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Item 2. Management’s Discussion and Analysis

2023-05-01 compared with 2022-10-31 · 191 added, 206 removed, 205 unchanged (66% of the section changed)

1 unchanged sentence

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

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

In addition, the following discussion and analysis should also be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2023 (“2022 Annual Report”).

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

3 unchanged sentences

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

Commodity prices have remained constructive with oil sustaining an average price of approximately $93 per barrel for the third quarter of 2022, and natural gas prices averaging approximately $8 per million Btu.

Third quarter consolidated revenue of $135.0 million was slightly below second-quarter levels and is comparable to the pre-pandemic period, although with significantly fewer operating frac crews in the United States.

Completion Fluids & Products Division revenues were slightly lower sequentially, as the prior quarter benefited from the seasonal uplift for our European industrial chemicals business.

However, with much higher oil prices relative to the prior year quarter continuing to drive demand, revenues were significantly higher compared to the prior year quarter, primarily due to increased completions activity in the Gulf of Mexico and international markets.

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

As the offshore market continues to improve, our pipeline of TETRA CS Neptune ® completion fluid opportunities is growing to levels we have not experienced since 2014, with additional projects expected to come on line beginning late in 2023.

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

("Eos") (NASDAQ:

EOSE) under our recent strategic partnership.

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

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

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

Because of the ongoing conflict between Russia and Ukraine, toward the end of the first quarter, our primary European supplier of certain raw materials advised us of supply constraints with one of their suppliers of a key raw material used in their manufacturing process.

This raw material is a widely used, global commodity but the disruption to the current supply chain has caused some impact on their production which in turn has caused a reduction in delivered volumes of certain raw materials to our plant in Finland where we manufacture calcium chloride, which has decreased our calcium chloride production volumes and had some impact on our margins during the first half of 2022.

Our supplier has sourced their material from an alternative location and resumed supplying increased volumes to us, greater than the first half of 2022, although not yet at full production levels.

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

The exact financial impact remains difficult to quantify at this time and is dependent on our primary supplier’s capability to restore historical supply and our ability to find alternative sources of certain raw materials from suppliers not directly or indirectly impacted by the conflict or the ability of our primary supplier to source alternative raw material sources.

Our Water & Flowback Services revenues increased sequentially, and improved significantly compared to the prior year quarter, 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.

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 early 2023.

Our fleet of TETRA SandStorm TM (“SandStorm”) advanced cyclone technology separators remains at high utilization with continued

market penetration and positive pricing progression.

During the quarter, over two thirds of our water transfer volumes in the Permian Basin was produced water and we expect this trend to continue, driven by seismicity concerns and disposal restrictions.

During the quarter, 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.

First-quarter consolidated revenue of $146.2 million was comparable to fourth-quarter levels and greater than pre-pandemic levels, although with significantly fewer operating frac crews in the United States.

Completion Fluids & Products Division revenues increased 4% sequentially despite significant projects that had previously moved up from the first quarter of 2023 into the fourth quarter of 2022.

The stronger performance was also driven by improved pricing and volumes in the industrial chemicals business where capacity is almost back to levels experienced prior to the Russia/Ukraine conflict.

Results for the first quarter of 2023 also reflect a full-quarter contribution from the fluids acquisition late last year in the North Sea, which performed above expectations.

The outlook for international and offshore markets activity growth remains strong.

With the planned expansion of our Brazil completion fluids blending and storage facility in the second quarter of 2023, we have now completed or committed to three strategic investments to grow our market position and add capacity in key offshore markets.

Our Water & Flowback Services revenues increased significantly compared to the first quarter of the prior year, driven primarily by growth in our domestic TETRA SandStorm TM business, as well as from the first two early production facilities in Latin America that became operational 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 second quarter of 2023.

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

Water & Flowback Services revenues decreased slightly compared to the fourth quarter due to the timing of certain customer completion schedules.

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

During the third quarter of 2022, the maiden inferred bromine and lithium brine resource estimation report for our leased acreage in the Smackover Formation in Southwest Arkansas was completed.

The report indicates the brine resource underlying the approximately 40,000 gross acres where we hold bromine mineral rights is estimated to contain an inferred resource of 5.25 million short tons of elemental bromine;

and the brine resource underlying the approximately 5,000 gross acres where we hold dedicated lithium mineral rights is estimated to contain an inferred resource of 44,000 short tons of elemental lithium.

Using an elemental to Lithium Carbonate Equivalent ("LCE") conversion ratio of 5.323, which is accepted in the industry, the acreage is estimated to contain 234,000 short tons of LCE.

The initial TETRA bromine and lithium brine resource estimations are presented as total resource within the Upper Smackover Member underlying the TETRA property.

Resource estimations were completed and reported using cutoffs of 250 mg/liter bromine and 50 mg/liter lithium.

We intend to complete an initial economic assessment for the bromine extraction plant this year which will highlight the economics of the potential investment and a corresponding business plan.

Starting in 2023, we will begin work on an initial economic assessment for a lithium extraction plant to enable extraction of lithium from our dedicated 5,000 gross acres.

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

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

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

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

See Note 2 – “Discontinued Operations” in the Notes to Consolidated Financial Statements for further information.

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.

Additional steps are required before making a decision to develop the bromine assets, including further studies to analyze the resource and completion of a pre-feasibility and/or feasibility study.

A second exploratory well on our acreage in Arkansas is in progress as of April 28, 2023 with the intent to improve the accuracy of our lithium and bromine resource estimates.

Results of Operations

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

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

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

Three months ended September 30, 2022 compared with three months ended June 30, 2022.

The analysis herein reflects the optional approach to discuss results of operations on a sequential-quarter basis, which we believe provides information that is most useful in assessing our quarterly results of operations.

Three months ended March 31, 2023 compared with three months ended December 31, 2022.

Consolidated Comparisons

Three Months Ended Period to Period Change

September 30, June 30, $ Change % Change

March 31, December 31, $ Change % Change

(in thousands, except percentages)

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24.8 % 21.1 %

Exploration and appraisal costs 936 634 302 47.6 %

Exploration and pre-development costs 720 3,135 (2,415) (77.0) %

General and administrative expense 23,191 23,846 (655) (2.7) %

2 unchanged sentences

Interest expense, net 5,092 4,900 192 3.9 %

Other income, net (1,410) (1,037) (373) 36.0 %

Income before taxes and discontinued operations 2,115 1,280 835 65.2 %

Income before taxes and discontinued operations as a percentage of revenue 1.6 % 0.9 %

Provision (benefit) for income taxes 2,178 (479) 2,657 NM (1)

Other (income) expense, net (214) 393 (607) (154.5) %

Income (loss) before taxes and discontinued operations 7,534 (1,163) 8,697 NM (1)

Income (loss) before taxes and discontinued operations as a percentage of revenue 5.2 % (0.8) %

Provision for income taxes 1,489 666 823 123.6 %

Income (loss) before discontinued operations 6,045 (1,829) 7,874 (430.5) %

Discontinued operations:

Income (loss) from discontinued operations, net of taxes 319 (34) 353 NM

Net income 256 1,725 (1,469) (85.2) %

Loss from discontinued operations, net of taxes (12) (75) 63 (84.0) %

Net income (loss) 6,033 (1,904) 7,937 (416.9) %

Loss attributable to noncontrolling interests 7 — 7 100.0 %

Net income attributable to TETRA stockholders $ 278 $ 1,745 $ (1,467) (84.1) %

Net income (loss) attributable to TETRA stockholders $ 6,040 $ (1,904) $ 7,944 (417.2) %

(1) Percent change is not meaningful

Consolidated revenues decreased in the current quarter primarily due to a decrease in overall activity for the Completion Fluids & Products division, from seasonality of the chemical business in Europe which experiences peak sales during the second quarter, partially offset by an increase in revenues from the Water & Flowback Services division.

Consolidated revenues are comparable between the current and previous quarters, with the decrease in revenues from the Water & Flowback Services division mostly offset by an increase in overall activity for the Completion Fluids & Products division.

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

Consolidated gross profit as a percentage of revenue increased primarily due to our Water & Flowback Services Division increased overall activity level and margins, including two early production facilities coming on line in Argentina during the current quarter, partially offset by lower activity from the higher-margin Completion Fluids & Products division.

Consolidated gross profit as a percentage of revenue increased primarily due to our Completion Fluids & Products division benefiting from increased overall activity levels and margins, as well as a $2.9 million insurance settlement received in March 2023, which was related to damage to our Lake Charles facility during Hurricane Laura in 2020.

See Divisional Comparisons section below for additional discussion.

Consolidated exploration and appraisal costs increased due to front-end engineering design and initial economic assessment costs of our bromine project in Arkansas.

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

Consolidated other income, net, increased in the current quarter, compared to the prior quarter primarily due to a $0.9 million decrease in unrealized loss from our investment in Standard Lithium shares received in April 2022 and a $0.2 million increase in foreign exchange gains compared to the previous quarter.

These increases are partially offset by a $0.5 million decrease in unrealized gains from the change in fair value of the CarbonFree convertible note and a $0.3 million increase in unrealized loss due to the change in the unit price of the CSI Compressco common units we own.

Consolidated provision for income tax was $2.2 million, during the current quarter, compared to a $0.5 million benefit during the prior quarter.

Our consolidated effective tax rate for the three months ended September 30, 2022 was 103.0% due primarily to the impact that changes in the full-year forecast had on our interim reporting under Accounting Standards Codification 740, Income Taxes.

Changes in our forecast resulted in recording most of our expected full-year provision during the current quarter.

Consolidated exploration and pre-development costs decreased primarily due to completion of the front-end engineering and design study for our potential brine to bromine processing plant in Southwest Arkansas during the prior quarter.

Consolidated other (income) expense, net, increased in the current quarter, compared to the prior quarter primarily due to a $0.9 million increase in unrealized gain from our Standard Lithium shares received in April 2022 and a $1.5 million decrease in foreign exchange losses compared to the previous quarter.

These changes are partially offset by a $1.4 million increase in unrealized loss due to the change in the unit price of the CSI Compressco common units we own and a $0.4 million increase in unrealized loss from the change in fair value of the CarbonFree convertible note embedded option.

Consolidated provision for income tax was $1.5 million during the current quarter, compared to a $0.7 million provision during the prior quarter.

Our consolidated effective tax rate for the three months ended March 31, 2023 was 19.8% due to income generated during the quarter, partially offset by the utilization of net operating loss carryforwards in the United States and certain other non-U.S.

jurisdictions for which a valuation allowance had been established.

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

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

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

jurisdictions.

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Three Months Ended Period to Period Change

September 30, June 30, $ Change % Change

March 31, December 31, $ Change % Change

(in thousands, except percentages)

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36.2 % 30.2 %

Exploration and appraisal costs 935 635 300 47.2 %

Exploration and pre-development costs 720 3,135 (2,415) (77.0) %

General and administrative expense 7,173 6,730 443 6.6 %

General and administrative expense as a percentage of revenue

Interest income, net (436) (283) (153) 54.1 %

Other (income) expense, net (613) 265 (878) (331.3) %

Income before taxes $ 12,357 $ 15,261 $ (2,904) (19.0) %

Income before taxes as a percentage of revenue

10.4 % 10.2 %

Revenues for our Completion Fluids & Products Division decreased primarily due to the seasonality of the chemical business in Europe which experiences peak sales during the second quarter, partially offset by an increase in international markets and higher shipments of TETRA PureFlow ® ultra-pure zinc bromide clear brine fluid.

Gross profit for our Completion Fluids & Products Division decreased compared to the prior quarter period primarily due to the seasonal impact mentioned above, and the curtailment of certain raw materials impacting production volumes.

Gross profit as a percentage of revenue improved slightly compared to the prior quarter due to the mix of products, including higher shipments of TETRA PureFlow ® .

Profitability in future periods will continue to be affected by the mix of its products and services, market demand for our products and services, drilling and completions activity, supply chain challenges and inflationary pressures.

Pretax income for our Completion Fluids & Products Division decreased primarily due to the $3.5 million lower gross profit described above, a $0.3 million increase in exploration and appraisal costs associated with front-end engineering design and initial economic assessment of our bromine project and a $0.5 million decrease in unrealized gains from the change in fair value of the CarbonFree convertible note.

These changes were partially offset by a $0.4 million decrease in foreign exchange losses and a $0.9 million decrease in unrealized loss from our investment in Standard Lithium shares received in April 2022.

Interest income, net (395) (304) (91) 29.9 %

Other income, net (930) (24) (906) NM (1)

Income before taxes and discontinued operations $ 18,442 $ 10,456 $ 7,986 76.4 %

Income before taxes and discontinued operations as a percentage of revenue 26.7 % 15.8 %

(1) Percent change is not meaningful

Revenues for our Completion Fluids & Products Division increased primarily due to increased pricing for industrial chemical sales, as well as higher sales volume in Europe.

Gross profit for our Completion Fluids & Products Division increased compared to the prior quarter period primarily due to the pricing and sales volume impact mentioned above, as well as a $2.9 million insurance settlement received in March 2023 related to damage to our Lake Charles facility during Hurricane Laura in 2020.

Gross profit as a percentage of revenue improved compared to the prior quarter due to the insurance settlement related to our Lake Charles facility and the shift to a higher margin mix of products.

Our profitability in future periods will continue to be affected by the mix of our products and services, market demand for our products and services, drilling and completions activity, supply chain challenges and inflationary pressures.

Income before taxes and discontinued operations for our Completion Fluids & Products Division increased primarily due to the $5.0 million higher gross profit described above, a $2.4 million decrease in exploration and pre-development costs associated with front-end engineering design for our potential Southwest Arkansas bromine development, a $0.4 million decrease in foreign exchange losses and a $0.9 million increase in unrealized gain from our investment in Standard Lithium shares received in April 2022.

These changes were partially offset by the $0.4 million unrealized loss from the change in fair value of the CarbonFree convertible note embedded option.

Water & Flowback Services Division

Three Months Ended Period to Period Change

September 30, June 30, $ Change % Change

March 31, December 31, $ Change % Change

(in thousands, except percentages)

2 unchanged sentences

Gross profit as a percentage of revenue

14.8 % 13.9 %

General and administrative expense 4,959 5,895 (936) (15.9) %

2 unchanged sentences

Other income, net 58 322 (264) (82.0) %

Income before taxes $ 6,482 $ 1,644 $ 4,838 294.3 %

Income before taxes as a percentage of revenue 8.5 % 2.5 %

Revenues for our Water & Flowback Services Division increased for both water management and production testing in the current quarter compared to the prior quarter, primarily due to the continued higher overall customer activity in the North America onshore business and in Latin America due to two early production facilities coming on line beginning in the third quarter.

The higher customer activity can be attributed to sustained high commodity prices.

Gross profit for our Water & Flowback Services Division increased compared to the prior quarter reflecting the margin expansion efforts driven by investments in technology, integration, digitalization and the benefit of our early production facilities being on line for the full quarter in Argentina.

Income before taxes and discontinued operations $ 6,378 $ 4,924 $ 1,454 29.5 %

Income before taxes and discontinued operations as a percentage of revenue 8.3 % 6.1 %

Revenues for our Water & Flowback Services Division decreased in the current quarter compared to the prior quarter, primarily in our Production Testing business due to the lower overall customer activity in the North America onshore business impacted by the timing of customer completion schedules.

Gross profit for our Water & Flowback Services Division remained flat compared to the prior quarter as the effect of lower revenue was offset by a more profitable sales mix.

Gross profit as a percentage of revenue increased reflecting the continued margin expansion efforts driven by investments in technology, integration, digitalization and the benefit of our early production facilities in Argentina.

Our SandStorm fleet remains at high utilization with continued market penetration and positive pricing progression.

The Water & Flowback Services Division pretax income increased due to an increase in gross profit which was partially offset by a $0.2 million decrease in gains on sales of assets and $0.2 million decrease in foreign exchange gains.

General and administrative expense decreased due to a $0.5 million decrease in professional services from contract labor, partially offset by higher compensation and benefits from higher salaries and additional headcount.

The Water & Flowback Services Division income before taxes and discontinued operations increased due to a decrease in general and administrative expenses, including a $0.4 million decrease in wages and benefits, a $0.3 million decrease in general expenses and a $0.3 million decrease in professional fees, as well as a $0.3 million decrease in foreign exchange losses.

Corporate Overhead

Three Months Ended Period to Period Change

September 30, June 30, $ Change % Change

March 31, December 31, $ Change % Change

(in thousands, except percentages)

3 unchanged sentences

Other expense, net 658 95 563 592.6 %

Loss before taxes $ (16,727) $ (15,628) $ (1,099) 7.0 %

Corporate overhead pretax loss increased primarily due to a $0.5 million increase in interest expense due to an increase in the interest rate on our Term Credit Agreement and a $0.4 million increase in general and administrative expense due to higher long-term incentive compensation expense.

Nine months ended September 30, 2022 compared with nine months ended September 30, 2021.

Loss before taxes and discontinued operations $ (17,286) $ (16,543) $ (743) 4.5 %

Corporate overhead loss before taxes and discontinued operations increased primarily due to a $0.4 million increase in interest expense due to an increase in the interest rate on our Term Credit Agreement and higher borrowings under our ABL Credit Agreement.

Other expense, net increased primarily due to a $1.4 million decrease in unrealized gains related to unit price changes of our investment in CSI Compressco, partially offset by a $0.8 million decrease in foreign exchange losses.

Three months ended March 31, 2023 compared with three months ended March 31, 2022.

Consolidated Comparisons

Nine Months Ended

September 30, Period to Period Change

Three Months Ended

March 31, Period to Period Change

2023 2022 $ Change % Change

4 unchanged sentences

24.8 % 24.9 %

Exploration and appraisal costs 3,500 — 3,500 100.0 %

Exploration and pre-development costs 720 1,930 (1,210) (62.7) %

General and administrative expense 23,191 20,643 2,548 12.3 %

3 unchanged sentences

Other income, net (214) (2,411) 2,197 (91.1) %

Income (loss) before taxes and discontinued operations 12,329 (13,963) 26,292 188.3 %

Income (loss) before taxes and discontinued operations as a percentage of revenue 3.0 % (5.1) %

Income before taxes and discontinued operations 7,534 8,934 (1,400) 15.7 %

Income before taxes and discontinued operations as a percentage of revenue 5.2 % 6.9 %

Provision for income taxes 1,489 1,200 289 24.1 %

Income (loss) before discontinued operations 9,430 (16,102) 25,532 158.6 %

Income before discontinued operations 6,045 7,734 (1,689) 21.8 %

Discontinued operations:

Income (loss) from discontinued operations, net of taxes 270 120,882 (120,612) (99.8) %

Loss from discontinued operations, net of taxes (12) (15) 3 (20.0) %

Net income 6,033 7,719 (1,686) (21.8) %

Loss (income) attributable to noncontrolling interests 43 (306) 349 (114.1) %

Loss attributable to noncontrolling interests 7 1 6 600.0 %

Net income attributable to TETRA stockholders $ 6,040 $ 7,720 $ (1,680) (21.8) %

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

Consolidated revenues increased in the current year primarily due to improving industry conditions compared to the prior year for our Water & Flowback Services division, as well as the first two early production facilities in Argentina that commenced operations in the third quarter of 2022, partially offset by lower revenues from our Completion Fluids & Products division.

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

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

Gross profit as a percentage of revenue also increased, primarily due to the significant improvement in profitability for our Water and Flowback Services Division, as well as a $3.8 million insurance settlement received in March 2022 associated with damage to our Lake Charles facility in 2020.

Consolidated exploration and appraisal costs were $3.5 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 and initial economic assessment costs for the bromine project.

Consolidated general and administrative expenses increased compared to the prior year, primarily due to $13.9 million of increased wage and benefit related expenses driven by reinstatement of full salaries and 401K match as well as higher short and long-term incentive expenses, and divisional headcount additions as operational activity levels increased.

Higher wage and benefit related expenses were partially offset by a $2.1 million decrease in professional fees primarily related to the GP Sale in the first quarter of the prior year.

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

Consolidated other income, net, decreased in the current year, compared to the prior year primarily due to a $12.0 million net decrease in unrealized gains on investments in CSI Compressco, Standard Lithium and CarbonFree, partially offset by a $1.6 million increase in foreign exchange gains, and a $0.4 million increase in gains on sales of assets.

Consolidated gross profit increased in the current year primarily due to the increase in revenue, partially offset by an increase in costs associated with the higher Water & Flowback Services division activity levels described above.

Gross profit as a percentage of revenue decreased slightly due to a $2.9 million insurance settlement received in March 2023 associated with damage to our Lake Charles facility in 2020, compared to the $3.8 million insurance settlement received in March 2022.

Consolidated exploration and pre-development costs decreased $1.2 million compared to the prior year following completion of the front-end engineering and design study during the fourth quarter of 2022 associated with our exploratory brine well in Arkansas.

Consolidated general and administrative expenses increased compared to the prior year, primarily due to $2.1 million of increased wage and benefit-related expenses driven by divisional headcount additions as operational activity levels increased, as well as higher short and long-term incentive expense and higher travel expenses, partially offset by lower stock-based compensation expense.

In addition, professional fees increased $0.5 million compared to the prior year.

Consolidated interest expense, net, increased in the current year primarily due to an increase in the interest rate on our Term Credit Agreement and higher borrowings under our ABL Credit Agreement.

Consolidated other income, net, decreased in the current year, compared to the prior year primarily due to a $1.6 million net decrease in unrealized gains on investments in CSI Compressco, Standard Lithium and CarbonFree, and a $1.0 million decrease in foreign exchange gains.

Consolidated provision for income taxes was $1.5 million during the current year, compared to $1.2 million during the prior year.

Our consolidated effective tax rate for the current year was 23.5%.

Our tax provision during the current year was primarily due to income generated in certain non-U.S.

Our consolidated effective tax rate for the current year was 19.8% during the current year, compared to 13.4% during the prior year.

The increase in our tax provision and effective tax rate compared to the prior year was primarily due to income generated in certain non-U.S.

jurisdictions for which a net operating loss carryforward is not available for offset.

2 unchanged sentences

jurisdictions.

Consolidated income (loss) from discontinued operations, net of taxes, for the prior year includes a $120.6 million primarily non-cash accounting gain from the deconsolidation of CSI Compressco.

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

Consolidated income (loss) from discontinued operations for the current year consists of $0.3 million of income from adjustments to reserves related to ongoing legal matters.

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

Divisional Comparisons

Completion Fluids & Products Division

Nine Months Ended

September 30, Period to Period Change

Three Months Ended

March 31, Period to Period Change

2023 2022 $ Change % Change

4 unchanged sentences

36.2 % 35.7 %

Exploration and appraisal costs 3,500 — 3,500 100.0 %

Exploration and pre-development costs 720 1,930 (1,210) (62.7) %

General and administrative expense 7,173 6,059 1,114 18.4 %

2 unchanged sentences

Other income, net (930) (811) (119) 14.7 %

Income before taxes $ 46,910 $ 40,113 $ 6,797 16.9 %

Income before taxes as a percentage of revenue

22.6 % 25.1 %

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

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

Pretax income for our Completion Fluids & Products Division increased compared to the prior year driven by higher gross profit, partially offset by $3.5 million of costs associated with the exploratory brine project during the current year and a $4.3 million increase in general and administrative costs due to reinstatement of full salaries and 401K match as well as higher short and long-term incentive expenses, and divisional headcount additions to support higher activity levels.

Interest income, net increased primarily due to an increase in interest rates on funds held in escrow pending resolution of tax court cases in certain foreign jurisdictions.

In addition, other income, net decreased due to the $9.9 million decrease in income from our Standard Lithium shares, most of which were sold during the fourth quarter of 2021, and a $1.1 million increase in foreign exchange losses.

These changes are partially offset by a $0.8 million unrealized gain on our investment in the CarbonFree convertible note purchased in December 2021.

Income before taxes and discontinued operations $ 18,442 $ 19,292 $ (850) (4.4) %

Income before taxes and discontinued operations as a percentage of revenue 26.7 % 26.4 %

Revenues for our Completion Fluids & Products Division decreased compared to the prior year primarily due to lower activity in the Gulf of Mexico due to the timing of projects, partially offset by higher sales volumes in Latin America and onshore in the United States.

Gross profit for our Completion Fluids & Products Division decreased compared to the prior year due to decrease in revenues, as well as a $0.9 million decrease in insurance settlements received in 2023 compared to 2022 from damage to our Lake Charles facility in 2020.

Income before taxes and discontinued operations for our Completion Fluids & Products Division decreased compared to the prior year driven by lower gross profit, a $1.1 million increase in general and administrative costs due to higher short-term incentive expenses, and divisional headcount additions during 2022 to support higher activity levels, partially offset by a $1.2 million decrease in costs associated with the exploratory brine project compared to the prior period.

Water & Flowback Services Division

Nine Months Ended

September 30, Period to Period Change

Three Months Ended

March 31, Period to Period Change

2023 2022 $ Change % Change

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Revenues $ 77,167 $ 56,843 $ 20,324 35.8 %

Gross profit (loss) 23,793 (2,483) 26,276 NM

Gross profit (loss) as a percentage of revenue 12.0 % (2.2) %

Gross profit 11,422 6,462 4,960 (76.8) %

Gross profit as a percentage of revenue 14.8 % 11.4 %

General and administrative expense 4,959 4,238 721 17.0 %

General and administrative expense as a percentage of revenue

Interest income, net (3) (515) 512 (99.4) %

Other income, net (2,736) (554) (2,182) 393.9 %

Income (loss) before taxes $ 10,808 $ (12,265) $ 23,073 NM

Income (loss) before taxes as a percentage of revenue

5.4 % (10.6) %

Revenues for our Water & Flowback Services Division increased for both water management and production testing due to much overall higher customer drilling and completion activity.

Customer activity levels have continued to improve, primarily in our North America land business as commodity prices have not only recovered but remained high for both crude oil and natural gas compared to the prior year period.

Revenues have also increased in Latin America due to two early production facilities coming on line beginning in the third quarter of the current year.

Gross profit for our Water & Flowback Services Division improved substantially from a loss 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.

Pretax income for our Water & Flowback Services Division increased in the current year primarily due to an improvement in the gross profit described above and a $1.6 million increase in foreign exchange gains as well as a $0.7 million increase in gains on sales of assets, offset by an increase in general and administrative expense primarily due to a $4.5 million increase in salary and employee expense from reinstatement of full salaries and 401K match as well as higher short and long-term incentive expenses, and divisional headcount additions to support higher activity levels.

Interest expense, net 27 — 27 100.0 %

Other (income) expense, net 58 (458) 516 (112.7) %

Income before taxes and discontinued operations $ 6,378 $ 2,682 $ 3,696 (137.8) %

Income before taxes and discontinued operations as a percentage of revenue 8.3 % 4.7 %

Revenues for our Water & Flowback Services Division increased significantly for both water management and production testing due to overall higher customer drilling and completion activity.

Customer activity levels have continued to improve, primarily in our North America land business, as commodity prices recovered during 2022 and remained strong.

Revenues have also increased in Latin America due to two early production facilities that began operations in the third quarter of 2022.

Gross profit for our Water & Flowback Services Division improved substantially from the prior year primarily due to higher revenues resulting from the increased activity levels described above and pricing improvements as activity levels improved and new higher-margin projects commenced.

Income before taxes and discontinued operations for our Water & Flowback Services Division increased in the current year primarily due to an improvement in the gross profit described above, partially offset by a $0.7 million increase in salary and employee expense from higher short and long-term incentive expenses, and divisional headcount additions to support higher activity levels, partially offset by a $0.3 million decrease in foreign exchange gains.

Corporate Overhead

Nine Months Ended

September 30, Period to Period Change

Three Months Ended

March 31, Period to Period Change

2023 2022 $ Change % Change

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Interest expense, net 5,460 3,647 1,813 49.7 %

Other income, net (964) (3,153) 2,189 (69.4) %

Loss before taxes $ (45,398) $ (41,820) $ (3,578) 8.6 %

Corporate overhead pretax loss increased due to a $2.9 million increase in general and administrative expense, as well as a $2.2 million decrease in other income, net, partially offset by a $1.4 million decrease in interest expense, net due to lower debt levels.

Corporate general and administrative expenses increased compared to the prior year, primarily due increased wage and benefit related expenses driven by reinstatement of full salaries and 401K match as well as higher short and long-term incentive expenses, partially offset by a $2.2 million decrease in professional fees primarily related to the GP Sale in the first quarter of the prior year.

Other income, net decreased primarily due to a $2.9 million decrease in income related to unit price changes of our investment in CSI Compressco, partially offset by a $1.1 million increase in foreign exchange gains.

Other (income) expense, net 658 (1,141) 1,799 (157.7) %

Loss before taxes and discontinued operations $ (17,286) $ (13,043) $ (4,243) 32.5 %

Corporate overhead loss before taxes and discontinued operations increased due to a $0.7 million increase in general and administrative expense, as well as a $1.8 million increase in interest expense, net due to an increase in the interest rate on our Term Credit Agreement and higher borrowings under our ABL Credit Agreement, and a $1.8 million decrease in other income, net.

Corporate general and administrative expenses increased compared to the prior year, primarily due to increased wage and benefit-related expenses driven by higher short and long-term incentive expenses.

Other income, net decreased primarily due to a $1.6 million decrease in unrealized gains related to unit price changes of our investment in CSI Compressco, and a $0.4 million decrease in foreign exchange gains.

Non-GAAP Financial Measures

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

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

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 appraisal costs and certain other non-cash charges and non-recurring adjustments.

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 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.

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.

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

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 and are excluded from Adjusted EBITDA because they do not relate to the Company’s current business operations.

Adjustments to long-term incentives represent cumulative 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.

The following tables reconcile net income (loss) before taxes and discontinued operations to Adjusted EBITDA for the periods indicated:

Three Months Ended

September 30, 2022

March 31, 2023

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

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Net income (loss) before taxes and discontinued operations 18,442 6,378 (11,059) (6,227) 7,534

Exploration and appraisal costs 936 — — — 936

Insurance recoveries (2,850) — — — (2,850)

Exploration and pre-development costs 720 — — — 720

Adjustment to long-term incentives — — 353 — 353

Former CEO stock appreciation right expense (credit) — — (307) — (307)

Transactions and other expenses — — 82 — 82

Adjusted income (loss) before taxes and discontinued operations $ 13,293 $ 6,564 $ (10,237) $ (4,756) $ 4,864

Interest expense, net (436) (2) — 4,437 3,999

Depreciation and amortization 1,846 6,626 — 162 8,634

Equity compensation expense — — 1,098 — 1,098

Interest (income) expense, net (395) 27 — 5,460 5,092

Depreciation, amortization and accretion 2,052 6,509 — 109 8,670

Equity-based compensation expense 17 — 1,276 — 1,293

Adjusted EBITDA $ 17,986 $ 12,914 $ (9,655) $ (658) $ 20,587

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Three Months Ended

June 30, 2022

December 31, 2022

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

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Impairments 342 200 — — 542

Exploration and appraisal costs 634 — — — 634

Exploration and pre-development costs 3,135 — — — 3,135

Adjustment to long-term incentives — — 131 — 131

Transactions and other expenses 576 — — — 576

Adjusted income (loss) before taxes and discontinued operations $ 16,115 $ 4,242 $ (10,092) $ (4,083) $ 6,182

Interest expense, net (283) (2) — 3,895 3,610

Depreciation and amortization 1,873 5,705 — 168 7,746

Equity compensation expense — — 1,159 — 1,159

Former CEO stock appreciation right expense (credit) — — (57) — (57)

Interest (income) expense, net (304) 140 — 5,064 4,900

Depreciation, amortization and accretion 1,787 6,808 — 163 8,758

Equity-based compensation expense — — 3,519 — 3,519

Adjusted EBITDA $ 15,992 $ 12,072 $ (7,628) $ (95) $ 20,341

Adjusted EBITDA as % of revenue 24.2 % 14.9 % 13.8 %

Three Months Ended March 31, 2022

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

(in thousands, except percents)

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

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

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

Exploration and pre-development costs 1,930 — — — 1,930

Adjustment to long-term incentives — — 784 — 784

Former CEO stock appreciation right expense — — 472 — 472

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

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

Equity-based compensation expense — — 1,104 — 1,104

Adjusted EBITDA $ 19,097 $ 8,225 $ (7,986) $ 1,141 $ 20,477

Adjusted EBITDA as a % of revenue 26.1 % 14.5 % 15.7 %

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

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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 third quarter was $92.3 million.

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

We believe that our capital structure allows us to meet our financial obligations.

Our liquidity at the end of the first quarter was $86.7 million.

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

Information about the terms and covenants of our debt agreements can be found in our 2022 Annual Report and in Note 6 - Long Term Debt and Other Borrowings.

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

Nine Months Ended

September 30,

Our consolidated sources and uses of cash are as follows:

Three Months Ended

(in thousands)

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Operating Activities

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

Consolidated cash flows provided by operating activities increased compared to the first three months of 2022 primarily due to an increase in cash profit and working capital changes.

Investing Activities

Total cash capital expenditures during the first nine months of 2022 were $32.7 million, which reflects increased expenditures to accommodate industry-wide activity recoveries.

Total cash capital expenditures during the first three months of 2023 were $12.8 million, which reflects increased expenditures to accommodate industry-wide activity recoveries as well as traditional front-loading of expected annual expenditures.

Our Water & Flowback Services Division spent $10.3 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.

Our Completion Fluids & Products Division spent $2.4 million on capital expenditures, primarily supporting higher activity levels in the United States and Europe.

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

Investing activities during the first three months of 2023 and 2022 included $2.9 million and $3.8 million, respectively, for insurance settlements from damage to our Lake Charles facility in 2020.

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

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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.

We currently have no long-term capital expenditure commitments, other than the asset purchase obligation described in Note 7 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

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

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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.

With respect to approximately 35,000 acres of that total acreage, we had previously entered into an agreement granting Standard Lithium an option to acquire lithium rights.

With respect to approximately 35,000 acres of that total acreage, we granted Standard Lithium an option to acquire the lithium rights.

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

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

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

Properties” in our 2022 Annual Report .

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

During the first nine months 2022, we spent $3.5 million to complete the drilling of our Arkansas exploration well, obtain and analyze fluid samples for multiple Smackover formation brine zones, and begin a bromine front-end engineering design study and bromine PEA.

During the third quarter of 2022, the maiden inferred bromine and lithium brine resource estimation report for our leased acreage in the Smackover Formation in Southwest Arkansas was completed.

Using an elemental to LCE conversion ratio of 5.323, which is accepted in the industry, the acreage is estimated to contain 234,000 short tons of LCE.

We intend to complete an initial economic assessment for the bromine extraction plant this year.

We expect the lithium front-end engineering design study and initial economic assessment for a lithium extraction plant to follow in the fall of 2023.

The extraction of lithium from our dedicated 5,000 gross acres should greatly benefit the financial returns for the overall project.

During early 2023, we completed an initial economic assessment for a bromine extraction plant.

We expect an initial economic assessment to follow in late 2023 for a lithium extraction plant, subject to the progress of early engineering.

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.

Financing Activities

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

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

Our financing activities for the first nine months of 2022 include $1.2 million of capital lease payments associated with equipment leased for the early production facilities in Argentina.

Our financing activities for the first three months of 2023 include $52.8 million of borrowings and $47.4 million of repayments under the ABL Credit Agreement, Argentina Credit Facility and Swedish Credit Facility, as well as $0.3 million of capital lease payments associated with equipment leased primarily for the early production facilities in Argentina.

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

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Long-Term Debt

Term Credit Agreement .

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

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.

As of March 31, 2023, $163.1 million in aggregate principal amount of our Term Credit Agreement is outstanding.

Asset-Based Credit Agreement .

As of September 30, 2022, our ABL Credit Agreement provides for a senior secured revolving credit facility of up to $80.0 million, with a $20.0 million accordion.

As of March 31, 2023, our ABL Credit Agreement provides for a senior secured revolving credit facility of up to $80.0 million, with a $20.0 million accordion.

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

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

As of September 30, 2022, we had zero outstanding and $4.7 million in letters of credit and guarantees against our ABL Credit Agreement and availability of $62.6 million, subject to compliance with the covenants, borrowing base, and other provisions of the ABL Credit Agreement.

As of March 31, 2023, we had $6.2 million outstanding and $8.3 million in letters of credit and guarantees against our ABL Credit Agreement and availability of $65.4 million, subject to compliance with the covenants, borrowing base, and other provisions of the ABL Credit Agreement.

Argentina Credit Facility .

In January 2023, the Company entered into a revolving credit facility for certain working capital and capital expenditure needs for its subsidiary in Argentina (“Argentina Credit Facility”).

As of March 31, 2023, we had $1.7 million outstanding and availability of approximately $0.3 million under the Argentina Credit Agreement.

Borrowings bear interest at a rate of 2.50% per annum.

The Argentina Credit Facility expires on October 19, 2023 and is backed by a letter of credit under our ABL Credit Agreement.

Swedish Credit Facility .

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

As of September 30, 2022, we had less than $0.1 million outstanding and availability of approximately $4.5 million United States dollars under this agreement.

As of March 31, 2023, we had $0.5 million outstanding and availability of approximately $4.4 million under this agreement.

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

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

As of September 30, 2022, there were US$1.4 million of letters of credit outstanding against the Finland Credit Agreement.

As of March 31, 2023, there were $1.5 million of letters of credit outstanding against the Finland Credit Agreement.

The Finland Credit Agreement expires on January 31, 2024 and the Company intends to renew it annually.

Term Credit Agreement .

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

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.

As of October 28, 2022, $163.1 million in aggregate principal amount of our Term Credit Agreement is outstanding.

Other Sources and Uses of Cash

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

In addition, as of September 30, 2022, the market value of our investments in CSI Compressco and Standard Lithium were $6.1 million and $1.7 million, respectively, with no holding restrictions on our ability to monetize our interests.

We also hold an investment in a convertible note issued by CarbonFree valued at $5.5 million as of September 30, 2022, excluding accrued interest.

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

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

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

In addition, as of March 31, 2023, the market value of our investments in CSI Compressco and Standard Lithium were $6.4 million and $1.5 million, respectively, with no holding restrictions on our ability to monetize our interests.

We also hold an investment in a convertible note issued by CarbonFree valued at $5.9 million as of March 31, 2023.

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

We received an additional 400,000 shares of Standard Lithium stock in April 2023 under the terms of this agreement.

On May 5, 2022, we filed a universal shelf Registration Statement on Form S-3 with the SEC.

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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.

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.

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

As of September 30, 2022, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations.

As of March 31, 2023, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations.

Critical Accounting Policies and Estimates

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

Information ab-out the terms and covenants of our lease agreements can be found in our 2021 Annual Report .

Product Purchase Obligations

For information on product purchase obligations, see - Note 7 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

We have finance leases for certain facility storage tanks and equipment rentals.

Information about the terms of our lease agreements can be found in our 2022 Annual Report .

Product and Asset Purchase Obligations

For information on product and asset purchase obligations, see - Note 7 - “Commitments and Contingencies” in the Notes to Consolidated Financial Statements.

Cautionary Statement for Purposes of Forward-Looking Statements

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“anticipates”, “assumes”, “believes”, “budgets”, “could”, “estimates”, “expects”, “forecasts”, “goal”, “intends”, “may”, “might”, “plans”, “predicts”, “projects”, “schedules”, “seeks”, “should”, “targets”, “will”, and “would”.

These forward-looking statements include statements concerning the inferred mineral resources of lithium and bromine, the potential extraction of lithium and bromine from the leased acreage, the economic viability thereof, the demand for such resources, and the timing and cost of such activities;

the ability to obtain an initial economic assessment regarding our lithium and bromine acreage;

These forward-looking statements include statements concerning the inferred mineral resources of lithium and bromine, the potential extraction of lithium and bromine from the leased acreage, the development of the assets including construction of bromine extraction plants, the economic viability thereof, the demand for such resources, and the timing and cost of such activities;

the ability to obtain an indicated or measured resources report and an initial economic assessment, indicated or measured resources report, and/or pre-feasibility or feasibility studies regarding our lithium and bromine acreage;

statements regarding the Company's beliefs, expectations, plans, goals, future events and performance;

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Inferred mineral resources are considered to have the lowest level of geological confidence of all mineral resources.

Investors are cautioned that mineral resources do not have demonstrated economic value.

Investors are cautioned that inferred mineral resources do not have demonstrated economic value.

Inferred mineral resources have a high degree of uncertainty as to their existence and as to whether they can be economically or legally commercialized.

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Therefore, investors are cautioned not to assume that all or any part of an inferred mineral resource exists, that it can be economically or legally commercialized, or that it will ever be upgraded to a higher category.

Investors should not place undue reliance on forward-looking statements.

Each forward-looking statement speaks only as of the date of the particular statement, and the Company undertakes no obligation to update or revise any forward-looking statements, except as may be required by law.

Management believes that these forward-looking statements are reasonable as and when made.

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We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our historical experience and our present expectations or projections.

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

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis