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Item 2. Management’s Discussion and Analysis

2022-05-02 compared with 2021-11-01 · 216 added, 223 removed, 190 unchanged (70% of the section changed)

1 unchanged sentence

The following discussion and analysis of financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included in this Quarterly Report.

In addition, the following discussion and analysis also should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 5, 2021 (“ 2020 Annual Report ”).

In addition, the following discussion and analysis also should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on February 28, 2022 (“2021 Annual Report”).

This discussion includes forward-looking statements that involve certain risks and uncertainties.

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 and production well testing.

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

In January, we announced our commitment to pursue low carbon energy initiatives that would 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.

On August 2, 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.

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 third quarter as oil prices remained constructive, averaging around $70 per barrel for the third quarter, while natural gas prices increased to over $4 per million Btu.

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

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

Completions Fluids & Products Division revenues were slightly below the prior year quarter with the impact of lower international sales and international shipping delays, mostly offset by stronger fluids and industrial chemicals sales in North America.

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

Total domestic revenues were higher compared to the prior-year quarter despite some offshore fluids sales being delayed due to Hurricane Ida in the Gulf of Mexico and loop currents.

Ongoing improvement in the oil demand outlook should support further increases in offshore activity both in the Gulf of Mexico and internationally through the end of the year.

On January 29, 2021 as previously announced in our 2020 Annual Report, we closed the sale of the general partner of CSI Compressco, including incentive distribution rights (“IDRs”) in CSI Compressco and approximately 23.1% of the outstanding limited partner interests in CSI Compressco, referred to as the “GP Sale.” We recorded a book gain of $120.6 million during 2021 in connection with the GP Sale.

We are an industrial and 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 are composed of two segments – Completion Fluids & Products Division and Water & Flowback Services Division.

Following a steady ramp up throughout 2021, customer activity levels continued to trend upward in the first quarter of 2022 as oil prices increased to an average of over $95 per barrel, and natural gas prices averaged $4.67 per million Btu.

Consolidated revenue of $130.0 million is very comparable to the pre-pandemic first quarter 2020 period, but with significantly fewer operating frac crews in the United States.

Completions Fluids & Products Division revenues improved over the fourth quarter due to higher completions activity in the Gulf of Mexico and international markets, and an increase in industrial chemicals product sales.

While drilling and completion activity has not returned to pre-pandemic levels, we have successfully leveraged opportunities to expand integrated services to completion fluids customers, resulting in Completion Fluids & Products revenues reaching near pre-pandemic results.

Our Completion Fluids & Products Division also continued to ship TETRA's high purity zinc bromine solution, TETRA PureFlow ® to Eos Energy Enterprises, Inc.

("Eos") (NASDAQ:

EOSE) under our recent strategic partnership.

The size of the shipments are expected to increase as Eos expands its production capacity to meet its growing backlog and to service its increasing number of identified opportunities.

Margins also improved as we have been able to negotiate higher pricing to offset inflationary pressures in certain raw materials and logistics costs.

We have not historically directly purchased any significant volumes of raw materials from Russia nor from Ukraine.

Additionally, we have not historically sold any significant volumes of product into Russia or to Ukraine.

However, one of our raw material providers sources one of their raw materials from Russia or Ukraine.

Because of the conflict between Russia and Ukraine, our primary European supplier of hydrochloric acid advised us of supply constraints with one of their suppliers of a key raw material used in their manufacturing process.

This raw material is a widely used, global commodity but the disruption to the current supply chain has caused some impact on their production which in turn has caused a reduction in delivered volumes of hydrochloric acid to our plant in Finland where we manufacture calcium chloride, which has decreased our calcium chloride production volumes.

The financial impact on first quarter results for our European industrial chemicals business was not significant but could become more significant to our Northern European calcium chloride production operations as the year progresses if these supply chain challenges continue.

We are working with secondary and tertiary raw material providers on options to address the situation and mitigate the financial impact and we are told from our primary provider that they expect improved deliveries and a more normalized supply chain as they progress through the second half of the year.

The exact financial impact is difficult to quantify at this time and is dependent on our ability to find alternative sources of acid from suppliers not directly or indirectly impacted by the conflict or the ability of our primary supplier to source alternative raw material sources.

Our Water & Flowback Services revenues increased slightly over the fourth quarter and significantly compared to the first quarter of 2021, due to a combination of higher overall customer activity levels and significant price recovery, particularly in the United States onshore land business.

We deployed our TETRA SandStorm TM technology for two major long-term projects in Latin America during 2021 and continue to add SandStorm units to United States onshore markets at rates approaching pre-pandemic pricing.

Despite significant recent capital investments in our Sandstorm technology, we continue to experience capacity constraints, with pricing in several regions approaching pre-pandemic levels.

Our focus on produced water treatment and recycling continues to generate results with several new recycling awards in the first quarter, including our first recycling project for a mid-stream company.

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

We are committed to pursuing low-carbon energy initiatives that leverage our fluids and aqueous chemistry core competencies, our significant bromine and lithium assets and technologies, and our leading calcium chloride production capabilities.

During the first quarter of 2022, we completed the drilling of our Arkansas exploration well and commenced gathering of fluid samples for multiple Smackover formation brine zones.

We expect the ongoing bromine and lithium fluid analysis will allow us to complete an inferred resources report for both the bromine and lithium in our approximately 31,100 net acre brine leases in Arkansas.

We are in the process of bidding and awarding the work for a preliminary economic assessment (“PEA”) to determine the economics of developing 3,600 net acres under which we hold exclusive brine rights to meet the demand for bromine-based fluids for both a growing oil and gas market as well as a rapidly growing energy storage market.

In addition to the bromine, we plan to extract lithium from the same brine feed which we expect will greatly benefit the financial returns for the project.

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

On January 29, 2021, we closed the sale of the general partner of CSI Compressco, which included the sale of the incentive distribution rights (“IDRs”) in CSI Compressco and approximately 23.1% of the outstanding limited partner interests in CSI Compressco, referred to as the “GP Sale.” We recorded a book gain of $120.6 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.

Following the closing of the transaction, we continue to own approximately 10.9% of the outstanding CSI Compressco common units.

See Note 2 – “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 to pay down $29.3 million on our term loan, which matures in September 2025.

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

Results of Operations

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

Three months ended September 30, 2021 compared with three months ended September 30, 2020.

In November 2020, the SEC issued a final rule to modernize and simplify Management’s Discussion and Analysis and certain financial disclosure requirements in SEC Regulation S-K.

As permitted by this final rule, the analysis herein reflects the optional approach to discuss results of operations on a sequential-quarter basis, which we believe will provide information that is most useful in assessing our quarterly results of operations going forward.

Also as required by the final rule, we have included the comparison of the current quarter to the prior-year quarter for this filing only, and will cease to provide this comparison in future filings.

We will continue to provide a comparison of year-to-date results to the prior year-to-date period.

Three Months Ended March 31, 2022 compared with three months ended December 31, 2021.

Consolidated Comparisons

Three Months Ended

September 30, Period to Period Change

2021 2020 2021 vs 2020 % Change

Three Months Ended Period to Period Change

March 31, 2022 December 31, 2021 $ Change % Change

(in thousands, except percentages)

3 unchanged sentences

24.9 % 17.0 %

Exploration and appraisal costs 1,930 — 1,930 100.0 %

General and administrative expense 20,643 18,972 1,671 8.8 %

2 unchanged sentences

Interest expense, net 3,324 4,004 (680) (17.0) %

Warrants fair value adjustment expense (3,164) — (3,164) NM (1)

Other income, net (6,968) (788) (6,180) NM

Income (loss) before taxes and discontinued operations 3,082 (9,458) 12,540 (132.6) %

Other income, net (2,411) (3,030) 619 (20.4) %

Income (loss) before taxes and discontinued operations 8,934 (758) 9,692 NM (1)

Income (loss) before taxes and discontinued operations as a percentage of revenue 6.9 % (0.7) %

Provision for income taxes 587 101 486 481.2 %

Income (loss) before discontinued operations 2,495 (9,559) 12,054 (126.1) %

Provision for income taxes 1,200 (55) 1,255 NM

Income (loss) before discontinued operations 7,734 (703) 8,437 NM

Discontinued operations:

Income (loss) from discontinued operations, net of taxes 18 (12,039) 12,057 (100.1) %

Net income (loss) 2,513 (21,598) 24,111 (111.6) %

Loss attributable to noncontrolling interest — 8,296 (8,296) (100.0) %

Net income (loss) attributable to TETRA stockholders $ 2,513 $ (13,302) $ 15,815 (118.9) %

Loss from discontinued operations, net of taxes (15) (475) 460 (96.8) %

Net income (loss) 7,719 (1,178) 8,897 NM

Income attributable to noncontrolling interest 1 37 (36) (97.3) %

Net income (loss) attributable to TETRA stockholders $ 7,720 $ (1,141) $ 8,861 NM

(1) Percent change is not meaningful

Consolidated revenues increased in the current year quarter primarily due to improving industry conditions compared to the prior year quarter which had been significantly affected by the impact of the COVID-19 pandemic and reduced demand for oil and gas.

See Divisional Comparisons section below for a more detailed discussion of the change in our revenue.

Consolidated gross profit increased in the current year quarter primarily due to the increase in revenue, partially offset by an increase in costs associated with the higher activity levels described above, reflecting improved margins .

Consolidated general and administrative expenses increased for the current quarter compared to the prior year quarter, primarily due to a $0.9 million increase in legal, settlement and other expenses, and $0.9 million of increased wage and benefit related expenses because of higher activity levels compared to the prior year quarter.

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.

A combination of the decrease in TETRA’s stock price over the last three months, together with less time remaining until expiration of the Warrants, resulted in the fair-value adjustment income in the current period of $3.2 million.

The outstanding Warrants expire by December 31, 2021.

Consolidated other income, net, increased in the current quarter, compared to the prior year quarter primarily due to a $5.4 million increase in income related to unit and stock price appreciation of our investments in CSI Compressco and Standard Lithium.

In addition, other income, net, includes foreign currency gains of

$0.1 million in the current year quarter compared to foreign currency losses of $1.2 million in the prior year quarter.

These increases in other income were partially offset by a $0.8 million decrease in gains associated with the sale of assets.

Consolidated provision for income taxes was $0.6 million during the current quarter, compared to $0.1 million during the prior year quarter.

Our consolidated effective tax rate for the current quarter of 19.0% was primarily due to taxes on income in certain non-U.S.

jurisdictions.

We establish a valuation allowance to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Consolidated revenues increased in the current quarter primarily due to an increase in overall activity for both the Completion Fluids & Products division and Water Management & Flowback division, as commodity prices continued to move upward for both crude oil and natural gas.

See Divisional Comparisons section below for a more detailed discussion of the change in our revenues.

Consolidated gross profit as a percentage of revenue improved primarily due to a change in revenue mix, with a higher portion of revenues generated from our Completion Fluids & Products division, as well as a $3.8 million insurance settlement received in March 2022 from damage to our Lake Charles facility during Hurricane Laura in 2020.

See Divisional Comparisons section below for additional discussion.

Consolidated exploration and appraisal costs were $1.9 million during the current quarter due to costs associated with our exploratory brine well in Arkansas.

Consolidated general and administrative expenses increased primarily due to $0.6 million in bad debt expense recoveries recorded in the prior quarter and a slight increase in salary and employee expenses.

Consolidated interest expense, net, decreased in the current year period primarily due to $13.0 million of repayments of our term credit facility during the fourth quarter of 2021.

Our consolidated provision for income taxes for the current year period is primarily attributable to taxes in certain non-U.S.

jurisdictions and Texas gross margin taxes.

Our consolidated effective tax rate for the three-months ended March 31, 2022 was 13.4% due to income generated during the quarter, partially offset by the utilization of net operating loss carryforwards in the United States as well as in certain non-U.S.

jurisdictions for which a valuation allowance had been established.

We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the United States as well as in certain non-U.S.

jurisdictions.

Loss from discontinued operations, net of taxes, was $12.0 million for the prior year quarter which reflects CSI Compressco‘s full quarter results.

Income (loss) attributable to noncontrolling interest improved $8.3 million from the prior year quarter as CSI Compressco’s results were included in the prior year, while the continuing noncontrolling interest is immaterial for TETRA.

Income from discontinued operations, net of taxes, for the prior quarter included a loss of $0.5 million for adjustments to the gain from the GP Sale.

Divisional Comparisons

Completion Fluids & Products Division

Three Months Ended

September 30, Period to Period Change

2021 2020 2021 vs 2020 % Change

Three Months Ended Period to Period Change

March 31, 2022 December 31, 2021 $ Change % Change

(in thousands, except percentages)

3 unchanged sentences

35.7 % 25.6 %

Exploration and appraisal costs 1,930 — 1,930 100.0 %

General and administrative expense 6,059 6,194 (135) (2.2) %

1 unchanged sentence

Interest income, net (323) (131) (192) 146.6 %

Other (income) expense, net (6,883) 112 (6,995) NM

Other income, net (811) (5,643) 4,832 (85.6) %

Income before taxes $ 19,292 $ 14,868 $ 4,424 29.8 %

1 unchanged sentence

26.4 % 24.9 %

Revenues for our Completion Fluids & Products Division decreased compared to the prior year quarter with lower international activity and international shipping delays, partially offset by stronger domestic sales.

The timing of the reduction in international activity during 2020 due to the effects of the COVID-19 pandemic lagged North America and did not significantly impact the prior year quarter for this division.

Completion Fluids & Products Division gross profit for the current year quarter decreased in relation to decreased revenues mentioned above as well as inflationary pressures in certain raw materials and logistics costs, resulting in slightly lower margins.

Pretax income for our Completion Fluids & Products Division increased compared to the prior year period driven by an increase in other income, partially offset by an increase in general and administrative expense.

The increase in other income, net, was primarily due to a $6.4 million increase in income from our investment in Standard Lithium, including an increase in the Standard Lithium stock price as well as income associated with additional shares received in May 2021.

The increase in general and administrative expense was a result of increased wage and benefit related expenses of $0.5 million.

Foreign currency fluctuations were favorable compared with the prior year quarter by $0.6 million.

Revenues for our Completion Fluids & Products Division increased primarily due to increased Gulf of Mexico and Middle East completion fluid sales and associated services as a result of higher drilling and completions activity following the continued improvement in commodity prices.

Our Northern European industrial business was negatively impacted from lower production volumes due to inflationary pressures for certain raw materials because of global shipping constraints and geopolitical events.

Gross profit for our Completion Fluids & Products Division increased compared to the prior year period due to a $3.8 million insurance settlement received in March 2022 from damage to our Lake Charles facility, as well as more revenues from higher-margin products and associated completion services, particularly in the Gulf of Mexico.

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, supply chain challenges and inflationary pressures.

Pretax income for our Completion Fluids & Products Division increased primarily due to the $10.9 million higher gross profit described above, partially offset by a $4.6 million decrease in other income, net due to prior quarter gains from our investment in Standard Lithium Ltd.

SLI) (“Standard Lithium”), which we sold during the fourth quarter of 2021.

Income before taxes also decreased due to $1.9 million of costs associated with the exploratory brine well drilled during the current year period.

Water & Flowback Services Division

Three Months Ended

September 30, Period to Period Change

2021 2020 2021 vs 2020 % Change

Three Months Ended Period to Period Change

March 31, 2022 December 31, 2021 $ Change % Change

(in thousands, except percentages)

Revenues $ 56,843 $ 53,319 $ 3,524 6.6 %

Gross profit (loss) 2,996 (5,714) 8,710 (152.4) %

Gross profit (loss) as a percentage of revenue 6.4 % (26.5) %

Gross profit 6,462 4,283 2,179 50.9 %

Gross profit as a percentage of revenue

General and administrative expense 4,238 3,762 476 12.7 %

General and administrative expense as a percentage of revenue

10.6 % 11.8 %

Interest expense (income), net 2 (77) 79 (102.6) %

Interest income, net — 4 (4) (100.0) %

Other income, net (458) (632) 174 (27.5) %

Loss before taxes $ (1,807) $ (7,746) $ 5,939 (76.7) %

Income (loss) before taxes as a percentage of revenue

(3.9) % (36.0) %

Revenues for our Water & Flowback Services Division increased due to higher customer drilling and completion activity compared to the prior year quarter.

Revenues for the prior year quarter had been significantly impacted by industry-wide reductions in rig and frac count resulting from historically low oil prices due to the price war between Russia and Saudi Arabia, as well as the global pandemic.

Gross profit for our Water & Flowback Services Division improved in the current quarter compared to the prior year quarter, primarily due to higher revenues resulting from the increased activity levels described above and some pricing improvements helping offset ongoing inflationary pressures.

The Water & Flowback Services Division reported a lower pretax loss in the current quarter primarily due to an improvement in the gross profit described above, offset by an increase in general and administrative expense primarily due a $1.4 million increase in salary and employee expense.

Income before taxes $ 2,682 $ 1,149 $ 1,533 133.4 %

Income before taxes as a percentage of revenue 4.7 % 2.2 %

Revenues for our Water & Flowback Services Division increased in the current year period compared to the prior quarter, primarily in our water management services due to higher overall customer activity in the North America onshore business, combined with some pricing improvements.

Customer activity levels have continued to improve, especially in the North America onshore business as crude oil and natural gas prices have increased.

The Water & Flowback Services Division reported improved gross profit compared to the prior quarter.

While certain costs increased, our prices for services have improved as activity recovered, resulting in improved margins.

The Water & Flowback Services Division pretax income also increased due to the improved gross profit, slightly offset by an increase in general and administrative expense, primarily due to $0.6 million in bad debt expense recoveries recorded in the prior quarter.

Corporate Overhead

Three Months Ended

September 30, Period to Period Change

2021 2020 2021 vs 2020 % Change

Three Months Ended Period to Period Change

March 31, 2022 December 31, 2021 $ Change % Change

(in thousands, except percentages)

Depreciation and amortization $ 191 $ 386 $ (195) (50.5) %

General and administrative expense 10,346 9,017 1,329 14.7 %

Interest expense, net 3,647 4,130 (483) (11.7) %

Warrants fair value adjustment income (3,164) — (3,164) NM

Depreciation and amortization 230 270 (40) (14.8) %

Other (income) expense, net (1,141) 3,245 (4,386) (135.2) %

Loss before taxes $ (13,043) $ (16,778) $ 3,735 (22.3) %

Corporate Overhead pretax loss decreased due to lower general and administrative expense, interest expense, and a $3.2 million favorable fair value adjustment for the outstanding Warrants liability in the current quarter resulting primarily from the decrease in TETRA’s stock price in the current quarter.

General and administrative expense decreased primarily due to lower salary and employee expenses of $1.0 million.

Salary and employee expenses were lower due to lower headcount and lower expense related to long-term incentive awards.

Nine months ended September 30, 2021 compared with nine months ended September 30, 2020.

Corporate Overhead pretax loss decreased due to an increase in other (income) expense, net and a decrease in interest expense, net, offset by an increase in general and administrative expense.

General and administrative expense for our Corporate Overhead increased compared to the prior quarter primarily due to higher salary costs associated with the impact of higher stock price on certain long-term incentive awards.

Interest expense, net decreased in the current year primarily due to $13.0 million of repayments of our term credit facility during the fourth quarter of 2021.

Corporate other (income) expense, net improved compared to the prior quarter primarily due to the change in the unit price of the CSI Compressco common units we retained, improving from a $3.2 million loss in the prior quarter to a $1.1 million gain in the current period.

Three months ended March 31, 2022 compared with three months ended March 31, 2021.

Consolidated Comparisons

Nine Months Ended September 30, Period to Period Change

2021 2020 2021 vs 2020 % Change

Three Months Ended

March 31, Period to Period Change

2022 2021 $ Change % Change

(in thousands, except percentages)

3 unchanged sentences

24.9 % 10.2 %

Exploration and appraisal costs 1,930 — 1,930 100.0 %

General and administrative expense 20,643 20,012 631 3.2 %

2 unchanged sentences

Interest expense, net 3,324 4,404 (1,080) (24.5) %

Warrants fair value adjustment expense (income) (143) (327) 184 (56.3) %

Other income, net (14,295) (1,308) (12,987) NM

Other income, net (2,411) (4,772) 2,361 (49.5) %

Income (loss) before taxes and discontinued operations 8,934 (11,775) 20,709 175.9 %

4 unchanged sentences

Income (loss) from discontinued operations, net of taxes (15) 120,990 (121,005) (100.0) %

Net income (loss) 104,780 (68,941) 173,721 (252.0) %

Net income 7,719 109,047 (101,328) (92.9) %

Income (loss) attributable to noncontrolling interest 1 (333) 334 (100.3) %

Net income (loss) attributable to TETRA stockholders $ 104,474 $ (36,108) $ 140,582 (389.3) %

Consolidated revenues decreased in the current year period primarily due to the effects of the COVID-19 pandemic and the impact of the associated decline in oil prices on customer activity levels.

The first quarter of the prior year period was not affected by the decline in oil prices or the pandemic.

United States onshore activity was significantly impacted in the second quarter of 2020, but the significant ramp down in offshore and international activity did not occur until the second half of 2020.

Although activity levels for the Completion Fluids & Products division have increased throughout 2021, year to date revenue remained below prior year.

This was partially offset by Water Management & Flowback division results, where significantly improved United States onshore market conditions resulted in higher revenue than in the prior year period.

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 Management & Flowback division.

See Divisional Comparisons section below for additional discussion.

Consolidated general and administrative expenses decreased primarily due to decreased bad debt expense of $4.7 million and decreased salary and employee expenses of $2.2 million, partially offset by increased professional services fees of $2.2 million related to the GP Sale and higher other legal expenses.

Salary and employee expenses were lower despite appreciation in our stock price since the start of the year, which resulted in $4.9 million of additional expense related to certain long-term incentive compensation awards.

The decrease in our salary and employee expenses stemmed from our restructuring efforts and headcount reductions in response to the decline in activity levels.

Consolidated interest expense, net, decreased in the current year period primarily due to $37.5 million of repayments of our term credit facility during the first and third quarters of 2021.

Consolidated other income, net, increased primarily due to a $10.8 million increase in unit and stock price appreciation of our investments in CSI Compressco and Standard Lithium.

Additionally, the current year period includes foreign currency gains of $1.1 million, compared with foreign currency losses of $2.2 million in the prior year period.

Our consolidated provision for income taxes for the current year period is primarily attributable to taxes in certain non-U.S.

jurisdictions and Texas gross margin taxes.

Our consolidated effective tax rate for the nine-month period ended September 30, 2021 of negative 15.3% was primarily the result of losses generated in entities for which no related tax benefit has been recorded.

The losses generated by these entities do not result in tax benefits due to offsetting valuation allowances being recorded against the related net deferred tax assets.

We establish a valuation allowance to reduce the deferred tax assets when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

Included in our deferred tax assets are net operating loss carryforwards and tax credits that are available to offset future income tax liabilities in the United States as well as in certain non-U.S.

jurisdictions.

Income from discontinued operations, net of taxes, was $120.9 million compared to a loss of $49.2 million for the prior year, including $14.3 million of asset impairments.

The current year income includes a $120.6 million primarily non-cash accounting gain from the deconsolidation of CSI Compressco.

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

Income (loss) attributable to noncontrolling interest improved from a $32.8 million loss in the prior year to $0.3 million of income for the first 29 days of January primarily due to the GP Sale in January 2021, and no depreciation or amortization recognized by TETRA for CSI Compressco in the current year.

Net income attributable to TETRA stockholders $ 7,720 $ 108,714 $ (100,994) (92.9) %

Consolidated revenues increased in the current quarter primarily due to improving industry conditions compared to the prior year for both the Completion Fluids & Products division and the Water Management & Flowback division.

See Divisional Comparisons section below for a more detailed discussion of the change in our revenues.

Consolidated gross profit increased in the current quarter primarily due to the increase in revenue, partially offset by an increase in costs associated with the higher activity levels described above.

Gross profit as a percentage of revenue also improved, primarily due to a higher portion of revenues generated from our Completion Fluids & Products division, as well as a $3.8 million insurance settlement received in March 2022 associated with damage to our Lake Charles facility in 2020.

Consolidated exploration and appraisal costs were $1.9 million during the current quarter due to the costs associated with our exploratory brine well.

Consolidated general and administrative expenses increased for the current quarter compared to the prior year, primarily due to $2.8 million of increased wage and benefit related expenses because of reinstatement of full salaries and 401K match, partially offset by a $2.2 million decrease in professional fees primarily due to the GP Sale in the first quarter of the prior year.

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

Consolidated other income, net, decreased in the current quarter, compared to the prior year quarter primarily due to a $1.8 million decrease in income related to unit price changes of our investment in CSI Compressco and a $1.1 million decrease in income from our shares in Standard Lithium, which were sold during the fourth quarter of 2021.

Consolidated provision for income taxes was $1.2 million during the current quarter, compared to $0.2 million during the prior year quarter.

Our consolidated effective tax rate for the current quarter of 13.4% was

primarily due to income generated during the quarter, partially offset by the utilization of net operating loss carryforwards in the United States as well as in certain non-U.S.

jurisdictions for which a valuation allowance had been established.

Loss from discontinued operations, net of taxes, for the prior year quarter includes a $120.6 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.

Income (loss) attributable to noncontrolling interest included $(0.3) million from the prior year quarter associated with CSI Compressco’s results for the month of January, prior to the GP Sale.

Divisional Comparisons

Completion Fluids & Products Division

Nine Months Ended September 30, Period to Period Change

2021 2020 2021 vs 2020 % Change

Three Months Ended

March 31, Period to Period Change

2022 2021 $ Change % Change

(in thousands, except percentages)

3 unchanged sentences

35.7 % 25.0 %

Exploration and appraisal costs 1,930 — 1,930 100.0 %

General and administrative expense 6,059 4,306 1,753 40.7 %

1 unchanged sentence

Interest income, net (323) (138) (185) 134.1 %

Other (income) expense, net (10,731) 218 (10,949) NM

Other income, net (811) (1,528) 717 (46.9) %

Income before taxes $ 19,292 $ 9,010 $ 10,282 114.1 %

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26.4 % 19.4 %

Revenues for our Completion Fluids & Products Division decreased primarily due to lower Gulf of Mexico and international oil and gas activity.

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

The COVID-19 pandemic and associated reduction in oil prices did not have a significant impact on offshore Gulf of Mexico activity and international activity until the third and fourth quarters of 2020 respectively.

Gross profit for our Completion Fluids & Products Division decreased compared to the prior year period due to lower revenue and product mix.

Pretax income for our Completion Fluids & Products Division decreased primarily due to the reduction in gross profit described above, partially offset by lower General and administrative expense and improved Other (income) expense.

General and administrative expense decreased primarily due to a lower bad debt expense of $3.1 million and decreased salary and employee-related expenses of $1.7 million.

Other (income) expense, net, improved primarily due to a $8.9 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.

In addition, foreign currency fluctuations were favorable compared with the prior year period by $2.0 million.

Revenues for our Completion Fluids & Products Division increased compared to the prior year primarily due to increased International and Gulf of Mexico completion services as a result of increased activity following the significant improvement in commodity prices and leveraging opportunities to expand services to completion fluids customers.

Completion Fluids & Products Division gross profit for the current quarter increased compared to the prior year due to a $3.8 million insurance settlement received in March 2022 from damage to our Lake Charles facility in 2020, as well as more revenues from higher-margin completion fluids services and products.

Pretax income for our Completion Fluids & Products Division increased compared to the prior year driven by higher gross profit, partially offset by $1.9 million of costs associated with the exploratory brine well drilled during the current quarter and a $1.8 million increase in general and administrative costs due to higher activity levels.

In addition, other income, net decreased due to the $1.1 million decrease in income from our Standard Lithium shares sold during the fourth quarter of 2021, partially offset by $0.3 million of higher income recognized from additional Standard Lithium shares received in May 2021 and recognized over a twelve-month term.

Water & Flowback Services Division

Nine Months Ended September 30, Period to Period Change

2021 2020 2021 vs 2020 % Change

Three Months Ended

March 31, Period to Period Change

2022 2021 $ Change % Change

(in thousands, except percentages)

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Gross profit (loss) 6,462 (3,615) 10,077 278.8 %

Gross profit as a percentage of revenue

(2.2) % (7.0) %

Gross profit (loss) as a percentage of revenue 11.4 % (11.7) %

General and administrative expense 4,238 2,686 1,552 57.8 %

General and administrative expense as a percentage of revenue

Interest income, net (515) (88) (427) NM

Interest income, net — (522) 522 (100.0) %

Other income, net (458) (299) (159) 53.2 %

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4.7 % (17.8) %

Revenues for our Water & Flowback Services Division increased in the current year period compared to the prior year period.

Customer activity levels have continued to increase from recent lows in response to an improving commodity price environment.

However, 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 reported a lower gross loss during the current year period compared to the prior year period primarily due to higher activity as described above.

The Water & Flowback Services Division reported a lower pretax loss due to the decrease in gross loss described above, as well as a decrease in General and administrative expense.

General and administrative expenses decreased primarily due to a decrease in bad debt expense of $1.7 million and decreased salary and benefit related expenses of $1.0 million.

Revenues for our Water & Flowback Services Division increased for both water management and production testing due to higher customer drilling and completion activity compared to the prior year quarter.

Customer activity levels have continued to improve, especially in the North America onshore business as crude oil and natural gas prices have recovered.

Gross profit for our Water & Flowback Services Division improved substantially from a loss in the prior year to double-digit profit in the current quarter, primarily due to higher revenues resulting from the increased activity levels described above and pricing improvements as activity levels improved.

The Water & Flowback Services Division reported higher pretax income in the current quarter primarily due to an improvement in the gross profit described above, slightly offset by an increase in general and administrative expense primarily due a $1.4 million increase in salary and employee expense from higher activity levels and salary reinstatement as well as a $0.5 million decrease in interest income.

Corporate Overhead

Nine Months Ended September 30, Period to Period Change

2021 2020 2021 vs 2020 % Change

Three Months Ended

March 31, Period to Period Change

2022 2021 $ Change % Change

(in thousands, except percentages)

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Interest expense, net 3,647 5,064 (1,417) (28.0) %

Warrants fair value adjustment income (143) (327) 184 (56.3) %

Depreciation and amortization 191 170 21 12.4 %

Other income, net (3,010) (50) (2,960) NM

Other income, net (1,141) (2,946) 1,805 (61.3) %

Loss before taxes $ (13,043) $ (15,308) $ 2,265 (14.8) %

Corporate Overhead pretax loss decreased due to an increase in Other income and a decrease in Interest expense, net, offset by an increase in General and administrative expense.

General and administrative expense for our Corporate Overhead for the current year period includes $4.9 million of expense related to certain long-term incentive compensation awards resulting from the significant appreciation in our stock price during the first half of the year and $1.3 million of transaction expenses related to the GP Sale.

Excluding these items, general and administrative expense would have been $24.7 million, or $3.9 million lower than prior year.

Corporate other income, net increased $3.0 million in the current year period compared to the prior year period.

This change was primarily due to a $1.9 million increase in the market value of the CSI Compressco units we continue to own following the closing of the GP Sale, an increase in foreign exchange gains of $0.5 million and a decrease in other expenses of $0.7 million.

How We Evaluate Operations

Corporate Overhead pretax loss decreased due to lower general and administrative expense and lower interest expense, partially offset by lower other income, net.

General and administrative expense decreased primarily due to $2.3 million lower professional services expenses due to the GP Sale and certain legal expenses during the prior year.

Interest expense, net decreased primarily due to $50.5 million of repayments of our term credit facility during 2021.

Corporate Overhead other income, net, decreased compared to the prior year primarily due to a $1.8 million decrease in income related to unit price changes of our investment in CSI Compressco.

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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Three Months Ended

September 30, 2021

March 31, 2022

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

(In Thousands, Except Percents)

(in thousands, except percentages)

Revenue $ 73,194 $ 56,843 $ — $ — $ 130,037

Net income (loss) before taxes and discontinued operations 19,292 2,682 (10,346) (2,694) 8,934

Insurance settlement (3,750) — — — (3,750)

Exploration and appraisal costs 1,930 — — — 1,930

Adjustment to long-term incentives — — 784 — 784

Transactions and other expenses 630 693 27 — 1,350

Former CEO stock appreciation right expense — — 472 — 472

Restructuring expenses 254 41 — — 295

Stock warrant fair value adjustment — — — (3,164) (3,164)

Adjusted income (loss) before taxes and discontinued operations $ 17,472 $ 2,682 $ (9,090) $ (2,694) $ 8,370

Adjusted interest expense, net (165) 2 — 4,246 4,083

Adjusted depreciation and amortization 1,712 6,192 — 225 8,129

Interest expense, net (323) — — 3,647 3,324

Depreciation and amortization 1,948 5,543 — 188 7,679

Equity compensation expense — — 1,104 — 1,104

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Three Months Ended

September 30, 2020

December 31, 2021

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

(In Thousands, Except Percents)

(in thousands, except percentages)

Revenue $ 59,828 $ 53,320 $ — $ — $ 113,148

Net income (loss) before taxes and discontinued operations 14,868 1,148 (9,017) (7,757) (758)

Severance 177 150 933 — 1,260

Adjustment to long-term incentives — — 495 — 495

Transaction and other expenses (39) 39 62 — 62

Former CEO stock appreciation right expense — — 107 — 107

Restructuring and severance expenses 324 57 — — 381

Stock warrant fair value adjustment — — — (56) (56)

Impairments and other charges — — — 132 132

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

Adjusted income (loss) before taxes and discontinued operations $ 15,153 $ 1,014 $ (8,353) $ (7,681) $ 133

Adjusted interest expense, net (291) (77) — 4,706 4,338

Interest expense, net (131) 4 — 4,130 4,003

Depreciation and amortization 1,767 5,868 — 251 7,886

Equity compensation expense — — 1,052 — 1,052

Adjusted EBITDA $ 16,789 $ 6,886 $ (7,301) $ (3,300) $ 13,074

Adjusted EBITDA as % of revenue 28.1 % 12.9 % 11.6 %

Three Months Ended

March 31, 2021

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

(in thousands, except percentages)

Revenue $ 46,522 $ 30,802 $ — $ — $ 77,324

Net income (loss) before taxes and discontinued operations 9,010 (5,480) (13,020) (2,285) (11,775)

Adjustment to long-term incentives 281 — 2,616 — 2,897

Transaction and other expenses — — 2,550 — 2,550

Former CEO stock appreciation right expense — — 509 — 509

Restructuring and severance expenses 181 — 160 — 341

Stock warrant fair value adjustment — — — 323 323

Adjusted income (loss) before taxes and discontinued operations $ 9,472 $ (5,480) $ (7,185) $ (1,962) $ (5,155)

Interest expense, net (138) (522) — 5,064 4,404

Adjusted depreciation and amortization 1,705 6,899 — 166 8,770

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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 third quarter was $90.1 million.

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

Our liquidity at the end of first quarter was $95.3 million.

Liquidity is defined as unrestricted cash plus availability under the ABL Credit Agreement and Swedish Credit Facility.

Information about the terms and covenants of our debt agreements can be found in our 202 1 Annual Report and in Note 5 - Long Term Debt and Other Borrowings.

Our consolidated sources and uses of cash, which include cash activity from our former Compression Division for January 2021 prior to the closing of the GP sale and for the nine months ended 2020 are as follows:

Nine Months Ended

September 30,

Our consolidated sources and uses of cash, which include cash activity from our former Compression Division for January 2021 prior to the closing of the GP sale, are as follows:

Three Months Ended

(in thousands)

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Operating Activities

Consolidated cash flows provided by operating activities decreased $54.4 million compared to the first nine months of 2020.

Current year cash flows provided by operating activities include $0.9 million generated by CSI Compressco in January prior to closing of the GP Sale, compared to $13.7 million during the nine-month period ending September 30, 2020.

Operating cash flows decreased primarily due to including the results of CSI Compressco for one month during the current year compared to nine months during the prior year, as well as a decrease in revenue, and the effect of working capital movements.

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.

Consolidated cash flows provided by operating activities increased slightly compared to the first three months of 2021 primarily due to an increase in cash profit, partially offset by the effect of working capital movements and $0.9 million of prior-year cash flows provided by operating activities generated by CSI Compressco in January prior to closing of the GP Sale.

Investing Activities

Total cash capital expenditures during the first nine months of 2021 were $14.6 million.

Our Water & Flowback Services Division spent $9.3 million on capital expenditures, primarily to maintain, automate and upgrade its water management and flowback equipment fleet.

Total cash capital expenditures during the first three months of 2022 were $9.3 million, which reflects front-loading our expected full year expenditures to accommodate industry-wide activity recoveries.

Our Water & Flowback Services Division spent $7.4 million on capital expenditures, primarily to deploy additional SandStorm units to meet increased demands and maintain, automate and upgrade its water management and flowback equipment fleet.

Our Completion Fluids & Products Division spent $1.9 million on capital expenditures.

Our former Compression Division spent $3.0 million in January of 2021 primarily to maintain its compression fleet.

During the first nine months of 2021, we recorded mark-to-market gains of $11.8 million on our equity holdings of CSI Compressco and Standard Lithium.

As of September 30, 2021, the market value of these investments was $22.4 million, with no holding restrictions on our ability to monetize these investments.

Investing activities during the first three months of 2022 included a $3.8 million insurance settlement received in March 2022 from damage to our Lake Charles facility in 2020.

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

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Lithium and Bromine Exploration Targets

On August 2, 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.

We have rights to the brine underlying our approximately 31,100 net acres of brine leases in the Smackover Formation in Southwest Arkansas, including rights to the bromine and lithium contained in the brine.

With respect to approximately 27,500 acres of that total acreage, we had previously entered into an agreement granting Standard Lithium an option to acquire lithium rights.

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.

This exploration assessment is the first step for us to quantify the significance of the resource potential we have in our Arkansas brine leases.

The lithium battery market is already acknowledged to be 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.

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 the approximately 31,100 net acres and lithium for the acreage where we hold the lithium rights not subject to the Standard Lithium Ltd.

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 of 5.323, the lithium amounts to between 85,000 and 286,000 tons of LCE.

The exploration target's potential quantity and grade 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.

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 contain 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 (>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).

It is conceivable 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 Smackover members 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 define 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 concentration of the exploration targets by +/- 20%.

We have yet to conduct mineral exploration work on the leases.

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 Smackover members, and

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

While we continue to evaluate the next steps regarding the potential development of our brine leases, we have yet 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 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 sample current wells, re-open suspended wells, and/or conduct appraisal drilling within the next one to two quarters.

It is anticipated that validation of the geology, mineralization, and mineral processing by us will 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.

The agreements governing this option contemplate a 2.5% royalty that Standard Lithium would pay us based on gross lithium revenues.

Additional information on these exploration targets is described in Part I, “Item 2.

Properties” in our 2021 Annual Report .

In August 2021, we announced the completion of a preliminary technical assessment by an independent geological consulting firm to assess lithium and bromine exploration targets in our approximately 31,100 net acres.

During the first quarter of 2022, we incurred $1.9 million to complete the drilling of our Arkansas exploration well and obtain fluid samples for multiple Smackover formation brine zones.

We are in the process of bidding and awarding the work for a PEA to determine the economics of developing 3,600 net acres under which we hold exclusive brine rights to meet the demand for bromine-based fluids for both a growing oil and gas market as well as a rapidly growing energy storage market.

In addition to the bromine, we plan to extract lithium from the same brine feed which we expect will greatly benefit the financial returns for the project.

Financing Activities

As a result of TETRA’s strong cash flow from operations in 2020 and the proceeds from the GP Sale, during the first nine months of 2021, we repaid $37.5 million on our term credit agreement.

As a result of TETRA’s strong cash flow from operations in 2020 and the proceeds from the GP Sale, during the first three months of 2021, we repaid $29.5 million on our term credit agreement.

We repaid an additional $21.0 million on our term credit agreement during 2021 using proceeds from the sale of Standard Lithium shares and cash flows from operations.

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 .

As of September 30, 2021, our ABL Credit Agreement provides for a senior secured revolving credit facility of up to $80.0 million, with a $20.0 million accordion.

As of March 31, 2022, our ABL Credit Agreement provides for a senior secured revolving credit facility of up to $80.0 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 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.

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.

As of March 31, 2022, we had $0.8 million outstanding and $6.0 million in letters of credit and guarantees against our ABL Credit Agreement and availability of $58.6 million, subject to compliance with the covenants, borrowing base, and other provisions of the ABL Credit Agreement.

Swedish Credit Facility .

In January 2022, the Company entered into a revolving credit facility for seasonal working capital needs of subsidiaries in Sweden.

As of March 31, 2022, we had $1.5 million outstanding and availability of approximately $3.8 million United States dollars under this agreement.

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.

Finland Credit Agreement.

The Company also entered into a new credit agreement guaranteed by certain accounts receivable and inventory in Finland (“Finland Credit Agreement”).

As of March 31, 2022, there were US$1.8 million of letters of credit outstanding against the Finland Credit Agreement.

Term Credit Agreement .

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Our term credit agreement requires us to offer to prepay a percentage of Excess Cash Flow (as defined in the term credit agreement) within five business days of filing our Annual Report.

The minimum amount of $8.2 million that we would have been required to offer to prepay pursuant to this obligation for the year ending December 31, 2021 was paid on July 30, 2021 in connection with amendment of the ABL Credit Agreement.

As of October 29, 2021, $176.1 million in aggregate principal amount of our term credit agreement is outstanding.

Other Sources and Uses

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

As of April 29, 2022, $163.1 million in aggregate principal amount of our term credit agreement is outstanding.

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 March 31, 2022, the market value of our investment in CSI Compressco was $7.3 million, with no holding restrictions on our ability to monetize our interest.

We also hold a $5.0 million investment in convertible notes issued by CarbonFree as of March 31, 2022.

In addition, we are party to agreements in which Standard Lithium has the right to explore, produce and extract Lithium in our Arkansas leases as well as additional potential resources in the Mojave region of California.

We expect to receive 400,000 shares of Standard Lithium stock during the second quarter of 2022 under the terms of this agreement.

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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If it is necessary to issue additional equity to fund our capital needs, additional dilution of our common stockholders will occur.

We periodically evaluate

engaging in strategic transactions and may consider divesting non-core assets where our evaluation suggests such a transaction is in the best interest of our business.

We periodically evaluate engaging in strategic transactions and may consider divesting non-core assets where our evaluation suggests such transactions are in the best interest of our business.

In challenging economic environments, we may experience increased delays and failures by customers to pay our invoices.

Given the nature and significance of the pandemic and disruption in the oil and gas industry, we could experience delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies.

If our customers delay paying or fail to pay us a significant amount of our outstanding receivables, it could have an adverse effect on our liquidity.

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

Off Balance Sheet Arrangements

As of September 30, 2021, 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.

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

As of March 31, 2022, 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.

Critical Accounting Policies and Estimates

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Commitments and Contingencies

For information regarding our MOU with and potential investment in CarbonFree, see Note 7 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

For information regarding litigation, see - Note 6 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Long-Term Debt

For information on our credit agreements, see Note 6 - “Long-Term Debt and Other Borrowings” in the Notes to Consolidated Financial Statements.

For information on our credit agreements, see our 2021 Annual Report and Note 5 - “Long-Term Debt and Other Borrowings” in the Notes to Consolidated Financial Statements.

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.

Information about the terms and covenants of our lease agreements can be found in our 202 1 Annual Report .

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

As of September 30, 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 $93.9 million, including $2.4 million for the remainder of 2021, $12.0 million per year from 2022 to 2025 and $43.5 million thereafter, extending through 2029.

Information about our product purchase obligations can be found in our 2021 Annual Report .

Cautionary Statement for Purposes of Forward-Looking Statements

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These risks and uncertainties include, but are not limited to, those described in Part II, “Item 1A.

Risk Factors” and elsewhere in this report and in our Annual Report on Form 10-K for the year ended December 31, 2020, and those described from time to time in our future reports filed with the SEC.

Quantitative and Qualitative Disclosures about Market Risk.

Not Applicable.

Risk Factors” and elsewhere in this report and in our 2021 Annual Report , and those described from time to time in our future reports filed with the SEC.

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-Q

Item 2. Management’s Discussion and Analysis