What changed in this filing

/stocks — the workspaceLOADING

Item 7. Management’s Discussion and Analysis

2023-02-27 compared with 2022-02-28 · 131 added, 181 removed, 172 unchanged (64% of the section changed)

7 unchanged sentences

For discussion of 2021 compared to 2020, 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.

Management’s Discussion and Analysis of Financial Condition and Results of Operations of our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.

Business Overview

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 are an energy services and solutions company operating on six continents, focused on bromine-based completion fluids, calcium chloride, water management solutions, frac flowback, and production well testing services.

Calcium chloride is used in the oil and gas industry, and also has broad industrial applications to the agricultural, road, food and beverage, and lithium production markets.

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.

Completion Fluids & Products Division revenues increased during 2022 as a result of the higher oil prices relative to the prior year continuing to drive demand, primarily due to increased completions activity in the Gulf of Mexico and international markets.

As the offshore market continues to improve, our pipeline of TETRA CS Neptune® completion fluid opportunities has continued to grow consistent with deepwater market growth.

During the fourth quarter of 2022, TETRA successfully completed its first CS Neptune® project in the United Kingdom.

With this project, TETRA has now completed CS Neptune jobs with 100% success rates in the Gulf of Mexico, Norway and the United Kingdom.

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 strategic partnership.

During the fourth quarter of 2022, TETRA received an order for TETRA PureFlow® from a second zinc-based energy storage battery provider.

We have also continued to successfully leverage opportunities to expand integrated services to completion fluids customers.

Our Water & Flowback Services revenues increased significantly compared to the prior year, due to margin expansion efforts driven by investments in technology, integration, digitalization, as well as two early production facilities in Latin America that became operational early in the third quarter of 2022.

The early production facilities are longer-term, high-margin projects with stable and predictable cash flows and we anticipate commencing operation on a third early production facility in the first half of 2023.

Our fleet of TETRA SandStorm TM advanced cyclone technology separators remains at high utilization with continued market penetration and positive pricing progression.

During 2022, we announced exclusive technology agreements with two innovative companies for oil and gas well produced water beneficial reuse.

These strategic relationships are expected to allow us to create new, sustainable markets for produced water, reduce the industry’s reliance on disposal and preserve precious freshwater resources.

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 2022, we completed the maiden inferred bromine and lithium brine resource estimation report for our leased acreage in the Smackover Formation in Southwest Arkansas, as well as a front end engineering and design study for the design of a brine to bromine processing plant, pipeline and related assets.

We are in the final stages of a reservoir analysis to further assess TETRA’s bromine and lithium assets in Arkansas.

Completion of this front end engineering and design study and reservoir analysis were incremental steps for TETRA to complete an initial and preliminary economic analysis.

Further steps are required before making a decision to develop the bromine assets, which may include drilling an additional well or wells, further studies to mature the resource and completion of a pre-feasibility and/or feasibility study.

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.

On January 29, 2021, we closed the GP 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 have reflected the operations of our former Compression Division as discontinued operations for all periods

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

9 unchanged sentences

21.9 % 15.3 %

Exploration and pre-development costs 6,635 — 6,635 100.0 %

General and administrative expense 91,942 75,049 16,893 22.5 %

2 unchanged sentences

Interest expense, net 15,833 16,377 (544) (3.3) %

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

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

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

Loss before taxes and discontinued operations as a percentage of revenue

(3.8) % (6.6) %

Other income, net (4,465) (17,468) 13,003 (74.4) %

Income (loss) before taxes and discontinued operations 11,166 (14,721) 25,887 NM (1)

Income (loss) before taxes and discontinued operations as a percentage of revenue 2.0 % (3.8) %

Provision for income taxes 3,565 2,084 1,481 71.1 %

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

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) before discontinued operations 7,601 (16,805) 24,406 (145.2) %

Income from discontinued operations, net of taxes 195 120,407 (120,212) (99.8) %

Net income 7,796 103,602 (95,806) (92.5) %

(Income) loss attributable to noncontrolling interest 43 (269) 312 (116.0) %

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

Net income attributable to TETRA stockholders $ 7,839 $ 103,333 $ (95,494) (92.4) %

(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 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.

Consolidated revenues for 2022 increased compared to the prior year due to higher activity in both our Completion Fluids & Products and Water & Flowback Services divisions, where revenue increased by $53.7 million and $111.2 million, respectively.

The increase in our Completion Fluids & Products division is primarily due to higher oil and gas activity, particularly in the Gulf of Mexico, and an increase in industrial chemicals product sales.

The increase in our Water & Flowback Services division is primarily due to increasing customer activity levels from an improved commodity price environment in 2022 and early production facilities that came online during the year.

Consolidated gross profit as a percentage of revenue increased due to margin improvements in both our Completion Fluids & Products and Water & Flowback Services divisions.

See Divisional Comparisons section below for additional discussion.

Exploration and Pre-Development Costs

Exploration and pre-development costs were $6.6 million during the current year due to the exploration drilling and sample analysis costs associated with our exploratory brine well in Arkansas, as well as front-end engineering design costs for the bromine project.

General and Administrative Expense

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.

Consolidated general and administrative expenses increased during 2022 compared to the prior year primarily due to a $17.7 million increase in wages and benefits from additional personnel to support the increase in activity, from increase in salaries for merit and inflationary factors as well as additional incentive compensation as a result of higher operational margin performance and adjustments to long term incentives associated with increases in the company’s stock price.

These increases were partially offset by a $1.9 million decrease in legal and other expenses primarily associated with the GP Sale in 2021.

Interest Expense, Net

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 decreased during 2021 compared to the prior year primarily due to decreased asset sales during the year.

Consolidated interest expense, net, decreased in 2022 compared to the prior year primarily due to interest income on the CarbonFree convertible note purchased in December 2021 and interest received on an escrow account related to a tax hearing in Latin America.

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.

Consolidated other (income) expense, net decreased during 2022 compared to the prior year primarily due to a $15.0 million decrease in other income primarily due to the gain realized in the fourth quarter of 2021 from the sale of our Standard Lithium shares.

This decrease was partially offset by a $1.2 million increase in the value of our interest in CSI Compressco due to improvements in their unit price and a $0.8 million increase in the fair value of the embedded option to convert our CarbonFree convertible notes into equity.

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.

Income from discontinued operations, net of taxes, was $0.2 million compared to $120.4 million for the prior year.

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

Provision for Income Tax

Our consolidated provision for income taxes during 2022 was primarily attributable to taxes in certain foreign jurisdictions and Texas gross margin taxes.

Our consolidated effective tax rate for the year ended December 31, 2022 of 31.9% was primarily the result of income generated in certain non-U.S.

jurisdictions for which a net operating loss carryforward are not available for offset and the local tax rate exceeded the US statutory tax rate .

Our consolidated effective tax rate for the year ended December 31, 2021 of negative 14.2% was primarily the result of losses generated in entities for which no related tax benefit has been recorded.

10 unchanged sentences

Revenues $ 273,373 $ 219,648 $ 53,725 24.5 %

Gross profit (loss) 58,458 77,206 (18,748) (24.3) %

Gross profit (loss) as a percentage of revenue 26.6 % 31.8 %

Gross profit 86,718 58,458 28,260 48.3 %

Gross profit as a percentage of revenue 31.7 % 26.6 %

Exploration and pre-development costs 6,635 — 6,635 100.0 %

General and administrative expense 25,246 20,446 4,800 23.5 %

1 unchanged sentence

Interest (income) expense, net (1,346) (596) (750) 125.8 %

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

Other income, net (1,183) (16,373) 15,190 (92.8) %

Income before taxes $ 57,366 $ 54,981 $ 2,385 4.3 %

Income before taxes as a percentage of revenue 21.0 % 25.0 %

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 revenues increased primarily due to higher oil and gas activity particularly in the Gulf of Mexico and an increase in industrial chemicals product sales.

Improved market conditions lead to increased demand and volume and contributed to the increase in revenues compared to the prior period.

Revenues also increased through leveraging opportunities to expand services to completion fluids customers.

Completion Fluids & Products Division gross profit during 2022 increased compared to the prior year due to higher revenue and margin growth as described above, as well as pricing improvements and good margin spot sale opportunities which more than offset increases in bromine supply costs and inflationary pressures in certain raw materials.

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.

Completion Fluids & Products Division pretax income increased slightly during 2022 compared to the prior year.

The increase in gross profit was offset by a $15.0 million decrease in the gain realized in the fourth quarter of 2021 from the sale of our Standard Lithium shares.

Furthermore, general and administrative expenses increased primarily from a $3.6 million increase in wages and benefit expense due to additional personnel, increase in salaries for merit and inflationary factors as well as additional incentive compensation as a result of higher operational performance.

In addition, other general and administrative expenses increased $0.6 million primarily due to higher insurance costs associated with higher activity levels, and foreign exchange fluctuations were unfavorable by $1.9 million primarily in Europe.

Water & Flowback Services Division

4 unchanged sentences

Revenues $ 279,840 $ 168,624 $ 111,216 66.0 %

Gross profit 1,800 (8,856) 10,656 120.3 %

Gross profit 35,074 1,800 33,274 NM

Gross profit as a percentage of revenue 12.5 % 1.1 %

3 unchanged sentences

Other income, net (2,415) (1,186) (1,229) 103.6 %

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

Income (loss) before taxes $ 15,732 $ (11,116) $ 26,848 (241.5) %

Loss before taxes as a percentage of revenue 5.6 % (6.6) %

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.

Water & Flowback Services Division revenues increased during 2022 compared to the prior year primarily due to improved market conditions, with higher frac and rig counts leading to a continued increase in customer drilling and completion activity compared to prior year in all North America regions.

Our growth has been boosted from investments in our SandStorm advanced cyclone technology to significantly expand our fleet and capture market share within the water management business.

In addition, two early production facilities in Latin America came on line beginning in the third quarter of 2022.

The Water & Flowback Services Division gross profit improved substantially from marginal profit in the prior year to double-digit profit in the current year, primarily due to higher revenues resulting from the increased activity levels described above and pricing improvements as activity levels improved and new projects commenced.

The Water & Flowback Services Division reported a pretax income compared to a pretax loss during the prior year, primarily due to the gross profit improvement described above, which was partially offset by an increase in general and administrative expenses primarily due to a $5.4 million increase in wages and benefits expense and a $1.0 million increase general expenses, both attributable to an increase in headcount to support the increase in activity.

Interest (income) expense, net decreased $0.6 million due to a decrease in intercompany interest income in Latin America related to capital and operating expense requirements associated with the early production facilities.

Other income, net increased $1.2 million primarily due to favorable foreign exchange fluctuations in Latin America.

Corporate Overhead

6 unchanged sentences

Interest expense, net 17,041 17,483 (442) (2.5) %

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

Other (income) expense, net (867) 93 (960) NM

Loss before taxes $ (61,943) $ (58,598) $ (3,345) (5.7) %

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.

Corporate Overhead pretax loss increased slightly during 2022 compared to the prior year primarily due to increased general and administrative expense, partially offset by decreased depreciation and amortization expense.

Corporate general and administrative expense increased primarily due to $8.7 million of increased salary related expense driven by reinstatement of full salaries and 401K match as well as a $3.3 million increase in short and long-term incentive and equity-based compensation expenses, offset by a $1.4 million decrease in general expenses and $2.2 million of decreased professional fees primarily due to expenses associated with the GP Sale in the prior year.

Interest expense decreased primarily due to $50.5 million of repayments on our Term Credit Agreement during the prior year, offset by higher interest rates in the current year.

Other (income) expense, net increased primarily due to a $1.2 million increase in unrealized gains on our interest in CSI Compressco due to unit price improvements.

Non-GAAP Financial Measures

2 unchanged sentences

We view Adjusted EBITDA as one of our primary management tools, and we track it on a monthly basis, both in dollars and as a percentage of revenues (typically compared to the prior month, prior year period, and to budget).

We define Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, impairments and certain non-cash charges and non-recurring adjustments.

We define Adjusted EBITDA as earnings before interest, taxes, depreciation, amortization, impairments, exploration and pre-development costs and certain non-cash charges and non-recurring adjustments.

Adjusted EBITDA is used as a supplemental financial measure by our management to:

4 unchanged sentences

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.

5 unchanged sentences

Net income (loss) before taxes and discontinued operations 57,366 15,732 (45,077) (16,855) 11,166

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)

Insurance recoveries (3,750) — — — (3,750)

Impairments and other charges 562 2,242 — — 2,804

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

Exploration and pre-development costs 6,635 — — — 6,635

Adjustment to long-term incentives — — 4,510 — 4,510

Transaction, restructuring and other expenses 576 638 — — 1,214

Adjusted income (loss) before taxes and discontinued operations $ 61,389 $ 18,612 $ (40,567) $ (16,855) $ 22,579

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

Interest expense, net (1,346) 138 — 17,041 15,833

Depreciation and amortization 7,455 24,683 — 681 32,819

Equity-based compensation expense — — 6,880 — 6,880

Adjusted EBITDA $ 67,498 $ 43,433 $ (33,687) $ 867 $ 78,111

5 unchanged sentences

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

Severance — — 1,511 — 1,511

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

Restructuring and severance expenses 77 759 — — 836

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

Transaction, restructuring and other expenses 1,531 1,718 2,419 — 5,668

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

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

Former CEO stock appreciation right expense — — 865 — 865

Impairments and other charges — — — 132 132

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

2 unchanged sentences

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

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

Equity-based compensation expense — — 4,664 — 4,664

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

1 unchanged sentence

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 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, 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:

We believe that our capital structure allows us to meet our financial obligations and fund future growth as needed, despite uncertain operating conditions and financial markets.

Our liquidity at the end of the fourth quarter of 2022 was $85.2 million consisting of $13.6 million of unrestricted cash plus $71.6 million of availability under our credit agreements.

Liquidity is defined as unrestricted cash plus availability under our revolving credit facilities.

Our consolidated sources and uses of cash, including cash activity from our former Compression Division through closing of the GP Sale in January 2021, for the years ended December 31, 2022 and 2021 are as follows:

Year Ended December 31,

2021 2020 2019

(In Thousands)

2 unchanged sentences

Financing activities $ 40 $ (50,054)

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.

Operating Activities

Consolidated cash flows provided by operating activities totaled $19.0 million during 2022 compared to $4.7 million during the prior year, an increase of $14.3 million.

Operating cash flows increased compared to the prior year primarily due to increased activity levels and higher consolidated margins from changes in product mix, 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 2021 prior to closing of the GP Sale.

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.

1 unchanged sentence

Total cash capital expenditures during 2022 were $40.1 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 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.

Our Water & Flowback Services Division spent $30.4 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.

Water and Flowback Services Division capital expenditures also included expenditures related to construction of three early production facilities in Argentina, including approximately $2.0 million of costs that were reimbursed by customers.

Our Completion Fluids & Products Division spent $9.4 million on capital expenditures during 2022, primarily supporting higher activity levels in the United States and Europe.

Investing activities for 2022 included a $3.8 million insurance settlement received in March 2022 from damage to our Lake Charles facility in 2020.

Investing activities for 2021 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.

We have rights to the brine underlying our approximately 40,000 gross acres of brine leases in the Smackover Formation in Southwest Arkansas, including rights to the bromine and lithium contained in the brine.

Additional information on these inferred resources is described in Part I, “Item 2.

Properties” in this Annual Report.

The extraction of lithium and bromine from these brine leases will likely require a significant amount of time and capital, which are subject to further analysis and consideration.

Only upon completion of an indicated resources study, pre-feasibility and/or feasibility study and attainment of capital commitment from either a joint venture partner, governments grants or loans, or other cost-effective sources of capital that will not over-lever TETRA, in addition to confirmation of a successful recapitalization of the long-duration zinc-bromide battery storage manufacturers, would we proceed to a final investment decision.

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

4 unchanged sentences

Financing Activities

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.

During the year ended December 31, 2022, consolidated net cash used in financing activities was breakeven, consisting of $12.5 million borrowings and $13.8 million repayments of our revolving credit facilities, as well as $1.3 million of payments of finance lease obligations in Latin America.

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.

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.

We are aggressively managing our working capital and capital expenditure needs in order to maximize our liquidity in the current environment.

Asset-Based Credit Agreement .

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 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.

3 unchanged sentences

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

We are not required to offer to prepay any amount based on our Excess Cash Flow for the year ended December 31, 2022.

As of February 24, 2023, $163.1 million in aggregate principal amount of our Term Credit Agreement is outstanding.

1 unchanged sentence

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.

Asset-Based Credit Agreement .

The amended ABL Credit Agreement provides for a senior secured revolving credit facility of up to $80 million, with a $20 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 million for letters of credit, a swingline loan sublimit of $11.5 million, and a $15 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 derived from our accounts receivable, certain accrued receivables and certain inventory.

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

As of December 31, 2022, we had $2.9 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 $71.6 million under the ABL Credit Agreement.

As of February 24, 2023, we have no outstanding borrowings under our ABL Credit Agreement and $8.3 million letters of credit, resulting in $71.7 million of availability.

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.

As of December 31, 2022, we had approximately $3.0 thousand outstanding and availability of approximately $4.8 million under the Swedish Credit Facility.

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

1 unchanged sentence

The Swedish Credit Facility expires on December 31, 2023 and the Company intends to renew it annually.

Finland Credit Agreement.

In January 2022, the Company also entered into an agreement guaranteed by certain accounts receivable and inventory in Finland (“Finland Credit Agreement”).

As of December 31, 2022, we had $1.5 million of letters of credit outstanding against the Finland Credit Agreement.

The Finland Credit Agreement expired on January 31, 2023 and has been renewed by the Company through January 31, 2024.

As of December 31, 2022, 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 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.

In addition, as of December 31, 2022, the market value of our equity holdings of CSI Compressco and Standard Lithium were $7.0 million and $1.2 million, respectively, with no holding restrictions on our ability to monetize our investments.

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

Instability or volatility in the capital markets at the times we need to access capital may affect the cost of capital and the ability to raise capital for an indeterminable length of time.

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

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 transaction is in the best interest of our business.

2 unchanged sentences

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 unpaid receivables would also negatively affect our borrowing availability under the ABL 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 $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.

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

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.

See Note 2 - “Basis of Presentation and Significant Accounting Policies” and Note 9 - “Leases” in the Notes to Consolidated Financial Statements for further information our lease obligations.

Asset Retirement Obligations

4 unchanged sentences

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.

For information on product purchase obligations, see - Note 11 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Off Balance Sheet Arrangements

13 unchanged sentences

If an impairment of a long-lived asset is warranted, we estimate the fair value of the asset based on a present value of these cash flows or the value that could be realized from disposing of the asset in a transaction between market participants.

The oil and gas industry is cyclical, and our estimates of the amount of future cash flows, the period over which these estimated future cash flows will be generated, as well as the fair value of an impaired asset, are imprecise.

The oil and gas industry is cyclical, and our

estimates of the amount of future cash flows, the period over which these estimated future cash flows will be generated, as well as the fair value of an impaired asset, are imprecise.

Our failure to accurately estimate these future operating cash flows or fair values could result in certain long-lived assets being overstated, which could result in impairment charges in periods subsequent to the time in which the impairment indicators were first present.

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.

Impairment of Goodwill

During the third quarter of 2019, we determined that the deteriorating energy industry outlook was an indicator requiring further analysis for impairment of goodwill.

We determined at that time that the fair value of the Water Management reporting unit, the only reporting unit with goodwill, exceeded its carrying value and there was no impairment to goodwill.

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, 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