foreign exchange fluctuations were favorable by $2.0 million.

Water & Flowback Services Division

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General and administrative expense as a percentage of revenue 8.7 % 11.6 %

Goodwill impairment 25,784 (25,784)

Interest (income) expense, net (511) (1,135) 624 (55.0) %

Other (income) expense, net (1,515) (2,161) 646 (29.9) %

Loss before taxes and discontinued operations $ (21,850) $ (21,173) $ (677) 3.2 %

Income (loss) before taxes as a percentage of revenue (16.2) % (7.5) %

Water & Flowback Services Division revenues decreased during 2020 compared to the prior year primarily due to reduced customer drilling and completions activity as a result of lower oil and gas prices caused primarily by

the ongoing COVID-19 pandemic.

Water management and flowback service revenues decreased $148.9 million during 2020 compared to the prior year.

The volatility in oil and gas commodity prices driving reductions in customer capital spending has resulted in decreased pricing and activity when compared to the prior year, leading to lower revenues and margins.

Product sales revenue increased by $2.0 million, due to higher equipment sales in the US.

The Water & Flowback Services Division reflected a gross loss during 2020 compared a gross profit in the prior year primarily due to lower revenues associated with lower activity levels.

The Water & Flowback Services Division reported a slight increase in pretax loss compared to the prior year, primarily due to the gross loss described above, offset by the goodwill impairment recognized in 2019.

General and administrative expenses decreased primarily due to decreased wage and benefit expenses of $7.3 million, decreased general expenses of $1.4 million, and decreased bad debt expense of $0.7 million.

Other income, net (1,186) (1,515) 329 (21.7) %

Loss before taxes $ (11,116) $ (21,850) $ 10,734 (49.1) %

Loss before taxes as a percentage of revenue (6.6) % (16.2) %

Water & Flowback Services Division revenues increased during 2021 compared to the prior year primarily due to increased customer drilling and completion activity in certain onshore North America markets as the industry continues to recover from the COVID-19 pandemic.

Revenues for the prior year were significantly impacted by industry-wide reductions in rig and frac count resulting from historically low oil prices.

The current year was negatively impacted by severe weather that caused extended shut downs in certain locations during the first quarter.

The Water & Flowback Services Division reflected a gross profit during 2021 compared to a gross loss in the prior year primarily due to increased revenues as described above and pricing improvements offsetting ongoing inflationary pressures.

The Water & Flowback Services Division reported a lower pretax loss compared to the prior year, primarily due to the gross profit improvement described above.

General and administrative expenses also decreased primarily due to a $2.0 million decrease in bad debt expense, partially offset by a $0.9 million increase in consulting and legal services.

Corporate Overhead

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Interest expense, net 17,483 20,727 (3,244) (15.7) %

Warrants fair value adjustment (income) expense (251) (1,624) 1,373 (84.5) %

Other (income) expense, net 93 836 (743) (88.9) %

Loss before taxes $ (58,598) $ (58,582) $ (16) — %

Corporate Overhead pretax loss decreased during 2020 compared to the prior year primarily due to decreased general and administrative expense and decreased interest expense.

Corporate general and administrative expense decreased primarily due to decreased salary related expense of $13.1 million, $1.2 million of decreased general expenses and $1.0 million of decreased professional fees.

Interest expense decreased due to lower borrowings under the ABL Credit Agreement.

The fair value of the outstanding warrants liability resulted in a $0.3 million credit to earnings in the current year compared to a $1.6 million credit to earnings during 2019.

How we Evaluate Operations

Corporate Overhead pretax loss remained stable during 2021 compared to the prior year primarily due to increased general and administrative expense, offset by decreased interest expense.

Corporate general and administrative expense increased primarily due to increased salary related expense of $2.0 million, $1.0 million of increased general expenses and $0.8 million of increased professional fees.

Interest expense decreased primarily due to $50.5 million of repayments on our term credit facility during the current year.

The warrants issued in 2016 expired in December 2021.

Non-GAAP Financial Measures

GAAP financial measures such as revenues, gross profit, income (loss) before taxes, and net cash provided by operating activities, as well as certain non-GAAP financial measures, including Adjusted EBITDA, as performance measures for our business.

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• determine our ability to incur and service debt and fund capital expenditures.

The following table reconciles net income (loss) to Adjusted EBITDA for the periods indicated:

December 31, 2020

Net Income (Loss), as reported Tax Provision Income (Loss) Before Tax, as Reported Impairments & Special Charges Adjusted Income (Loss) Before Tax Interest Expense, Net

Depreciation & Amortization

Expense Adjusted EBITDA

(In Thousands)

Completion Fluids & Products Division

$ 55,334 $ 6,370 $ 61,704 $ (853) $ 7,389 $ — $ 68,240

Water & Flowback Services Division

(21,850) 3,960 (17,890) (1,594) 30,384 — 10,900

Eliminations and other

12 — 12 — (12) — —

33,496 10,330 43,826 (2,447) 37,761 — 79,140

Corporate G&A (36,201) 2,185 (34,016) — 4,721 (29,295)

Other (22,381) 226 (22,155) 20,727 720 — (708)

TETRA excluding Discontinued Operations

$ (26,844) $ 1,758 $ (25,086) $ 12,741 $ (12,345) $ 18,280 $ 38,481 $ 4,721 $ 49,137

December 31, 2019

Net Income (Loss), as reported Tax Provision Income (Loss) Before Tax, as Reported Impairments & Special Charges Adjusted Income (Loss) Before Tax Interest Expense, Net Depreciation & Amortization Equity Comp.

Expense Adjusted EBITDA

(In Thousands)

Completion Fluids & Products Division

$ (33,969) $ 91,140 $ 57,171 $ (720) $ 13,518 $ — $ 69,969

Water & Flowback Services Division

(21,173) 25,619 4,446 (1) 33,424 — 37,869

Eliminations and other

14 — 14 — (14) — —

(55,128) 116,759 61,631 (721) 46,928 — 107,838

Corporate G&A (51,466) 2,085 (49,381) 7,064 (42,317)

Other (21,515) (1,471) (22,986) 21,473 635 — (878)

TETRA excluding Discontinued Operations

$ (130,920) $ 2,811 $ (128,109) $ 117,373 $ (10,736) $ 20,752 $ 47,563 $ 7,064 $ 64,643

Adjusted EBITDA is a financial measure that is not in accordance with U.S.

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This measure may not be comparable to similarly titled financial metrics of other entities, as other entities may not calculate Adjusted EBITDA in the same manner as we do.

Management compensates for the limitations of Adjusted EBITDA as analytical tools by reviewing the comparable U.S.

Management compensates for the limitations of Adjusted EBITDA as analytical tools by reviewing

the comparable U.S.

GAAP measures, understanding the differences between the measures, and incorporating this knowledge into management’s decision-making processes.

The following table reconciles net income (loss) to Adjusted EBITDA for the periods indicated:

December 31, 2021

Completion Fluids & Products Water & Flowback Services Corporate SG&A Other and Eliminations Total

(In Thousands, Except Percents)

Revenue $ 219,648 $ 168,624 $ — $ — $ 388,272

Net income (loss) before taxes and discontinued operations 54,981 (11,116) (39,990) (18,596) (14,721)

Adjustment to long-term incentives — — 4,675 — 4,675

Transaction and other expenses 322 878 2,419 — 3,619

Restructuring 1,209 840 — — 2,049

Stock warrant fair value adjustment — — — (198) (198)

Former CEO stock appreciation right expense — — 865 — 865

Impairments and other charges — — — 132 132

Allowance for bad debt — (230) — — (230)

Adjusted income (loss) before taxes and discontinued operations $ 56,512 $ (9,628) $ (32,031) $ (18,662) $ (3,809)

Adjusted interest expense, net (595) (512) — 17,483 16,376

Adjusted depreciation and amortization 6,885 25,045 — 889 32,819

Equity compensation expense — — 4,664 — 4,664

Adjusted EBITDA $ 62,802 $ 14,905 $ (27,367) $ (290) $ 50,050

Adjusted EBITDA as % of revenue 28.6 % 8.8 % 12.9 %

December 31, 2020

Completion Fluids & Products Water & Flowback Services Corporate SG&A Other and Eliminations Total

(In Thousands, Except Percents)

Revenue $ 242,661 $ 135,054 $ — $ — $ 377,715

Net income (loss) before taxes and discontinued operations 55,334 (21,850) (36,201) (22,369) $ (25,086)

Severance 1,166 1,853 1,555 — 4,574

Transaction and other expenses (90) 124 1,009 — 1,043

Restructuring and severance expenses 1,267 861 — — 2,128

Stock warrant fair value adjustment — — — (251) (251)

Impairments and other charges 108 — — 98 206

Allowance for bad debt 3,919 1,122 — — 5,041

Adjusted income (loss) before taxes and discontinued operations $ 61,704 $ (17,890) $ (33,637) $ (22,522) $ (12,345)

Adjusted interest expense, net (853) (1,594) — 20,727 18,280

Adjusted depreciation and amortization 7,389 30,384 — 708 38,481

Equity compensation expense — — 4,721 — 4,721

Adjusted EBITDA $ 68,240 $ 10,900 $ (28,916) $ (1,087) $ 49,137

Adjusted EBITDA as % of revenue 28.1 % 8.1 % 13.0 %

December 31, 2019

Completion Fluids & Products Water & Flowback Services Corporate SG&A Other and Eliminations Total

(In Thousands, Except Percents)

Revenue $ 279,255 $ 281,986 $ — $ — $ 561,241

Net income (loss) before taxes and discontinued operations (33,969) (21,173) (51,466) (21,501) (128,109)

Severance — — 1,511 — 1,511

Transaction and other expenses (543) — 574 (351) (320)

Restructuring and severance expenses 77 759 — — 836

Stock warrant fair value adjustment — — — (1,624) (1,624)

Impairments and other charges 91,606 24,784 — — 116,390

Former CEO stock appreciation right expense — — — 504 504

Allowance for bad debt — 76 — — 76

Adjusted income (loss) before taxes and discontinued operations $ 57,171 $ 4,446 $ (49,381) $ (22,972) $ (10,736)

Adjusted interest expense, net (720) (1) — 21,473 20,752

Adjusted depreciation and amortization 13,518 33,424 — 621 47,563

Equity compensation expense — — 7,064 — 7,064

Adjusted EBITDA $ 69,969 $ 37,869 $ (42,317) $ (878) $ 64,643

Adjusted EBITDA as % of revenue 25.1 % 13.4 % 11.5 %

Liquidity and Capital Resources

We believe that our capital structure allows us to meet our financial obligations despite current uncertain operating conditions and financial markets.

Our liquidity at the end of fourth quarter was $91.9 million.

Our liquidity at the end of the fourth quarter was $67.7 million consisting of $31.6 million of unrestricted cash plus $36.1 million of availability under the ABL Credit Agreement.

Liquidity is defined as unrestricted cash plus availability under the revolving credit facility.

Our consolidated sources and uses of cash, including cash activity from our former Compression Division, during the years ended December 31, 2020 and 2019 are as follows:

Our consolidated sources and uses of cash, including cash activity from our former Compression Division, for the years ended December 31, 2021 (which represents January 2021 prior to the closing of the GP sale), 2020 and 2019 are as follows:

Year Ended December 31,

2021 2020 2019

(In Thousands)

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Financing activities (50,054) (17,629) (5,925)

Consolidated cash flows provided by operating activities totaled $76.9 million during 2020 compared to $90.2 million during the prior year, a decrease of $13.3 million.

CCLP generated $20.8 million of our consolidated cash flows provided by operating activities during the year ended December 31, 2020 compared to $67.7 million during the prior year.

Operating cash flows decreased primarily due to a decrease in revenues, which were partly offset by monetization of working capital.

During 2020, TETRA increased cash generation, which offset CCLP’s decreased cash generation.

Our cash flows from operating, investing and financing activities will no longer include cash activities of our former Compression Division, including CCLP, following the GP Sale on January 29, 2021.

Consolidated cash flows provided by operating activities totaled $4.7 million during 2021 compared to $76.9 million during the prior year, a decrease of $72.3 million, and compared to $90.2 million during the year ended December 31, 2019.

Operating cash flows decreased due to including the results of CSI Compressco for one month during the current year compared to twelve months during the prior years.

CSI Compressco generated $0.9 million, $20.8 million and $67.7 million of our consolidated cash flows provided by operating activities during the years ended December 31, 2021, 2020 and 2019, respectively.

Excluding the activities of CSI Compressco, cash flow from operations decreased $52.4 million compared to the prior year primarily due to lower consolidated margins from the change in product mix and working capital changes.

We continue to monitor customer credit risk in the current environment and focus on serving larger capitalized oil and gas operators and national oil companies.

Investing Activities

During 2020, CCLP launched an initiative to rationalize its fleet by selling smaller and mid-sized equipment to focus on the larger-horsepower fleet as well as to sell equipment outside its core area of focus.

One of CCLP’s larger customers purchased a small number of large units recently deployed.

Additionally during 2020, the Partnership sold its Midland fabrication facility and real estate for $17.0 million.

Investing cash flows for 2020 also include $14.2 million from TETRA’s sale of 15 high horse power compressor units to Spartan during the fourth quarter.

As a result of CCLP’s and TETRA’s equipment sales, 2020 cash proceeds from the sale of used equipment exceed the cash outflows to purchase new equipment.

Total cash capital expenditures, including capital expenditures associated with discontinued operations, during 2020 were $29.4 million, net of $12.7 million cost of compressors sold, as we adjusted to current market conditions.

Our Completion Fluids & Products Division spent $4.0 million on capital expenditures during 2020, the majority of which related to plant and facility additions.

Total cash capital expenditures during 2021 were $20.5 million.

Our Water & Flowback Services Division spent $13.6 million on capital expenditures, primarily to maintain, automate and upgrade its water management and flowback equipment fleet.

Our former Compression Division spent $14.7 million, primarily to maintain its compression fleet.

2019 Investing cash flows include proceeds of $12.9 million from the sale of property, plant and equipment primarily the result of a sale-leaseback transaction during the fourth quarter of 2019, where CCLP sold ten compression units and immediately leased them back at a monthly rate.

These compression units are included in operating lease right-of-use assets on our consolidated balance sheets.

Our Completion Fluids & Products Division spent $3.8 million on capital expenditures during 2021, the majority of which related to plant and facility additions.

Capital expenditures also include $3.0 million from our former Compression Division during January 2021.

Investing activities for 2021 also included $17.6 million of proceeds from sale of our shares of Standard Lithium during October and November of 2021, offset by $5.0 million from our investment in a convertible note issued by CarbonFree in December 2021.

As a result of CSI Compressco’s and TETRA’s equipment sales, 2020 cash proceeds from the sale of used equipment exceeded the cash outflows to purchase new equipment.

During the year ended December 31, 2020, cash provided by investing activities included $5.2 million from CSI Compressco, primarily consisting of $19.4 million in proceeds from sales of compressors and facilities, offset by $14.7 million of capital expenditures.

During 2020, CSI Compressco launched an initiative to rationalize its fleet by selling smaller and mid-sized equipment to focus on the larger-horsepower fleet as well as to sell equipment outside its core area of focus.

One of CSI Compressco’s larger customers purchased a small number of large units recently deployed.

Additionally during 2020, CSI Compressco sold its Midland fabrication facility and real estate for $17.0 million.

Investing cash flows for 2020 also include $14.2 million from TETRA’s sale of 15 high horse power compressor units during the fourth quarter.

During the year ended December 31, 2019, cash used in investing activities included $64.2 million from CSI Compressco, primarily consisting of $75.8 million of capital expenditures.

Investing cash flows for 2019 also include proceeds of $12.9 million from our former Compression Division related to the sale of property, plant and equipment primarily the result of a sale-leaseback transaction in which CSI Compressco sold ten compression units and immediately leased them back at a monthly rate.

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 lithium rights.

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.

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.

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.

Historically, a significant majority of our planned capital expenditures have been related to identified opportunities to grow and expand our existing businesses.

However, such expenditures have recently been, and may continue to be, postponed or canceled as we are reviewing all capital expenditure plans carefully in an effort to conserve cash.

We are also focused on enhancing shareholder value by capitalizing on our key mineral assets, brine mineral extraction expertise, and deep chemistry competency to expand our offerings into the low carbon energy markets.

However, we continue to review all capital expenditure plans carefully in an effort to conserve cash.

We currently have no long-term capital expenditure commitments.

The deferral of capital projects could affect our ability to compete in the future.

If the forecasted demand for our products and services increases or decreases, the amount of planned expenditures on growth and expansion may be adjusted.

Through our common unit ownership interest in CCLP, which was approximately 35% as of December 31, 2020 and approximately 11% as of March 4, 2021, we receive quarterly cash distributions, if any, from CCLP.

On January 19, 2021, CCLP announced a cash distribution of $0.01 per common unit for the quarter ended December 31, 2020, which was paid on February 12, 2021 based on our retained interest.

Financing Activities

During the year ended December 31, 2020, the total amount of consolidated net cash used in financing activities was $17.6 million, primarily related to pay down of our Term Credit Agreement, cash fees related to the exchange of CCLP debt and repayments under our ABL Credit Agreement.

During the year ended December 31, 2019, the total amount of consolidated net cash provided by financing activities was $5.9 million, primarily due to borrowings under our ABL Credit Agreement and our Term Credit Agreement, net of cash redemptions of the CCLP Preferred Units.

During the year ended December 31, 2021, consolidated net cash used in financing activities was $50.1 million, primarily related to the $50.5 million pay down of our Term Credit Agreement.

During the year ended December 31, 2020, consolidated net cash used in financing activities was $17.6 million, primarily related to the $8.0 million pay downs of our Term Credit Agreement and our ABL Credit Agreement and $5.0 million cash fees related to CSI Compressco’s exchange of debt.

During the year ended December 31, 2019, consolidated net cash used in financing activities was $5.9 million primarily due to $28.0 million of net cash redemptions of the CSI Compressco Preferred Units, offset by $21.5 million of borrowings under our Term Credit Agreement and our ABL Credit Agreement.

We may supplement our existing cash balances and cash flow from operating activities with short-term borrowings, long-term borrowings, issuances of equity and debt securities, and other sources of capital.

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Asset-Based Credit Agreement .

The ABL Credit Agreement provides for a senior secured revolving credit facility of up to $100 million, subject to a borrowing base to be determined by reference to the value of inventory and accounts receivable, and includes a sublimit of $20.0 million for letters of credit and a swingline loan sublimit of $10.0 million.

The amended ABL Credit Agreement provides for a senior secured revolving credit facility of up to $80 million, with a $20.0 million accordion.

The credit facility is subject to a borrowing base to be determined by reference to the value of inventory and accounts receivable, and includes a sublimit of $20.0 million for letters of credit, a swingline loan sublimit of $11.5 million, and a $15.0 million sub-facility subject to a borrowing base consisting of certain trade receivables and inventory in the United Kingdom.

The ABL Credit Agreement may be used for working capital needs, capital expenditures and other general corporate purposes.

The amounts we may borrow under the ABL Credit Agreement are based on a percentage of our accounts receivable and certain inventory.

Changes in demand for our products and services have an impact on our eligible accounts receivable, which could result in significant changes to our borrowing base and therefore our availability under our ABL Credit Agreement.

With the current depressed oil and gas market conditions, we believe our availability under our ABL Credit facility will be adversely impacted by the expected decline in our customers’ activity levels.

The ABL Credit Agreement is scheduled to mature on September 10, 2023.

As of December 31, 2020, we had no outstanding balance under the ABL Credit Agreement and, subject to compliance with the covenants, borrowing base, and other provisions of the agreement that may limit borrowings, we had an availability of $24.6 million under the ABL Credit Agreement.

As of March 3, 2021, we have no outstanding borrowings under our ABL Credit Agreement and $8.3 million letters of credit, resulting in $30.1 million of availability.

The amounts we may borrow under the ABL Credit Agreement are derived from our accounts receivable, certain accrued receivables and certain inventory.

Changes in demand for our products and services have an impact on our eligible accounts receivable, accrued receivables and the value of our inventory, which could result in significant changes to our borrowing base and therefore our availability under our ABL Credit Agreement.

The ABL Credit Agreement is scheduled to mature on May 31, 2025.

As of December 31, 2021, we had $1.6 million outstanding under the ABL Credit Agreement and, subject to compliance with the covenants, borrowing base, and other provisions of the agreement that may limit borrowings, we had an availability of $36.1 million under the ABL Credit Agreement.

As of February 25, 2022, we have $0.8 million of outstanding borrowings under our ABL Credit Agreement and $6.0 million letters of credit, resulting in $51.8 million of availability.

Term Credit Agreement.

The Term Credit Agreement provides a loan in the amount of $220.5 million and is scheduled to mature on September 10, 2025 for certain acquisitions (the “Additional Term Loans,” and together with the Initial Term Loan, the “Term Loan”).

The Term Credit Agreement is scheduled to mature on September 10, 2025.

Our Term Credit Agreement requires us to annually prepay up to 50% of Excess Cash Flow (as defined in the Term Credit Agreement) from the most recent full fiscal year.

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If our Leverage Ratio at year-end is less than 1.50 to 1.00, then no prepayment is required.

As of March 3, 2021, $201.7 million in aggregate principal amount of our Term Credit Agreement is outstanding.

As of February 25, 2022, $163.1 million in aggregate principal amount of our Term Credit Agreement is outstanding.

We repaid an additional $8.2 million of our term loan in July 2021 and $13.0 million of our term loan in December 2021.

As of December 31, 2021, we are in compliance with all covenants of our debt agreements.

See Note 10 - “Long-Term Debt and Other Borrowings” in the Notes to Consolidated Financial Statements for further information.

Other Sources and Uses

Swedish Credit Facility.

In January 2022, the Company entered into a new revolving credit facility for seasonal working capital needs of subsidiaries in Sweden and Finland (“Swedish Credit Facility”).

There are no borrowings and the facility has availability of 50.0 million Swedish Krona, or approximately $5.3 million United States dollars, as of February 25, 2022.

During each year, all outstanding loans under the Swedish Credit Facility must be repaid for at least 30 consecutive days.

Borrowings bear interest at a rate of 2.95% per annum.

The Swedish Credit Facility expires on December 31, 2022 and the Company intends to renew it annually.

Other Sources and Uses of Cash

In addition to the aforementioned credit facilities and senior notes, we fund our short-term liquidity requirements from cash generated by our operations and from short-term vendor financing.

In addition, as of December 31, 2021, the market value of our equity holdings of CSI Compressco was $6.2 million, with no holding restrictions on our ability to monetize our investment.

Should additional capital be required, the ability to raise such capital through the issuance of additional debt or equity securities may currently be limited.

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An increase of unpaid receivables would also negatively affect our borrowing availability under the ABL Credit Agreement.

In November 2020, we sold 15 high horsepower compressor units to Spartan for $14.2 million.

In connection with that sale, we also assigned a lease with CCLP for those units to Spartan.

On January 29, 2021 we completed the GP Sale.

Approximately $18.8 million in net cash proceeds from both the November 2020 compressor sale and the GP Sale were used to repay borrowings under our Term Credit Agreement.

On April 11, 2019, we filed a universal shelf Registration Statement on Form S-3 with the SEC.

On May 1, 2019, the Registration Statement on Form S-3 was declared effective by the SEC.

Pursuant to this registration statement, we have the ability to sell debt or equity securities in one or more public offerings up to an aggregate public offering price of $464.1 million, inclusive of $64.1 million of our common stock issuable upon conversion of our currently outstanding warrants.

Pursuant to this registration statement, we have the ability to sell debt or equity securities in one or more public offerings up to an aggregate public offering price of $400 million.

This shelf registration statement currently provides us additional flexibility with regard to potential financings that we may undertake when market conditions permit or our financial condition may require.

We intend to renew the shelf Registration Statement during the second quarter of 2022.

We have operating leases for some of our transportation equipment, office space, warehouse space, operating locations, and machinery and equipment.

Our leases have remaining lease terms ranging from 1 to 13 years.

See Note 2 - “Basis of Presentation and Significant Accounting Policies” in the Notes to Consolidated Financial Statements for further information our lease obligations.

Asset Retirement Obligations

We operate facilities in various U.S.

and foreign locations that are used in the manufacture, storage, and sale of our products, inventories, and equipment.

We are required to take certain actions in connection with the retirement of these assets.

Product Purchase Obligations

In the normal course of our Completion Fluids & Products Division operations, we enter into supply agreements with certain manufacturers of various raw materials and finished products.

Some of these agreements have terms and conditions that specify a minimum or maximum level of purchases over the term of the agreement.

Other agreements require us to purchase the entire output of the raw material or finished product produced by the manufacturer.

Our purchase obligations under these agreements apply only with regard to raw materials and finished products that meet specifications set forth in the agreements.

We recognize a liability for the purchase of such products at the time we receive them.

As of December 31, 2021, the aggregate amount of the fixed and determinable portion of the purchase obligation pursuant to our Completion Fluids & Products Division’s supply agreements was approximately $114.5 million, extending through 2029, including commitments on average of $15.3 million per year from 2021 through 2026.

Off Balance Sheet Arrangements

As of December 31, 2021, we do not have any off balance sheet arrangements that may have a current or future material effect on our consolidated financial condition or results of operations.

For information regarding litigation, including contingencies of discontinued operations, see Note 11 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Critical Accounting Policies and Estimates

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Alternatively, if our estimates of future operating cash flows or fair values are understated, impairments might be recognized unnecessarily or in excess of the appropriate amounts.

During 2020, we recorded an impairment charge of $0.6 million primarily related to a right of use asset for the lease of our Canada office within our Water & Flowback Services Division as we ceased use of the office during the year.

Impairment of Goodwill

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During the fourth quarter of 2019, due to further deterioration in the energy industry outlook resulting in decreased expected future cash flows for our Water Management reporting unit, a component of our Water & Flowback Services Division, we recorded a full goodwill impairment of $25.9 million.

As a result, there was no goodwill balance as of December 31, 2020 or December 31, 2019.

Off Balance Sheet Arrangements

An “off balance sheet arrangement” is defined as any contractual arrangement to which an entity that is not consolidated with us is a party, under which we have, or in the future may have:

• any obligation under a guarantee contract that requires initial recognition and measurement under U.S.

• a retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity, or market risk support to that entity for the transferred assets;

• any obligation under certain derivative instruments;

• any obligation under a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging, or research and development services with us.

As of December 31, 2020 and 2019, we had no off balance sheet arrangements that may have a current or future material effect on our consolidated financial condition or results of operations.

Commitments and Contingencies

For information regarding litigation, see See Note 12 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Long-Term Debt

For information on our credit agreements, see Note 10 - “Long-Term Debt and Other Borrowings” in the Notes to Consolidated Financial Statements.

Asset Retirement Obligations

We operate facilities in various U.S.

and foreign locations that are used in the manufacture, storage, and sale of our products, inventories, and equipment.

We are required to take certain actions in connection with the retirement of these assets.

See Note 2 - “Summary of Significant Accounting Policies” and Note 8 - “Leases” in the Notes to Consolidated Financial Statements for further information regarding asset retirement obligations.

We have operating leases for some of our transportation equipment, office space, warehouse space, operating locations, and machinery and equipment.

Our leases have remaining lease terms ranging from 1 to 16 years.

See Note 2 - “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for further information our lease obligations.

Product Purchase Obligations

In the normal course of our Completion Fluids & Products Division operations, we enter into supply agreements with certain manufacturers of various raw materials and finished products.

Some of these agreements have terms and conditions that specify a minimum or maximum level of purchases over the term of the agreement.

Other agreements require us to purchase the entire output of the raw material or finished product produced by the manufacturer.

Our purchase obligations under these agreements apply only with regard to raw materials and finished products that meet specifications set forth in the agreements.

We recognize a liability for the purchase of such products at the time we receive them.

As of December 31, 2020, the aggregate amount of the fixed and determinable portion of the purchase obligation pursuant to our Completion Fluids & Products Division’s supply agreements was approximately $85.3 million, extending through 2029, including commitments of $9.5 million per year from 2021 through 2025.

Contingencies of Discontinued Operations

In early 2018, we closed the Maritech Asset Purchase and Sale Agreement with Orinoco Natural Resources, LLC (“Orinoco”) that provided for the purchase by Orinoco of Maritech’s remaining oil and gas properties and related assets.

Also in early 2018, we closed the Maritech Membership Interest Purchase and Sale Agreement with Orinoco that provided for the purchase by Orinoco of all of the outstanding membership interests in Maritech.

As a result of these transactions, we have effectively exited the business of our former Maritech segment.

Under the Maritech Asset Purchase and Sale Agreement, Orinoco assumed all of Maritech’s decommissioning liabilities related to the leases sold to Orinoco (the “Orinoco Lease Liabilities”) and, under the Maritech Membership Interest Purchase and Sale Agreement, Orinoco assumed all other liabilities of Maritech, including the decommissioning liabilities associated with the oil and gas properties previously sold by Maritech (the “Legacy Liabilities”), subject to certain limited exceptions unrelated to the decommissioning liabilities.

To the extent that Maritech or Orinoco fails to satisfy decommissioning liabilities associated with any of the Orinoco Lease Liabilities or the Legacy Liabilities, we may be required to satisfy such liabilities under third party indemnity agreements and corporate guarantees that we previously provided to the U.S.

Department of the Interior and other parties, respectively.

Pursuant to a Bonding Agreement entered into as part of these transactions (the “Bonding Agreement”), Orinoco provided non-revocable performance bonds in an aggregate amount of $46.8 million to cover the performance by Orinoco and Maritech of the asset retirement obligations of Maritech (the “Initial Bonds”) and agreed to replace, within 90 days following the closing, the Initial Bonds with other non-revocable performance bonds, meeting certain requirements, in the aggregate sum of $47.0 million (collectively, the “Interim Replacement Bonds”).

Orinoco further agreed to replace, within 180 days following the closing, the Interim Replacement Bonds with a maximum of three non-revocable performance bonds in the aggregate sum of $47.0 million, meeting certain requirements (the “Final Bonds”).

Among the other requirements of the Final Bonds was that they must provide coverage for all of the asset retirement obligations of Maritech instead of only relating to specific properties.

In the event Orinoco does not provide the Interim Replacement Bonds or the Final Bonds, Orinoco is required to make certain cash escrow payments to us.

The payment obligations of Orinoco under the Bonding Agreement were guaranteed by Thomas M.

Clarke and Ana M.

Clarke pursuant to a separate guaranty agreement (the “Clarke Bonding Guaranty Agreement”).

Orinoco has not delivered such replacement bonds and neither it nor the Clarkes has made any of the agreed upon cash escrow payments and we filed a lawsuit against Orinoco and the Clarkes to enforce the terms of the Bonding Agreement and the Clarke Bonding Guaranty Agreement.

A summary judgment was initially granted in favor of Orinoco and the Clarkes which dismissed our claims against Orinoco under the Bonding Agreement and against the Clarkes under the Clarke Bonding Guaranty Agreement.

We filed an appeal and also asked the trial court to grant a new trial on the summary judgment or to modify the judgment because we believe this judgment should not have been granted.

On November 5, 2019, the trial court signed an order granting our motion for new trial and vacating the prior order granting summary judgment for Orinoco and the Clarkes.

The parties are awaiting direction from the court on a new scheduling order and/or trial setting.

The Initial Bonds, which are non-revocable, remain in effect.

If we become liable in the future for any decommissioning liability associated with any property covered by either an Initial Bond or an Interim Replacement Bond while such bonds are outstanding and the payment made to us under such bond is not sufficient to satisfy such liability, the Bonding Agreement provides that Orinoco will pay us an amount equal to such deficiency and if Orinoco fails to pay any such amount, such amount must be paid by the Clarkes under the Clarke Bonding Guaranty Agreement.

However, if the Final Bonds or the full amount of the escrowed cash have been provided, neither Orinoco nor the Clarkes would be liable to pay us for any such deficiency.

Our financial condition and results of operations may be negatively affected if Orinoco is unable to cover any such deficiency or if we become liable for a significant portion of the decommissioning liabilities.

In early 2018, we also closed the sale of our Offshore Division to Epic Companies, LLC (“Epic Companies,” formerly known as Epic Offshore Specialty, LLC).

Part of the consideration we received was a promissory note of Epic Companies in the original principal amount of $7.5 million (the “Epic Promissory Note”).

At the end of August 2019, Epic Companies filed for bankruptcy and we recorded a reserve of $7.5 million for the full amount of the promissory note, including accrued interest, and certain other receivables in the amount of $1.5 million during the quarter ended September 30, 2019.

The Epic Promissory Note became due on December 31, 2019 and neither Epic nor the Clarkes made payment.

TETRA filed a lawsuit against the Clarkes on January 15, 2020 for breach of the promissory note guaranty agreement.

In September 2020, the court granted TETRA’s Motion for Summary

Judgment and entered Final Judgment in our favor, dismissing counterclaims by the Clarkes and awarded TETRA $7.9 million in damages.

The Clarkes have filed an appeal which we will defend.

We cannot provide any assurance the Clarkes will pay the judgment or that they will not file for bankruptcy protection.

If the Clarkes do file for bankruptcy protection, we likely would be unable to collect all, or even a significant portion of, the judgment owed to us.

For further discussion, see Note 3 - “Discontinued Operations” and Note 11 - “Acquisitions and Dispositions” in the Notes to Consolidated Financial Statements for further information.

Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Financial Statements and Supplementary Data.

The financial statements and supplementary data required to be included in this Item 8 are set forth in Item 15 of this Annual Report.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

As a result, there was no goodwill balance as of December 31, 2021 or 2020.

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 7. Management’s Discussion and Analysis