TETRA TECHNOLOGIES INC 10-Q

Item 1. Financial Statements. TETRA Technologies, Inc. and Subsidiaries Consolidated Statements of Operations (In Thousands, Except Per Share Amounts) (Unaudited) Three Months Ended March 31, 2024 2023 Revenues: Product sales $ 73,337 $ 65,535 Services 77,635 80,674 Total revenues 150,972 146,209 Cost of revenues: Cost of product sales 45,406 42,395 Cost of services 65,708 61,671 Depreciation, amortization, and accretion 8,756 8,670 Insurance recoveries — ( 2,850 ) Total cost of revenues 119,870 109,886 Gross profit 31,102 36,323 Exploration and pre-development costs — 720 General and administrative expense 22,298 23,191 Interest expense, net 5,952 5,092 Loss on debt extinguishment 5,535 — Other income, net ( 3,978 ) ( 214 ) Income before taxes and discontinued operations 1,295 7,534 Provision for income taxes 380 1,489 Income before discontinued operations 915 6,045 Discontinued operations: Loss from discontinued operations, net of taxes — ( 12 ) Net income 915 6,033 Loss attributable to noncontrolling interests — 7 Net income attributable to TETRA stockholders $ 915 $ 6,040 Basic net income per common share: Income from continuing operations $ 0.01 $ 0.05 Income from discontinued operations — — Net income attributable to TETRA stockholders $ 0.01 $ 0.05 Weighted average basic shares outstanding 130,453 128,940 Diluted net income per common share: Income from continuing operations $ 0.01 $ 0.05 Income from discontinued operations — — Net income attributable to TETRA stockholders $ 0.01 $ 0.05 Weighted average diluted shares outstanding 132,123 129,975 See Notes to Consolidated Financial Statements 1 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Statements of Comprehensive Income (In Thousands) (Unaudited) Three Months Ended March 31, 2024 2023 Net income $ 915 $ 6,033 Foreign currency translation adjustment from continuing operations, net of taxes of $ 0 in 2024 and 2023 ( 1,634 ) 1,421 Unrealized gain on investment in CarbonFree 237 121 Comprehensive income (loss) ( 482 ) 7,575 Less: Comprehensive loss attributable to noncontrolling interests — 7 Comprehensive income (loss) attributable to TETRA stockholders $ ( 482 ) $ 7,582 See Notes to Consolidated Financial Statements 2 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands) March 31, 2024 December 31, 2023 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 35,939 $ 52,485 Trade accounts receivable, net of allowances of $ 462 in 2024 and $ 614 in 2023 132,429 111,798 Inventories 94,285 96,536 Prepaid expenses and other current assets 24,911 21,196 Total current assets 287,564 282,015 Property, plant, and equipment: Land and building 23,800 23,173 Machinery and equipment 311,609 304,884 Automobiles and trucks 10,201 10,148 Chemical plants 66,491 67,114 Construction in progress 11,126 10,323 Total property, plant, and equipment 423,227 415,642 Less accumulated depreciation ( 309,858 ) ( 307,926 ) Net property, plant, and equipment 113,369 107,716 Other assets: Patents, trademarks and other intangible assets, net of accumulated amortization of $ 52,427 in 2024 and $ 51,509 in 2023 28,073 29,132 Operating lease right-of-use assets 30,964 31,915 Investments 20,386 17,354 Other assets 10,969 10,829 Total other assets 90,392 89,230 Total assets $ 491,325 $ 478,961 See Notes to Consolidated Financial Statements 3 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Balance Sheets (In Thousands, Except Share Amounts) March 31, 2024 December 31, 2023 (Unaudited) LIABILITIES AND EQUITY Current liabilities: Trade accounts payable $ 47,491 $ 52,290 Compensation and employee benefits 19,232 26,918 Operating lease liabilities, current portion 8,731 9,101 Accrued taxes 13,192 10,350 Accrued liabilities and other 29,280 27,303 Total current liabilities 117,926 125,962 Long-term debt, net 179,394 157,505 Operating lease liabilities 26,738 27,538 Asset retirement obligations 14,645 14,199 Deferred income taxes 2,176 2,279 Other liabilities 4,299 4,144 Total long-term liabilities 227,252 205,665 Commitments and contingencies (Note 7) Equity: TETRA stockholders’ equity: Common stock, par value 0.01 per share; 250,000,000 shares authorized at March 31, 2024 and December 31, 2023; 134,274,837 shares issued at March 31, 2024 and 133,217,848 shares issued at December 31, 2023 1,343 1,332 Additional paid-in capital 488,440 489,156 Treasury stock, at cost; 3,138,675 shares held at March 31, 2024 and December 31, 2023 ( 19,957 ) ( 19,957 ) Accumulated other comprehensive loss ( 46,628 ) ( 45,231 ) Retained deficit ( 275,794 ) ( 276,709 ) Total TETRA stockholders’ equity 147,404 148,591 Noncontrolling interests ( 1,257 ) ( 1,257 ) Total equity 146,147 147,334 Total liabilities and equity $ 491,325 $ 478,961 See Notes to Consolidated Financial Statements 4 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Statements of Equity (In Thousands) (Unaudited) Common Stock Par Value Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Deficit Noncontrolling Interest Total Equity Currency Translation Unrealized Gain (Loss) on Investment Balance at December 31, 2023 $ 1,332 $ 489,156 $ ( 19,957 ) $ ( 45,886 ) $ 655 $ ( 276,709 ) $ ( 1,257 ) $ 147,334 Net income for first quarter 2024 — — — — — 915 — 915 Translation adjustment, net of taxes of $ 0 — — — ( 1,634 ) — — — ( 1,634 ) Other comprehensive income — — — — 237 — — 237 Comprehensive loss ( 482 ) Equity-based compensation — 1,623 — — — — — 1,623 Other 11 ( 2,339 ) — — — — — ( 2,328 ) Balance at March 31, 2024 $ 1,343 $ 488,440 $ ( 19,957 ) $ ( 47,520 ) $ 892 $ ( 275,794 ) $ ( 1,257 ) $ 146,147 Common Stock Par Value Additional Paid-In Capital Treasury Stock Accumulated Other Comprehensive Income (Loss) Retained Deficit Noncontrolling Interest Total Equity Currency Translation Unrealized Gain (Loss) on Investment Balance at December 31, 2022 $ 1,318 $ 477,820 $ ( 19,957 ) $ ( 48,991 ) $ ( 72 ) $ ( 302,493 ) $ ( 1,228 ) $ 106,397 Net income (loss) for first quarter 2023 — — — — — 6,040 ( 7 ) 6,033 Translation adjustment, net of taxes of $ 0 — — — 1,421 — — — 1,421 Other comprehensive income — — — — 121 — — 121 Comprehensive income 7,575 Equity-based compensation (1) — 3,514 — — — — — 3,514 Other 7 ( 1,341 ) — — — — 1 ( 1,333 ) Balance at March 31, 2023 $ 1,325 $ 479,993 $ ( 19,957 ) $ ( 47,570 ) $ 49 $ ( 296,453 ) $ ( 1,234 ) $ 116,153 (1) Equity-based compensation for the three months ended March 31, 2023 includes $ 2.3 million for a portion of short-term incentive compensation that was settled through grants of restricted stock units rather than cash. See Notes to Consolidated Financial Statements 5 Table of Contents TETRA Technologies, Inc. and Subsidiaries Consolidated Statements of Cash Flows (In Thousands, Unaudited) Three Months Ended March 31, 2024 2023 Operating activities: Net income $ 915 $ 6,033 Reconciliation of net income to net cash provided by operating activities: Depreciation, amortization, and accretion 8,755 8,670 (Gain) loss on investments ( 2,795 ) 505 Equity-based compensation expense 1,623 1,276 Recovery of credit losses ( 115 ) ( 21 ) Amortization and expense of financing costs 380 884 Expense unamortized finance costs 5,535 — Insurance recoveries associated with damaged equipment — ( 2,850 ) Gain on sale of assets ( 29 ) ( 170 ) Other non-cash credits ( 553 ) ( 100 ) Changes in operating assets and liabilities: Accounts receivable ( 19,605 ) 12,626 Inventories 1,542 ( 11,313 ) Prepaid expenses and other current assets ( 3,918 ) 4,496 Trade accounts payable and accrued expenses ( 5,577 ) ( 11,179 ) Other 26 128 Net cash provided by (used in) operating activities ( 13,816 ) 8,985 Investing activities: Purchases of property, plant, and equipment, net ( 15,827 ) ( 12,784 ) Proceeds from sale of property, plant, and equipment 251 289 Proceeds from insurance recoveries associated with damaged equipment — 2,850 Other investing activities ( 172 ) ( 1,552 ) Net cash used in investing activities ( 15,748 ) ( 11,197 ) Financing activities: Proceeds from credit agreements and long-term debt 184,456 52,756 Principal payments on credit agreements and long-term debt ( 163,215 ) ( 47,362 ) Payments on financing lease obligations ( 277 ) ( 258 ) Shares withheld for taxes on equity-based compensation ( 2,339 ) — Debt issuance costs and other financing activities ( 5,277 ) — Net cash provided by financing activities 13,348 5,136 Effect of exchange rate changes on cash ( 330 ) 167 Increase (decrease) in cash and cash equivalents ( 16,546 ) 3,091 Cash and cash equivalents at beginning of period 52,485 13,592 Cash and cash equivalents at end of period $ 35,939 $ 16,683 See Notes to Consolidated Financial Statements 6 Table of Contents TETRA Technologies, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) NOTE 1 – ORGANIZATION, BASIS OF PRESENTATION, AND SIGNIFICANT ACCOUNTING POLICIES Organization 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. In addition to providing products and services to the oil and gas industry and calcium chloride for diverse applications, TETRA is expanding into the low-carbon energy market with chemistry expertise, key mineral acreage, and global infrastructure, helping to meet the demand for sustainable energy in the twenty-first century. We were incorporated in Delaware in 1981. Our products and services are delivered through two reporting segments – Completion Fluids & Products Division and Water & Flowback Services Division. Our Completion Fluids & Products Division manufactures and markets clear brine fluids (“CBFs”), additives, and associated products and services to the oil and gas industry for use in well drilling, completion, and workover operations in the United States and in certain countries in Latin America, Europe, Asia, the Middle East, and Africa. The Division also markets liquid and dry calcium chloride products manufactured at its production facilities or purchased from third-party suppliers to a variety of markets outside the energy industry. 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. Our Completion Fluids & Products Division also markets TETRA PureFlow, an ultra-pure zinc bromide, as well as TETRA PureFlow Plus, an ultra-pure zinc bromide/zinc chloride blend, to battery technology companies. Our Water & Flowback Services Division provides onshore oil and gas operators with comprehensive water management services. The Division also provides frac flowback, production well testing, and other associated services in many of the major oil and gas producing regions in the United States, as well as in oil and gas basins in certain countries in Latin America, Europe, and the Middle East. Unless the context requires otherwise, when we refer to “we,” “us,” and “our,” we are describing TETRA Technologies, Inc. and its subsidiaries on a consolidated basis. Presentation Our unaudited consolidated financial statements include the accounts of our wholly owned or controlled subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The information furnished reflects all normal recurring adjustments, which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods. Operating results for the period ended March 31, 2024 are not necessarily indicative of results that may be expected for the twelve months ended December 31, 2024. The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the U.S. Securities and Exchange Commission (“SEC”) and do not include all information and footnotes required by U.S. generally accepted accounting principles (“U.S. GAAP”) for complete financial statements. These financial statements should be read in conjunction with the financial statements for the year ended December 31, 2023 and notes thereto included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on February 27, 2024 (the “ 202 3 Annual Report ”). 7 Table of Contents Significant Accounting Policies Our significant accounting policies are described in the notes to our consolidated financial statements for the year ended December 31, 2023 included in our 2023 Annual Report . There have been no significant changes in our accounting policies or the application thereof during the first quarter of 2024. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclose contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, and impairments during the reporting period. Actual results could differ from those estimates, and such differences could be material. Mineral Resources Arrangement 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. In June 2023, we entered into a memorandum of understanding (“MOU”) with Saltwerx LLC (“Saltwerx”), an indirect wholly owned subsidiary of ExxonMobil Corporation, relating to a newly formed Brine Unit and potential bromine and lithium production from brine produced from the unit. We completed an initial preliminary economic assessment in early 2023 for a bromine extraction plant. On January 8, 2024, we announced the completion of a technical resources report for our Brine Unit in Arkansas. During the three months ended March 31, 2024, we capitalized approximately $ 4.0 million of costs associated with the development of our properties in Arkansas. We recognized $ 0.7 million of expense during the three months ended March 31, 2023 for exploration and pre-development costs representing expenditures incurred to evaluate potential future development of our lithium and bromine properties in Arkansas. Foreign Currency Translation We have designated the Euro, the British pound, the Canadian dollar, the Brazilian real, and the Mexican peso as the functional currencies for our operations in Finland and Sweden, the United Kingdom, Canada, Brazil, and certain of our operations in Mexico, respectively. The United States dollar is the designated functional currency for all of our other non-U.S. operations. The cumulative translation effects of translating the applicable accounts from the functional currencies into the United States dollar at current exchange rates are included as a separate component of equity. Foreign currency exchange (gains) losses are included in other (income) expense, net and totaled $( 0.2 ) million and $ 0.2 million during the three months ended March 31, 2024 and March 31, 2023, respectively. Fair Value Measurements We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized on a recurring basis in the determination of the carrying values of certain investments. See Note 7 - “Fair Value Measurements” for further discussion. Fair value measurements are also utilized on a nonrecurring basis in certain circumstances, including the impairment of long-lived assets (a Level 3 fair value measurement). 8 Table of Contents Supplemental Cash Flow Information Supplemental cash flow information is as follows: Three Months Ended March 31, 2024 2023 (in thousands) Interest paid $ 5,406 $ 4,513 Income taxes paid $ 433 $ 1,358 March 31, 2024 December 31, 2023 (in thousands) Accrued capital expenditures $ 3,908 $ 5,171 New Accounting Pronouncements Standards not yet adopted In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which is intended to improve reportable segments disclosures in annual and interim financial statements, primarily through expanded disclosures of significant segment expenses. ASU 2023-07 is effective for annual reporting periods beginning after December 15, 2023 and interim reporting periods beginning after December 15, 2024, with early adoption permitted. In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The new standard requires companies to disclose specific categories in the income tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. ASU 2023-09 is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the expected impact of these standards but does not expect them to have a significant impact on its consolidated financial statements upon adoption as the standards expand disclosures only. NOTE 2 – REVENUE FROM CONTRACTS WITH CUSTOMERS Our contract asset balances, primarily associated with contractual invoicing milestones and/or customer documentation requirements, were $ 25.4 million and $ 30.6 million as of March 31, 2024 and December 31, 2023, respectively. Contract assets, along with billed trade accounts receivable, are included in trade accounts receivable in our consolidated balance sheets. Unearned income includes amounts in which the Company was contractually allowed to invoice prior to satisfying the associated performance obligations. Unearned income balances were $ 5.8 million and $ 3.1 million as of March 31, 2024 and December 31, 2023, respectively, and vary based on the timing of invoicing and performance obligations being met. Unearned income is included in accrued liabilities and other in our consolidated balance sheets. We recognized approximately $ 0.1 million and $ 0.7 million of revenue during the three months ended March 31, 2024 and March 31, 2023, respectively, deferred in unearned income as of the beginning of the period. During the three months ended March 31, 2024 and March 31, 2023, contract costs were not significant. 9 Table of Contents We disaggregate revenue from contracts with customers into Product Sales and Services within each segment, as noted in our two reportable segments in Note 9 - “Industry Segments.” In addition, we disaggregate revenue from contracts with customers by geography based on the following table below. Three Months Ended March 31, 2024 2023 (in thousands) Completion Fluids & Products United States $ 41,437 $ 32,824 International 35,845 36,218 77,282 69,042 Water & Flowback Services United States 64,711 68,338 International 8,979 8,829 73,690 77,167 Total Revenue United States 106,148 101,162 International 44,824 45,047 $ 150,972 $ 146,209 NOTE 3 – INVENTORIES Components of inventories as of March 31, 2024 and December 31, 2023 are as follows: March 31, 2024 December 31, 2023 (in thousands) Finished goods $ 81,138 $ 79,769 Raw materials 4,280 8,329 Parts and supplies 7,012 6,868 Work in progress 1,855 1,570 Total inventories $ 94,285 $ 96,536 Finished goods inventories include newly manufactured clear brine fluids as well as used brines that are repurchased from certain customers for recycling . NOTE 4 – INVESTMENTS Our investments as of March 31, 2024 and December 31, 2023 consist of the following: March 31, 2024 December 31, 2023 (in thousands) Investment in CSI Compressco $ 12,204 $ 8,538 Investment in CarbonFree 6,888 6,850 Investment in Standard Lithium 944 1,616 Other investments 350 350 Total Investments $ 20,386 $ 17,354 Following the January 2021 sale of the general partner of CSI Compressco LP (“CSI Compressco”), we owned approximately 3.7 % of the outstanding CSI Compressco common units (NASDAQ: CCLP) as of March 31, 2024. CSI Compressco was acquired by Kodiak Gas Services, Inc. (NYSE: KGS) (“Kodiak”) on April 1, 2024. See Note 10 - “Subsequent Events” for further information. 10 Table of Contents CarbonFree Chemicals Holdings LLC (“CarbonFree”) is a carbon capture company with patented technologies that capture CO 2 and mineralize emissions to make commercial, carbon-negative chemicals. In December 2021, we invested $ 5.0 million in a convertible note issued by CarbonFree. During the three month period ended March 31, 2024, the convertible note agreement was amended and, in connection with that amendment, note holders agreed to defer their right to electively convert the convertible notes to common units of CarbonFree (“CarbonFree Units”) for two years . In exchange for the amendment, we received CarbonFree Units representing less than 1 % of the CarbonFree Units outstanding as of March 31, 2024. The CarbonFree Units are not publicly traded and may not be offered, sold, transferred or pledged until such common units are registered pursuant to an effective registration statement or pursuant to an exemption from registration. Our exposure to potential losses by CarbonFree is limited to our investment, including capitalized and accrued interest associated with the CarbonFree convertible note and CarbonFree Units. We are party to agreements whereby Standard Lithium Ltd. (NYSE: SLI) (“Standard Lithium”) has the rights to produce and extract lithium in a portion of our Arkansas leases. The Company received stock of Standard Lithium under the terms of its arrangements. See Note 7 - “Fair Value Measurements” for further information. NOTE 5 – LONG-TERM DEBT AND OTHER BORROWINGS Consolidated long-term debt as of March 31, 2024 and December 31, 2023 consists of the following: Scheduled Maturity March 31, 2024 December 31, 2023 (in thousands) Term Credit Agreement (1) January 12, 2030 $ 179,394 $ 157,505 Total long-term debt $ 179,394 $ 157,505 (1) Net of unamortized discount of $ 5.5 million and $ 2.2 million as of March 31, 2024 and December 31, 2023, respectively, and net of unamortized deferred financing costs of $ 5.1 million and $ 3.3 million as of March 31, 2024 and December 31, 2023, respectively. Term Credit Agreement On January 12, 2024, the Company entered into a definitive agreement for a $ 265.0 million credit facility, consisting of a $ 190.0 million funded term loan and a $ 75.0 million delayed-draw term loan (collectively the “Term Credit Agreement”) that refinanced the Company’s prior credit facility outstanding as of December 31, 2023 and provided capital to advance the Company’s Arkansas bromine processing project. Pricing on the Term Credit Agreement is the secured overnight financing rate plus 5.75 %. The Company is required to pay a commitment fee on the unutilized commitments with respect to the delayed-draw term loan at the rate of 1.5% per annum. The interest rate per annum on borrowings under the Term Credit Agreement is 11.17 % as of March 31, 2024 and the maturity date of the Term Credit Agreement is January 12, 2030. The Company used the net proceeds to repay in full the balance of its prior credit facility, with approximately $ 15.2 million of additional cash, net of discounts and transaction expenses. As a result of termination of the prior credit facility, a loss of $ 5.5 million was recognized during the three-month period ended March 31, 2024 primarily for unamortized deferred financing costs. The Term Credit Agreement contains certain affirmative and negative covenants, including covenants that restrict the ability of the Company and certain of its subsidiaries to take certain actions including, among other things and subject to certain significant exceptions, the incurrence of debt, the granting of liens, engaging in mergers and other fundamental changes, the making of investments, entering into transactions with affiliates, the payment of dividends and other restricted payments, the prepayment of other indebtedness and the sale of assets. The Term Credit Agreement also requires the Company to maintain a Leverage Ratio (as defined in the new term loan credit agreement) of not more than 4.0 to 1.0 as of the end of each fiscal quarter and Liquidity (as defined in the Term Credit Agreement) of not less than $50.0 million at all times. All obligations under the Term Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a security interest on substantially all of the property of the Company and its domestic subsidiaries, subject to the lien priorities set forth in the intercreditor agreement with the agent under our ABL Credit Agreement. 11 Table of Contents Our Term Credit Agreement requires us to offer to prepay a percentage of Excess Cash Flow (as defined in the Term Credit Agreement) within five business days of filing our Annual Report beginning with the financial statements for the year ending December 31, 2024. The Term Credit Agreement includes customary events of default including non-payment of principal, interest or fees, violation of covenants, inaccuracy of representations or warranties, cross-default to other material indebtedness, bankruptcy and insolvency events, invalidity or impairment of security interests or invalidity of loan documents, certain ERISA events, unsatisfied or unstayed judgments and change of control. ABL Credit Agreement As of March 31, 2024, our asset-based credit agreement (“ABL Credit Agreement”) provides for a senior secured revolving credit facility of up to $ 80.0 million, with a $ 20.0 million accordion. The credit facility is subject to a borrowing base determined monthly 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. As of March 31, 2024, we had no balance outstanding and $ 0.5 million in letters of credit and guarantees under our ABL Credit Agreement. Deferred financing costs of $ 0.5 million and $ 0.6 million as of March 31, 2024 and December 31, 2023, respectively, were classified as other long-term assets on the accompanying consolidated balance sheet as there was no outstanding balance on our ABL Credit Agreement. Subject to compliance with the covenants, borrowing base, and other provisions of the ABL Credit Agreement that may limit borrowings, we had availability of $ 79.5 million under this agreement. Borrowings under the ABL Credit Agreement bear interest at a rate per annum equal to, at the option of TETRA, either (i) the standard overnight financing rate plus 0.10%, (ii) a base rate plus a margin based on a fixed charge coverage ratio, (iii) the Daily Simple Risk Free Rate plus 0.10%, or (iv) with respect to borrowings denominated in Sterling, the Daily Simple Risk Free Rate for Sterling plus 0.0326%. The base rate is determined by reference to the highest of (a) the prime rate of interest as announced from time to time by JPMorgan Chase Bank, N.A. (b) the Federal Funds Effective Rate (as defined in the ABL Credit Agreement) plus 0.5% per annum and (c) the standard overnight financing rate (adjusted to reflect any required bank reserves) for a one-month period on such day plus 1.0% per annum. Borrowings outstanding have an applicable margin ranging from 1.75% to 2.25% per annum for LIBOR-based loans and 0.75% to 1.25% per annum for base-rate loans, based upon the applicable fixed charge coverage ratio. As of March 31, 2024, the interest rate per annum on borrowings under the ABL Credit Agreement is 8.75 %. In addition to paying interest on the outstanding principal under the ABL Credit Agreement, TETRA is required to pay a commitment fee in respect of the unutilized commitments at an applicable rate ranging from 0.375% to 0.5% per annum, paid monthly in arrears based on utilization of the commitments under the ABL Credit Agreement. TETRA is also required to pay a customary letter of credit fee equal to the applicable margin on loans and fronting fees. All obligations under the ABL Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a security interest for the benefit of the ABL Lenders on substantially all of the personal property of TETRA and certain subsidiaries of TETRA, the equity interests in certain domestic subsidiaries, and a maximum of 65% of the equity interests in certain foreign subsidiaries. Swedish Credit Facility In January 2022, the Company entered into a revolving credit facility for seasonal working capital needs of subsidiaries in Sweden (“Swedish Credit Facility”). As of March 31, 2024, we had no balance outstanding and availability of approximately $ 4.7 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. Borrowings bear interest at a rate of 2.95 % per annum. The Swedish Credit Facility expires on December 31, 2024 and the Company intends to renew it annually. 12 Table of Contents 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 March 31, 2024, there were $ 1.5 million of letters of credit outstanding against the Finland Credit Agreement. The Finland Credit Agreement expires on January 31, 2025 and the Company intends to renew it annually. Covenants Our credit agreements contain certain affirmative and negative covenants, including covenants that restrict the ability to pay dividends or other restricted payments. As of March 31, 2024, we are in compliance with all covenants under the credit agreements. NOTE 6 – COMMITMENTS AND CONTINGENCIES Litigation We are named defendants in several lawsuits and respondents in certain governmental proceedings arising in the ordinary course of business. There have been no material developments in our legal proceedings during the quarter ended March 31, 2024. For additional discussion of our legal proceedings, please see our 202 3 Annual Report . Also see Note 10 - “Subsequent Events” for information related to a putative class action complaint that was filed on April 25, 2024. While the outcome of lawsuits or other proceedings against us cannot be predicted with certainty, management does not consider it reasonably possible that a loss resulting from such lawsuits or other proceedings in excess of any amounts accrued has been incurred that is expected to have a material adverse impact on our financial condition, results of operations, or liquidity. Product Purchase Obligations In the normal course of our Completion Fluids & Products Division operations, we enter into supply agreements with certain manufacturers of various raw materials and finished products. Some of these agreements have terms and conditions that specify a minimum or maximum level of purchases over the term of the agreement. Other agreements require us to purchase the entire output of the raw material or finished product produced by the manufacturer. Our purchase obligations under these agreements apply only with regard to raw materials and finished products that meet specifications set forth in the agreements. We recognize a liability for the purchase of such products at the time we receive them. As of March 31, 2024, 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 $ 69.0 million, including $ 20.9 million for the remainder of 2024, $ 22.5 million in 2025, $ 16.0 million in 2026, $ 7.4 million in 2027 and $ 2.2 million in 2028 . NOTE 7 – FAIR VALUE MEASUREMENTS Financial Instruments Investments We retained an interest in CSI Compressco representing approximately 3.7 % of CSI Compressco’s outstanding common units as of March 31, 2024. CSI Compressco was acquired by Kodiak on April 1, 2024. See Note 10 - “Subsequent Event” for further information. In December 2021, we invested in a $ 5.0 million convertible note issued by CarbonFree. In addition, we receive stock of Standard Lithium under the terms of our arrangements as noted in Note 4 - “Investments.” Our investments in CSI Compressco and Standard Lithium are recorded in investments on our consolidated balance sheets based on the quoted market stock price (Level 1 fair value measurements). The stock component of consideration received from Standard Lithium was initially recorded as unearned income based on the quoted market price at the time the stock is received, then recognized in income over the contract term. Changes in the value of stock are recorded in other (income) expense, net in our consolidated statements of operations. 13 Table of Contents Our investment in convertible notes and common units issued by CarbonFree is recorded in our consolidated financial statements based on an internal valuation with assistance from a third-party valuation specialist (Level 3 fair value measurement). The valuation is impacted by key assumptions, including the assumed probability and timing of potential debt or equity offerings. The convertible note includes an option to convert the note into equity interests issued by CarbonFree. The change in the fair value of the embedded option is included in other (income) expense, net in our consolidated statements of operations. The change in the fair value of the convertible note, excluding the embedded option, and common units are included in other comprehensive income (loss) in our consolidated statements of comprehensive income. The change in our investments for the three-month periods ended March 31, 2024 and 2023 are as follows: Three Months Ended March 31, 2024 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Unobservable Inputs (Level 1) (Level 3) Total (in thousands) Investment balance at beginning of period $ 10,154 $ 7,200 $ 17,354 Unrealized gain on equity securities 2,994 — 2,994 Unrealized loss on embedded option — ( 199 ) ( 199 ) Unrealized gain on convertible note, excluding embedded option — 237 237 Investment balance at end of period $ 13,148 $ 7,238 $ 20,386 Three Months Ended March 31, 2023 Fair Value Measurements Using Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Unobservable Inputs (Level 1) (Level 3) Total (in thousands) Investment balance at beginning of period $ 8,147 $ 6,139 $ 14,286 Unrealized loss on equity securities ( 184 ) — ( 184 ) Unrealized loss on embedded option — ( 321 ) ( 321 ) Unrealized gain on convertible note, excluding embedded option — 121 121 Investment balance at end of period $ 7,963 $ 5,939 $ 13,902 Recurring fair value measurements by valuation hierarchy as of March 31, 2024 and December 31, 2023 are as follows: Fair Value Measurements Using Total as of Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs Description March 31, 2024 (Level 1) (Level 2) (Level 3) (in thousands) Investment in CSI Compressco $ 12,204 $ 12,204 $ — $ — Investment in CarbonFree 6,888 — — 6,888 Investment in Standard Lithium 944 944 — — Other investments 350 — — 350 Total investments $ 20,386 14 Table of Contents Fair Value Measurements Using Total as of Quoted Prices in Active Markets for Identical Assets or Liabilities Significant Other Observable Inputs Significant Unobservable Inputs Description December 31, 2023 (Level 1) (Level 2) (Level 3) (in thousands) Investment in CSI Compressco $ 8,538 $ 8,538 $ — $ — Investment in CarbonFree 6,850 — — 6,850 Investment in Standard Lithium 1,616 1,616 — — Other investments 350 — — 350 Investments $ 17,354 Other The fair values of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings and long-term debt approximate their carrying amounts. See Note 5 - “Long-Term Debt and Other Borrowings” for further discussion. NOTE 8 – NET INCOME PER SHARE The following is a reconciliation of the weighted average number of common shares outstanding with the number of shares used in the computations of net income per common and common equivalent share: Three Months Ended March 31, 2024 2023 (in thousands) Number of weighted average common shares outstanding 130,453 128,940 Assumed vesting of equity awards 1,670 1,035 Average diluted shares outstanding 132,123 129,975 15 Table of Contents NOTE 9 – INDUSTRY SEGMENTS We manage our operations through two segments: Completion Fluids & Products Division and Water & Flowback Services Division. Summarized financial information concerning the business segments is as follows: Three Months Ended March 31, 2024 2023 (in thousands) Revenues from external customers Product sales Completion Fluids & Products Division $ 72,753 $ 65,515 Water & Flowback Services Division 584 20 Consolidated $ 73,337 $ 65,535 Services Completion Fluids & Products Division $ 4,529 $ 3,527 Water & Flowback Services Division 73,106 77,147 Consolidated $ 77,635 $ 80,674 Total revenues Completion Fluids & Products Division $ 77,282 $ 69,042 Water & Flowback Services Division 73,690 77,167 Consolidated $ 150,972 $ 146,209 Income (loss) before taxes and discontinued operations Completion Fluids & Products Division $ 19,792 $ 18,442 Water & Flowback Services Division 721 6,378 Corporate Overhead (1) ( 19,218 ) ( 17,286 ) Consolidated $ 1,295 $ 7,534 (1) Amounts reflected include the following general corporate expenses: Three Months Ended March 31, 2024 2023 (in thousands) General and administrative expense $ 11,102 $ 11,059 Depreciation and amortization 81 109 Interest expense 6,145 5,460 Loss on debt extinguishment 5,535 — Other general corporate (income) expense, net ( 3,645 ) 658 Total $ 19,218 $ 17,286 NOTE 10 – SUBSEQUENT EVENTS The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been no events that have occurred that would require adjustments to our disclosures in the consolidated financial statements except for the transaction and event described below. On April 1, 2024, Kodiak completed its acquisition of CSI Compressco. In exchange for our 5.2 million CSI Compressco common units, we received approximately 450,000 shares of Kodiak common stock. 16 Table of Contents On April 25, 2024, a purported stockholder of the Company filed a putative class action complaint in the Delaware Court of Chancery naming as defendants all current members of the Board, the Company and the Rights Agent. The litigation is captioned Webb, et al. v. Murphy, et al., C.A. No. 2024-0445 (Del. Ch.). The plaintiff alleges that the Board breached their fiduciary duties by adopting and maintaining the Company’s Tax Benefits Preservation Plan (the “Tax Plan”). The plaintiff seeks, among other relief, to enjoin the Tax Plan. We believe that the plaintiff’s claims lack merit. 17 Table of Contents