What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-02-27 · 117 added, 118 removed, 185 unchanged (56% of the section changed)

9 unchanged sentences

Business Overview

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.

We are an energy services and solutions company with operations on six continents focused on developing environmentally conscious services and solutions that help make people’s lives better.

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.

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.

Completion Fluids & Products Division revenues increased during 2023 as a result of increased completions activity in the Gulf of Mexico and international markets, as well as higher volumes in Europe following resolution of raw materials limitations.

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.

The division has also benefited from the December 2022 Peacock acquisition in Europe.

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 Water & Flowback Services revenues increased compared to the prior year, due to margin expansion efforts driven by investments in technology, integration, digitalization, as well as the benefit of having two early production facilities in Latin America operating the entire year and a third beginning in May 2023.

The early production facilities are longer-term, high-margin projects with stable and predictable cash flows.

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.

In June 2023, we entered into a MOU with Saltwerx, an indirect wholly owned subsidiary of ExxonMobil Corporation, relating to a newly formed Evergreen Brine Unit and potential bromine and lithium production from brine produced from the unit.

The MOU with Saltwerx includes provisions relating to:

(i) initial brine ownership percentages within the Evergreen Brine Unit, including the bromine and lithium contained in the brine, (ii) the transfer of certain leased acres outside the proposed Evergreen Brine Unit from us to Saltwerx, (iii) reimbursement by Saltwerx of certain expenses that we incurred for the development of leased acreage to be included in the Evergreen Brine Unit, and (iv) an allocation of certain future costs for the drilling of a brine production test well and other development operations, including front-end engineering and design studies for bromine and lithium production facilities.

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

We completed an initial preliminary economic assessment in early 2023 for a bromine extraction plant.

We expect an initial economic assessment to follow in early 2024 for a lithium extraction plant, subject to the progress of early engineering.

Only upon completion of a 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.

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

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Other income, net (9,112) (4,465) (4,647) 104.1 %

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) %

Income before taxes and discontinued operations

31,699 11,166 20,533 183.9 %

Income before taxes and discontinued operations as a percentage of revenue

Provision for income taxes 6,220 3,565 2,655 74.5 %

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

Income before discontinued operations

25,479 7,601 17,878 235.2 %

Income from discontinued operations, net of taxes 278 195 83 42.6 %

Net income 25,757 7,796 17,961 230.4 %

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

Loss attributable to noncontrolling interest

27 43 (16) (37.2) %

Net income attributable to TETRA stockholders $ 25,784 $ 7,839 $ 17,945 228.9 %

(1) Percent change is not meaningful

Consolidated revenues for 2023 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 $39.7 million and $33.4 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.

The increase in our Completion Fluids & Products division is primarily due to an increase in industrial chemicals product pricing and incremental volumes.

The increase in our Water & Flowback Services division is primarily from an entire year of operations of the first two early production facilities in Latin America which came on line beginning in the third quarter of 2022 and the third early production facility that came online during the second quarter of 2023.

Consolidated gross profit as a percentage of revenue increased due to revenue and 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.

Exploration and pre-development costs increased $5.5 million compared to the prior year due to the increased activities surrounding our Arkansas strategic initiatives, which included additional front-end engineering design studies and completing a second exploration test well.

General and Administrative Expense

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.

Consolidated general and administrative expenses increased during 2023 compared to the prior year primarily due to a $5.1 million increase in employee compensation from additional headcount to support higher activity levels as well as merit and inflationary factors, and additional incentive compensation as a result of higher operational margin performance and the impact of increases in the company’s stock price on long-term incentive awards.

Interest Expense, Net

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.

Consolidated interest expense, net, increased in 2023 compared to the prior year primarily due to an increase in the interest rate on our Term Credit Agreement.

Other Income, net

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 $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.

Consolidated other (income) expense, net increased during 2023 compared to the prior year primarily due to a $9.3 million reimbursement from our partner associated with the collaborative arrangement related to our Arkansas resource development opportunity, partially offset by a $4.5 million increase in foreign exchange losses, including the impact of currency volatility in Argentina.

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.

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.

Our consolidated provision for income taxes during 2023 was primarily attributable to taxes in certain foreign jurisdictions and state taxes.

Our consolidated effective tax rate for the year ended December 31, 2023 and December 31, 2022 was 19.6% and 31.9% respectively.

The increase in our tax provision compared to the prior year was primarily due to the increase in income before taxes, while our effective tax rate decreased because a significant portion of the increase in income was in jurisdictions for which we were able to utilize net operating losses for which we had established valuation allowances.

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.

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Other income, net (10,104) (1,183) (8,921) 754.1 %

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

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

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.

Income before taxes and discontinued operations

$ 78,313 $ 57,366 $ 20,947 36.5 %

Income before taxes and discontinued operations as a percentage of revenue

25.0 % 21.0 %

Completion Fluids & Products Division revenues increased primarily due to incremental brominated product sales in the United States and Latin America, an increase in European calcium chloride pricing, and higher volumes in Europe as a result of resolution of raw materials limitations as well as the Peacock acquisition in December 2022.

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 gross profit during 2023 increased compared to the prior year due to higher revenue and margin growth as described above, as well as pricing improvements.

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.

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.

Completion Fluids & Products Division pretax income increased during 2023 compared to the prior year primarily due to the increase in gross profit, along with a $9.3 million increase in other income due to reimbursements from TETRA's partner for the Arkansas resource development, partially offset by the $0.8 million decrease in the unrealized gain on the CarbonFree convertible notes.

The increase in gross profit was also offset by a $5.5 million increase in exploration and pre-development costs due to increased activities for our Arkansas strategic initiatives, which included additional front-end engineering design studies and completing a second exploration test well.

General and administrative expenses increased primarily due to a $1.9 million increase in employee compensation from additional headcount to support higher activity levels as well as merit and inflationary factors and a $0.5 million increase in professional services.

Water & Flowback Services Division

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Revenues $ 313,232 $ 279,840 $ 33,392 11.9 %

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

Gross profit 47,138 35,074 12,064 34.4 %

Gross profit as a percentage of revenue 15.0 % 12.5 %

2 unchanged sentences

Interest (income) expense, net 205 138 67 48.6 %

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

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 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.

Other (income) expense, net

1,757 (2,415) 4,172 NM (1)

Income before taxes and discontinued operations

$ 25,724 $ 15,732 $ 9,992 63.5 %

Income before taxes and discontinued operations as a percentage of revenue

(1) Percent change is not meaningful

Water & Flowback Services Division revenues increased during 2023 compared to the prior year primarily due to improved market conditions.

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

In addition, revenue increased from an entire year of operations of three early production facilities in Latin America which came on line beginning in the third quarter of 2022.

Revenues also include the sale of one early production facility to the operator in October 2023 for $5.4 million.

The Water & Flowback Services Division gross profit improved 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 income before taxes increased during 2023 compared to prior year primarily due to the increase in gross profit.

In addition, general and administrative expenses decreased primarily due to a $1.0 million decrease in employee compensation expense primarily due to lower short-term incentive compensation, a $0.7 million decrease in general expenses and a $0.7 million decrease in legal expenses.

Other (income) expense, net moved from income to expenses due to a $3.9 million swing in foreign exchange losses caused by exchange rate devaluation in Argentina.

Corporate Overhead

6 unchanged sentences

Interest expense, net 22,790 17,041 5,749 33.7 %

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

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

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.

Impairments and other charges

777 — 777 100.0 %

Other (income) expense, net (763) (867) 104 (12.0) %

Loss before taxes and discontinued operations

$ (72,339) $ (61,943) $ (10,396) (16.8) %

Corporate Overhead loss before taxes increased during 2023 compared to the prior year primarily due to higher interest expense due to an increase in the interest rate on our Term Credit Agreement, an increase in general administrative expenses primarily due to $4.1 million of increased salary related expense driven by a $2.7 million increase in short and long-term incentive and equity-based compensation expenses, and a $0.8 million impairment of our corporate office lease.

Non-GAAP Financial Measures

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Adjusted EBITDA .

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, 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:

• evaluate the financial performance of our assets without regard to financing methods, capital structure, or historical cost basis;

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

We define Adjusted EBITDA as net income (loss) before taxes and discontinued operations, excluding impairments, exploration and pre-development costs, certain special, non-recurring or other charges (or credits), interest, depreciation and amortization, income from collaborative arrangement and certain non-cash items such as equity-based compensation expense.

The most directly comparable GAAP financial measure is net income (loss) before taxes and discontinued operations.

Exploration and pre-development costs represent expenditures incurred to evaluate potential future development of TETRA’s lithium and bromine properties in Arkansas.

Such costs include exploratory drilling and associated engineering studies.

Income from collaborative arrangement represents the portion of exploration and pre-development costs that are reimbursable by our strategic partner.

Exploration and pre-development costs, net of the associated income from collaborative arrangement are excluded from Adjusted EBITDA because they do not relate to the Company’s current business operations.

Adjustments to long-term incentives represent adjustments to valuation of long-term cash incentive compensation awards that are related to prior years.

These costs are excluded from Adjusted EBITDA because they do not relate to the current year and are considered to be outside of normal operations.

Long-term incentives are earned over a three-year period and the costs are recorded over the three-year period they are earned.

The amounts accrued or incurred are based on a cumulative of the three-year period.

Equity-based compensation expense represents compensation that has been or will be paid in equity and is excluded from Adjusted EBITDA because it is a non-cash item.

Adjusted EBITDA is used by management as a supplemental financial measure to assess financial performance, without regard to charges or credits that are considered by management to be outside of its normal operations and without regard to financing methods, capital structure or historical cost basis, and to assess the Company’s ability to incur and service debt and fund capital expenditures.

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

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Net income (loss) before taxes and discontinued operations 78,314 25,724 (49,135) (23,204) 31,699

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

Insurance recoveries, net of related expenditures

(2,678) — — — (2,678)

Impairments and other charges 2,189 — 777 — 2,966

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

Exploration, pre-development costs and collaborative arrangements

2,838 — — — 2,838

Adjustment to long-term incentives — — 1,526 — 1,526

Former CEO stock appreciation right expense — — 237 — 237

Transaction, restructuring and other expenses — — 502 — 502

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

Unusual foreign exchange loss

— 2,444 — — 2,444

Interest expense, net (647) 205 — 22,791 22,349

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

Depreciation, amortization and accretion

9,053 24,876 — 400 34,329

Equity-based compensation expense — — 10,622 — 10,622

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

Insurance recoveries

(3,750) — — — (3,750)

Impairments and other charges

562 2,242 — — 2,804

Exploration and pre-development costs

6,635 — — — 6,635

Adjustment to long-term incentives — — 4,277 — 4,277

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

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

Former CEO stock appreciation right expense — — 233 — 233

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

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

Interest expense, net

(1,346) 138 — 17,041 15,833

Depreciation, amortization and accretion

7,455 24,683 — 681 32,819

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

5 unchanged sentences

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:

Our consolidated sources and uses of cash for the years ended December 31, 2023 and 2022 are as follows:

Year Ended December 31,

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Consolidated cash flows provided by operating activities totaled $70.2 million during 2023 compared to $19.0 million during the prior year, an increase of $51.2 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.

Operating cash flows increased compared to the prior year primarily due to increased activity levels and higher consolidated margins from changes in product mix, as well as 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.

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Our Water & Flowback Services Division spent $26.6 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.

Water and Flowback Services Division capital expenditures also included expenditures related to construction of the third early production facility in Argentina which became operational in May 2023.

Our Completion Fluids & Products Division spent $11.1 million on capital expenditures during 2023, 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.

Investing activities for 2023 also included $6.7 million proceeds from sales of property, plant and equipment, $3.9 million of proceeds from the sale of marketable securities, and a $2.9 million insurance settlement received from damage to our Lake Charles facility in 2020.

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.

Additional information on these 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.

Only upon completion of a pre-feasibility and/or feasibility study and attainment of capital commitment from either a joint venture partner, government 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.

1 unchanged sentence

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

We currently have no long-term capital expenditure commitments.

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

As of December 31, 2023, we have no long-term capital expenditure commitments.

If the forecasted demand for our products and services increases or decreases, or we proceed with development of brine resources in Arkansas, the amount of planned expenditures on growth and expansion may be adjusted.

Financing Activities

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.

During the year ended December 31, 2023, consolidated net cash used in financing activities was $4.7 million, consisting of $100.5 million borrowings and $97.5 million repayments of our revolving credit facilities, as well as $1.7 million of payments of finance lease obligations in Latin America.

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.

Term Credit Agreement.

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

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

If our Leverage Ratio (as defined in the Term Credit Agreement) at year-end is less than 2.00 to 1.00, the prepayment requirement is decreased to 25%.

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.

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.

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, 2023, the $163.1 million principal balance of the Term Credit Agreement was due on September 10, 2025.

On January 12, 2024, the Company entered into a New Term Credit Agreement consisting of a $190.0 million funded term loan and a $75.0 million delayed-draw term loan that refinanced the Company’s Term Credit Agreement outstanding as of December 31, 2023 and provided capital to advance the Company’s Arkansas bromine processing project.

The maturity date of the New Term Credit Agreement is January 12, 2030.

As of February 23, 2024, $190.0 million in aggregate principal amount of our New Term Credit Agreement was outstanding.

Asset-Based Credit Agreement .

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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 December 31, 2023, we had no balance 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 availability of $68.8 million under the ABL Credit Agreement.

As of February 23, 2024, we have no outstanding borrowings under our ABL Credit Agreement and $0.5 million letters of credit, resulting in $70.5 million of availability.

1 unchanged sentence

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”).

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

As of December 31, 2023, we had no balance outstanding and availability of approximately $5.0 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.

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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”).

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

As of December 31, 2023, 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.

The Finland Credit Agreement has been renewed by the Company through January 31, 2025.

As of December 31, 2023, 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.

See Note 10 - “Long-Term Debt and Other Borrowings” and Note 18 - “Subsequent Events” in the Notes to Consolidated Financial Statements for further information.

Other Sources and Uses of Cash

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In addition, as of December 31, 2023, the market value of our equity holdings of CSI Compressco and Standard Lithium were $8.5 million and $1.6 million, respectively, with no holding restrictions on our ability to monetize our investments.

If the pending acquisition of CSI Compressco by Kodiak closes, our common units in CSI Compressco will be exchanged for Kodiak common stock.

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.

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

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 transaction is 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 COVID-19 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.

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.

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

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.

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

Asset Retirement Obligations

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Actual results are likely to differ from our current estimates, and those differences may be material.

The following critical accounting policies reflect the most significant judgments and estimates used in the preparation of our financial statements.

Impairment of Long-Lived Assets

The determination of impairment of long-lived assets, including identified intangible assets, is conducted periodically whenever indicators of impairment are present.

If such indicators are present, the determination of the amount of impairment is based on our judgments as to the future operating cash flows to be generated from these assets throughout their estimated useful lives.

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.

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.

An accounting policy is considered critical if it is both material to the presentation of the financial statements and requires management to make difficult, subjective or complex judgments that could have a material effect on the financial condition or results of operations.

Accounting estimates and assumptions may become critical when they are material due to the levels of subjectivity and judgment necessary to account for highly uncertain matters or the susceptibility of such matters to change, and that have a material impact on financial condition or operating performance.

Critical accounting estimates are estimates that require us to make assumptions about matters that were highly uncertain at the time the accounting estimate was made and if different estimates that we reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely occur from period to period, have a material impact on the presentation of our financial condition, changes in financial condition or results of operations.

We believe there are currently no critical accounting policies and estimates that affect the preparation of our financial statements.

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