Tetra Technologies, Inc. Stock

Hello, and thank you for standing by. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the TETRA Technologies, Inc. Second Quarter 2026 Earnings Results Conference Call.

[Operator Instructions]

I would now like to turn the conference over to Kurt Hallead, Treasurer and Investor Relations. Please go ahead.

Thank you, Dennis, and good morning, everyone, and thank you for joining TETRA's second quarter earnings call. The speakers on today's call will be Brady Murphy, President and CEO; and Matt Sanderson, Chief Financial Officer. Before we begin, I would like to call your attention to the safe harbor statement in our Form 10-Q. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties as outlined in our SEC filings, and actual results may differ materially from those expressed or implied. In addition, we may refer to adjusted EBITDA, free cash flow and other non-GAAP financial measures.

Please refer to our press release for GAAP reconciliations and note that these reconciliations are not a substitute for GAAP financials. As such, we encourage you to refer to our 10-Q. After Brady and Matt provide their comments, we will open the line for Q&A. I will now turn the call over to Brady.

Thank you, Kurt, and good morning, everyone. I'm really pleased with our second quarter results across many fronts. Financially, we delivered one of the best second quarters and first 6 months of the year in the past decade. We accomplished this through the strength of our deepwater market share in our growing international business despite the impact of the Middle East conflict. I'll come back to the financials shortly. But we also reached some really strategic milestones in the second quarter that are setting us up very well to achieve our 2030 targets that we laid out at our Investor Day in September of last year.

For our Deepwater markets, we expanded our patented TETRA completion fluid offering with the introduction of TETRA Neptune Z-Lite, a high-value Deepwater completion fluid that leverages our TETRA Neptune chemistry to achieve higher densities while significantly reducing zinc content. We were especially pleased to be awarded a Beacon Offshore Energy contract to deploy TETRA Neptune Z-Lite in a 3-well 20,000 psi Gulf of America program.

During the quarter, our Board of Directors approved the final investment decision for our Arkansas Bromine project. Proceeds of approximately $108 million from our recently completed equity offering will be used in a portion of the anticipated project cost with the balance of such costs to be funded by cash from operations, borrowings from our credit facilities, alternate sources of capital. This project will provide a pathway to meet our growing Deepwater completion fluids market as well as our increasing electrolyte demand while providing significant benefits for security of supply at a lower cost.

The project is on schedule for completion in the fourth quarter of 2027 and start up in early 2028. We advanced our TETRA Oasis TDS Desalination Solution for produced water on several fronts as our customer engagements continue to expand. At the request of our customers to meet data center requirements for larger volumes of water, we made significant progress on the engineering design of our 100,000 barrel per day desalination plant.

Very importantly, we also strengthened our intellectual property position, receiving Notices of Allowance that expand the scope of our TETRA Oasis TDS patented portfolio to include a broad range of pre-treatment technologies critical to long-term membrane performance. As you can see, it's been a very busy and very productive second quarter for us.

Coming back to our financials. Overall for the company, our second quarter revenue increased 19% sequentially and 7% year-over-year to $185.7 million. Adjusted EBITDA increased 24% sequentially to $31.9 million. Income from continuing operations was $10.2 million. Internationally and globally offshore, our revenues for both the second quarter and the first 6 months of the year reached 10-year highs.

First half 2026 international revenue was 24% higher than the first half period over the past decade. Our international business was led by Argentina, where we're on pace to double our growth in '26 over '25 behind the strength of our early production systems and the TETRA SandStorm technology. For offshore, despite the delay of some fluid sales to the Middle East region due to the conflict, our international offshore revenues were 59% above the closest second quarter in the past 10 years.

In Completion Fluids & Products revenue increased 23% sequentially and 3% year-over-year, delivering the highest first half revenues again in 10 years. Sequential growth was driven by increased sales activity from our Europe and Caspian region, which more than offset some fluid shipments that were delayed as a result of the Iran conflict.

Chemicals also delivered a first half revenue record supported by seasonal demand in Europe and increased electrolyte sales. Demand for TETRA PureFlow zinc bromide electrolyte that we manufacture also continued to accelerate during the quarter, supported by expanding customer manufacturing capacity and increasing customer backlog. We believe the growing requirement for grid resiliency, reliable power infrastructure and long-duration energy storage are expanding the addressable market for zinc bromide battery technology. Adoption is also increasing across defense and critical infrastructure markets.

In Water & Flowback Services, revenue increased 12% sequentially and 13% year-over-year, led by record second quarter revenues from Argentina from our early production projects and in the Vaca Muerta Basin. Our Water and Flowback business continued to materially outpace the year-over-year decline in U.S. frac activity, leaving us well positioned to capture incremental upside from any recovery.

Looking forward, the business outlook is very positive, and we believe we're on track with our 2030 objectives and financial targets. Our Deepwater and international activity remains strong, and the U.S. is showing signs of improvement. The Middle East conflict continues to introduce some unpredictability and uncertainty but so far, the strength of TETRA's other markets and our security of supply, particularly for bromine-based completion fluids more than offset delays or losses in the Middle East sales.

Our patented SandStorm continues to gain market share in the U.S. and is becoming a standard technology for key customers in some international markets. As announced, we expect the first of 3 TETRA Neptune Z-Lite wells to be executed in 2026. With regards to TETRA Neptune, our pipeline of projects is the strongest it has ever been as deepwater offshore exploration and development activities continue to shift to deeper, higher pressure and higher temperature reservoirs. This is creating additional opportunities for TETRA Neptune fluids, which is designed to address higher pressures while also lowering corrosive chemistry in downhole wells and flowback conditions.

We're encouraged by Eos' progress with our new automated manufacturing line and their confidence in having their stated capacity of 4 gigawatt hours by year-end heading into 2027. Our calcium chloride business continues to meet new production and revenue records and find new markets to grow at rates that exceed GDP.

For the remainder of 2026, we expect our base business to perform in line with market expectations while recognizing that the Middle East conflict introduces a level of market unpredictability and also the timing of planned and potential Neptune jobs in our growing pipeline could make a meaningful impact to our second half 2026 results.

Beyond 2026, we see multiple drivers supporting continued growth, including increased Deepwater completion activity, further expansion of our long-duration energy storage electrolyte business and the commercialization of Oasis TDS produced water desal solution. The start-up of our Arkansas plant planned in early '28 will have a material impact on both our supply and cost of bromine to meet our growing demands for both completion fluids and electrolytes.

We continue to evaluate our next steps in Arkansas with our broader resource position, providing meaningful additional strategic value. TETRA controls 40,000-acre mineral position in Southwest Arkansas with exposure to lithium and magnesium, 2 critical minerals benefiting from improving market fundamentals and growing U.S. supply chain priorities.

Our portfolio includes lithium royalty rights on approximately 35,000 acres held by Smackover Lithium, a 65% ownership interest in an estimated 585,000 tons of lithium carbonate equivalent in our Evergreen Unit and more than 2 million tons of measured and indicated magnesium resources. Given the increasing focus on domestic critical mineral supply chain, energy security and strategic resource development as well as the significant synergies with our bromine investment.

We see potential opportunities to accelerate the development and monetization of our lithium and broader critical minerals platform. While our near-term execution priority remains the Arkansas bromine facility, we believe the embedded value of our lithium and magnesium resources represents an important source of optionality and potential long-term shareholder value.

With that, I'll turn the call over to Matt to discuss our financial results in more detail.

Thank you, Brady. Good morning, everyone. Second quarter revenue was $185.7 million compared with $156.3 million in the first quarter this year and $173.9 million in the second quarter of 2025. Despite broader market volatility throughout the quarter, as Brady mentioned, both international and global offshore revenues achieved 10-year highs for the second quarter and the first half of the year. Income from continuing operations was $10.2 million compared with $8.3 million in the first quarter and $11.3 million in Q2 of last year. Adjusted EBITDA was $31.9 million, which increased sequentially from $25.6 million in the first quarter and down from $36.2 million in the second quarter of 2025, where we completed a 3-well TETRA Neptune project, which was not expected to repeat this year.

Adjusted EBITDA margin was 17.2% of revenue in the second quarter, increasing sequentially from 16.4% in the first quarter and was down from 20.8% in the second quarter of 2025, again, resulting from the completion of a TETRA Neptune project in Q2 of last year. Completion Fluids & Products revenue was $113.1 million. Net income before taxes was $27.2 million and adjusted EBITDA was $29.9 million. Adjusted EBITDA margin was 26.4%, which aligned with our previously guided expectation of historical margins for this segment.

Revenue increased 23% sequentially and 3% year-over-year, supported by bromine-based clear brine fluid spot sales in the European region, seasonal calcium chloride demand for dust binding and increased TETRA PureFlow and electrolyte sales that Brady mentioned previously. This strong performance was achieved despite the broader market volatility, delayed fluid shipments into the Middle East and the increased cost of third-party bromine that we mentioned on previous earnings calls.

Water & Flowback Services revenue was $72.5 million. Net income before taxes was $3.2 million and adjusted EBITDA was $10.8 million. Adjusted EBITDA margin was 14.8%, which increased from 14.1% in Q1 of this year and was up from 9.9% in Q2 2025, representing a 68% increase year-on-year.

As Brady mentioned, revenue increased 12% sequentially and 13% year-over-year, supported by record second quarter Argentina revenue. During the quarter, cash generated by operating activities was $34.4 million. Total capital expenditures were $23.3 million, inclusive of $10.9 million associated with the Arkansas bromine project and $2 million of capitalized interest. Base business adjusted free cash flow was $22.8 million and total adjusted free cash flow was $9.9 million.

Turning to the balance sheet. As Brady mentioned, during Q2, our Board of Directors approved the FID of our Arkansas bromine facility, and we successfully completed a follow-on equity offering, which generated approximately $108 million of net proceeds to fund a portion of the costs associated with our bromine plant.

I would like to take this opportunity to thank our shareholders for their tremendous support. Following the equity offering, we ended the quarter with cash and cash equivalents of $154.6 million and total debt of $183.3 million. Net debt was $28.7 million, and our net leverage ratio improved to 0.4x.

To summarize, our second quarter results demonstrated continued strong execution in our core businesses with consolidated revenue increasing 19% sequentially while continuing to advance multiple growth platforms.

I will now turn the call back over to Brady for closing comments.

Thanks, Matt. As we covered during the call, the second quarter was very productive and successful on many fronts. We're very pleased with the second quarter financial results and the outlook going forward. We're also pleased with our ability to execute on the key strategic milestones that are critical to our One TETRA 2030 strategy.

With that, we'll open it up for questions.

[Operator Instructions]

And the first question is from the line of Stephen Gengaro with Stifel.

I think two things. One, you mentioned on the call and in the press release that you expect your base business to perform in line with market expectations. When you say base business, what are you including? Are you including electrolyte sales to Eos or anything on the deal side? Like how do I think about that comment?

Yes, Stephen. So we would consider our base business to be our ongoing completion fluids business, our Water & Flowback. We would include our electrolyte sales as part of that base business. We would not typically include Neptune type jobs in our -- what is traditionally our base business. Now obviously, we'd like to make that part of our base business, and I think it's got the potential in the future to be what we consider our base business, but we wouldn't consider that today.

Okay. All right. That's helpful just to clarify. And then as we think about what you're seeing in the Deepwater markets and the activity levels likely rising, what should we think about the timing for you and I'm not talking about specifically Neptune jobs, but just in total sort of Deepwater fluid sales growth as we look into '27, like what's sort of the lag time we should be baking into expectations?

Yes. So as we talked about, I think, earlier this year, the Gulf of America was actually a heavy drilling activity and less of a completion cycle. So quite frankly, the Gulf of America this year for us has been down compared to even the prior year. But we think that cycle starts to reverse in 2027 based on what we see. And then the overall growth of the Deepwater market, we think, is -- will continue to rise as we go into 2027.

At our Investor Day in September of last year, we had projected an 8% CAGR from where we were at, at that point in time through 2030. I would say potentially, we could even exceed that CAGR depending on how things develop, but that's certainly intact for us today.

Okay. Just maybe one other quick one. When you think about your expansion plans for your raw materials, how much of Eos growth and needs is driving that need to expand your raw materials over multiple years?

Yes, Stephen, we won't give specific volumes related to Eos or bromine. But as we move into 2027 and assuming they're at their 4 gigawatt hour capacity, it's a material shift for us in '27. And if they get to their 8 gigawatts before 2030, which is what they've stated their objective is well before that, it will take up a meaningful part of our capacity of our new plant. I don't know that we've given specific numbers on that, but it's material volume.

Okay. Because I'm only asking because one of the questions we often get is, would TTI be doing this if they weren't confident in. That's my last question.

The business case on our bromine plant stands on its own with or without our electrolyte sales, Stephen. That's for sure.

Your next question is from the line of Bobby Brooks with Northland Capital Markets.

Could you give us a sense for how impactful the Neptune Z-Lite projects can be on financials? And then secondly, could you discuss how and why this expands the opportunities where you are well positioned to win? It seems like this is materially -- it seems like this materially expands it. So just wanted to hear a bit more there?

Sure. Yes. So the Z-Lite is a very important launch for us. You've seen the financial impact when we have a Neptune job or a project in a given quarter. If you look at a linear scale between a typical Deepwater job and a full-blown Neptune job, Z-Lite is on that scale. You can just think of it maybe as a midpoint marker, if you want to think of it in that way. But probably more importantly, it expands the market opportunity for TETRA.

Zinc bromide is probably the leading high-pressure Deepwater market completion fluid in the market. In some markets, zinc is banned. It has some environmental challenges with it. It has some challenges in the Flowback operations of our customers' refining operations, et cetera. So reducing the zinc concentration in that fluid is a material value for our customers, and we think it expands the market pretty significantly for our Neptune chemistry.

Got it. And then something that really caught my attention was the wording around commercial discussions on Oasis and that you specifically called out hyperscalers being involved there, where previously it was more alluded to as general data centers were likely to be demand drivers. Maybe I'm reading too much into that. But if not, can you just touch on what's happened more recently that made you feel comfortable specifically calling out hyperscaler conversations?

Yes. So look, our confidence of commercial projects continues to grow with Oasis. The number of customer engagements, the quality of customer engagements, the feedback from customer engagements, their confidence in the technology and the engineering work that we've done.

In Q2, we had the first time, most of our -- as you know, our customer base is the midstream folks and the E&P companies who own the water. They are still our customer base. But we did have the opportunity in the second quarter at a hyperscaler's request to meet with us and discuss our TETRA Oasis solution. And we learned a lot from that process as well. It's a very valuable engagement.

So yes, our confidence levels continues to grow. We've talked about the engineering work that we've done, the value that we see as we scale from a small scale 20,000 barrels per day plus the economies of scale that come with that. And so there's a pretty big shift from where we were thinking we would be this time of year when we had our Investor Day last year and where we are today with much larger type projects that we're evaluating and being evaluated on.

So our confidence is high. Honestly, I think the gating issue that going forward, we all need to be keeping an eye on is the permitting process. The TCEQ is responsible for that. There's actually 6 projects pending permit approval by the TCEQ. They're looking at setting a general standard discharge quality as well as frequency of testing specifications. We know they're very active with it. We're active with them. The EPA is actively involved. So this is gathering momentum. It's going to happen, but that now is potentially a gating item in terms of being able to finalize a project.

That's very helpful color. And when you say TCEQ is the sixth project pending approval, are those for Oasis or are those for other beneficial reuse systems?

Well, we won't comment on any of the technology associated with their general permits that are not specific to any technology. They're general just discharge permits for produced water.

Got it. And you mentioned like your typical -- your historical customers and the new ones kind of coming in the fold between midstream E&Ps and the new ones as the hyperscalers. Just from your current perspective, what are maybe the key differences within each conversation? And you did mention like the permitting could be a hurdle, and that's -- I would think that's probably going to be a hurdle across all 3. But are there specific hurdles you see for each type of customer? Or is it just kind of they're all looking for -- those are all sort of the same between each discussion?

Yes. I think if I understand your question properly, I think the shift that's happening right now is hyperscalers are trying to get comfortable with water-cooled systems. They have generally used air-cooled systems in a lot of their operations. There are a lot of advantages to water-cooled systems. And in West Texas, as you can imagine, air cooling has even more challenges. And as their data density increases, air cooling in some cases, will not even be an option.

So that process is ongoing. You have E&Ps and our midstream customers who were thinking of a very methodical crawl walk run strategy to lay out desalination plants to now being looking at much larger plant facilities to service the data center. So there's a lot of dynamics going on there. We're right in the middle of all this and playing a big part, we feel, in all of this and then you got the permitting issue that I discussed. So there's a lot of dynamics happening. It has to get solved. AI is great, but physics laws still exist and the disposal issue in West Texas is still a growing problem that has to be solved. So...

Got it. And then just last one for me is on the base business, you mentioned how SandStorm has made inroads in new markets. Just wanted to hear more about what those new markets look like. And if you could touch on what factors internally or externally are helping drive those breaks into new markets.

Yes. So Sandstorm has been instrumental for our growth in Argentina. As we've mentioned, we're doubling our revenues this year over last year. We're introducing Sandstorm into some of the Middle East unconventional markets, and we feel really good about some of the traction that we're seeing with it in those markets as well.

Your next question is from the line of Martin Malloy with Johnson Rice.

Just wanted to ask about Argentina, if you could expand a little bit more about the equipment that you're putting down there. Obviously, the SandStorm you just mentioned, production skids, anything else that maybe you wanted to highlight?

Yes. I mean there's really two technologies that are supporting our growth down there, Marty, is the early production facilities. We're one of the leading providers of early production facilities, EPS in the market today. And then with that, in conjunction with that are our SandStorm, our Flowback technology. So really, that combination of Flowback, early production systems and Sandstorm is what's driving our growth.

Okay. And then I just wanted to ask my last question on the Deepwater completion market and specifically Gulf of America. The wells that are being talked about in terms of potentially needing one of your solutions, are these wells that were drilled a while ago and the higher pressure, higher temperatures were a hurdle and now that the technology is catching up and the companies are able to complete them? Can you just give us a little bit more color about the opportunity set there?

Yes, I'll ask Matt to comment on that.

Yes, Marty, as you're aware, recent announcement around Z-Lite, some of the projects that we're participating in, the 20,000 psi project that was referenced, some of that project has already been ongoing. However, as Brady referenced, there's been some public information out there around zinc, how it relates to production facilities, how it can relate to refineries and things like that.

And so TETRA really founded on delivering commercial solutions to customer challenges. So Z-Lite fits in that boat, where it's not a completely zinc-free system, but it significantly reduces the concentration of the zinc ion in those high-pressure, high-density completions in a very, I'll call it, economical package commercial solution for the customer.

So we're really excited about it for the wells that are already ongoing in that market. Plus also, as Brady mentioned, that the wells that are planned, right, you can see the permitting activity in the Gulf over the next several years. The reservoirs that are being targeted, they're really down in this pressure regime really on the back of some of the companies that have already started to drill into that reservoir and prove that these can be completed. And a company like TETRA, we can bring solutions to help them do that economically, do it safely and be a value add.

Your next question is from the line of Jon Tanwanteng with CJS.

My first one is I was wondering if you could dive a little bit deeper into the optionality around lithium and magnesium. Maybe talk about the potential time line before you have to make -- you want to make a decision there, the amount of investment it would take and then the returns of profitability you might see on the back end?

Yes. We're really excited about the optionality. As you recall, when we did our Investor Day, we had or laid out our 2030 targets, but we had lithium kind of a target out there, but beyond the year 2030. But as we now move forward with the bromine plant on schedule, on time, on budget, operational in 2028, the upstream piece of that will be in place. The investment we're making in the infrastructure around the bromine plant, adding lithium to that entire plant site looks very attractive, both from a CapEx savings from the -- not duplicating the upstream as well as the infrastructure.

But also lithium prices have moved above the $20,000 per metric ton mark compared to where we were last September and the growth projections for lithium, I think, have even strengthened since that time, particularly with what's being perceived as higher oil prices going forward.

So yes, we're looking at it. We'll decide at what point in time we want to engage in the engineering studies and publish something perhaps even before this year, the end of this year. But we're definitely excited by the prospects. The magnesium is probably a little bit further out, mainly because our joint venture with Magrathea, we need to establish a demonstration plant first to prove out the technology. That will be a small-scale commercial plant, not really a meaningful volume commercial plant before we engage in a larger commercial plant, which will likely be after 2030 and after lithium.

Great. And then just a question on the quarter. Margins in the Completion Fluids business down sequentially despite the higher revenue. I get the bromine prices has been rising on you from a third-party contract. I was wondering if there's anything else that went into that margin and kind of what we can expect in the quarters that are coming.

Yes. So the mix can have an impact on our margin profile. We guided between 25% and 30% for our Completion Fluids business. That's still intact for our base business as we move forward. And we'll see when we get into next year. We have one more year that we need to bridge until we get to the completion plant, which will be a material impact for us in terms of our cost of bromine. We have a good portion of our bromine for '27 already under contract but we'll need to look at what that volume looks like as we get closer to the planning cycle for '27.

Got it. And if I could sneak another one in there. Just could you expand on the bromine optionality if perhaps Eos doesn't perform according to its projections? Can you resell that bromine? Or is there a plan to just leave it in the ground? How should we think about how you plan for capacity if Eos or something else doesn't quite meet expectations?

Yes. With what we're seeing in the Deepwater market growth, even with the Eos, if they do meet their expectations, we're still going to be -- we'll be at 100% capacity of our bromine plant, plus we'll still be buying some from the third-party markets. So if Eos had challenges and did not meet the demand growth that we're planning for, we'll still be very well utilized at the plant for our existing Completion Fluids business, and we have the option to sell elemental bromine into the market, which is a pretty good market right now, particularly given the Middle East security supply issues, which is where most of the bromine -- over 50% of the world's bromine is produced today.

[Operator Instructions]

Your next question is from the line of Joshua Jayne with Daniel Energy Partners.

I wanted to go back to the hyperscaler commentary just around the difference in cost between water-cooled data centers and the conventional air-cooled facilities. Could you talk about that 30% difference? What that ultimately equates to from a dollar value perspective? And the reason I ask is just because the hyperscalers have sort of come out with very aggressive budgets, and I think people are starting to look a lot differently at the money that they spend. And so I'm just curious, like from a dollar perspective, what that ultimately looks like.

Well that comment came directly from a hyperscaler to us -- a feedback to us in the discussions after we were discussing our Oasis solution and what I guess they're traditionally paying for their air cooling systems. I can't give you a whole lot more detail than that, but that's just the feedback we received from that particular hyperscaler.

Okay. Maybe just Lower 48 spending, how you are seeing things unfold just sort of exiting this year and into 2027. A lot of commodity price volatility and we've seen sort of privates have the uptick in CapEx, a lot of the larger companies sort of just standing pat. Just from your discussions with your Lower 48 customers, could you just give us a little more insight into what you're seeing today and how you're thinking about what they ultimately may spend in '27 or how they're thinking about the world?

Yes. I think it's a little early for us to project on 2027 spend. I mean we are clearly starting to see some uptick in activity that impacts our business, right, in the second half of 2027 (sic) [ 2026 ] . You got to remember, rigs come first. They got to drill the wells and frac crews come to frac the wells and then we come into play for both supplying water, but also the flowback side of the business, the sand management piece. And so we're a little bit on the tail end of increased activity, but we're starting to see that now in the second half of this year. And everything we're hearing about the second half of this year is slightly up as we go forward in terms of rig and frac activity. But I think it's a little premature for us to speculate on '27 at this point.

Okay. And last one for me is just on the Middle East as someone has been operating there. Could you just give any insight into how you're thinking about the world moving forward, discussions with customers? And after everything settles down, do you think that there's any sense that capital will sort of come back to work pretty quickly in that region? Do you think that it's structurally changed and people will be hesitant to spend in the region? Maybe just your insights into some of the discussions you've had with customers would be great.

Yes. I think, again, nobody really knows how ultimately this Middle East issue will be resolved. So anything we say with that regard would be speculative. But one thing I think we can say with confidence is that the Deepwater market is just continuing to grow more and more attention, support from the markets doesn't have to deal with the Middle East conflict regardless of how it's resolved. The cost of the projects, the per barrel breakeven cost continue to go lower. The efficiencies of the Deepwater rigs, the production profiles of these wells.

All of these, I think, are building momentum around the Deepwater side. How the Middle East shakes out is really very difficult for me to predict but I would say the unconventional markets in the U.S. and Argentina and Deepwater will benefit short term, at least until things get sorted out there.

And at this time, there are no further questions. I will turn the call back to Brady for closing remarks.

Well, thank you very much. We're excited that TETRA is positioned around really 3 long-term growth trends, energy security related to Deepwater development, energy storage and domestic critical minerals and sustainable water solutions for oil and gas, agriculture and now AI infrastructure. We're encouraged by the progress, remain focused on disciplined execution, commercial advancement and creating long-term value for our shareholders. We appreciate your interest in TETRA Technologies and look forward to updating you on our continued progress. Thank you.

This concludes the TETRA Technologies, Inc. Second Quarter 2026 Earnings Conference Call. Thank you for joining. You may now disconnect.

All right. We're going to keep things moving. Again, Arun Jayaram from JPMorgan's E&P OFS and integrated oils teams. Really excited to welcome TETRA to the stage. And I think this is one of the more unique companies that we have within the space because they have some really, really interesting long-term growth drivers that are really differentiated.

A lot of the companies within oilfield service maybe have a little bit of a commodity type of field to them, but this is one of the more differentiated stories within the sector that showed up in your equity performance.

I'm really excited to have Brady Murphy, who's the CEO of TETRA. Brady, I was wondering if you could maybe just give investors today just a little bit of a brief background on the company.

Sure. Yes. Thanks, Arun, and glad to be here. Thank you for hosting us today.

As you said, I think we do have a unique story. We are 45 years old. The company was founded in 1981. The competency of the company really evolves around fluid chemistry. And we started in the completion fluids business, which is still a flagship part of our business today. Like a lot of oilfield service companies over the last 20, 30 years, got into segments, got out of a lot of segments, but we did maintain that fluid chemistry competency and expertise over the years, which several years ago after being in the CEO seat, we really want to start to look at how do we leverage the fluid chemistry expertise that we have into other higher-growth areas outside of oilfield services and energy spaces, particularly energy storage.

We were able to evolve some of our completion fluids chemistry into electrolyte space for long-duration energy storage. We have a very unique position in Arkansas with our brine resources with critical minerals, whether it's bromine, lithium and magnesium, all of those represent future growth opportunities for the company. And then when the unconventional business started in North America, we got into the water management space to complement our Completion Fluids business and evolve that now as Water & Flowback, one of our external segments, again, with some differentiated technology.

But again, looking forward with what we can do with that business is desalinating produced water and establishing a whole new business line, which doesn't exist today, but is really an industry need, particularly in the Permian Basin. So good, strong company today, performing very well, but with really 3, we think, very strategic longer-term growth opportunities that we have the skill sets to execute. And these are not new businesses that we don't understand. It all evolves around the competency of fluid chemistry and very confident we can execute on that.

Yes. Brady, you guys have described One TETRA 2030 as your plan to leverage these core fluids chemistry capabilities into these higher growth markets. What is the simplest way to describe the strategy today and that path towards One TETRA in 2030?

Sure. So we have 2 external reporting segments today, our Completion Fluids business and our Water & Flowback segment. As we looked to these growth opportunities that we had and projected where we would be by 2030, we decided that really we would look differently, instead of 70%, 80% of our revenue today from oilfield services, 70%, 80% in the future will be 1/3 and 1/3 and 1/3. So 3 reporting segments, one on Specialty Chemicals and Minerals; 2 on desalinating and treatment of produced water. And then we will keep, obviously, the high-value components of our current energy services, our Completion Fluids, our Flowback business as part of our Energy Services segment.

But between those 3 segments, we see them really kind of split 1/3 and 1/3 and 1/3 is kind of what we will look like in 2030, each of them with very good EBITDA margin profiles, 25% to 30% for some. Some of them, we think, get above 30% in the critical minerals piece. But we laid all that out at our Investor Day. We got very good reception from our investors. I think we laid it out in a coherent way with a very credible way of how we can execute on that plan. And I think our investors have rewarded us accordingly.

Yes. I want to see if you can maybe talk a little bit about your calcium chloride business. What are some of the primary revenue drivers here? What's the competitive landscape?

So that was really the first business where TETRA started to take its, I'd say, fluid chemistry expertise and evolve it into the industrial outside of oilfield services. So we developed a calcium chloride industrial business today, where we're #1 in Europe, #1 calcium chloride provider in Europe and #2 in the U.S. And so those markets are very different than your traditional oilfield services, food and beverage, de-icing during weather, dust binding during the spring and summer in your water, mineralizing water.

So all industrial applications, we still have a piece of it associated with oil and gas. But that was -- if you look at TETRA, that was kind of the first step of evolving the expertise that we have into industrial and other higher-growth segments.

Great. I think the future plan, and Kurt, maybe you could shed some light on this is to report in 3 segments starting in 2027. What's the strategic rationale? And what do you hope investors will gain from this kind of new reporting structure?

Brady, maybe you kick that off, and I'll get back to.

Yes. We haven't decided it will be for sure '27. It could be '28, but we will be reporting 3 segments in the future. And again, it's to give investors a little bit more understanding of the composition of the company outside of just our oilfield services, Specialty Chemicals and Minerals for instance, in addition to our calcium chloride business, we will layer in our electrolyte sales and show the growth of that segment separately.

Our desal will marry up with our current recycling for water for frac reuse, forming a whole new segment, again, showing our investment community what that business looks like on a discrete basis and then keeping our flagship Completion Fluids and Energy Services component separate. So that's really the rationale behind it is giving more transparency, more visibility of what these 3 strategies, growth strategies, how they materialize into future growth and earnings.

I maybe just add to that with Brady too. The whole concept is to leverage our fluids chemistry expertise into new growth end markets, right, one being the battery electrolyte and the other one being the desal for beneficial reuse.

I think the other dynamic around that is these businesses and these segments all have very similar EBITDA margin profiles, all around that down 30% EBITDA margin dynamic. So we're looking to shed kind of a lower margin element of our water business right now. We'll see how that evolves. But ultimately, as we get through the end of the decade, we'll be closer to a 30% margin business across the board.

Okay. I wanted now maybe to go down, maybe peel a layer of the onion on your businesses. Let's start with deepwater completion fluids. This is where you compete at the high end of the market. We got a lot of very complicated deepwater reservoirs, high-pressure, high temperature wells. Can you talk a little bit about your business there and what are some of the growth drivers?

Yes. So first of all, just the deepwater in general, we have a very bullish outlook for what the next 5 years looks like from a deepwater perspective. The good thing about the types of deepwater projects that we're engaged in with our customers is we have almost a 2-year window on those projects because we have to go through a very thorough testing of the metallurgy, how the fluid reacts with the casing of the metallurgy, the elastomers, formation damage. So we're involved in all these testing programs well ahead of these projects getting kicked off. So that gives us excellent visibility, and that's why we feel really bullish about the coming years in the deepwater overall.

But I think the trends are also helping TETRA in terms of deeper, hotter more complex environments because that fits our higher profile, higher density, less corrosive completion fluids technology, which obviously Neptune fits into that portfolio as well. So I think the combination of just a general up to the right deepwater market, coupled with some of the trends of deeper, hotter, higher pressure fits our sweet spot.

I think adding to what Brady is saying, too, in terms of lead indicator, if you take a look at the subsea tree installation profile through the end of the decade, every subsea tree represents a completion fluid opportunity, right? We have generally, what, 30% to 40% market share overall in the business. So as -- I know you have TechnipFMC here. So if you guys look TechnipFMC and their visibility, it's kind of like to like our visibility as well.

Great. I want to talk a little bit about the bromine project in Southwest Arkansas. Can you talk a little bit about what's exciting about this project?

Yes, absolutely. Bromine is a critical component for, number one, our Completion Fluids, our zinc bromide Completion Fluids, which again, is the same chemistry that we utilize to move into the electrolyte space. The zinc bromide electrolytes are the core part of the electrolytes that Eos Energy uses.

And so the growth projections that we have for our deepwater business that we just talked about and for what we see on the electrolyte side, requires us to really ramp up our capacity to acquire bromine. Fortunately, we have a great resource base in Arkansas. Brine leases in Arkansas, very rich in bromine. We've had this project on the radar for a long time, and we've timed it to marry up with our long-term supply agreement that comes to an ending in 2029.

So this project will do 2 things. It allows us to grow our offshore business as well as our electrolyte business and also gives us a lower cost base being vertically integrated with our own bromine supply and not relying on third-party purchases, again, as our long-term supply agreement comes to end at the end of 2029. So very important project.

We've communicated this project will add an estimated $100 million of EBITDA to TETRA's business by 2030, a combination of growth as well as cost reduction. So the project financials are extremely attractive. Our Board FID-ed the project a month or so ago. We announced that. We did a capital raise to finalize the funding that we need for the project to be started or completed at the end of 2027 and starting in 2028.

So first of what I consider to be 3 really critical minerals in TETRA's future, bromine first, lithium, we think will probably be second and then magnesium, the third, all of in the same brine, each of them leveraging some of the investment that we're making in Arkansas today.

Can you maybe unpack that $100 million of incremental EBITDA contribution? How much is that of cost when you're going to run...

Yes. We won't give discrete numbers on that, but I would just think in rough terms, half of that will come through growth and half of that will come through some cost reduction opportunities.

Okay. Speaking of growth markets, you've been leaning into electrolytes and long-duration battery demand as a major growth vector. Could you talk a little bit about kind of the opportunities there?

Yes. Yes. We really like zinc bromide electrolytes. Obviously, we're not a battery company, but we have the capability to produce very cost-effective, high-purity electrolytes for the battery producers.

Obviously, Eos is one of the first -- Eos Energy is one of the first companies to get out there on a large commercial scale. There are others that are developing their own solutions around that, but they're not near to the level of commercial scale that Eos has achieved. So we're very happy with the relationship we have with Eos.

But there's really 2 key advantages to that technology. Number one is the long-duration energy storage. You can cycle these -- their batteries 10, 12 hours compared to a typical lithium battery of 4 to 6 hours. So it fits the utility applications very, very well, having that long 12-hour charge -- discharge cycle time.

And then you have the safety aspect of it, the largest market for bromine around the world is a power target and so when you think of a large utility scale lithium ion, it has a fire risk associated with it. That still exists today and the amount of cost investment you have to put in place to mitigate that fire hazard.

By nature, because of the zinc bromide chemistry, there is no fire hazard with this technology. So we like the technology. Eos is out and running, I think, at first commercial scale, but there are others that are coming.

And what are the opportunity set to scale volumes of electrolytes over the next year to a couple of years?

Yes. So that's why this bromine project is quite important to us. Eos has been -- has announced just recently, they have their second line, which will give them 4 gigawatt hour of manufacturing capacity up and running by the end of the year.

I think their target is publicly stated. I'm not sure they've changed yet, but it was 2027. They wanted to get 8 gigawatt hours. And obviously, that's a meaningful volume of electrolyte for TETRA to keep pace with, which is another reason why we need the bromine plant.

Okay. And just general commentary on like the margin profile.

Yes. I mean we won't obviously get into specific margins of different products. But in general, we think the electrolyte margin profile will be similar to our current Completion Fluids, which they have to compete for product, right? So...

Can I come back to what we said earlier in our 3 segments, right? So electrolyte will be part of our Specialty Chemicals and Minerals business. And as we outlined in our Investor Day, we expect the margins in that business to be in that 30% EBITDA range.

25% to 30%, yes.

25% to 30%.

Brady, as you approach the end of the preferred supply window with Eos in 2027, what are the key priorities to extend or expand your commercial position?

Yes. So we're having discussions with Eos today to extend that contract. I say, we're not going to get into the specific details of those discussions, but we like the partnership. They know they need a good, reliable provider, a U.S. provider. We're the only provider in the U.S. of zinc bromide. So there's a security supply equation to that as well. And obviously, we want to help them be successful. So we're optimistic that we'll get things agreed upon to extend the agreement.

Okay. And are you in discussions with other OEMs as well? Or is this...

Yes. Well, not to the commercial scale that Eos is, but there are other providers out there that are investing in this technology. So yes.

Let's talk about produced water, your kit for desalination. Can you talk a little bit about how the Oasis pilot performance has been doing?

Yes. Yes. So we've announced publicly that we partnered with EOG actually quite a few years ago now, 3, 4 years ago, we've started the partnership. We put our pilot in place, I believe it was October of last year. So we've been running over 6 months now.

We're under a nondisclosure agreement, so I can't provide a lot of details, but let's just say we're very happy with the results that we've been achieving. We feel confident EOG is happy with the results. And we feel happy the regulatory agencies are happy with the results. So we're going to continue that pilot. I think the plan is to go through several growing seasons of different grasslands and crops, et cetera.

In the meantime, though, we're in discussions with other midstream companies, other operators for commercial scale applications. And so very excited about that. I think that the data centers coming into West Texas have given some -- a new push as if there wasn't enough of a push to address the injection disposal problem in West Texas, and you now have an end user that's interested in buying this treated water. And so that's become an exciting aspect of this. So a lot more to come on that.

We're doing our engineering design work for our 100,000 barrel per day plant. And once we have that, we'll be able to have deeper commercial discussions with our customers.

Yes. Chevron at the conference did announce a major agreement with Microsoft to build a over 2.5 gigawatt power facility just out of Pecos. Can you talk a little bit about kind of the -- not the business model, but how you could leverage these capabilities into that data center market?

Yes. No, it's -- we've talked about this coming. I think it's the first of many that you're going to see. It's -- obviously, Chevron can provide the natural gas for the power solution that these data centers need as they get behind the meter and have their own self-generated power.

Obviously, there's -- land is not an issue in West Texas, but you do have a water issue in West Texas, actually in all of Texas, 50% geographically of Texas is technically under a drought condition. So water is a valuable resource in the state of Texas. And we're producing -- the state is producing 20 million barrels a day of produced water, which today is just treated as a waste because it's reinjected downhole.

But I think most people in the industry realize the challenge that's coming with disposing of all this produced water and the overpressuring of the of the formation. So the operators needed a solution to address this water disposal problem for some time, which is really where TETRA started down this path, which was to provide a solution to our customers to treat this water to avoid disposal restrictions.

Well, as you mentioned, Chevron and the other hyperscalers that are coming into West Texas now, they need water. They need water for cooling. There's power generation that needs water for their systems. So this is, again, when we did our Investor Day in September last year, the data centers were even not on the radar screen. We were -- we laid out our 2030 targets just on what we felt the oil and gas E&Ps would need to address their disposal issues. That's changed pretty rapidly now with this whole new demand of hyperscalers and data centers coming in like the Chevron announcement and needing a water solution. So that's where we come into play.

Got it.

Maybe put numbers around that, Arun. So I think we think from -- if you look at a 1 gigawatt data center, you have 2 opportunities. You got to cool the power gen unit, you got to cool the data center itself. So a 1 gigawatt facility could be 600,000 barrels a day of water throughput for us, right? And in context of what Brady was saying on our 2030 plan, we had outlined maybe 500,000 barrels a day by 2030 for just ag and industrial use. So the data center becomes a plus 1 to that.

Got it. Got it. And are you seeing opportunities for this segment outside of the Permian Basin?

I think anywhere in the future, any unconventional market in the future is going to see similar type challenges with water like the Permian is seeing now. It's just that the Permian is obviously well advanced from any other market. The volumes of water that are produced in the Permian per barrel of oil and now just the pure volume of the Permian has it well ahead of any other market. But I think the future unconventional markets are going to face the same challenge, water.

Let's move to critical minerals. Talk to us about what you're doing in this space.

Yes. So look, we -- when we laid out our 2030 targets, we had a post 2030 objectives, which was really where most of the critical minerals for us were targeted at.

As we look at things today, I would say we may likely try to accelerate the lithium side of that project. Lithium prices have rebounded nicely. They're now in the $25,000 a metric ton range. The synergies, capital synergies savings we will get from our bromine investment because all the upstream and the brine flow will be in place. A lot of the plant infrastructure around the bromine plant will be common to what we will need for lithium. So really, we're talking about a direct lithium extraction plant on the backside of our bromine facility.

Really taking advantage of a lower CapEx, the CapEx synergies, a nice price environment, what we think could be a low OpEx environment. And so that project, we'll be talking more about that as we get closer. No decisions have been made, but that we think we will probably accelerate that project.

And then magnesium is right behind it. Very interesting market. I know we're getting short on time, but 95% of the world's magnesium comes from China. The U.S. has no commercial scale volume of magnesium. And of course, it is relied upon by defense industry for whether it's helicopters, drones, whatever. It's a very lightweight, high-strength metal.

And so we think it's a critical mineral. We think we'll get good government support to help get our projects off the ground. And by the way, the gift that keeps giving the smackover is rich in magnesium as well. So that's clearly on our radar and our plans as well.

Yes. Just maybe in closing, you guys held a recent Analyst Day. It's been a few months, but maybe just kind of end with some of the key kind of financial targets and maybe the investment thesis in TETRA today.

Yes. So at our 2030 Investor Day was September of last year, we said by 2030, we thought we would more than double revenue and triple EBITDA over $300 million of EBITDA. A big part of the milestone for that is our bromine plant. As we said, that's $100 million of contribution to the company. These other -- the desalination opportunities that we have in front of us are another fairly significant contribution.

The deepwater market, we think, will continue to grow. Critical minerals, as I said, was not a big part of those 2030 targets. But as we think about it now, we may try to accelerate those. So I'd say ever since our Investor Day presentation and we laid out, I'd say our confidence level being able to deliver and execute that has only gotten higher, maybe exceed those numbers.

Okay. Any last word?

No I think what Brady laid out is true. I think the critical springboard for us was getting the financing to fund the bromine project. That puts us well on pace and target to get the project up and running in 2028. And at that point in time, we'll be in a position to generate some higher levels of free cash flow to continue to invest in our future growth.

Great. Why don't we end things there? Thank you so much, gentlemen. Really appreciate it.

Thank you. Appreciate it. Well done.

Thanks a lot.

Thank you for standing by. My name is Carly, and I will be your conference operator today. At this time, I would like to welcome everyone to the TETRA Technologies, Inc. 1Q 2026 Earnings Conference Call. [Operator Instructions]

Thank you. I would now like to turn the call over to Kurt Hallead. Please go ahead.

Good morning, and thank you for joining TETRA's First Quarter 2026 Earnings Call. Speakers on today's call will be Brady Murphy, President and Chief Executive Officer; and Matt Sanderson, Chief Financial Officer.

Before we begin, I'd like to call your attention to the safe harbor statement in our Form 10-Q. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties as outlined in our SEC filings. Actual results may differ materially from those expressed or implied. In addition, we may refer to adjusted EBITDA, free cash flow and other non-GAAP financial measures. Please refer to our press release for GAAP reconciliations and note that these reconciliations are not a substitute for GAAP financials. As such, we encourage you to refer to our 10-Q that was filed yesterday. After Brady and Matt provide their comments, we will open the line for Q&A.

I'll now turn the call over to Brady.

Thank you, Kurt, and good morning, everyone. Welcome to TETRA's First Quarter 2026 Earnings Call. I'll walk through the very positive first quarter highlights, how TETRA is positioned in this uniquely uncertain time and the progress towards our 2030 targets before turning it over to Matt to cover more detailed financials and the balance sheet.

Despite the backdrop of one of the most tumultuous periods in the history of the oil and gas industry, we started 2026 with one of the strongest first quarter performances in the company's past 10 years. If we exclude the benefit of the Gulf of America Neptune project in the first quarter of last year, revenue of $156 million and adjusted EBITDA of $26 million were 10-year highs as were the first quarter results for both Brazil and Gulf of America.

In addition, the industrial chemicals and Production Testing subsegments each delivered 10-year high revenues with strong margin contributions. What encourages us most -- encourages most about our results is that the operational and financial fundamentals for each of our segments and many of our subsegments are improving even before the benefit of current elevated oil prices and potential increased customer spending activity. At current oil prices, we anticipate offshore projects could be pulled forward and unconventional activity in the U.S. will eventually respond. Combine this with the significant growth opportunities laid out in our One Touch TETRA 2030 strategy, which I will update later on our call, we feel very good about how TETRA is positioned for 2026 in the coming years.

Regarding the -- ongoing conflict in the Middle East and given that this region has historically accounted for about 5% of the company's revenue, we do not expect an overall negative impact on our financial results. That is because what we have seen so far is activity in our core business regions of the U.S., Europe and Latin America will likely offset any reductions that may occur in our Middle East business. This applies to our supply chain as well since all of our chemical manufacturing plants are located in the United States and Europe, and our elemental bromine is sourced from Arkansas, which is also a location of our critical minerals resources.

Over the longer term, it remains to be seen how the developments in the Persian Gulf, the Middle East will impact the global oil and gas markets and our business. But in general, we believe it could boost investment in the U.S. and international unconventional activity and provide tailwinds to an already robust offshore and deepwater outlook. For Completion Fluids & Products, our Industrial Chemicals business had a record-setting first quarter with revenue up 15% year-over-year and 13% quarter-over-quarter.

For the first time since 2021, when energy services were suppressed due to COVID-19, it accounted for over 50% of total first quarter segment revenue. Higher pressure gas plays in South Texas and the Western Haynesville supporting Gulf Coast LNG plants are driving higher volumes of higher-value completion fluids. Increasing pressures in West Texas due to disposal well pore space are also contributing to higher density fluids for well workovers. Looking forward, we're well positioned heading into our traditional European seasonal second quarter peak.

For Completion Fluids Energy Services, Q1 revenue and adjusted EBITDA in Brazil were at a 10-year high. Although we did not execute any Neptune jobs, our first quarter fluids business in the Gulf of America, excluding Neptune work in the first quarter of last year, also recorded a 10-year high in revenue and adjusted EBITDA.

Regarding Neptune projects, we're very encouraged by the growing pipeline. The trend toward deeper, hotter wells in the Gulf of America continues as evidenced by very strong first quarter revenues for our highest density Zinc Bromide Completion Fluid.

For the Water & Flowback business, despite U.S. frac fleets down 24% year-over-year and a slow January due to freezing weather, our overall revenue was up 1% year-over-year and 3% quarter-over-quarter. Our Production Testing -- subsegment reached a 10-year high in the Q1 revenue as our automated SandStorm technology continues to gain market share across the unconventional land operations in the U.S., Argentina and the Middle East. Our strategy to grow this segment internationally has been successful. And for the first time in the last 10 years, international Production Testing revenue was over 50% of the total PT subsegment revenue.

Looking ahead to the rest of '26, significant uncertainty remains for oil and gas prices. However, given our geographic footprint, we believe any headwinds from the Middle East will be offset by the strength of our other geo markets. We expect to gain further clarity on customer activity offshore and outside of the Middle East as we move through the second quarter. For now, we are maintaining our prior '26 guidance of single-digit revenue growth over 2025 with Completion Fluid margins between 25% and 30% and Water Flowback in the mid-teens.

Turning to our strategic progress towards our One TETRA 2030 objectives. At the – at our Investor Day last September, we outlined a clear strategic path for the company. Although much has changed in the world since that event, our view of the company's key growth trajectories across deepwater, specialty chemicals, electrolytes for battery energy storage, critical minerals and desalination of produced water has strengthened. We expect bromine demand to support our deepwater completion fluids and battery storage electrolytes to double by 2030, driving the need for and reliable access to cost-effective elemental bromine, a critical feedstock.

This has become more evident with the current events in the Middle East as well over 50% of the global bromine supply comes from that region. Our bromine plant project in Southwest Arkansas continues to proceed on time and on budget. Phase 2 of the project is underway with Phase 3 slated for 2027 and first production at the start of 2028. The plant is designed to have an annual capacity of up to 75 million pounds, more than double our existing long-term third-party supply agreement.

TETRA's Electrolyte revenue grew meaningfully in 2025 as U.S. energy information administration reports that a record 15 gigawatts of utility scale battery storage was added to the grid in '25. The EIA projects that another record 24 gigawatts is planned for 2026, representing a 16% growth rate.

As artificial intelligence and cloud computing drive rapid growth in data center power demand, scalable long-duration energy storage is becoming increasingly critical. TETRA's proprietary PureFlow Zinc Bromide is a key input for these systems, supporting safe, nonflammable performance at utility scale.

TETRA's OASIS TDS end-to-end desalination of produced water for beneficial reuse continues to gain momentum with multiple engineering efforts and customer commercial engagements. Since achieving 24/7 steady-state operations 60 days ago, our Permian Basin pilot project has operated at over 96% uptime and continues to meet our performance specifications. We believe that behind-the-meter power generation, access to affordable natural gas and land and other factors will drive significant data center growth in West Texas and accelerate the produced water desalination market well ahead of our 2030 targets.

Regulatory agencies continue to focus on understanding the technology, setting permitting standards, and encouraging the industry to bring solutions to the produced water disposal challenge. TETRA is honored to participate in the National Petroleum Council Produced Water Committee and to support the recently announced U.S. Environmental Protection Agency Reuse Action Plan 2.0.

Regarding TETRA's lithium and magnesium critical mineral resources in Arkansas, we continue to advance relationships with technology providers and conduct engineering studies. We have formed a joint venture with Magrathea Metals to advance domestic magnesium metal production and monetize this asset. The JV will leverage our specialty chemical processing expertise and large-scale magnesium resource base, combined with Magrathea's proprietary electrolytic magnesium production technology, which has been partially underwritten by the U.S. Department of War.

In April, Magrathea successfully converted TETRA Smackover brine, rich in magnesium, into a high-purity magnesium metal at its small pilot operation in the San Francisco Bay Area. The JV named Arkansas Magnesium is currently conducting engineering studies for a first-of-a-kind demonstration plant planned for co-location at the Evergreen Bromine site in Arkansas.

For lithium, a strong rebound in lithium carbonate prices over the past six months has led us to look at options to accelerate the development of our Evergreen 585,000 metric ton lithium carbonate resources. As a reminder, Evergreen is a 6,900-acre brine unit in Southwest Arkansas on which TETRA owns 65% of the brine mineral rights, and ExxonMobil owns 35%. The combination of current LCE prices of around $25,000 per metric ton and efficiency advances in direct lithium extraction technology are making this a very attractive option to accelerate. More to come as we look at ways to advance this opportunity. With that, I'll turn the call over to Matt.

Thank you, Brady. Good morning, everybody. Completion Fluids & Products revenue of $92 million and adjusted EBITDA of $26 million increased 10% and 12%, respectively, relative to Q4 2025. The sequential increase was driven by higher sales volumes in our industrial chemicals business and ongoing deepwater projects in the Gulf of America and Brazil that Brady referenced earlier.

Year-over-year, Completion Fluids & Products revenue and adjusted EBITDA decreased 1% and 23%, respectively. As a reminder, our first half 2025 results included high-impact Tetra Neptune projects, which we previously noted, we do not expect to repeat in the first half of this year. That said, the pipeline of deepwater and high-pressure, high-temperature completion opportunities continues to grow. With our best-in-class service delivery and unique fluid chemistry solutions, we are well-positioned to participate in the forecasted growth in offshore deepwater activity.

As Brady mentioned earlier, geopolitical unrest in Europe and the Middle East has led to a rapid shift in global market dynamics. As a result, offshore activity in the Middle East has slowed, and logistics into the region continue to face higher costs and shipping delays.

Our exposure in the region is relatively small compared with our overall business, but some of our Q2 2026 completion fluid sales in the Middle East could be delayed.

However, as mentioned, our calcium chloride and bromine-based completion fluids are manufactured outside the Middle East. As such, our fluid production has been unaffected, and we are seeing an increased number of spot sales inquiries from regions and customers we have not historically supported, which could more than offset any delays.

For Water & Flowback Services, revenue of $65 million increased 3% sequentially and 1% year-over-year. To put our performance in context, during the same 12-month period, U.S. frac activity declined more than 24% year-over-year. Adjusted EBITDA of $9 million increased 20% sequentially and 9% from the prior year. The improvement in profitability was driven by cost reduction initiatives and continued market penetration of higher-margin automation technology.

Outside the U.S., project start-ups in the Vaca Muerta Basin will enable us to double revenue in Argentina in 2026 at margins that are overall accretive to the segment. Compared with the broader market conditions, our outperformance highlights the strength of our service delivery, our differentiated technology, and our geographical diversification.

As commodity prices have increased and a 12-month strip price remains above what the market projected at the start of this year, we are seeing our customers consider increasing their activity plans for 2026. Should this occur, we are well-positioned to incrementally benefit from any increase in activity in U.S. shale basins that may result from higher oil and gas prices.

Regarding our capital structure, we had $36 million in cash and a total debt of $182 million at the end of the quarter, resulting in a net leverage ratio of 1.5x. Cash used in operating activities was $12 million. Total CapEx was $19 million, including $8.4 million for our Arkansas bromine project. Total adjusted free cash flow was a use of $32 million, and base business adjusted free cash flow was a use of $23.5 million.

The use of cash was driven by higher incentive compensation tied to our strong 2025 financial results, our three year return on net capital invested, and our exceptional total shareholder return performance. Cash use also reflected a build in our -- AR balance at the end of the quarter and the seasonal inventory build in Europe, which will be monetized in Q2. We expect to generate positive base business free cash flow in 2026, with that cash being reinvested in our Arkansas bromine plant.

Overall, we are off to a strong start and remain confident in our ability to deliver solid financial results this year while continuing to advance towards our 2030 targets. The global market conditions continue to evolve, but overall, they are providing modest tailwinds for the markets that we serve.

I'll now turn the call back to Brady for his closing comments.

Well, thanks, Matt. And again, despite the continued uncertainty caused by the conflict in the Persian Gulf, the long-term outlook for our business appears to be even better than when we had started the year in 2026. So overall, very confident in TETRA's ability to execute in these market conditions that we see, make prudent financial decisions to support our growth, and continue to make progress towards our 2030 targets.

So with that, let's open it up to questions and answers.

[Operator Instructions] Your first question comes from Bobby Brooks with Northland Capital Markets.

It seems like the OASIS commercial discussions are progressing well. And what really stuck out to me in the script was the "multiple engineering efforts and customer commercial engagements. " Could you just pull back the curtain a little bit more about what that looks like and add some comparison to what that looked like, say, at the start of the year or six months ago?

Sure, Bobby. I appreciate the question. So yes, we are very encouraged by the ongoing dialogues that we have. Remember, we mentioned in our last call that we were engaging in a 100,000-barrel-per-day plant. We actually now have several parallel engineering studies going on for a smaller-sized plant as well as a 100,000-barrel-per-day plant. And those engineering studies, they take time, and we're still on progress. We feel that we have what we need from those projects to at least get into more commercial discussions with our customers before the end of the second quarter.

We're encouraged by what we see from the preliminary engineering studies in terms of the OpEx and the CapEx, and socializing some of those discussions with customers, but we still have a ways to go to finish those efforts, and we'll continue to do so. So that's really kind of an update. Again, we're in the middle of engineering studies -- engineering work that we'll need to complete before we can really get into any long-term contracts, Bobby.

Got it. And then maybe just on the customer discussion side. It seems like over the past, like since the Investor Day, specifically, there's probably been more folks entering, reaching out, wanting to hear about the technology and learn more. Is that trend still continuing? Or maybe I'm off base? Just any color on the kind of that dynamic?

Yes, Bobby, this is Matt. So absolutely. I said we cannot disclose the customers that we're engaged with. But certainly, those engagements, those dialogues, those engineering studies like Brady referenced, that's increased. And as you say, you picked up on the fact that it's not one engineering effort. This is with different customers, multiple opportunities.

So we're very encouraged. We're also very encouraged by the performance of our technology, of our patented Oasis offering and the economics associated with that, I think also are only continuing to improve. I think as you're well aware, some of the challenges with disposal, some of the costs associated with disposal -- those costs continue to rise. And as we continue to go through our engineering efforts, we're able to demonstrate that the TETRA OASIS solution is -- in our view, very cost competitive with alternatives.

Your next question comes from Martin Malloy with Johnson Rice.

Congratulations on a solid quarter. Question was on the -- my first question was on the deepwater side. And any indications that -- I know there's no Neptune projects in your '26 guidance. But can you talk about what you're seeing in terms of your -- the conversations with customers for deepwater completion fluids and particularly with respect to Neptune potential projects second half this year or next year?

Yes. Sure, Marty. I mean we've been feeling good about the deepwater outlook really going all the way back to at our Investor Day when we outlined some pretty strong compound annual growth as we march towards 2030. And I would say the recent events have only strengthened that outlook. As you look at cutting off the amount of oil that's currently happening in the Middle East, these projects that already were looking very strong financially for our customers.

As you can imagine, they're looking at what they can pull forward, what makes sense to pull forward. And we're hearing some of that churn. We've actually picked up, as we've mentioned, the work outside of the Middle East that we've seen already will offset whatever impact that we see from our Middle East business, even though it's roughly 5% of our revenue, we've seen opportunities already well overcompensate that potential loss. So yes, we're seeing some churn in that regard, but it's already been a strong outlook, at least in terms of our base business, deepwater completion fluids.

With regards to Neptune, as we said, the pipeline continues to grow. The wells are getting hotter, more challenging. Zinc is still an option in the Gulf of America, but it has its own challenges as you get hotter with corrosion, as you deal with production facilities. So we're seeing that pipeline continue to grow. And we're also seeing opportunities outside of the Gulf of America continue to build. So may or may not see a Neptune project in this year, but I would say the probabilities for next year are continuing to increase pretty significantly.

Great. Very helpful. And then for a follow-up question, I just wanted to ask in your -- you commented on it a little bit, but in your press release, you did talk about evaluating options to accelerate lithium and magnesium development. And I don't know if there's more you can share with us now. Is that -- would that be in conjunction with perhaps accelerating the bromine project? Or is that -- is it dependent on that? Or is this separate related to the Exxon joint venture?

Yes. We're accelerating the bromine project really at the pace -- at the fastest pace we can. That project is our priority. And we will definitely prioritize that project to have them completion by the end of '27 and start in 2028. Now the benefit of that is that all the upstream that we -- if you want, the brine wells that we put in place, the pipelines, some of the pretreatment plant capabilities to take out H2S from the brine field, those types of things will be in place for whatever additional plants we put on that site.

As we've mentioned on the call, we're currently doing engineering studies and plan to put a demonstration plant for -- with Magrathea for the magnesium demonstration plant. And also, we've already done quite a bit of engineering for a lithium plant that will be on that same site that, again, will benefit from a lot of the infrastructure and investments that we have already made -- for the bromine project. So a lot of synergies related to that. We're not ready to publish any financial information on those projects yet. But as we move forward, you can anticipate we will be at the appropriate time.

Your next question is from Tim Moore with Clear Street.

My first question is about battery energy storage. We all know that EOS has some supply manufacturing hiccups, which seem temporary. So I'm just kind of curious, do you get a rolling update on that? It seems like you have enough feed supply for electrolytes to quickly maybe get it to them if they start ramping up more seriously after the summer. Just kind of curious about how you're thinking about that logistically and the supply side.

Yes. Tim, we don't want to comment on kind of forecasting anything, obviously, ahead of EOS. But obviously, we're very plugged into their forecast so we can plan for not only the bromine, but the full electrolyte production that we need to produce. So we do have good visibility into that, but we really can't talk about any specifics.

We have -- as we've mentioned before, in addition to our long-term supply agreement, we have secured additional third-party bromine supply that is in place to meet the forecast that we are getting from EOS. That's really not a concern. And of course, once we have our own plant operating in 2028, if they continue their path to the eight gigawatt hours of production that they've stated publicly they're striving for, we'll be in a great position to not only supply their requirements, but also the deepwater growth that we have projected.

That's helpful, Brady. I'm sure we'll get an update on in two weeks from them when they report, but it seems like it's feasible on their end. The other question, just switching gears. I don't know if this is more for Matt and you, Brady, but for the Arkansas bromine project, I mean, it was nice to hear Brady, your prepared remarks on production still expected early 2028. Can you just maybe just walk us through maybe some of the next construction milestones? And I'd anticipate CapEx to uptick pretty meaningfully, I guess, in the coming quarters. I think it was only $7 million in the March quarter. If Matt could just share some color on that.

Sure. Yes, I'll take that one and if Matt wants to add anything, I'm sure he will. So yes, the project is on schedule. We've completed Phase 1. Phase 1 was important because standing the bromine tower up -- the tower up on site was a logistics challenge. It's a large 130-foot titanium structure. Having that up and secured was a really important milestone. But again, a lot of the actual on-site construction around the bromine tower, the pipelines from the upstream, all of that, the pretreatment, all that has to still be constructed. And so yes, there will be more construction activity in '27 and '28.

Again, we're projecting good cash flows for the rest of this year and 2027. So we are looking to finance as much of that as we can from our free cash flow. And if we do need additional capital, we have very good options available to us if we have to go that direction. But for right now, we're funding from our cash flow, and that's the plan.

Your next question comes from Patrick Ouellette with Stifel.

It's Pat on for Stephen Gengaro. Thanks for taking the question. Could you talk about the opportunity you have for magnesium production, maybe including any sense you have for demand and any color on the joint venture? I believe I saw the JV partner referenced 7,000 tons per year by 2029.

Yes. So we're having ongoing discussions. We have finalized the joint venture, which is great. We had our first formal Board meeting a week or so ago. We really like this technology. As you're probably aware, the U.S. really doesn't produce any magnesium. The world is heavily dependent on China production for magnesium. And so as you can imagine, it's being on the critical minerals list, it's got the attention of the current administration, the Department of War. So I would say it's a little premature to start saying how large the first commercial plant will be that we are having some discussions along those lines.

We will have plenty of brine flow to make the plant as large as we want to make it, but there are some other considerations that we want to take into account what type of offtake agreements we can have well ahead of time, what type of support we may or may not get from government funding. So there are considerations that will still be taken into account. But the demonstration plant, obviously, will be a small scale to prove out the technology. But as far as the commercial scale, we have not made any final determinations on that yet.

Okay. It seems like a great opportunity. Just shifting gears a little bit. Thinking about fluids, it seems like the timing of completions versus rig activity in deepwater would lead to maybe sharply higher 2027 fluids demand. Is that reasonable? And any way you'd maybe translate deepwater rig additions to demand?

Yes, Patrick, on the earnings call back in -- this is Matt, back in February, we mentioned and gave some soft guidance around what to expect in our Completion Fluids & Products this year, highlighting that we came off a very strong performance in 2025 where a lot of the rigs in the markets that we serve were in completion activity. And then we guided that we expected those rigs to move into more drilling activity in '26. But then again, of course, shifting back to 2027 and seeing some of that higher completion activity like what you referenced.

As Brady touched on, certainly, the geopolitical events that are going on in the world today have really highlighted global demand in terms of -- and where that demand is fulfilled. So we are seeing projects coming online, FID. If you look at some of the leasing activity that's been going on, again, as Brady touched on, it tends to be deeper, hotter, a little more challenging environment, requiring higher density brines and more exotic chemistries, which again plays into the strength of TETRA.

So, we're very pleased by what we're seeing already in 2026. We said some modest tailwinds, quite a strong performance in Q1. And then as we guided to earlier on our call back in February, we expect that 2027, some of that completion activity, but also the type of completion activity that will be going on really benefits TETRA.

Your next question is from John Tanwanteng with CJS.

My first one is could you talk about your partners' lithium project FID status? And one, if you may need to pursue your own roll investments there to keep the bromine project on time? And then second part of that is, if you do decide to drill your own wells, would that be feeding into your own lithium production endeavors if you want to accelerate that?

Let me make sure I understood the question that came across a little bit, right. The question was status of lithium FID was the first part of the question? Right.

Your partners who are drilling the lithium wells, what's the status there? And do you think you'll need to be -- you'll have to drill your own lithium or your own well to get the brine for the bromine?

Yes. So let me clarify that a little bit. The wells that we drill in the upstream for the brine contain both lithium bromine and magnesium. All three minerals are within the same brine. So what I mentioned earlier, the wells that we will be drilling for our bromine project that will feed the bromine tower, those wells already have lithium and magnesium in it. So we don't really need to drill additional wells in order to extract the lithium or even the magnesium. That's the real benefit of this project. We're getting three really critical minerals for us out of the same upstream investment.

Now the plant itself is a different issue. As you know, we're building the bromine plant right now. The lithium plant will come later. We're not at a point where we're ready to FID a lithium plant. There's still some more technology evaluation and engineering studies to be done before we are ready to do that. But as I said, the current economics of lithium make it attractive enough for us to put some accelerated time into that.

Right. I guess my question was, are you expecting your partners to drill the wells? Or are you expecting to drill your own wells?

When you say our partners, who are you referring to in that case?

Standard Lithium and Equinor.

Okay. So they have their own projects. Standard Lithium and Equinor on our brine leases. That's a separate project from our brine leases. They have the Reynolds unit that has been approved. We get a royalty of the lithium off of that production. So they're not -- technically they're really not our partners. They are partners themselves. Equinor and Standard Lithium have a joint venture. But we have -- we own the brine leases and we get a royalty off of that production.

So there are separate units in discussion. Our Evergreen unit is where we will be drilling -- producing brine for bromine and future lithium and magnesium. They will be drilling on their own unit, the Reynolds unit, where we get a royalty off the lithium, but still -- and then we get the tail brine from that production when we need it in the future. And we also get the other mineral rights within that brine. Hopefully, that clarifies a bit.

It does. Appreciate it. And then another question, if I could. What's happening in calcium chloride markets? And is that being impacted by the conflict you're seeing in Iran and how that flows through supply chains and industrial demand?

Calcium chloride business for us continues to perform extremely strong. As I've mentioned, it's a big part of our chemicals -- industrial chemicals business that had a record first quarter, up pretty significantly over last year and quarter-to-quarter. We're not -- I wouldn't say we're seeing any material change due to the current conflict. We really don't have any supply chain issues related to that for that market. We don't have a large presence selling calcium chloride into the Middle East.

But our European business is very strong. Our U.S. business is very strong. We mentioned on our last call, we saw some new emerging markets as it relates to chip manufacturing requirements. So that business is performing very well for us, and we fully expect it to into the future.

Your next question comes from Josh Jayne with Daniel Energy Partners.

First one is just on international production testing. You talked about revenues being greater than 50% internationally. Where do you see that going overtime? And could you walk through some of the markets where you're seeing strength today and how the recent events have potentially changed your outlook there?

Yes. Thanks, Josh. As mentioned, we're seeing some and we guided towards at the beginning of the year, strong performance in the Argentina business. As we mentioned in our prepared remarks, we're seeing that continue throughout the quarter and expect that we'll more than double our revenue in 2026.

Other markets, we've obviously touched on a little bit, the Middle East where we have some exposure there, although it's relatively small. But we also see opportunities in some of those markets, those regions to continue to deploy technology and automation. We've been, as we touched on, very successful in terms of North America, automating and bringing differentiated technologies such as SandStorm, automated drill-out and things like that to our North American customers. And these are technologies that can be exported and used and deliver value in those international markets.

So as we touched on, we're quite pleased with our geographical diversification. Again, as we see the world in terms of where energy is produced, having that diversification is getting a lot of focus right now. And so it's not just U.S. land, but other markets are looking at how they secure their own energy, and we're pleased to participate in that.

And on that point, could you just expand? I mean, what has the game changed when we think about energy security longer term and the opportunity set across multiple of your business lines, international and offshore for just a broader opportunity set as a result of what's happened over the last eight weeks. Are you starting to see that? Are you having incremental conversations with customers you may not have been having 8 to 12 weeks ago? Maybe just elaborate on that a little bit more.

Yes. I think when you look at the current situation and the future energy markets where you want to be positioned, offshore deepwater is clearly a key market for future barrels, right? And then also unconventional activity in the U.S. and Argentina because relatively speaking, it's a short cycle time to get additional production as you put more rigs and frac crews into the unconventional markets. So as Matt said, we're also seeing unconventional activities start to grow in the Middle East. We'll see how that -- how this current environment impacts may or may not impact that activity going forward.

But the markets where we want to be right now, strong position in Europe, strong position in the U.S., strong position in Latin America, offshore deepwater, unconventional, we think these are the markets that we really want to be in to, as you speak about security of future supply.

Yes. And I think the other aspect, which we touched on in our remarks as well is that we are seeing an increased inquiry of spot sale from different customers into different regions than we've historically served in terms of our completion fluids. As Brady mentioned, more than half of the world's bromine is derived from -- in the Middle East. Obviously, some of the challenges of that region are well publicized.

And so some customers, we are having those conversations and again, spot sale inquiries around being able to support their business with all of our fluids in terms of the bromine-based fluids being manufactured in North America from Arkansas. So we're pleased with some of that. Obviously, I think as well in terms of energy security, you highlighted it, right? The current situation, I think everyone is appreciating that the world needs all forms of energy and is going to need all forms of energy for a long time.

Your next question comes from Bobby Brooks with Northland Capital Markets.

Just turning to domestic onshore completion fluids market. What are you hearing from customers on their back half of this year activity outlook? Are they sort of in a wait-and-see mode if these higher oil prices are here to stay? Just wanted to hear your perspective from -- on that.

So Bobby, you were asking about our U.S. land completion fluids business? Is that what I understood you're asking about??

Yes.

So completion fluids is largely an offshore business for us. We do have some land business for our completion fluids but generally speaking, it's small relative to our offshore and deepwater markets. But we're seeing some interesting trends as it relates to land opportunities. I've mentioned them on my comments, some very high-pressure Western Haynesville, South Texas gas wells that are feeding LNG projects require a -- heavier density brine fluid for completion work. So that trend is working in our favor.

And then in West Texas, the poor pressures are getting so high in West Texas that some additional work -- some workover activity also requires heavier brine. So those two areas are where we see most of the activity that's growing for us on the completion fluids side for land applications. Still relatively small to our deepwater, but it's actually starting to grow in a meaningful way.

Your next question is from Martin Malloy with Johnson Rice.

I just wanted to focus maybe a little bit on Argentina. You've guided some projects coming on later this year, giving you confidence in the outlook there. Could you maybe talk about a little bit more about the services you're providing down there? Is it -- are you seeing any – are you expecting demand for the early production facilities that have been pretty profitable in the past, being utilized down there? Or is this more on the flowback and testing side?

Yes. Really all of the above. So we did see continued interest and secured some early production facility projects for this year. But then also, as I mentioned, in terms of some of the technologies such as SandStorm automation, which has been deployed in unconventional -- and proven and unconventional plays in the U.S., we're seeing that technology be deployed into Argentina. So we have SandStorm down there today. And so it's a little bit of a combination of both, whereas historically in the past, our business down there was a little more levered towards the early production facilities.

Now we're really seeing a combination of the two, an increased number of early production facilities being executed and those pipeline of opportunities are very healthy, but also taking some of our differentiated technology from unconventional plays in the U.S. and deploying them down into the Vaca Muerta for the operators there is bringing some value. So we're quite pleased with how that business continues to progress.

There are no further questions at this time. I'll now turn the call back over to Brady for any closing remarks.

Yes. Thank you all very much. We appreciate your participation in our call, and we look forward to talking to you at our second quarter earnings call. We'll conclude the call now. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the TETRA Technologies, Inc 4Q '25 and Full Year 2025 Earnings Conference Call.

[Operator Instructions] I would now like to turn the call over to Kurt Hallead, Treasurer and Investor Relations. Kurt, please go ahead.

Thank you so much. Good morning, and thank you for joining TETRA's Fourth Quarter and Full Year 2025 Earnings Call. The speakers for today will be Brady Murphy, Chief Executive Officer; Elijio Serrano, Chief Financial Officer; and Matt Sanderson, Chief Commercial Officer.

Before we begin, I would like to call your attention to the safe harbor statement in our Form 10-K. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties as outlined in our SEC filings. Actual results may differ materially from those expressed or implied.

In addition, we may refer to adjusted EBITDA, free cash flow and other non-GAAP financial measures. Please refer to our press release for reconciliations of non-GAAP to the most comparable GAAP financial measures. These reconciliations are not a substitute for GAAP financials, and we encourage you to refer to our 10-K that was filed yesterday. After Brady, Elijio and Matt provide their comments, we will open the line for Q&A.

I'll now turn the call over to Brady.

Thanks, Kurt, and good morning, everyone. Welcome to TETRA's Fourth Quarter and Total Year 2025 Earnings Call. Before we get into the quarterly results and outlook, I would like to begin the call by acknowledging and highlighting the exceptional efforts and the 2025 performance of our leadership team and all of the TETRA employees.

2025 was a challenging year for the U.S. oil and gas industry, marked by reduced levels of U.S. onshore activity and a volatile global economic environment. But despite these headwinds, there's a long list of TETRA's record financial achievements as well as overwhelming support for the company's strategic developments.

I'll highlight some of the outstanding financial achievements and progress against our 2030 objectives, which we communicated as part of our One TETRA 2030 strategy at our investor conference at the New York Stock Exchange last September. I'll then turn it over to Matt Sanderson and Elijio Serrano to summarize our fourth quarter results and provide an update on our balance sheet.

Headlining our exceptional 2025 performance is our Gulf of America Completion Fluids team. For the fifth consecutive year, TETRA was ranked the top supplier in the Gulf of America for product quality and overall performance for offshore completion fluid suppliers in the well-respected Kimberlite International Oilfield Research report. As the market and technology advanced to 20,000 ultra-high pressure and ultra-high-temperature wells, our innovation leadership is resulting in market share gains.

TETRA's Gulf of America revenue increased well over 50% in 2025 compared to 2024, driven by participation in deepwater projects, including 3 CS Neptune wells that we completed in the first half of the year for a super major. Our unique zinc-free, high-density completion fluid allowed them to complete their high-pressure wells on schedule without exposing their production facilities to zinc in the production flowback.

The performance of our Gulf of America team drove our Completion Fluids & Products' EBITDA margins to improve 420 basis points from 28.9% in 2024 to 33% in 2025. The combination of our vertically-integrated business model as the only service provider that manufactures our own fluids, and our unique technology portfolio gives us a very strong market position. Supporting our global Completion Fluids business is our West Memphis manufacturing team, which is the heart of our bromine-based completion fluids and our PureFlow electrolyte production.

Using elemental bromine sourced through a combination of open market purchases and our long-term supply agreement, we produce offshore completion fluids, including CS Neptune and the PureFlow-based electrolyte. 2025 was a record production year for West Memphis, producing 40% more bromine end products than our long-term bromine supply agreement allows. The West Memphis team also expanded their production and distribution capacity to ship PureFlow electrolyte to Eos in tanker trucks rather than totes to keep up with their expanded production.

Another 2025 record performance is our global calcium chloride business, which set both revenue and adjusted EBITDA records and again outperformed GDP in 2025. We hold a market-leading position in Europe and a strong second place in the U.S. market. In addition to our food-grade products, we are encouraged by the outlook for our Tech Grade product lines, supporting the reintroduction of chip and other high-tech manufacturing operations in the U.S.

Although still a small percentage of our U.S. calcium chloride revenue, our Tech Grade for chip manufacturing grew by 144% in 2025 over 2024. The combination of these 3 record-setting operations; Gulf of America, West Memphis plant production and calcium chloride business, not surprisingly, resulted in record level revenue and adjusted EBITDA for the Completion Fluids segment as a whole in 2025.

This performance occurred despite an estimated 55% fewer floating deepwater rigs operating globally than the 2014 peak, and we believe are still in the early days of anticipated Eos production ramp-up. This is one of the reasons we feel very well positioned to benefit from the multiyear deepwater activity recovery and the electrolyte growth highlighted in our One TETRA 2030 strategy.

Moving on to the strategic milestones for 2025 and the fourth quarter. During the year, we made significant progress on our new bromine plant and reached a major milestone in December by erecting a 120-foot tall titanium bromine tower and support structure at our Evergreen plant site in Southwest Arkansas. We completed Phase 1 of the planned 3 phases on time and materially below budget.

We've advanced the detailed engineering design for Phases 2 and 3, placed orders for long lead items, refined the plant's total cost and are finalizing the detailed schedule. By designing the plant around the bromine tower's capacity of 75 million pounds of bromine annually, we will have 56% more low-cost bromine available to us than the 48 million pounds we published in our definitive feasibility study in August of 2024.

Since that study was completed, we have increased our demand outlook for deepwater completion fluids and now expect total bromine product demand to reach the 75 million plant capacity by 2029. Once we have the final upstream well field schedule from Standard Lithium and Equinor's Reynolds unit from which we intend to receive the post-lithium extracted brine, with Board approval, we intend to FID the project. For the reasons highlighted, we expect the Arkansas bromine project's economics to be improved from what we previously published.

Continuing on with our Arkansas brine resources, we're pleased with the progress towards finalizing JV terms with Magrathea for the production of magnesium metal using the rich concentration of magnesium, also in the same Smackover brine on our 40,000 acres. Magnesium is classified as a critical mineral by the U.S. government and is used to produce a highly valued metal for the Department of War and other U.S. industries. Through our planned partnership, we would combine Magrathea's advanced process technology with TETRA's deep operational expertise and a world-class magnesium resource base from our Southwest Arkansas brine acreage.

Magrathea has already secured Defense Production Act Title III funding from the Department of War to support its commercial Phase 1 planned to be on site at TETRA's Evergreen plant. We're optimistic that further government support is possible for our future commercial plans.

Finally, as it relates to our Arkansas brine resources and as we highlighted in our 2030 strategy, lithium has been viewed as a future opportunity beyond our 2030 targets. However, with lithium prices increasing back to over $20,000 per metric ton, we are reengaging direct lithium extraction technology companies and evaluating technological and cost efficiency advantages to understand the current economic environment. As a reminder, TETRA is the designated operator of the Evergreen brine unit and owns 65% of the brine minerals, including lithium, while ExxonMobil owns the remaining 35%.

Our final strategy update concerns desalination for beneficial re-use. We're very pleased with the results of our EOG commercial plant desalination operation in the Permian Basin. This Phase II grassland study has been running with over 95% uptime for the past 4 months following completion of the greenhouse Phase 1 study. This grassland study is evaluating oil and gas produced water desalinated through TETRA's oasis technology.

Of great significance is that TETRA was issued a patent for our TETRA oasis TDS end-to-end desalination solution. We're pleased that our unique pretreatment combined with exclusive membrane and post-treatment technologies has been recognized as a unique and patentable solution for desalinating oil and gas produced water for beneficial re-use.

However, the biggest desalination update since our Investor Day in September is the growing attractiveness of West Texas for data centers, which has shifted our customers' priorities and our focus. With data center straining electric utility grids and driving price increases, behind-the-meter cost-effective power has become a major driver for data centers. With West Texas low-cost abundant natural gas, ample and affordable land and a friendly regulatory environment, it is easy to understand why.

The one challenge West Texas does have is a lack of fresh water for power and data center cooling. However, with over 20 million barrels of produced water per day, there is far more water available by desalinating produced water. This is an extremely attractive option since operators need to reduce the amount of water they reinject for disposal and converting it into a viable resource for power and data center cooling is a double win given they now have a revenue source instead of incurring disposal costs.

Our customer plan for 25,000 barrels per day plants have been shifted to greater than 100,000 barrel per day desalination plants as one data center could require as much as 200,000 barrels of desalinated water. This is a very dynamic environment that has not changed the fact that operators need a solution for disposal well pore space filling up. However, has provided an exciting acceleration opportunity that has significant potential for TETRA. All these efforts are contributing towards the goals we laid out for 2030, including our future segments focused on specialty chemicals and water desalination and treatment.

Looking forward to 2026, we see continued momentum towards our 2030 objectives. We expect incremental revenue growth driven largely by a material increase in electrolyte business and major contract awards in Argentina. Argentina has been a real success story for us as our team has secured contracts to meaningfully expand our production testing business, anchored by our proprietary and highly efficient SandStorm technology.

In addition, our team secured 3 early production facility contracts. The combination of winning more early production facility contracts and gaining market share with Sandstorm is expected to double our revenue in '26 compared to '25. Argentina's margins are accretive to our overall water management and flowback margins and are more stable given the long-term nature of our contracts.

On the Completion Fluids side, Gulf of America activity in 2025 was heavily weighted towards completion and less towards drilling. 2026 activity is forecasted to be higher in drilling, including more exploration with less completion activity. As a result, we do not expect the Gulf of America to reach the same record levels as in 2025. However, this is projected to cycle into stronger 2027 completions activity and our 2030 targets for this business are on track.

Our U.S. water onshore -- our onshore Water & Flowback Services business continues to benefit from longer laterals, increased sand and water usage and more production-related activities, including water treatment and recycling. We expect the net impact of all these to result in overall modest growth in 2026.

We've secured third-party bromine supply for '26 and '27 to bridge our growing bromine demand and until our bromine processing plant is brought online. These third-party supplies will allow us to keep pace with the expected material increase in electrolyte and robust deepwater market, but they do come at an incrementally higher cost relative to our current long-term bromine supply agreement, which is consistent with our expectations.

Although it is possible for one or more CS Neptune jobs to materialize in '26, without CS Neptune projects and somewhat higher short-term cost of bromine, we expect our Completion Fluids & Products' adjusted EBITDA margins to be in the 25% to 30% range, which is consistent with the average margin range for this segment over the past 7 years.

The increased cost for additional bromine supply has been anticipated as a bridge until we have our bromine processing plant operational, but it further supports the strong business case and significant EBITDA increase we expect for this segment starting in 2028 when the plant is operational. For Water & Flowback Services, the continued focus on differentiated technology and our profitable international growth contribute to improved adjusted EBITDA margins from 12% in '25 to the mid-teens in 2026.

With that, I'll ask Matt Sanderson, who has currently and for the past 2 years, done a great job as our Chief Commercial Officer, to update us on the fourth quarter highlights and then Elijio Serrano to close out with our balance sheet and update. Before turning the call over to Matt and Elijio, I'd like to again express my and the Board's deep appreciation for Elijio's contributions and efforts over the past 13 years.

Last October, we announced that Elijio had notified TETRA of his intention to retire at the end of March. Over the past 6 months, Elijio has worked with Matt to ensure a seamless and orderly transition of the CFO responsibilities. Matt has been with TETRA for over 9 years and as stated, most significantly as Chief Commercial Officer. The Board and I spend a lot of time on succession planning to ensure we have the talent necessary for the organization to execute on the base business and deliver our longer-term goals. This transition will allow us to do so.

Elijio has agreed to remain available to Matt, me and the Board as an adviser so we can leverage his skills, knowledge and relationships with our investors, the financial community, our lenders and the financial team. While this might be Elijio's last quarterly earnings call, we fully expect that in the background, he will continue to support the organization as we methodically march towards our 2030 goals.

With that, Matt will provide some additional color on the fourth quarter results before handing over to Elijio.

Thank you, Brady. As mentioned, 2025 was a record-setting year for TETRA on several fronts. This included our strong fourth quarter performance. Completion Fluids & Products revenue of $83.7 million was up 22% compared to a year ago and included a material increase in shipments of electrolyte and our adjusted EBITDA margins remained strong at 28.2%.

Water & Flowback services revenue of $63 million was flat compared to the third quarter despite the traditional year-end slowdown in the U.S. market. Conversely, we saw stronger activity in Argentina as we started another early production facility during the quarter. We expect to start another one this week, setting us up for a strong year in 2026 in the Vaca Muerta region, as Brady mentioned earlier. Production testing activity remains strong on the back of our SandStorm technology.

Adjusted EBITDA margins improved 100 basis points on aggressive cost reductions and a continued focus on new technology and automation aimed at reducing personnel at the well site. Despite competitive pricing pressures in U.S. land, our adjusted EBITDA margins remained relatively flat during the year. Our focus remains on leveraging technology on higher-margin opportunities and generating free cash flow in this segment.

Corporate and other expenses were $11.3 million and included materially higher variable compensation expense resulting from our team's record 2025 performance. This variable compensation includes both short-term and long-term incentives, including returns on net capital employed targets and a total shareholder return, or TSR, over a 3-year period, which is structured to align management's interests with those of our shareholders.

For the 3-year period that we are being compared to our peers, we were in the top quartile of our peer group. As a result of that increase in shareholder value, our long-term variable cash compensation increased $2 million over the third quarter. In the fourth quarter, we also changed our corporate office location, which will reduce our corporate G&A expenses by approximately $2 million per year.

We will be participating in several upcoming investor-related events in the first part of this year, which have been listed on our website. I look forward to working closely with our current and future shareholders, along with the broader investor community. On a personal note, I'd like to congratulate Elijio on his upcoming retirement. I sincerely appreciate all of Elijio's support during these past 9 years, and I wish he and Mary all the best on the next chapter in their life together.

With that, I will turn it over to Elijio to cover cash flow and the balance sheet.

Thank you, Matt. I'll highlight 3 areas, then we'll open the call up to questions. The first one is free cash flow. Cash flow from the base business in the fourth quarter was very solid at $21.8 million. For the year, free cash flow from the base business was $83 million. As you recall, all during 2025, we have been communicating our objective of generating over $50 million of base business free cash flow, and we did $83 million.

Included in 2025's free cash flow was $19 million in cash proceeds from the sale of our shares in Kodiak Gas Services following our divestiture of CSI Compressco. Just like we did with our previous sale of shares of Standard Lithium, we time our sale of Kodiak shares near their 52-week high.

The organization is very focused on managing cash flow and managing working capital, so we can maximize cash flow from our base business to invest into our bromine project in Arkansas. Despite a $12 million increase in fourth quarter revenue compared to a year ago, our cash management efforts allowed us to reduce working capital by almost 20% or by $21 million from -- to $88 million at the end of 2025.

To demonstrate the quality of our customers and our internal focus on timely invoicing and collections, days sales outstanding improved 13% from 71 at the end of 2024 to 62 days outstanding at the end of 2025.

Base business capital expenditures were $30.5 million and investments in Arkansas were $45 million. We also capitalized $4.5 million of interest expense consistent with GAAP requirements on large capital projects. Consolidated TETRA free cash flow, including all our Arkansas investments was $33 million in 2025, demonstrating the strength of our base business to allow us to invest into the projects and still be free cash flow positive. This will allow us to keep making progress towards our 2030 goals without over-levering TETRA.

The second topic of emphasis is our balance sheet. Even after we invested $45 million into Arkansas, we ended the year with cash on hand of $73 million, double where we started the year at. Net debt is $109 million, down from $143 million at the end of '24. Our net leverage ratio improved from 1.8x at the end of 2024 to 1.1x at the end of 2025. We have nothing outstanding on our revolvers. As of this week, we had borrowing capacity of approximately $7 million on our revolvers.

Brady mentioned the growth in our business in Argentina. Argentina is cash self-sufficient for us. We are not having to support Argentina by moving cash there to double the business in 2026. We expect to begin repatriating cash to the U.S. in 2027, given the strong performance that we expect from them with long-term stable early production contracts.

The third topic is our tax loss carryforwards. As of the end of 2025, we have a tax loss carryforward of approximately $84 million that can offset almost $300 million of taxable income in the United States. In 2025, we're able to use approximately $7 million of this deferred tax asset to reduce our U.S. cash taxes in the United States. This tax loss carryforward is of significant value to TETRA and TETRA shareholders as we continue to grow our business and move towards the 2030 goals with expected higher U.S. income from our bromine plant and from water desalination facilities.

And lastly, given this is my final earnings call, I would like to express my appreciation to the TETRA organization, our Board of Directors, the research community and our shareholders for the opportunity to work with all of you. TETRA is in a great position to deliver on our 2030 goals and create even more value to our shareholders as we grow our earnings.

Tiffany, with that, we'll open the call to question.

[Operator Instructions] the call to questions. Your first question comes from Stephen Gengaro with Stifel.

It will be odd without Elijio next quarter, but we'll keep talking to him. So, I think the first thing is, when we think about the comments on the fluids side and how the deepwater market looks in '26 versus '25 for fluids and how that evolves into 2027. Can you just talk a little bit about kind of what you're seeing -- just any incremental color on how we should be thinking about the offshore -- basically the nonindustrial piece of fluids?

Yes. Yes, sure, Stephen. As mentioned, we had a record-setting year for our Completion Fluids business in 2025. And really, when you think about it, we're still way below where the market peaked in deepwater in 2014. As I mentioned, we're 55% below where we were in the peak, and we're setting records financially. But we had a couple of tailwinds with us in '25 because the Gulf of Mexico, as I mentioned, was largely in completion phase. And there are -- these cycles happen, right, in deepwater.

If your drilling campaign is ongoing and you're doing less completions, that has an impact on us. If you're doing more exploration and less development, that has an impact on us. So, '25 was a great year. '26 is still going to be a very strong year for us. But we are seeing a cycle into more drilling phase and less completion phase. But again, that cycle will reverse itself in 2027. And I will say the overall deepwater market is -- overall is continuing to look very positive over the next 3 to 4 years.

So, hopefully, that helps with your question.

Yes, it does. And the other question I had on that was, when we think about margin progression on the fluids side, and obviously, we can sort of back out the first half of '25, which you had the CS Neptune work. The guidance parameters you gave, is there -- is it -- what's driving that? Is it just kind of normalized margins ex Neptune? And is there -- and what's sort of the pricing situation look like for the deepwater fluids?

Yes. Our pricing power is pretty strong in the Completion Fluids. We are the innovation leaders, and we get -- we think we get a premium for that. We're also vertically-integrated from the standpoint of being able to produce our own fluids. So, we feel we have an advantageous position in that regards.

I mean, as I've mentioned, we are securing third-party bromine at higher pricing levels, spot market pricing levels than our long-term supply contract because we're growing in both the deepwater and the Eos demand. So that does put a little bit of pressure on our margin side. But as we communicated, we think we're going to be in that range, 25% to 30% for the year in the segment, which is really consistent with our past 7 years.

But I think what it does highlight is, again, the strong business case that we have for our bromine plant because when we bring that plant online, we will have 75 million pounds of bromine available to us at significantly lower cost than what we are paying today. And that's, again, part of our 2030 objectives that we've outlined.

And then just one really quick one on the margin side. I don't think you've ever said this. I don't know if you will tell us, but how -- any guidance on how much of your bromine needs are serviced by the long-term LANXESS agreement?

I don't know that we have communicated that, Stephen. Do you know Elijio, if that's public knowledge?

We've indicated that approximately 75% of our historical needs have been met under our long-term agreement, and we've been doing open market purchases for the rest of it. But as Brady mentioned, with the volumes increasing, we're doing more and more open market purchases.

Yes. The percentage of open markets is definitely increasing, Stephen, as we grow and we support the electrolyte ramp-up. So, we're going to continue to see that in '26 and '27 until we bring the plant online, which will have a dramatic change.

Your next question comes from the line of Martin Malloy with Johnson Rice.

Elijio, enjoyed working with you for a number of years and wish you the best in retirement.

Thank you Marty.

We're going to keep him busy, Marty. Don't worry.

Okay, good. I wanted to ask about the desalinization plants. And it seems like, obviously, the size of the potential projects has increased substantially. I'd imagine that there's a number of different parties involved from E&P companies to midstream to the data/powered providers. Can you maybe help us with how we should think about the timing of these commercial contracts potentially getting finalized and then the time to revenue?

Yes. So appropriate question, Marty, because we were -- even since our Investor Day in September, we were going down a path with several customers who had a really sincere interest to stand up our 25,000 design plant in 2026. That has changed dramatically since our September discussion. And multiple customers, multiple data centers are now part of the discussion and have kind of taken over, I would say, the opportunity set that we initially were thinking about.

But it also includes the fact that we have to do additional engineering work. We had almost -- well, we completed our 25,000 engineering study. But clearly, when you go to 100,000 and above, we have to kind of restart that engineering cycle. And as you stated, there are multiple parties involved with this, the supplier of natural gas, a potential midstream supplier who's got water or an operator that has their own water, the power generation itself and the potential hyperscaler, whoever that in the case may be.

So, it is a multiparty process. It's an exciting process. West Texas is looking very favorable, I would say, in terms of the future of these data centers. And quite frankly, we've been open to the fact that we, to date, still, to our knowledge anyway, are the only ones that have communicated an end-to-end full commercial offering for desalinating produced water for beneficial reuse. And we're very encouraged by the patent that we received in the fourth quarter that provides more validation that we've got a technological advanced position.

So, in terms of timing, look, we're hopeful that one of these data center desalination projects will materialize in the first half of this year. Obviously, we weren't planning on much revenue, if any, revenue in 2026, but it does hopefully set us up for a first revenue of a large facility sometime in 2027.

That's great. And then for my follow-up question, I just wanted to ask about bromine and you're having to go out in the spot market and make purchases to meet the demand. And it sounds like from Eos' call earlier this morning, demand is not the issue. They've had some temporary execution issues ramping up, but the demand is certainly out there, and they'll be increasing the manufacturing going forward.

Does it make sense to try to accelerate the timing of bringing that bromine project online? It seems like you all are trying to pace it so you kept it within free cash flow. But given the ramp-up in demand and potentially completions in the deepwater coming back in '27, does it make sense to try to bring that in some, the completion date for the bromine facility?

Yes. The bromine facility is really being a schedule-driven -- it's a construction-driven project right now. The timing of being able to get the contractors on site, get all of the major equipment, tagged equipment on location. So, we're not slowing the pace of this project by any means to try to pace it with cash flow funding. So, we are moving as quickly as we can. We're still on schedule for the fourth quarter of 2027, Marty. But there may be a little bit of opportunity to pull it in a little bit, but we want to be conservative with our estimates on that.

Your next question comes from the line of Bobby Brooks with Northland Capital Markets.

First I want to say, Elijio, congratulations on the terrific career. And I'm glad I've got to known you pretty well over the past couple of trips we've had the last few years, including you taking me to -- on my first trip to Midland.

Thank you, Bobby. And hopefully, that was a very good experience for you.

Absolutely. So, I wanted to double-click on the desal stuff. I thought it was really exciting to hear the customer conversations have pivoted from the 25,000 barrel a day to 100,000 or more plants. But what I wanted some more clarity on was, I thought that when you did the engineering on the 25,000 barrel a day plant that it was sort of modular and scalable in nature, so you could kind of just stack for to get to that 100,000 number. Maybe I'm misunderstanding it, but could you just discuss why -- if that is the case, like why not just deploy 4 of them to hit that 100,000 goal?

Yes. Good question, Bobby. And we did anticipate that if we started out with 25,000 plants that as volumes increased, we would be able to build them in a train type of environment, right, another 25,000. But when you know you're going to start instead of a 25,000 plant and you're going to start with 100,000 or more, obviously, there are efficiencies to be gained out of a large 100,000 barrel per day plant versus just going and building 4 separate 25,000 facilities. So, with that in mind, our customer is asking us to prepare for a much larger facility as opposed to, well, let's just build 4 25,000 and put them together. So -- because there are some economies of scale to be had.

Absolutely. That makes a lot of sense. And maybe to dive a little bit deeper there, I think it took a couple of quarters to do the -- to get the engineering finalized for the 25,000 barrel a day plant. Do you think that might be a little bit accelerated since I'm guessing there's probably some crossover where you're kind of starting at second phase rather than starting at first phase with this engineering plan?

Yes. No, absolutely. I mean the fundamentals of the engineering are in place. So, we will get some efficiencies as we move into the 100,000-plus plant site. And if we were starting from scratch, this would clearly be a 6-month exercise, but we're not. And we feel fairly confident within the next 3 to 4 months, we will have a good range of where we need to be to move into a commercial discussion.

Great. And then just one last one for me. Just on the kind of base business, Water & Flowback Services U.S. If we think -- if you take the assumption that onshore U.S. activity stays flat, do you guys think you can continue to outperform that just through the value add that you provide the E&Ps? Or is it probably more likely kind of -- if it's in a flat environment, you stay flat as well?

Yes. So, I mean, the SandStorm technology uptake really continues with our customers, and we have more room to grow on that side of the business. As you probably heard, as you -- I'm sure you heard during our Investor Day, we are deemphasizing our water transfer business somewhat. We're still supporting that business and looking for the efficiencies that we'd like to get out of that business, but investing less in growth as that piece of our business becomes -- which is our lower-margin business, becomes less of our North America business, then we fully expect the flowback side of the business to continue to increase share. And that's what's helping us, along with Argentina, to continually drive our overall margins up in that segment in '26.

Got it. Great to hear. And maybe if I just could squeeze in one more. I thought it was really exciting here in the industrial calcium chloride for chip production had really outstanding growth in '26. Could you just maybe remind us, is that being supplied to domestic chip manufacturing, international chip manufacturing or is it a mix of both?

It is domestic chip manufacturing. And really, we're on early days of that growth. And calcium chloride provides a really valuable part of the solution for these chip manufacturers because it neutralizes fluorine and fluorides, which we know are an environmental concern. So, we fully expect that business to grow as the chip manufacturing market grows here in the U.S.

Your next question comes from the line of Jon Tanwanteng with CJS Securities.

Nice quarter. I was wondering if you could go a little bit more into the decision to bring on a third-party supplier for bromine. Does that indicate that you're having any issues with your current supplier or perhaps any delays or shortfalls expected when you ramp the new facility? Or is it purely just the demand for bromine is exceeding what you already had contracted? That's the first part of the question. The second part is, are you expecting to pass on some of that higher input cost through to your customers?

Yes. So, the incremental bromine -- remember, bromine feeds 2 important parts of our business, our completion fluids, our deepwater completion fluids, which had a record year in 2025. And then it also supports our electrolyte production, which Eos electrolyte production, as they ramp. So, we are definitely supplying -- securing third-party supply well above now the long-term contract. There's no issue with the long-term contract. But as we've stated publicly that contract does wind down through the end of 2029, which dovetails very nicely with our bringing the plant online in 2028.

We have some success with pricing because of our innovation leadership. That does help offset some of the increased price of bromine. But again, that's consistent with the guidance range that we've given between 25 and 30 for the segment, which is consistent with our past 7 years, really even overcoming the increased cost of bromine that we see as a short-term issue in '26 and '27.

Got it. And then you did mention you're expecting to hit that plant capacity in ' 29, just 2 years after you open it. I'm wondering if -- or what the plan is for excess bromine supply after that? Is it to stay with these third-party contractors? Or are there extension opportunities that you can do with the assets that you have?

Yes. The 75 million will be the current tower that we have. We have plenty of resource in the ground and in our brine to continue building out additional capacity. But most likely, we will go to the market with incremental bromine supply above the 75 million, at least for a period of time until see whether or not we've reached a whole new plateau of future bromine growth above our 75 million. But for the short term, we would expect to go to the market for any needs above that.

Okay, great. If I could squeeze one more in there. Do you have any expected shortfall in supply in bromine in the short term to your -- both your completion business -- or the battery business or is it -- are you expecting to satisfy all the demand with these new agreements?

We have secured -- contractually secured well what we need for 2026. Obviously, as we get closer to 2027, we will do the same thing, but we're in good shape for the supply.

Your next question is a follow-up from Stephen Gengaro with Stifel.

Just a quick one, and I was -- I might have missed this earlier, so I apologize. The margin guidance you gave on the water side for 2026 is pretty healthy. What's behind that guidance?

That is simply reflecting stronger or pricing pressures in the Permian Basin that we're working toward offsetting some of that with aggressive cost actions that Roy McNiven and his team are taking. So, we believe we'll remain in the teens with that business, especially with Argentina coming on.

Okay. And then just a quick follow-up. When we think about the progression through 2026, given what you know as far as seasonal factors, et cetera, any sense for -- or any color you could give on kind of where the consensus sits for the first quarter EBITDA, which I think is like in the $23 million, $24 million range?

As you know, we don't -- we're not giving any guidance for the year, much less for the quarters. The only spike that we see will be the second quarter spike that we traditionally see in Northern Europe with our calcium chloride business. Otherwise, I think each of the quarters are going to reflect the offshore activity and the timing of projects.

Your next question is a follow-up from Jon Tanwanteng CJS Securities.

I don't know if you've mentioned this specifically, but just given where you sit with the Oasis negotiations on the data center side, when is the earliest do you think you could have a large scale, the 100-plus million plant online and starting to produce?

Probably the earliest, I would say, would be Q2, probably more like midyear of 2027 would be our expectation.

Okay. Great. And does that also take into account factors like the relative difficulty of like getting gas turbines on site and things like that, just given where backlogs are for power generation?

Yes. We can't comment on the other partners in these programs kind of where they are on securing everything they need for these projects, but we are having specific discussions with multiple customers as it relates to data centers and our role, and they're aware of our time line. Obviously, they're asking us if we can shorten that time line, but that's a realistic time line for us to stand up that size of a plant.

Okay. Great. One more just high-level question. Is there any sort of long-term impact that you might expect in the offshore business based on just the changes in Venezuela and how that might be impacting the overall energy market?

Yes. I mean our view of Venezuela, I mean, I think it's positive for both the country and the oilfield services long term. I don't think you're going to see a huge impact in the short term. We had a business TETRA did in Venezuela that we will look at returning or at least selling completion fluids into that market by way of participation. But as far as the overall energy market, my view is that it will not be significant in the short term.

That concludes our question-and-answer session. I will now turn the call back over to Brady Murphy for closing remarks.

Well, thank you very much for joining us. 2025 is in the books as a record year for TETRA and really a year that our strategic initiatives came into focus for us with our One TETRA 2030 strategy. And we're very excited about the future. So, thank you all for joining us and participating with us today.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the TETRA Technologies Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

I would now like to turn the call over to Kurt Hallead, Treasurer and Investor Relations. Kurt, please go ahead.

Thank you, Tiffany. Good morning, and thank you for joining TETRA's Third Quarter 2025 Earnings Call. The speakers for today will be Brady Murphy, Chief Executive Officer; and Elijio Serrano, Chief Financial Officer. Before we begin, I'd like to call your attention to the safe harbor statement in our Form 10-Q. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties as outlined in our SEC filings.

Actual results may differ materially from those expressed or implied. In addition, we may refer to adjusted EBITDA and other non-GAAP financial measures. Please refer to our press release for reconciliations of GAAP to non-GAAP measures. These reconciliations are not a substitute for GAAP financials, and we encourage you to refer to our 10-Q that was filed yesterday. After Brady and Elijio provide their comments, we will open the line for Q&A.

I will now turn the call over to Brady.

Thanks, Kurt, and good morning, everyone. Welcome to TETRA's Third Quarter 2025 Earnings Call. Late last week, our colleague and good friend, Elijio, announced that he will retire at the end of March next year. As part of TETRA's succession planning process, Matt Sanderson will replace Elijio as CFO. Matt is currently Executive Vice President and Chief Commercial Officer, having joined TETRA in November of 2016.

Through the end of March 2026, both executives will continue in their existing duties and responsibilities to deliver and execute on the company's One TETRA 2030 objectives. Upon his retirement, Elijio will continue to serve in an advisory capacity for the company. Since I became CEO in May of 2019, Elijio has played a key role in working with me and our Executive Team to refocus the company on our core fluid chemistry expertise and the results speak for themselves.

From guiding the company through arguably the industry's most challenging period during the COVID-19 pandemic through the divestiture of our general partnership in CSI Compressco and shaping our One TETRA 2030 strategy, Elijio has been a strong contributor to our current success and future outlook. I, the Board of Directors and the rest of the Executive Team are very grateful for his contribution and are pleased he will continue to serve in a non-executive advisory role.

Fortunately, we have a strong Executive Team that many of our investors had the chance to see and hear from at our recent Investor Day at the New York Stock Exchange in September. And as part of our succession planning process, Matt is well-prepared for the transition to CFO. The recent addition of Kurt Hallead as VP of Investor Relations, FP&A and Treasury, along with Katherine Kokenes as CAO, has significantly strengthened our current and future financial organization.

I'm confident there will be a smooth and seamless transition. Now I'll summarize some highlights for the quarter, provide an update on our strategic initiatives before turning the call over to Elijio to provide some more details about the financials and our guidance. Our employees delivered a very strong third quarter results against the backdrop of an ongoing challenging industry environment.

Our third quarter, combined with our first quarter year -- first half year results, allowed us to reach the highest revenue of $484 million and adjusted EBITDA of $93 million in the past 10 years. Mainly driven by chemicals and deepwater completion fluids, this 10-year record is further highlighted by the fact that the overall deepwater rig count is 40% lower than it was 10 years ago, emphasizing the significant deepwater market penetration we have achieved.

For the quarter, we achieved revenue of $153 million and adjusted EBITDA of $25 million with adjusted EBITDA margins of 16%. This represents an 8% year-over-year increase in revenue and 7% rise in adjusted EBITDA, driven by continued strength in our offshore completion fluids and industrial calcium chloride business.

Third quarter Completion Fluids & Products revenues increased 39% compared to the previous year period, with adjusted EBITDA margins rising by 6.9 -- sorry, adjusted EBITDA rising by $6.9 million. Through the first 9 months of the year, Completion Fluids & Products adjusted EBITDA margin reached 34.5%, a 500 basis point improvement compared to the same period in 2024.

This was driven by a successful completion of three TETRA Neptune wells in the Gulf of America, increased demand for high-density zinc bromide completion fluids, strong contributions from Brazil deepwater projects and robust calcium chloride results in Northern Europe. For full year 2025, we believe completion fluids may reach a 10-year high.

As highlighted at our recent Investor Day, the long-term outlook for the Completion Fluids & Products business remains strong, driven by deepwater completion activity, exceptional performance in our industrial chemicals business and a material increase in battery electrolyte revenue as our customer ramps up deliveries from its first automated production line.

Water & Flowback Services revenue declined 2% for the second quarter and 18% year-over-year. Adjusted EBITDA rose 18% sequentially due to better cost controls but fell 33% from the same period last year on lower activity. Sequential adjusted EBITDA margins improved by 200 basis points to 12%, driven by higher utilization of our patented automated TETRA SandStorm and Auto-Drillout units, efficiency gains and cost controls.

This performance was achieved despite a 12% sequential decline in U.S. frac crew count and a 27% decrease compared to the second quarter of 2024. Despite a muted outlook for the U.S. frac crew count, we expect our onshore testing and flowback business to benefit from three industry trends: longer laterals, increased sand and water usage and a continuous rise in overall volumes of produced water.

Outside of the U.S., we are seeing the benefit of material increase in overall unconventional activity in Argentina and the Middle East. We are currently 100% utilized with our Automated SandStorms units in Argentina and have recently been awarded TETRA SandStorm work in the Kingdom of Saudi Arabia.

In Argentina's Vaca Muerta region, we've been awarded five contracts related to production testing, SandStorms and two production facilities, one of which is now operational and the second is expected to go live in the first quarter of 2026. These recent wins in Argentina, utilizing the technology we've developed in the U.S. on conventional shale plays are expected to almost double our revenue next year in Argentina, helping to minimize the uncertainty in the U.S. onshore activity.

With respect to our Arkansas bromine plant, we've generated $58 million of base business free cash flow and invested $28 million in the project through the first 9 months of this year. We are on schedule and under budget for Phase 1 of the project and remain confident that the plant will be fully operational by the end of 2027.

The plant will have the capacity to process 75 million pounds of bromine per year, which is more than double that of our current long-term third-party supply agreement. This will also enable TETRA to generate between $200 million to $250 million in additional revenue and between $90 million and $115 million of adjusted EBITDA, as noted in our definitive feasibility report.

Adjusted EBITDA target contribution is underpinned by lower input costs and additional volumes for the battery electrolyte and deepwater completion fluids business. At our Investor Day on September 25, 2025, we unveiled One TETRA 2030, a strategy focused on leveraging our core fluids chemistry expertise into new high-growth end markets, notably delivering battery electrolytes for long-duration energy storage as well as oil and gas produced water desalination solutions.

Our goal is to more than double revenue to over $1.2 billion and triple adjusted EBITDA to over $300 million by 2030. We're very appreciative of the attendance and the interest in our Investor Day presentation. The feedback has been overwhelmingly positive and supportive of the strategy and the Executive Team that will deliver the One TETRA 2030 targets.

On the electrolyte front, we're encouraged by the progress Eos Energy continues to make in automating their first manufacturing assembly line and its recent announcement that it will expand its manufacturing capacity in 2026. As the AI push continues to drive increasing energy demand, the importance of power stability through zinc bromide long-duration storage systems appears to be gaining traction, mainly due to its safety, scalability and domestic sourcing.

To account for that, we have completed the installation of our bulk delivery system, which will significantly increase electrolyte volumes in 2026. Moving to Water Treatment & Desalination; the U.S. Oil and Gas industry is facing increasingly urgent challenge in managing produced water, particularly in the Permian Basin, where over 6 billion barrels of wastewater are injected into saltwater disposal wells annually.

This traditional underground injection method is becoming less feasible as downhole formation pressures keep increasing and storage pressure -- storage [ core ] pressure fills up. With the commercial launch of TETRA Oasis and the engineering design of the industry's first 25,000 barrel per day produced water treatment and recycling facility, TETRA is well-positioned to lead in solving this problem.

The front-end engineering and design has been completed and the estimated capital and operating expenses are within our initial projections for the project. This step is facilitating commercial discussions with multiple customers, and we remain confident that we could sign our first commercial contract in the coming quarters.

We have a strong free cash flow generating base business and our One TETRA 2030 strategy will enable us to leverage our fluids chemistry expertise into new high-growth end markets. We believe this transformation will enable TETRA to generate over $100 million in annual adjusted free cash flow by 2030 and drive meaningful cash returns for our shareholders.

Now I'll turn it over to Elijio to discuss the financials.

Thank you, Brady, and thank you for the kind words. I'm not going anywhere nor slowing down between now and next March. We've got a job to do. We ended the third quarter with $67 million of cash on hand and net leverage ratio of 1.2x. Throughout the year, our focus has been on generating free cash flow from the base business to maintain a strong balance sheet and to self-fund as much of the bromine project as we can.

We have accomplished this through aggressive cost reductions in our onshore business, carefully scrutinizing all capital expenditures and remain very focused on managing our working capital. Working capital was $113 million at the end of September, an increase of only $4 million from year-end. As a comparison, third quarter revenue of $153 million was $19 million higher than the fourth quarter, yet working capital was only up $4 million.

DSO has improved 2 days from the fourth quarter. This highlights the focus we have on generating cash from the base business by managing inventory and receivables. Since the end of September 4 weeks ago, our liquidity has further improved, increasing $10 million from $208 million to $218 million, inclusive of the $75 million delayed draw feature that is available to TETRA for the bromine project.

In an effort to further reduce our cost structure and reduce corporate G&A expenses, we are expecting to relocate to a new corporate office later this quarter. The new office is a short distance from the current office in the Woodlands. Compared to our current lease, we expect to reduce lease expense by approximately $2 million per year.

We updated our 2025 guidance. Income before taxes will reflect a fourth quarter noncash charge as we early terminate the existing lease and move into a new lease with significant lease concessions for the first 2 years. With respect to the outlook, total year projected EBITDA is now expected to be between $107 million and $112 million. This compares to our prior total year estimate of between $100 million and $110 million.

And this takes into account the stronger-than-expected third quarter that benefited once again by strong offshore activity. The fourth quarter is expected to see continued weakness on the onshore side. The timing of deepwater projects in the fourth quarter will dictate whether we are near to the lower or the higher end of the guidance range.

Recall that as deepwater activity improves, some projects moving between quarters can have a meaningful impact on this or the next quarter, and some of these projects are hard to predict exactly when they will be completed. U.S. onshore remains challenging, but we continue to leverage automation, technology and strong cost control to keep our margins in the double-digit range.

The wins in Argentina will be a tailwind for us next year and are expected to improve our onshore margins. Eos and the deepwater market will also be a tailwind for us next year. Let me close by summarizing what I believe to be the items everyone should focus upon. First, the third quarter was another quarter where we outperformed with stronger-than-expected revenue, EBITDA and cash flow. We like the cadence that we are on.

Second, we continue to win work both offshore and now with the significant wins in Argentina that Brady mentioned. The base business is performing in a challenging market environment. Third, the immediate milestones we laid out as the road markers toward 2030 are materializing. Eos volumes are increasing and Eos is launching the build of their second line.

The bromine plant remains on schedule and within budget, all self-funded. The front-end engineering study for the first desalination facility was completed on schedule and confirm our CapEx and OpEx numbers.

Now we are changing terms and pricing with customers. And we are expanding our business internationally with the Argentina wins that Roy mentioned during the Investor Day as a goal. The journey towards One TETRA 2030 remains on schedule.

Brady, let me turn it back to you for closing comments.

Thanks, Elijio. Despite the ongoing macroeconomic and energy market uncertainty, we have strong conviction in the longer-term outlook, our ability -- proven ability to differentiate in the markets in which we operate and our One TETRA 2030 strategy.

With that, we'll turn it open for questions.

[Operator Instructions] Your first question comes from the line of Bobby Brooks with Northland.

And I want to congrats Elijio on an incredible career. Just first on the Oasis commercial engineering. It's great to hear you completed the FEED study, but I just wanted to understand, are there any further engineering work that needs to be completed or just maybe more broadly, what are the next steps there?

Yes. No, certainly, Bobby. Yes. No, the FEEDs is an important milestone because it validates what we had estimated in terms of the CapEx and the OpEx and the overall financials for our desalination technology. 25,000 is still a relatively small-scale commercial plant. We expect, in fact, the discussions we're having are much larger facilities where the economics will even get improved from there as we get higher volumes.

But the next steps are really socializing, discussing these -- the economics financials with the customers that we're engaged with. As we've mentioned before, we've got 7 NDAs in place. Those customers have been waiting for us to get to a point where we could have commercial discussions and those discussions are initiated.

So as far as additional engineering, we have enough confidence in the engineering that's been done to this point to enter into commercial discussions and a contract. But there is still detailed engineering that has to be done in order to construct the final plant. So that will be part of the next steps.

Would that detailed engineering to then construct the final plant would -- is it reasonable to think that that would be kicked off once a commercial agreement was signed or would that maybe come before that win?

Yes. We'll most likely -- I mean, we have high confidence in commercializing this technology. And so we're already getting a proposal together from the engineering firm that we're working with to start the detailed engineering ahead of any commercial contracts.

Very helpful color. And then just on the CFP sales, so a step down about [ $90 million ] sequentially, but obviously, it's more importantly up $15 million year-over-year. And obviously, a big factor on the sequential step down is the absence of Neptune jobs and the seasonal industrial calcium chloride sales.

What I was hoping to get a little bit more color on is thinking about that $90 million step down, is that all essentially the absence of those two factors? And then reversely, looking at the $15 million year-over-year increase, could you maybe break down what were the different -- break down what were the different factors that drove that growth?

Elijio, do you want to take that one?

Yes. So Bobby, the vast majority of it was the European calcium chloride seasonality. And recall that we also had a Neptune -- a well and a half of Neptune that we completed in the second quarter. So it was those two partially offset by the ramp-up in activity in Brazil that we've been talking about.

Your next question comes from the line of Martin Malloy with Johnson Rice.

Elijio, best of luck with your future endeavors upon retirement. First question I wanted to ask about was just in terms of the offshore market. It seems like it's been strengthening for you all. And when you look at the subsea tree orders for the industry, they've been trending up. Can you maybe talk about your confidence as you look forward to '26, '27? And any early indications as to whether Neptune projects are a possibility in '26?

Yes, sure. Thanks, Marty. Look, we have -- we see the same thing you do with the offshore activity from our customers' discussions as well as the subsea tree orders. So yes, we have a strong confidence in '26 and '27 and beyond, quite frankly. We think the deepwater market is going to be on a pretty nice long run, certainly as the U.S. shale play starts to plateau.

But in terms of Neptune, I think our pipeline is as strong as it's ever been. So I would say we have a fairly high degree of confidence that we will be executing work in 2026 and beyond with Neptune. Obviously, we don't want to give any specific information on that until we have the well defined, the project awarded and then we can give more detail, but we have a high confidence level.

Great. And for my follow-up question, I wanted to ask about on the desalinization side and very encouraging to see that you expect a first commercial project in early 2026. Can you remind us of the capital cost for one of these standard facilities and maybe your outlook for initial couple of commercial projects, whether they're going to be owned by the customer, the facilities that is -- are owned by TETRA, how that breaks down?

Yes. I'll answer the commercial model, Marty, that we are utilizing. First of all, the core technology within the plant will always be owned by TETRA. We have a couple of different commercial models. One is a licensing model -- a long-term licensing model, but TETRA will continue to maintain ownership.

We have a shared capital -- project financials as well as one where the customer funds the capital if they have a lower cost of capital and they prefer to do that. So we have a couple of different models with that type of flexibility. But in either case, TETRA will maintain control and ownership of the core technology within the plant itself. As far as the CapEx goes, I think general industry numbers that are out there are $1 million of CapEx for every 1,000 barrels of desal.

I would say that those numbers are relative to the core technology that we bring to the equation. There's also civil works and depending on where power is derived for the project that would be addition to that. But those are order of magnitude type numbers that we're confident in.

Your next question comes from the line of Stephen Gengaro with Stifel.

I apologize if you touched on this earlier, but at a high level, when we think about '26 versus '25 and we think about the first half of '25 in the fluids side, can you outline the puts and takes into '26, maybe even off the back half of '25, if it's easier given what we know about the deepwater fluids business in the first half?

And then maybe along with that, you did mention confidence in the deepwater business. What's the timing look like? Because it sounds like the ramp recovery in deepwater is kind of a mid-'26 event based on what some of the larger cap service guys are playing. And how does that kind of fold into the timing of your product sales?

Yes. I'll take that first, Stephen, and then Elijio will let you add some additional comment. So as we look forward to 2026, there's a couple of really strong growth pieces of our business. We mentioned Argentina. The awards that we've recently received, as I mentioned, we should double our revenue in Argentina in 2026 over 2025. Even the Middle East with the recent SandStorm awards, that will be some additional growth for us.

Eos will be -- is anticipated to be a very large material ramp-up from us. Eos activity for us in 2025 is well up over 2024, but it's still -- I would say it's not really -- has not been a material part of our business so far. It will -- we believe it will be very much so a material business for us in 2026.

As far as the deepwater work, the markets that we're strongest in, the Gulf of America, Brazil, North Sea, particularly on the Norway side, we have good visibility into the projects and our customer plans for those markets in '26. And so we -- that's why we have a confidence level because of those markets and those customers for us in '26.

Now the Neptune can move the needle for us, as you well know. Our confidence level, as I've mentioned, is high for 2026. Now whether those come in the first half of the year or second half of the year, we'll give a little more color as we get into the start of the year, a little bit visibility on that. But those are all contributing factors to what we think will be a pretty strong 2026 for us on the deepwater side. Elijio, did you want to add anything?

Yes. Stephen, you referenced an interesting point just on rig activity. Look, as you know, right, the rig count doesn't necessarily -- it underrepresents what our opportunity set is from the completion side. So I would not necessarily take what you're hearing from the drilling contractors about a little bit of a lull in contracting activity and suggest that there's any direct correlation to our outlook for the completion side of the business.

And Stephen, to add, if you want to sequence the second half of this year to the first half of next year, Brady mentioned Argentina. We got a ramp-up occurring there. Obviously, we expect yield continues to increase volumes. Every second quarter, we see around a $15 million increase in our Europe calcium chloride business. And the Brazil market continues to perform quite nicely for us. So there's quite a few tailwinds that I think are going to benefit us in the first half of next year compared to the second half of this year.

I don't know if you'll answer this, but if we exclude Eos, does fluids grow '26 over '25?

We believe so because of the deepwater market and the activity that we're seeing out there.

Your next question comes from the line of Tim Moore with Clear Street.

Congratulations Elijio for his retirement plan, and he will be well missed. So just maybe starting out on desalination. Can you maybe provide us with an update on the beneficial reuse ag growing season for Eos? I can't remember if that needed maybe two growing seasons.

And then just on the topic, you talked about FEED study and progress and everything. Can you just maybe remind us of any remaining regulatory-related milestones that that first customer might have to do in Texas to get signed off to really start the construction?

Yes. I think that the regulatory side of that equation is -- has really been constructive, Tim, over this past year. I mean we're -- again, a reminder that we're not the ones that apply for the permit. Our customers are. So they're the ones who will still own the water and will be responsible for the permitting.

But all of the information that we have tells us that that is being well-facilitated by the regulators these days. So no real concerns on that side of it. As far as the program we have with EOG, we do have an NDA in place on that project. And so we're limited to the details that we can give.

We can say it's going very smoothly, very successfully. And we're very encouraged by the progress of the pilot. It is a grassland studies as we -- is actually a grasslands growth project. But that's really as much detail as we can share at this point other than it's going very well.

Understood Brady. That was helpful color. And then just switching gears to Eos Energy. They hold their quarterly earnings call next week on the 6th. Can you just give us a sense of maybe TETRA's lead time visibility on rolling orders?

I mean, is it kind of a rolling 60- or 90-day advanced planning period for you to get the solutions ready for PureFlow Plus and electrolytes? I'm just kind of thinking about that as we model out the fourth quarter and that probably ramps up for them and you benefit.

Elijio, you want to take that one?

Yes. So we're in constant dialogue with Eos on a weekly basis between our manufacturing team and their procurement team at the executive level, appears to be almost like a weekly or every other week call. Once we get purchase orders, we can turn it around quite quickly. As you know, we're producing the electrolyte out of our West Memphis facility.

That facility is producing the zinc bromide that is either used for the offshore market or we further purify it and increase the purity levels there to meet the Eos demand. And all the incremental products that we buy are available on short notice. So we can turn around purchase orders within 30 days from Eos.

Great. That's really helpful color, Elijio. And then my last question is because most of the others already asked and my favorite theme in the last few years has been desalination, but you don't get asked a lot about your calcium chloride business, and we know there's seasonality drop in the third quarter every year. But how would you kind of quantify maybe that overall business 9 months year-to-date? Does it grow more than 5% this year, the industrial calcium chloride?

So Brady, I'll take that one. One of the things that we joke about is the leader for our calcium chloride business, Tim Moeller, every time he gets in front of the Board, he talks about a record quarter. And they literally have been achieving a record quarter with the calcium chloride business.

They have found additional applications for the calcium chloride. They continue to expand and gain market share. So that business is one of our little crown jewels that probably isn't recognized and appreciated as much as it should. And they've been outperforming the Consumer Price Index by a nice factor.

And if I could just add to that, Tim, if we look -- as we laid out in our Investor Day, that business tends to outpace the growth of GDP by something north of 300 basis points.

No, no. Yes. It's pretty familiar, but I think investors just really haven't caught on the last few years. I mean it was something like I calculated 35% to 40% of your EBITDA last year, the year before. So I'm always curious of how that's going. It seems like it's going great. So that's it for my questions.

Tim, I will add that we updated our investor deck and posted it on our website this morning to reflect Q3 numbers, and it includes TTM Q3 calcium chloride revenue and the trend. I encourage you to take a look at it to appreciate how that business is performing.

Your next question comes from the line of Josh Jayne with Daniel Energy Partners.

First, just as we think about offshore opportunities into next year, you've hit on it a little bit. Maybe you could just talk through your key markets, Brazil, Gulf of America and North Sea. And in the event that we've seen this over the last couple of years, things can slip to the right when thinking about offshore projects.

Could you discuss which of those markets you may expect to hold up better than others in the event operators become increasingly cautious and just talk through those opportunities a bit more.

Yes, sure, Josh. I mean, I think keep in mind, the Brazil awards that we were awarded, we've really only seen a half a year of benefit from Brazil this year. So next year, we're expecting to see a full benefit and not really anticipating any change to that program. I would say the same for the Gulf of America.

We've mentioned in our Investor Day as more and more operators start moving out to the lower tertiary, these wells have significant productivity. And even in a lower cost environment, we anticipate those projects to continue to move forward. So no real change in our outlook for Gulf of America.

And then North Sea, I'd say the same. Equinor and the businesses in Norway continue a very strong pace. Again, we're not anticipating much change there. Now keep in mind, the rest of the markets, even though we may not have a strong service operation in a lot of other deep markets around the world, we do sell our completion fluids through the major service providers. Since again, they don't manufacture their own completion fluids.

They buy them from companies like TETRA. So we actually have a pretty strong market presence around international markets around the world, but through the service providers. That can probably be a little bit more volatile than the three key markets that I've mentioned, and we'll see as we get into the 2026 planning process with our customers. But again, everything we're hearing about the deepwater market is a multiyear growth story for us.

Josh, the other thing I would add is if you look at our investor deck and our historical results for the Completion Fluids & Products segment, those margins hold up in almost any cycle. During COVID, we saw margins improve in -- during the 2 COVID years over the prior year. So that business has strong resilient margins even during slower periods.

Absolutely. And then as a follow-up, I just wanted to -- maybe you could talk about SandStorm and opportunities in Saudi just as a -- how do you see that evolving as potentially a multiyear opportunity? Could you speak to that a bit more? And is that the type of product and business that is ultimately going to consume more of your capital over the next 2 to 3 years?

Yes, absolutely. Yes. I mean it's a very exciting opportunity for us. I mean we're starting to really see unconventional activity outside of the U.S. ramp up. As I mentioned, our Argentina growth, which really was fueled by SandStorm and our production testing capabilities is going to double next year compared to this year -- is anticipated to double compared to this year.

Now Saudi, we're not seeing that type of growth yet, but having our first award with SandStorm is a great start because it typically leads to the growth of other pieces of our business as we've seen in Argentina. So yes, we're very excited about getting a foothold into that market with such a key piece of technology that will be a catalyst for growth for us.

There are no further questions at this time. I will now turn the call back over to Brady Murphy for closing remarks.

Thank you. I appreciate everyone joining us for the call today. Again, despite the current macro and energy market uncertainty, again, we have very strong convictions in our base business performing to the levels that it is as well as the future outlook, again, related to our One 2030 strategy. So thank you very much for your participation. We'll conclude the call.

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.

I'm Kurt Hallead,, Treasurer and VP, Investor Relations. In the context of our day today, -- can we roll the script here, please? Thank you. Keep going. Technical difficulty.

Here we go. It's a privilege to host you. Keep going, please. Thank you. It's a privilege to host you today in this historic venue, and I couldn't be more excited to help set the stage for One TETRA 2030, the next phase in TETRA's transformation. We prepared a compelling agenda featuring presentations from members of our executive leadership team, each bringing unique insights.

These sessions will conclude at 11:30, followed by a 30-minute Q&A and then lunch. Midway through the morning, we'll take a short break, so you can stretch your legs, hydrate, caffeinate and mingle with the management and our Board members, all of which are very eager to share our transformation story with you.

Now some of you are long-term shareholders. Some of you may be inspired to invest after what you hear today, while others may wait us to reach certain milestones. Whatever your positioning may be, our goal is simple. We want to leave you with a clear understanding of where TETRA stands today, where we're headed over the next 5 years and how we plan to leverage our core competencies, operational excellence and financial strength to deliver long-term value.

Now before we begin, I'd like to call your attention to our safe harbor statement. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties as outlined in our SEC filings. Actual results may differ materially from those expressed or implied, and for those that are joining us remotely, our Investor Day materials, all of our Investor Day materials are currently available on our Investor Relations website for your reference.

Now as well, may I ask everybody please silence your phones. And with that, let's get started. Leading the charge in this transformation is Brady Murphy, our President and CEO. Brady, the floor is yours.

Well, thank you, Kurt, and good morning, everyone. We have a really exciting story to tell today. As Kurt mentioned, we call it TETRA 2030, and we again, appreciate the time for you to join us and -- so that we can share it with you. As Kurt mentioned, I'm Brady Murphy, President and CEO.

Our presentations today will be really focused on some recent financial performance, but more importantly, the transformational journey that we are on and are undertaking to get us to the right place here.

This is our agenda for today. As Kurt kicked things off, I'm going to give us a 15-minute overview to get us started today. Roy McNiven will cover our Energy Services. Matt Sanderson will discuss our water treatment and desalination. We'll have a short break, followed by Tim Moeller will cover our Specialty Chemicals and Minerals. And then Elijio will wrap things up with our financial summary.

Our last Investor Day was over 7 years ago before I had the opportunity to serve as CEO, but the journey we're on really began in early 2021 when we announced the divestiture of our general partnership in CSI Compressco and our strategy to refocus the company on what we do exceptionally well, which is fluid chemistry. You'll hear quite a bit about that today.

We identified that by leveraging our core strengths, we could develop new innovative businesses supporting new energy and critical water solutions that could create significant value. The One TETRA represents the core philosophy of leveraging our strengths and creating strong synergies between our businesses. Today, you'll hear about our progress and what it means for our future.

We're starting our presentation today with the end in mind, which is sharing the main takeaway, which is the progression from what we look like today to what we plan to be in 2030. Those of you familiar with the company's history know that we're recognized as an oilfield services company. That's because 71% of our revenue today comes from traditional oilfield services with 2 external reporting segments, Completion Fluids & Products and Water Management and Flowback. An additional 23% of our revenue is from our industrial chemicals business, primarily calcium chloride and another 6% from water treatment and recycling for frac reuse. Since announcing our new strategy over 4 years ago, we've charted a clear path for significant growth outside of the traditional oilfield services sector. Our planned future segments, these paths will be outlined today, along with our future planned changes to our external reporting.

Our planned future segments displayed in the upper right-hand corner of this slide will be Specialty Chemicals and Minerals, water treatment and desalination and Energy Services. As we'll detail today, these segments form a higher-value portfolio driven by substantial growth, higher margins and increased cash flow. These growth channels are expected to boost the company's revenues from just over $600 million trailing 12 months to approximately $1.25 billion by 2030, but as the charts point out, this isn't just a growth story. This is about enhancing profitability, returns and generating significant cash flow.

While executing this transformation, we'll achieve a balanced mix of high-value energy services, which will still comprise about 36% of our revenue, another 36% in specialty chemicals and minerals and an additional 28% in water treatment and desalination for beneficial reuse. You'll hear detailed information behind these numbers today from the team that's responsible for executing them. But our years of solid execution and discipline to our strategic plan has us very excited and confident that we will be successful.

Those familiar with our story over the past few years know that we have been directing all of our free cash flow from operations toward key investment enablers that will help us execute this strategy. This includes leveraging our extensive mineral resources in Arkansas to vertically integrate our bromine supply, which will allow for growth and margin expansion for our bromine end users.

We're also investing heavily in R&D to strengthen our deepwater fluids offering, automating our sand management technology and gaining a first-mover advantage in the beneficial reuse of produced water. By 2030, we anticipate generating significant free cash flow to consider returning capital through debt repayment, share buybacks and dividends. Additionally, we'll have the cash flow needed to determine the timing for our future lithium project, which is not included in our 2030 targets that we will share with you today, but remains a highly attractive option that we continue to evaluate.

Now that you know the punchline, let's step back and give those of you less familiar with the company, some background on how we got here. The company has been in business for over 40 years, and we started in the area that remains our strength, which is fluid chemistry for completion fluids. Originally, we were servicing the oil and gas industry. We gradually expanded into the industrial chemicals market, where today, we're a leading global provider of calcium chloride.

Our main business is now focused on the global offshore completion fluids market, primarily deepwater, water management for the unconventional plays in the U.S. and Argentina and as mentioned, maintaining a strong position with our calcium chloride. The company's transformation is really primarily driven by 3 emerging growth areas: electrolytes for energy storage, desalination of produced water and critical minerals from our brine leases in Arkansas. We have much to share about each of these areas today.

Geographically, we're well positioned where we need to operate including the deepwater markets of Gulf of America, Brazil and the North Sea, along with a growing market in the Middle East. We've recently completed the expansion investment in each of our key offshore markets. Our international footprint is now well established to meet our long-term goals.

Let me introduce our executive team of whom I'm very proud, some of which you will hear from today. You'll notice that each of them has worked at and been successful in larger companies earlier in their careers. But similar to me, they chose to join TETRA because of the entrepreneurial culture that we have developed, the opportunity to have a more direct impact on the company's success and the bright future that we have in front of us. As we'll discuss, this team has delivered some excellent results over the last 4 to 5 years.

Today, you'll hear from Roy on our future Energy Services, Matt on desalination, and Tim and I will jointly cover the Specialty Chemicals. I'm just as excited about our Board of Directors. As we transform the company, we have evolved the Board by adding 5 new directors over the past 5 years, while maintaining strong core strengths in our Energy Services business, which remains very important for our future. We've added executive skills in specialty chemicals, including bromine and lithium, water solutions and new energy.

The depth of our executive management and financial leadership experience on our Board is substantial with 4 former CEOs and 2 former CFOs. We now have a great mix of talent and experience to support our future. As mentioned, today, we have two main segments, external reporting segments. About 55% of our revenue comes from Completion Fluids & Products and 45% from Water Management and Flowback. The chart on the right is something we're very pleased with, which shows the improvements that we've made in the business, consistently increasing margins for nearly 8 years and developing a business model that stays highly resilient during the very tough cycles that our industry often encounters.

Since announcing our divestiture of CSI Compressco and our new One TETRA strategy in January of 2021, our financial performance has improved dramatically and is reflected in our share price appreciation of nearly 440% since that time. Although we forecast substantial growth in revenue, EBITDA and free cash flow through 2030, I want to highlight the exceptional performance this team has delivered over the past few years. Since 2021 and the start of our new journey, the company has increased revenue by 56%, EBITDA by 129% and cash flow from operations 544%. These results were achieved despite an overall 19% decline in the current frac crews compared to the same period in 2021.

This team has a proven track record of excellent execution and delivering results aligned with our future projections. Unlike many start-ups that predict rapid hockey stick financial growth, we have a stable, positive free cash flow generating business, a strong track record and a battle-tested management team committed to achieving our results.

As mentioned, we're planning to make changes to our current reporting segments, which are shown on the left-hand side of this slide. Today, our Completion Fluids business is primarily, as we mentioned, offshore and primarily deepwater, holding a well-recognized market leadership position and a strong calcium chloride business in both Europe and United States. We're also innovators in the water management space with strong positions in water treatment, recycling for frac reuse and sand management for unconventional flowback.

Moving to the right-hand side of the slide represents how we plan to report in the future, which is how we will be presenting to you today. We will transition to 3 reporting segments shown on the right, Energy Services, Specialty Chemicals and Minerals and water treatment and desalination. Here are some key highlights from each of these new segments. Starting with Energy Services, we'll continue focusing on our leading and flagship business, Completion Fluids. Roy will share the bright outlook for this product line and the broader deepwater market as well.

We'll also continue focusing on our market-leading flowback and sand management business by capturing additional market share, including new and emerging international opportunities. On the Water Services side, which is currently part of our Water and Flowback segment, we will transfer the water treatment for frac reuse into our newly formed water treatment and desalination segment. Matt will highlight in his presentation today.

An important note to highlight is we are not including our water transfer business in our 2030 subsegments as we will likely rationalize that business sometime between now and 2030. The good news for our employees in that business is they will be part of a much faster, exciting future new segment in our desalination segment.

Our newly formed Specialty Chemicals and Minerals segment will consist of 3 primary subsegments: our current calcium chloride business, electrolytes for energy storage, which Tim will highlight in his presentation, and an array of key minerals, most of which are found in high concentration in our smackover leases in Arkansas. Our third segment will focus on water treatment and desalination, which, as mentioned, includes our current treatment and recycling, combined with our first-to-market end-to-end Oasis TDS water desalination business. Again, Matt will cover this in great detail.

We're also here via recorded video from the Chairman of the Texas Railroad Commission at our request, Jim Wright, and the CEO of B3 Insight, who are experts on analyzing trending subsurface disposal well pressures and their implications for the industry. I'm frequently asked, how is it that TETRA is best positioned to capture these significant growth opportunities and enable the company to achieve these substantial financial targets. The short answer is that each of these areas revolves around fluid chemistry, especially brine chemistry.

Our 40-plus years of developing brine chemistry solutions, operating chemical and evaporation plants and extracting key minerals from brine is in our DNA. When considering the billions of barrels of brine water beneath the surface of the U.S. alone and the richness of minerals within that brine water containing concentrations of minerals much higher than in ocean water, and the ability to extract those minerals and desalinate that water for beneficial reuse where water scarcity is becoming even more severe, it becomes clear why TETRA is in a unique position to lead the way in this area. These synergies summarized on this slide describe the One TETRA theme for our current and future business segments and central to our message today.

Here, we take a closer look at each segment, including growth targets, EBITDA margin expectations and planned maintenance CapEx. For Energy Services, we expect a steady 5% to 8% compound annual growth as the deepwater market expands through the end of this decade and our testing and flowback technology continues to gain traction and expand internationally. Our new Specialty Chemicals and Minerals segment is projected to grow to over $400 million in revenue with EBITDA margins consistent with our current Fluids & Chemicals segment. The highest growth segment is our new water treatment and desalination business. We're targeting 500,000 barrels a day of produced water desalination by 2030. We believe a very conservative estimate, especially after you hear from our experts today.

You'll hear much more details in the presentations this morning on each of these targets. However, we spend considerable time modeling these financial targets and are confident that these can be achieved. So in summary, for my opening comments, TETRA has delivered exceptional financial performance since refocusing the company and establishing our One TETRA strategy. Our market-leading position in deepwater completion fluids and sand management will enable us to continue growing and expanding margins for our future Energy Services segment.

Our strategic plan to leverage our fluid chemistry expertise has led to new high-growth markets for electrolytes, an industry critical solution with the desalination of produced water and the resources and capacity to bring critical minerals to the market. Thank you again for joining us this morning. You'll have a great opportunity to hear from a high-performing executive team and to meet with our Board members over lunch. I hope you find the One TETRA 2030 story as compelling as every employee at TETRA does. Thank you.

Good morning, everybody. It's a pleasure to be here today, and I appreciate everybody taking the time. I wanted to start off quickly with an introduction for myself. I'm going to go back one slide here. So my name is Roy McNiven. I'm our Senior Vice President for Energy Services. I cover our Global Completion Fluids, Water and Flowback segments. I am originally from Canada, I grew up on a cattle ranch in Southern Alberta, and I got my journeyman electrical certificate and then my MBA from Athabasca University. I joined the industry in the early 2000s. In my current role here, I've been for 3 years with TETRA.

Prior to that, I was leading CSI Compressco, where TETRA was a general partner. We divested CSI Compressco, as Brady mentioned, in 2021. I spent a year with the transaction, getting things handed over, and I stayed in contact with Brady and the rest of the management team because I was really excited about this transformation story that we're going to be delivering to you guys this morning, and that's what I made the decision to come back.

Prior to that, I spent the last 20 years at different various leadership roles at Nabors Industries and then in TESCO Corporation. And I'm going to spend the next 30 minutes talking to you guys about a really exciting story that Brady just introduced to you. So as TETRA continues to evolve in this transformation, our focus is going to be on transitioning to the highest performing businesses. For Energy Services, that future state is going to be us moving the calcium chloride into Tim Moeller's business that he's going to talk about on the industrial chemical side. And then our Water Treatment and Recycling segment is going to transition into our new water recycle and desalination segment, and as we look towards 2030, we're going to continue to evaluate each business within Energy Services and direct our focus and investment towards our two highest performing segments today, which are Completion Fluids and our well testing and flowback offerings, and I'm going to spend a little bit of time today talking to you about both of those in more detail.

So to get started, I think most everybody here is familiar with our current reporting segments. And so on the Water & Flowback segment, that consists of our water management offerings. We provide water transfer services, water recycle and water treatment services. And on the flowback side, we provide flowback services, which consists of the sand management that Brady mentioned. And in Argentina, we also provide early production facility and temporary production facility services for our clients.

We're highly regarded for the quality service, technology and automation that we offer to our customers. And one of the things that we value most within TETRA is our people. And an interesting story is in 2024, we underwent a rebranding exercise. And so some of you guys have seen the One TETRA tagline that Kurt opened with. So that started with an employee and a customer survey where we went out and asked our customers, what do you value most about TETRA? We asked our people, what do you guys hold in the highest regard. Unilaterally, the answer was our people. And so that's something that differentiates us and one of the reasons why we came across with the ONE TETRA.

We're very proud of our Permian Basin operations. And today, we hold a leadership position in water recycle, where we're recycling over 800,000 barrels per day of produced water. Matt Sanderson, my counterpart, is going to talk a little bit later about how that transition us is in the tip of the spear for our new TETRA Oasis total desalination solution. So to build on our highly differentiated flowback story, I'm going to take a minute to explain what flowback is and where that operation comes into play.

So as you guys will see on the slide here, this talks about the total life cycle of a well from the beginning of drilling through to the actual production. And so the flowback operation comes into play twice during the life cycle of a well, once during completion and once on the actual flowback when it's brought online for production. So in the completion process, everybody here is familiar with the term fracking, right? So you're moving sand and water down into the wellbore and it's going through perforations and it's fracturing the rock so we can recover the oil and gas from that segment. That fracturing process is completed in stages. And so as they do those stages, they're putting plugs in the well to isolate those different zones.

Those plugs later need to be drilled out and recovered. And that's where the drill-out operation comes in. So the completion flowback is where they're drilling those plugs out and they're flowing that debris back, and we have to capture that. Historically, that's been done with a conventional solution. We'll talk about that a little bit more in a couple of slides. What TETRA has brought to market is the automated drill out, where we are automating this entire process, removing manpower from the operation and from hazards associated. This represents roughly a $350 million market opportunity for TETRA on U.S. land today.

The next phase is on the production side. After the well has been completed, they bring it online for production. You're going to get all of that sand, that proppant that was moved down hole and some of the debris formation back in high volumes. That can be very damaging to all of the production equipment if you don't capture that sand. And so that's where sand management comes into play and TETRA's automated SandStorm solution.

We have a 96.4 -- or 99.4% recovery rate on sand with this solution. This represents a $550 million market on U.S. land for TETRA today, and we have presence in all major basins. And so one thing that's in common here, TETRA's innovation, technology, automation and people. So how is TETRA applied technology solutions to improve operator economics and safety? I'm going to start by explaining a little bit more about our automated drill-out system and solution. So one of the things that we focus on here is safety.

Our industry is one that's known, right, for having safety concerns. And so one of the things TETRA holds in the highest regard is keeping our people and our customers safe. And so one thing that most people might not be familiar with is the term red zone, and I'm not talking about NFL. I'm talking about the actual red zone on a rig. So if you look at the picture on the left, all of that iron, flow iron has high pressure and moving, we're moving in roughly anywhere from 2,000 to 8,000 psi. So that's a lot of pressure, a lot of iron and a fairly high-risk job. There's also overhead suspended loads that people need to be cautious of. And in a conventional setup, all of that equipment is operated manually, and so some of these wells today and some of these pads, you have as many as 80 to 90 stages.

These flowback -- or these drill-out operations take 5 to 6 days. And so it's a lot of work. It's very manual and it's high exposure. Our team up in Appalachia decided there had to be a better way. And so they worked with our engineering group in Houston, leveraged our proprietary new product development process, and they came up with the automated drill-out system. We're the only people in the market with an automated solution for this today.

So if you look to the right, where there was people all over that iron and everything is scattered on location on the right, we've got everything really neatly organized, a trailer that pulls on the location, we connect to and everything is operated from that command center you see on the bottom left. This has actually allowed us to reduce the CapEx to deploy this solution because it's a lot less equipment. We reduced the amount of people required to manage this operation, and so it's producing higher margins. And the payback on this is less than a year. So the returns are fantastic.

Now let's talk about the SandStorm. So in 2018, TETRA introduced the SandStorm to the market, and it was rapidly adopted by our customers. The recovery rates on this are 99.4%. This is in contrast to legacy cyclonic solutions that are in the 40% to 60% range. If you take a 60% range cyclonic solution where they're having to typically put them in tandem, you're only recovering 75% of your sand production. Whereas with one unit, we're able to recover 99.4%. So our customers highly regard and highly value this solution. But we also took some time to look at the market, the way things are going and the evolution, and we identified the need for automation.

So in 2023, the team used that same new product development process to develop an automated solution, which is what you see on the right-hand side of the screen. So that single unit is operated again from a command center, nobody having to manually actuate valves, nobody having to be in a high-pressure zone or a high-risk area. And we're not done yet. We have some really exciting stuff coming that's going to allow us to run this autonomously. So that's something we'll hopefully be able to announce later on in the year. So the same with the drill-out skid, right? So we've got a reduction in the capital deployed for this solution.

We've got a reduction in manpower, so higher margins and higher returns. So the really exciting stuff for us. The other fact that comes in with this is this is all helping our operators achieve more efficient operations. So it's not just a benefit to TETRA. It's also a benefit to our customers. They're able to reduce the days on location. They're able to see savings, and they're able to drive more efficient and safer operations.

So transitioning to talking about U.S. land. At dinner last night, I was talking to Stephen and Jay, and we're having a conversation about U.S. land and the fact that it's really hard to put a positive spin on what's happening on U.S. land this year. And it's no secret, drilling activity and frac activity is down year-to-date. I think the things that are important to note, though, is that it is stabilizing. I think we found our floor on oil, and it's starting to trend up. And the future prospect for natural gas is very positive.

We've got export capacity coming online. We've got domestic demand that's here. And I'm not sure if everybody in the room saw the IEA article that came out last week. If you didn't, I took a check to write it down here, I'll quote it to you. So the article was reverses course on oil and gas investments. The world needs to develop new oil and gas resources to keep output flat amidst faster declining rates in existing fields. Now I'll say this, this didn't come as a shock to most people in this room, but it's good that somebody is finally admitting it. Oil and gas is going to be here for a long time to come, and we're excited about being part of this.

In the next few slides, I'm going to talk about the fact that while wells fracked may be stabilizing at lower levels, the opportunity for TETRA is still significant. In this graph, I took a second to go back to what we opened with, transitioning to highest performing businesses. So this is our U.S. revenue for flowback operations plotted against the rig count, and the things that are important to point out here are that since 2021, our revenue per U.S. rig has gone up 108%, that's significant. We're taking market share, and we're driving higher margins and higher returns with our automation, our technology and the innovation that we deploy, and the last point to touch on here as well is that when we talk about automation, it only makes up roughly 10% of the market today. So there's a lot of room for growth.

So back to the story on U.S. land. When everybody hears and talks about U.S. land today, what are we hearing on U.S. rig count, up or down. It's down. Frac spreads, same thing. They're coming down. So as U.S. production has increased and now plateaued, we're seeing it maintain with lower service level activities, right? Historically, this has been an indicator for oilfield services companies. We watch rig count, we watch frac spreads, and it's an indication of the health of oilfield services companies and our overall business. Part of the drive behind this year is the operator consolidation.

The other factor that's behind it is something called operators drive for efficiencies. It presents a pretty challenging picture for the traditional oilfield services company. But it's not all bad. And this is where TETRA departs from the norm. And so what you're seeing on the left-hand side here is our production flowback on the SandStorm is we're looking at the proppant per well and the frac fluid per well. You guys might have heard of the term of monster fracs, simul and trimul fracs.

They're moving more water. They're moving more sand than ever. We're drilling longer laterals. They're getting the production out of 100 wells today where they used to get out of 130. So it's a significant drive, and it's all the things that were on that slide before on the left, right, these efficiency gains. TETRA is part of that story, and so when we're sitting here looking at longer wells, we're here longer laterals. right? And we hear simul and trimul fracs and increased proppant and frac plugs.

We hear more sand production to recover. We hear longer flowback operations and more plugs to drill out. This is a positive for TETRA, and not only is the water production continuing to decrease, which is going to be better for our recycle division, which is what Matt is going to talk about later, it's driving a lot of efficiency gains, and TETRA is part of that story. And so one thought to leave you guys with is when you hear operators drive for efficiency, recognize that's good for TETRA's flowback business.

So like the U.S., historical -- historically, conventional fields have been developed and international markets are moving toward their unconventional assets as their next phase of production. So automation and technology solutions we just spoke about are relevant as each of these models looks to exploit the learnings of U.S. shale. We've hosted multiple contingents from Argentina and from the Middle East here in Houston at our technology center, which I'll talk about in a little bit, and in our Permian Basin operations. They want to see what we're doing on the recycle, the water recycle side. They want to see what we're doing on flowback. They want to see what we're doing overall on water management because they're looking to learn from the United States as they go and develop their own assets.

TETRA has an international presence in all three of the locations you see here. We're one of two publicly traded companies that offer water management and flowback services. And of those two, we're the only ones with an international footprint. And like I mentioned, we're in all of these markets. The Vaca Muerta in Argentina is an area that we've been working in for over a decade. So we've got significant presence there. We have almost near full utilization on our well testing and our sand management assets in country. And I mentioned earlier, we offer EPF or TPF services. And so the Vaca Muerta is very isolated, and they're just currently putting in all of the takeaway capacity, the pipeline capacity. And so how they're managing a lot of these fields is with these small production facilities, 10,000, 12,000, 15,000 barrels per day. TETRA offers those services. We design, we build, we manage those facilities, and they're typically on 3- to 5-year contracts. So that's a really lucrative business for us. And under the current administration, right, the future looks really bright in Argentina and our ability to repatriate the cash has also been very favorable.

As we think about emerging markets, we look towards the Middle East. both the United Arab Emirates, Abu Dhabi and Saudi Arabia. We've performed technical trials in both markets with our water management solutions as well as our SandStorm solutions. And so there's a lot more to see here in the -- a lot more to see here in the future. And as I transition from my section from flowback over to Completion Fluids, I want to leave you with a few key thoughts.

So as referenced in the opening, we're transitioning to the highest value businesses for which our most traditional oilfield services offering will be our flowback service line. We're uniquely -- we have a unique value proposition and differentiation through our advanced completion and flowback technology and automation. Our capital investment strategy for this segment supports projections to have our entire fleet of SandStorm's automated by the end of 2028. And as emphasized earlier, our automation and technology drive margin improvements. Beyond saturated in U.S. land, where automation only accounts for 10% of the current market, we have significant potential for expansion in key international markets, unconventional -- international unconventional markets where we are active today.

TETRA's automation and technology is what's enabling our customers to achieve greater efficiency while improving their overall safety performance. And lastly, I'll leave you with a thought that when you hear operator drive for efficiency, remember that's good for TETRA's Flowback business.

So transitioning over to our Completion Fluids segment. I think everybody here is again familiar with what Brady opened with. This segment has historically consisted of our Completion Fluids and our Industrial Chemicals segment, which Tim Moeller, my counterpart, is going to talk to you about shortly. So as a leader in high-value completion fluid solutions for the past 45 years, we are highly regarded and recognized for unique and innovative solutions like TETRA's Neptune family of fluids.

Our commitment to safety and service quality continues to lead the market, where we have been recognized as the #1 provider of completion fluids for 4 consecutive years with industry-leading customer loyalty and performance in product quality, technical support and customer responsiveness in the annual Kimberlite Completion Fluids industry study. That's something we're very proud of.

Additionally, our long-term bromine supply agreement ensures we have product availability and our global infrastructure positions us to participate in all key deepwater markets. So getting into the Completion Fluids business specifically, we continue to benefit from our innovation, quality and vertical integration. Being highly differentiated, as you can see in the slide -- or on the right-hand side of this slide, has helped us maintain market share and ensured margin resilience even through one of the worst down cycles our industry has ever experienced in 2020 and 2021.

The deepwater market has been showing resurgence since 2022 and is backed by a robust long-term outlook that carries through 2030. More technically challenging and high-temperature wells are coming online and 20,000 rigs are coming into the Gulf of America. We have a strong pipeline of Neptune and high-density zinc bromide opportunities ahead of us, and with the incremental bromine supply coming in from our existing acreage in Arkansas, we're uniquely positioned to participate in a meaningful way.

So what are completion fluids and why are they important? I'll take a second to talk about where they come into play first. So in the well construction process, you guys can see on the screen here in the center, right? A drilling rig arrives, is spotted on location. They're going to drill a hole, thousands of feet into the ground. They're going to case that hole. They're going to cement that hole, and then they go to the completion phase.

So part of that drilling process is using drilling mud, which has suspended solids in it. Those need to be removed and flushed from the casing string before you can bring production online. That's done with the completion fluid. Completion fluids are important because it helps manage downhole pressures, preventing well control issues or blowouts while ensuring that the formation integrity remains strong and avoids corrosion to the casing string, again, maintaining the integrity of the well.

They're chosen based on the density for pressure control, corrosion prevention and compatibility with the reservoir. The deepwater -- the deeper the well, the higher the pressure and the higher the temperature, hence, the higher the density and corrosion resistance required. Deepwater wells often use brominated fluids due to the higher pressures and temperatures, which I'll go into more on the next slide.

The global market for completion fluids is $1.1 billion. It's predominantly offshore and deepwater, and TETRA has been a leader in this market for over 45 years. So completion fluids, clear brine fluids or commonly referred to as CBFs, they're water-based fluid. They're composed of dissolved salts as a means for increasing the density of the fluid, and it's unlike a typical drilling mud.

There's no suspended solids in a CBF, and due to that, they won't cause any damage or plug the reservoir pores. Engineered CBFs range in weight and density, and with respect to price, it increases as the density and weight increases, and you'll see that illustrated on the chart. TETRA manufactures everything that's highlighted on the chart, and we are the only manufacturer in the United States of zinc bromide.

So achieving these higher densities for use in high-pressure applications is technically challenging. That's part of what drives the price up and obviously, the cost and the value proposition to the customer, and just as an example, if you take the average bottle of water, that's got a pounds per gallon weight of 8.33 pounds. That same bottle of water with the zinc bromide solution in it is going to weigh 2.54 pounds, and it's very -- when we think about technically challenging the science behind it, being able to get that much density into the same volume and prevent it from crystallizing or changing state or form so that you can use it and it can maintain the integrity of the well is something that TETRA is an expert at.

The last couple of items to mention on this slide. So you'll see Cesium formate here. So that's an alternate at higher densities. The challenge with Cesium is it's a mining process and the manufacturing process for it is very expensive. It's finite supply and quantities. And so a lot of times, it's found to be not to be economically viable for completion projects.

The other thing that's on this slide is our Neptune family of fluids. And that's an alternate, obviously, to zinc at the higher densities as well as cesium. And we're going to talk about that more throughout the course of this presentation. So why do we get excited about the fluids business? And why should you? So we talked about the long-term outlook for the deepwater activity and it being robust. And the -- as we see that long-term outlook improve and we think about some of the lower-hanging fruit already been extracted, we're moving into these higher pressure and higher temperature wells, which are going to require more high-density fluids, which is right in TETRA's wheelhouse.

And as you recall from the brine density table, these are our higher-margin businesses as well. Our strategic acquisitions in the key deepwater markets, North Sea, Brazil and Gulf of America have added to our capacity and our capability to our already well entrenched position. And they will continue to enable TETRA to service their key customers and be benefactors of key contract awards such as the recent 20,000 rig award in the Gulf of America, the long-term brominated fluids contract in deepwater Brazil, along with being the primary fluids provider for one of the largest operators in the Gulf of America.

Adding to TETRA's strengths and differentiators is our competency linkages. As the only vertically integrated completion fluids provider, TETRA has decades of fluid chemistry experience in their Conroe, Texas-based technology center, along with over 40 years of chemical manufacturing, which Tim is going to talk about shortly. Couple this with our people, systems and processes behind our solutions that come with 45 years of experience as a leader in the completion fluids space, and you've got the premier completion fluids provider in TETRA that our customers see.

At the core of our innovation is the innovation group or the TIG as we refer to it internally. Base of the TIG is a team of world-class experts in fluid chemistry with state-of-the-art labs and equipment who work directly with the technical teams of our internal and external customers to support current projects and develop solutions for the future to maintain our leadership position as an innovator. And as you can see on this slide, this group holds multiple patents in this space as well as a method for producing zinc bromide electrolyte.

So I've talked about the robust long-term outlook for the deepwater market. Here, you can see that oil and gas demand is projected to continue to increase, almost over 25% through 2030. On the right-hand side, you'll see breakevens for the deepwater market. The important thing to note here is over 83% of deepwater markets have breakevens less than $45 per barrel. So if you're following U.S. land, these are fantastic. And how that's achieved? So if you think about the significance of an investment for a deepwater well, it's in the tens, hundreds of millions of dollars. But it's recovered over a very long period of time.

So when you think about Permian Basin and decline curves, we're talking about wells with life cycles of years. Offshore, we're talking about wells with life cycles of decades and the decline curves are much further out. So these economics are recovered over a significant period of time. So these -- so when you think about the offshore market and how long these wells stay in play, it's no wonder that the market is so bullish and our view of the market is so bullish, and these deepwater economics are going to remain attractive even in low price environments.

So when TETRA looks at the market, and we use indicators and what we're watching, these are some of the things we're looking at. We're looking at CapEx investments. And if you look at an offshore CapEx projections through 2028, they're increasing over 41%. If you take into account the planning cycle for a deepwater well being longer than 3 years, these deepwater forecasts start to look a lot less like projections and a lot more like backlog. And this is further enforced by the global floater demand.

These rigs are contracted years out, and they're contracted 4 years. These aren't wells that get shut in when oil drops $1 or $2. These are long-term projects that are planned for a long time, and so the deepwater floater rig count is projected to increase over 27% through 2028, and coming back to the high-pressure and high-temperature wells and the demand increasing for these zinc fluids and for potentially Neptune, right?

The left-hand chart shows TETRA's revenue against the global floater count, where you can see our revenue per floater has continued to increase significantly year-over-year, and we see the demand increasing on deepwater activity, but the percentage of deepwater wells require heavily bromated fluids. So again, this supports our bullish outlook.

On the last slide, I talked a little bit about backlog. And so something people here might be familiar with is subsea tree installations. So on the right-hand side, you can see our bromine revenue plotted against subsea tree installations. So when a subsea tree is being purchased, it's indicative of a well being completed in the future, along with the completion where completion fluids are going to be required. And as you can see, that's going to be an opportunity for TETRA as it has been in the past. And so when you think about Technique and FMC reported on our backlog, recognize that's an indicator for an upcoming completion fluid opportunity.

So here, we're looking at a map of global completions that require a fluid density of greater than 14 pounds per gallon. This is -- these are items that fall right within TETRA's sweet spot. There's over 550 offshore leases. So whether it's going to be a calcium bromide, calcium zinc bromide or an Neptune opportunity, this falls right in our wheelhouse, and when we think about the high-pressure and high-temperature wells, we think about higher-density fluids and often a zinc bromide. It's important to note that some markets don't allow the use of zinc. They consider it a marine pollutant, and so there's 2 solutions if you can't use zinc. It becomes Cesium formate, which we talked about earlier, being cost prohibitive for well economics, and you have TETRA's Neptune.

So transitioning into this slide, I want to talk a little bit more about Neptune. We'll take a second, this picture that you see, it's a little bit distracting. That's a jackup. You're standing on the top of the legs of a jackup and looking down on the rig floor, and so we touched on the fact that zinc bromide solutions can be banned in certain markets. right? And beyond that, zinc can be very corrosive in nature, particularly at higher temperatures and can damage downhole metallurgy, elastomers and surface facilities unless they're specifically engineered to handle the fluid.

So how Neptune was born. In 2015, we had a super major in the Gulf of America with a multibillion-dollar capital investment for deepwater field development come to us with a significant challenge. They couldn't use zinc to complete their well due to the production facility not being able to take it on and the high pressures in the reservoir. So TETRA, over the course of 18 months was the only company that was able to rise to the challenge, and we delivered noncorrosive, environmentally friendly and solids-free non-formation damaging solution, which is TETRA's Neptune. That saved the customer over $100 million on that 4-well project. And since Neptune has been introduced to the market, TETRA has generated over $150 million in revenues.

And I talked about TETRA being a family of -- or Neptune being a family of fluids. And so what I think most people have been accustomed to is these significant wells that generate plus or minus $10 million per well in revenue. But the reality is it is a family of fluids and there are applications where this is being deployed much more commonly. And so in markets like Norway and even in the Gulf of America, you're going to see that Neptune is deployed in applications like a gravitational displacement and carrier fluids for reservoir simulation and packer fluids.

When we think about the future, we've got some significant opportunities, some of which are going to be in the drilling fluid space and for high-density frac fluids. So there's a lot of things we're excited about going forward. Thinking about the Gulf of America and what's coming next, I talked a little bit about 20,000 rigs. Where these rigs are going is somewhere called the lower tertiary. And so with all markets, right, most of the low-hanging fruit has been extracted and the development is moving towards more technically challenging environments, and the Gulf of America is no exception.

So the next frontier is the lower tertiary, where we're seeing more high-pressure and high-temperature wells. This is driving the requirement for these 20,000 rigs that I talked about, where we were recently awarded one of the two that are working in the Gulf of America. The higher pressures are going to require zinc-like densities for which TETRA is the only manufacturer based in the U.S. However, due to the high temperatures, and like I mentioned earlier, zinc can be corrosive and some production facilities don't allow it, which means they're going to look towards alternative solutions for which TETRA's Neptune is the most viable.

So as we get towards the end of this section, I want to highlight a couple of things. So with our competency linkages, our IP portfolio, the innovation and commitment to quality, TETRA will continue to be a leader in completion fluids, introducing innovative solutions such as TETRA's Neptune to help solve upcoming challenges for our industry and for our customers. We're poised for growth and value creation through our strategic positioning and expansion investments in the Gulf of America and in Brazil.

Leveraging our internal innovation and bromine project to further enhance margin and gain market share, we're going to drive some of the strongest returns in our sector. And as we look towards 2030, we believe this business is going to continue to grow at a 7% to 10% CAGR while maintaining or even increasing margins as more high-density wells come online.

One of the important points to note, most of the investments for our facilities and our infrastructure has already been made and is in place. So it's going to continue to drive even better returns in this segment. And lastly, as I close out on my section and transition over to my counterpart, Matt Sanderson, I hope everybody is excited about the future of Energy Services business as we are.

Brady mentioned it earlier, this is a business we're in today. So these aren't future-like statements. This is businesses that are performing and producing cash flow as we speak. TETRA is actively transitioning its Energy Services portfolio to the highest performing segments, which are completion fluids, well testing and flowback that I just talked about this morning.

This streamlined focus will continue to drive growth along with margin enhancement. And our proprietary solutions like the automated drill-out and SandStorm technologies deliver superior safety, efficiency and market-leading recovery rates for our customers. When you hear operator efficiencies, remember, that's good for TETRA. And TETRA's completion fluids business is positioned for long-term growth, fueled by rising demand for high-density fluids in deepwater and in high-pressure, high-temperature wells, and this is supported by our strategic acquisitions and the vertical integration of our bromine asset.

And when you hear high-pressure, high-temperature wells, remember, that's right in TETRA's sweet spot. And lastly, we have room for expansion with our international footprint. So with that, I'll hand it over to Matt. Thank you.

All right. Thanks, Roy. So Matt Sanderson, Chief Commercial Officer for TETRA. Last name Sanderson. So you heard Roy mention SandStorm. I would suggest there might be a linkage in there somewhere, okay? So I grew up not in South Texas. You're going to hear my buddy, Tim over here, slightly different accent from mine. I did not grow up in West Texas like Elijio. In fact, it grew up just about a 7-hour drive north of here. As we were preparing for this presentation, I was looking back a little bit, and I was thinking it's been almost 30 years since I graduated with a civil environmental engineering degree from Queen's University up in Canada.

Immediately upon graduation, I went to work for a company called Schlumberger, also now known as SLB. I held various field, operational, functional management roles. In fact, one of the first jobs I ever did was outside on a rig, it was minus 50. Anybody want to guess was that Celsius, Fahrenheit? Well, if you actually look it up, it's the same thing, right? It's just really, really cold.

I also had opportunities where 22 years old, I went to work in a helicopter, right? In fact, halfway to Greenland where the Titanic sunk, icebergs floating by, right? In fact, one time, I remember getting evacuated in the middle of the night because 60-foot high waves were approaching the rig, right? Needless to say, it was an adventure.

So after escaping icebergs, freezing cold in Canada, I had the fortunate opportunity to move over to Australia. Now this was almost 25 years ago, went from Australia up to Thailand, over to India. In fact, in India, I was the Director of HR for Schlumberger for a very large region, right? I'm not from India. My background is an engineer, right? It was not an HR professional, albeit that was a short-lived assignment, okay?

SLB then thought better, and they bought a company back in Canada. So I quickly moved back there. Nancy knows the story behind that one. And then in 2012, I relocated down to the U.S. During that time as well, I was also very proud to have completed my master's degree at Heriot-Watt over in Edinburgh, Scotland. Now who here is a golf fan? A couple, right? The Ryder Cup is on right now. So I will offer -- I took advantage of the fact of going to school in Scotland for a few years to get the golf bug and play a little bit. And I'm going to reference golfing again in the presentation.

Now going back, again, looking back in time, preparing for this, it was almost 9 years ago when I received a phone call, that call was an opportunity to join TETRA. Now I knew who TETRA was. I didn't know a lot about the company. So I was gainfully employed at the time, a relatively maybe the youngest VP in my former employers company with an upward trajectory. However, I kept getting more and more phone calls saying, Matt, you need to look at TETRA, right? There's an opportunity. We know they've been calling. So I said, fine, right? Looking at her, I'm going to go for an interview.

So I went to Houston and over 2 days was grilled, right, person after person after person coming in. At the end of the two days, the big heavy hitters came in, right? Bill Sullivan, who was Chairman of the Board; and Dr. Tom Bates. Where's Tom? So Tom is here today, right? Tom is one of our Board members. At the end of those two days, Tom got to the brass taxes. He looks at me and he goes, "All right, Matt, what's it going to take to get you to join TETRA?" I looked at him, I said, it's really simple, Tom, I need a round of golf at Bluejack National. He paused, he looks at me as what? And then all of a sudden, he got this big grin and he looked down at his golf shirt, which had a Bluejack emblem on there, and he goes, smart guy, right?

Now at that point, I had made the decision to leave SLB after 20 years to join TETRA. The reason being I could see the tremendous potential in the company. Brady touched on some of that a little bit earlier. The goal here today is that really, hopefully, after today's session, you guys walk away with the same impression you see that same potential in TETRA that I do.

So switching gears. who here is aware that the U.S. is the #1 producer of crude oil in the world. think a few, right? More than 13 million barrels a day of daily production. Who here is aware that on average, with each and every barrel of crude produced, there comes along with it 4 or 5 barrels of what we call produced water. A few hands? Yes. Okay. Put that in perspective, that's -- if you look at the Permian alone, that's 24 million barrels of produced water each and every day.

So I was trying to think about that. I knew it was coming up to New York City. So what do you do when you're lost for words? You check ChatGPT, right? You check AI. So I said, put 24 million barrels a day of production into context in New York City, right? So the answer that came back was we heard Roy talk about the red zone. It came back with NFL. I said, okay, think about a modern-day NFL stadium like a big swimming pool, 24 million barrels a day of produced water is enough to fill 100 NFL stadiums each and every day. Closer to home, the Jacqueline Kennedy Onassis Reservoir over in Central Park, that 24 million barrels a day of Permian produced water fills that reservoir every single day. Amazing.

The other thing before we move on, you heard Brady mentioned the word oasis. Take a look at the photo, okay? That's by design. There might be a quiz or a question a little bit later about that, but be thinking about oasis, have that visual, stark, aired land. However, in the middle, all of it, life, right, fueled by a valuable resource. So there are several challenges facing our industry today. But overall, I would offer that the most pressing is related to water.

In many regions, there's crippling drought, freshwater depletion. In some regions like the Permian, which I mentioned, there's an overabundance of produced water. Today, the vast majority of that water is put into the ground. However, as you're going to hear from several speakers today, the window for disposing of more water underground is closing, and it's closing quickly.

We're going to talk about several solutions available to some of these challenges that are being deployed today. Some of those are out-of-basin disposal. You may have heard of it. Moving to shallow from deep disposal, recycling for frac, which Roy touched on, and then lastly, we'll talk about desalination and beneficial reuse.

So we've been producing oil and natural gas in the U.S. and around the world for well over 100 years. So why is this produced water such a challenge today? Rather than having me explain, I thought it would be beneficial for you to hear it directly from the state agency with the primary responsibility over the industry in Texas. Unfortunately, Jim Wright, Chairman of the Texas Railroad Commission, was unable to be with us in person today. However, he was kind enough to provide his comments and perspective on this subject.

Well, I think you have to kind of go back to the beginning so that people understand what comes along with oil and gas that we have generated beneath the surface of the earth. It's not just oil and gas that comes to the top. It also has water, what we refer to as produced water. So you've got some level of gas, some level of crude oil and some level of produced water.

Today, those averages are somewhere between 4 and 5 barrels of water for every barrel of crude that gets produced. Our crude production today is basically 6 million barrels a day. So if you do the math on that, that's 24 million barrels, not gallons, barrels of produced water that Texas generates alone. In total, we've got about 30 million barrels of water every day that we're having to handle by reinjecting that into zones that we're not producing that oil and natural gas from.

So what that means is it's got to go in a zone other than the zone that, that resource is actually being extracted from. And you ask, well, why don't just put it back where it came from? Well, it's almost impossible to do that because the new way of drilling today is horizontal fracking. And that fracking is cracking really tough tight formation rock. So to try to put that water back into those tight formations is almost impossible.

You've got to look for formations that is more porous that allows that water to dissipate. So it's either got to go in a formation above or below where that production is. So the commission is looking at that very hard. We've determined some seismic areas that are very vulnerable to that. We've curtailed that now where a lot of that water has to go into a shallower injection.

When shallower is good, it lessens the threat of seismicity, but it also builds pressure in those shallower formations, which are closer to our groundwater sources than you would in a deeper formation, which could cause that water to find a path of least resistance like older wells, bores that could take it into groundwater.

Okay. As you just heard from Chairman Wright, the produced water challenges are a particular concern in these unconventional shale developments. I'd suggest that as that development activity expands into lower quality acreage, you've heard the term Tier 2, Tier 3, those water volumes are only expected to increase.

Much of the data and discussion today is really going to be focused on the Permian Basin for a reason, right? The sheer size of the issue in the Permian today, plus the immediate need for solution. However, as unconventional field development continues around the world, places like the Middle East, over in Latin America, in fact, I had a discussion at dinner last night about some of these activities that are going on today.

As Roy mentioned, we're in those basins already. And undoubtedly, the folks in those regions are going to be looking to the U.S. to understand how we've addressed those challenges. As mentioned, the Permian Basin alone produces over 24 million barrels a day. Again, put that in context, that's over 9 billion barrels of water each and every year that has to be addressed. Treatment and recycling for reuse and frac, Roy talked about that, that's increasing. However, you can see the volume is still relatively small. Overwhelmingly, most of that water is disposed of.

Now conversely, this is at the same time where you have several markets that require abundant, clean, fresh water. So you've got something on one hand that's being treated like a waste. And right next door, you've got somebody that needs something that's very, very similar.

I'm Kelly Bennett, CEO of B3 Insight, the leading provider of data and analytics to the oilfield management industry. The Permian water challenge has been in the news a lot over the last year. But what is it exactly? At its core, the issue is the tremendous amount of water produced in the basin. Each oil well produces 3 to 5 barrels of water per barrel of oil, depending on the location. Industry has increased use of this water and completion significantly. This year, 66% of all water use and completions will be produced water, and we expect that number to grow by 2 million barrels a day over the next decade.

In order to support even modest growth in oil production over the next decade, injected volumes will need to grow nearly 40%, or over 6 million barrels per day. But this is where the challenge gets complicated. Injecting into disposal formations has created a growing level of pressure in those formations themselves. This pressure has been linked to seismicity and surface flows, and creates challenges for both existing producing wells, and in the process of drilling new wells.

Pressure is a Permian-wide issue, but -- as pressure rises, it reduces the amount of water that you can safely inject in a disposal well, what we call the operational capacity, eventually rendering that well unuseful. Pressure limitations will likely cause disposal needs to exceed the available operational capacity in existing wells by the late part of 2028, resulting in rapidly growing volumes of water with no clear place to go. I'm Kelly Bennett, CEO of B3 Insight.

So quick apologies. As you saw with Roy, this thing is sticking a little bit. So I did miss one slide that introduces Kelly. So Kelly's firm B3 Insight really models produced water disposal in places like the Permian Basin. So you heard some of the data and the modeling that Kelly and his team at B3 have been putting out there in the public domain. So I recommend that you have a look at it.

As Kelly mentioned, the formation pressures in the Permian Basin have been increasing significantly as a result of disposal of produced water into shallow formations. What you see in this slide here highlights those pressure increases in just the past 7 years. For those of you not familiar with it, there's a very faint line right here. That's the border between New Mexico and Texas. So this part that you see over here, this is really what's referred to as the Delaware Basin out in the Permian.

Over here is the Midland Basin in the Permian. What you see in the blue shading, that's the typical downhole water pressure at 0.33 psi per linear foot. Over to the right, the reddish or the brown shading that you see, that's where those pressures in just 7 years have risen to 0.72 from 0.433, basically, a 70% increase over normal downhole pressures.

As you heard from both Kelly and Chairman Wright, that's unsustainable and it's causing several issues. So right now, one of the solutions that's being proposed, and you're going to hear about it, is shifting some of the disposal from this area in the Delaware over to what's called the central platform, okay? So in essence, back to the swimming pool analogy, we've essentially filled up all the swimming pools in our town. So we're going down the street to the next town over, we're going to start filling up those swimming pools.

However, out of basin disposal, I would suggest, is not a long-term solution and significantly increases both the capital and operating costs associated with that disposal. In fact, a recent announcement by a midstream company launching a brand-new project, a 42-mile pipeline, 30 inches in diameter, capital cost approaching $0.5 billion with a B. Again, I would suggest this is a stopgap measure and not a long-term solution.

As Kelly explained, the pore space or operating capacity is being filled up. The water production continues to rise. And even if we factor in increases in treatment and recycling, it's simply not enough. In fact, Kelly's firm, they're modeling, they project that as soon as the end of 2028, there's no more disposal capacity in the Delaware Basin. Simply, as he said, there's no place for the water to go.

And as we touched on a little bit earlier, that water is associated with what? Crude production, okay? And on average, 4 to 5 barrels of crude for every barrel of water. So you can imagine that in this scenario, somewhere in the future, over here to the right, you've got over 6 million barrels of produced water being modeled that again has no place to go.

The associated crude production with that water could be north of 1 million barrels a day, okay? So think about that for a second. The Permian having to shut in over 1 million barrels a day of crude production simply because no place to put the water. You can do the math. The numbers become very big very quickly. So we've touched on the magnitude of the problem and issues associated with disposal. We've talked about different solutions that are in play to address out-of-basin disposal, moving from deep to shallow. We've talked about recycling and treatment for frac and a little bit upon beneficial reuse.

However, again, what we talked about is this overabundance of produced water today being treated like a waste. But by and large, throughout history, water is really the most valuable resource on the planet. Huge demand, right? So what if we could repurpose, transform that to be used over there. That's what we're going to be talking about.

Okay. So we've got a bit of a thorough understanding of the magnitude of the problem. So why is it that TETRA is here to bring a solution to the market? Brady touched on it. You're going to hear a similar theme over and over during this morning. Really, TETRA's core competencies have not changed. Service, technology development deployment, fluid chemistry, specifically saltwater experience in terms of chemistry. I would suggest these are the very core competencies required to desalinate oilfield produced water.

So Roy touched on the fact that treatment and recycling of produced water for frac will continue to increase. This represents a meaningful opportunity for TETRA. As he mentioned, we have a leading position in that market today. In fact, we have over 400 team members working in the Permian Basin, serving a broad customer base that includes both E&P operators and midstream companies alike. The very folks that are producing this water, moving it around and being challenged with the disposal.

The competencies and technologies that we are and will be deploying in this space are really the first step in the desalination process. The next step in desal requires the operation of a chemical plant, specifically a plant designed to process saltwater. As my South Texas friend, Tim over here will explain, TETRA owns and operates chemical plants around the world. Specifically, these are chemical plants that process water for commercial applications, including those that must exceed the highest quality of standards and regulatory requirements, including food grade qualification.

In fact, we even have a plant that utilizes thermal evaporation and crystallization technology. Up in El Dorado, Arkansas, we not only built but operated a thermal evaporation plant that processed over 24,000 barrels a day of produced water for the sole purpose of extracting various minerals for commercial applications. So why is this relevant?

Quite frankly, boiling water, condensing it, it's well understood. It's relatively easy. That's what thermal does. However, the economics associated with thermal evaporation are extremely expensive. Both the CapEx and OpEx and the ability to scale to much larger volumes are economically prohibitive. I'd suggest that because we own and operate one of these plants, we have a very unique understanding of thermal evaporation, okay? So why is this relevant? Why am I bringing it up?

Well, you may have heard in the news, some folks because it is simple, are considering using thermal evaporation for desalination of oilfield produced water. I would suggest this is a big hammer approach. We looked at it over 6 years ago. We moved past it to something a little more, I'll call it, surgical. So where do we look?

I think most folks in the room would be aware that on a global scale, seawater desalination is a well-understood, well-known process, okay? Overwhelmingly, membrane-based technology is used to desalinate seawater for the simple reason that the economics are very favorable. This desalination technology works very, very well at scale. In fact, you see over here on the -- on your right, a desalination plant in Indonesia designed for over 175,000 barrels a day of seawater desalination. I would suggest that the scale associated with that plant is much more aligned with the throughput volumes we talked about in the Permian.

Now in your mind, compare that picture that you see, those throughput volumes to what you saw earlier with the El Dorado plant, our thermal evaporation plant that processes 24,000 barrels a day. Much smaller, much more efficient package, much more economical. However, I think everybody in the room will appreciate that seawater is not exactly the same as oilfield produced water.

The total dissolved solids or TDS in oilfield water tends to be much, much higher than seawater. And the organic compounds or TOCs also tend to be different. You can also imagine the different chemicals and compounds found in oilfield water different, again, than what you find in seawater. However, leveraging our more than 40-year history in chemistry service technology, specifically saltwater chemistry, you're going to hear a little bit later that we have the ability to analyze what's in that water down to the parts per billion, okay?

We also have the ability to then treat and remove those different compounds, those elements, those minerals so that membrane-based technology can be effectively used. So we had heard previously from Chairman Wright and Kelly with B3 that both the risk and costs associated with produced water disposal continue to rise. Chairman Wright was also kind enough to share with us his views on alternative solutions to disposal and why the timing for these technologies is now.

So it's imperative that as the oil and gas industry, as the Railroad Commission of Texas, we start looking at the possibility of alternative uses for this water to decrease the chances and seismicity or those chances in overpressurization that could make its way to our precious ground water sources and to try to be a supply that could maybe be used to regenerate our surface water sources or aquifers or the vast amount of irrigation needs that we have everywhere west of the 98th Meridian.

So industry and the commission both have looked really strong and hard at what are alternative uses for this water. Has technology come far enough for us to treat that water and use it for water needs that we need, especially everything west of the 98th, as I talked about before. When you looked at that smaller circle, what's really caused is for us to move that water as much as we can outside that circle.

We know that infrastructure cost increases the cost of disposal. So when we looked at very favorable injection rates a long time ago, today, those rates are much greater because we're having to build the infrastructure and the cost to transport that water further out of those zones. So that price has gone up I would say today, probably in the magnitude of 3 to 4x what we had ever imagined, and when you look at technology of treating this water for beneficial reuses, the economics, which started out 5 years ago being this different are now like this whenever you look at cost.

So I think now is the time for the industry that we regulate, the oil and gas industry for us to look at kind of killing two birds with one stone. Let's find out how do we keep from injecting the stuff and causing issues like seismicity, overpressurization, and how do we solve some of the drought conditions that we've been experiencing here in Texas.

All right. So as Chairman Wright stated, right, the million-dollar question, if you will, everyone asked, what about the economics? We had a discussion this morning, John and I about that. You just heard it from the horse's mouth, right? The economics with produced water disposal, the risk and the costs are rising. At the very same time, the risk and cost with disposal or pardon me, with desalination are falling.

Continued disposal of produced water, again, fails to recognize that, by and large, clean, fresh water is a valuable resource, again, virtually everywhere in the world. You saw in some earlier pictures, as you can well imagine, unconventional field developments, they have a bunch of land, but they also tend to be in pretty aeried dry climates.

So as Chairman Wright mentioned, things like agriculture in Texas, tremendous demand for this water. Who here has heard about AI, right? Data centers, room full of investment bankers, okay? I'm sure everybody is aware of it. So simplistic terms, what does AI need? AI needs land, needs a lot of power. It needs a lot of water, okay? I guess what? Permian Basin has all three in abundance. So the market opportunity for desalinating produced water, I'd suggest is significant, but so is the opportunity to exploit the other minerals in the water.

During the process of desalination, those other minerals in the water are variably increased in concentration and create an additional opportunity to further improve the overall commercial aspects of a project. As you'll learn today from Tim and Brady and others, TETRA has the knowledge and proven ability to remove minerals from the produced water streams. In some cases, we've been doing it for several years already.

So taking a pause, right, quite simply, if desalinating oilfield produced water at scale was easy, it would have been done already, okay? However, you heard from the Chairman of the Texas Railroad Commission, the cost and risk associated with desalination with disposal continue to rise, while the cost and risk associated with desalination continue to fall.

What was once a wide gap has narrowed considerably. The regulatory environment is changing and new measures are being passed to enable the use of this desalinated water for various applications. Our technical ability as a company to desalinate this produced water, it's been demonstrated. We're ready for commercial applications. At the very same time, there's significant market demand for desalinated water from a wide variety of industries. So I suggest this is a time where these favorable market dynamics are converging with TETRA's core competencies.

So after more than half a decade of overcoming the aforementioned barriers, we're really excited to announce that we have a viable commercial offering, TETRA Oasis, I remember the photo from the beginning, right, total desalination solution or TETRA Oasis TDS. So as Roy touched on, if you look over here to the left, we are delivering water management services and technologies to customers in unconventional basins today. Again, these are the midstream and E&P operators that are producing this water and are faced with these disposal challenges.

As Roy also mentioned, we're a leading provider of treatment and recycling services and technologies. These are the first step in the desalination process. We operate saltwater-based chemical plants. This is the basis for future desalination plants. We've evaluated and exclusively licensed specific technologies because we moved past thermal evaporation 6 years ago. We're going to talk in the next couple of slides a little bit about vacuum membrane distillation, VMD. You may have heard the term KMX. In fact, the CEO of KMX, Zach, he's sitting there at the back smiling, okay? So take an opportunity to say hi to Zach.

The next one is a bit of a challenge, Osmotically Assisted Reverse Osmosis. Say that a bunch of times really fast in front of a room full of strangers. I practiced that one a couple of times. So OARO is what we're going to go with right now, okay? Again, we're going to talk about these a little bit later.

So you get into post treatment, we have the proven ability to analyze, treat and desalinate this water down to a beneficial reuse spec as designed by our customers. I'll call out for a moment, ammonia. So in some cases, dependent on the beneficial reuse application, you want to remove that ammonia. We can do it. We can do it easily. However, I would suggest in other beneficial reuse applications like agriculture, what is ammonia? It's a fertilizer, right?

A little bit of ammonia in that water as a fertilizer is of more value to the agriculture industry. So you wouldn't spend the time or money to remove it, okay, understanding those economics. We have the proven ability to extract and commercialize minerals from produced water. Again, this can help the economics. So it's because of all these core competencies that we believe that TETRA is ideally suited to provide a complete end-to-end desalination solution. left to right. Again, these are our customers today.

So I mentioned previously that we had exclusively licensed two different membrane-based technologies, why? Like most things, there's pros and cons to everything, right? We wanted to leverage the strengths of these different technologies and minimize some of the areas that were less strong, okay?

So in this situation, our unique patent-pending TETRA Oasis TDS utilizes a hybrid type system where we take advantage of the OARO technology at the bottom left, where the economics, both CapEx and OpEx in this electrically driven technology much, much lower, okay? As we concentrate up the water, move up to the right, the economics with a vacuum membrane distillation solution, VMD, become much more attractive. So you can see we shift over. Again, a hybrid solution, taking advantage of the strength of both of these technologies from a CapEx and OpEx standpoint.

Another distinct advantage of our TETRA Oasis TDS is the multi-barrier approach as it relates to contaminants. Our pretreatment technologies remove these contaminants. However, anything that might still remain in that water is then effectively captured by the membranes themselves before it ever even reaches the post-treatment process. We've done extensive internal testing, a broad range of different waters, broad range of different applications.

We've had third-party labs test our desalinated water, okay, even performing what's called a whole effluent toxicity test, WET test for short. Basically, what they do is they subject freshwater species of fish to the desalinated water for acute and chronic testing, see if they swim and survive. I'm pleased to announce that they did, right? The water is extremely clean. In fact, how do you like the water you're drinking today? No, we didn't go that far, but we could.

So as mentioned, if it was easy, anybody could do it, it would have been done a long, long time ago. However, we've been really focusing our efforts for over 6 years. We have a strong market presence in places like Oklahoma. We identified the issues with disposals such as seismicity, things like that a long time ago and predicted that these would manifest themselves in a much larger way in places like the Permian Basin.

So you can see here, we exclusively licensed these technologies over 3 years ago. That was before anybody else was even talking about desalinating, running field pilots, things like that. We had already locked in agreements with key partners such as Zach, okay? Do I mention field pilots. We ran one in South Texas successfully over 3 years ago. We then spent next couple of years testing, validating, putting the solution through its paces before ultimately, we came out and said, listen, we've got a solution. We're commercial. We're ready to go.

Since then, very proud to announce that we have a collaboration with EOG. Since then, you've heard Texas passed Bill 49 that enables this water to be reused in a variety of different industries. So with our unique set of core competencies, we've been working at this for some time to again, bring an economically viable solution, and because the clicker takes so long, you had a long time to look at that time line. So you might have picked up the fact that earlier this year, we also won a Hart Energy award, a Meritorious Award for Engineering Innovation in the water category. You heard earlier from Roy, we've also won awards for TETRA CS Neptune, which he touched on, right? We're very proud of this.

We're bringing solutions to an industry-wide problem. So everybody wants to know what does this mean, right? What's the size of the financial opportunity? Stephen is on his calculator already, right? He's trying to do the math. So let's forget unconventional fields overseas. Let's forget right now, those are even an opportunity. Let's not even consider other unconventional fields in the U.S. Forget the fact that water in the Permian is going to continue to rise.

So for a moment, assume that the water that's disposed of in the Permian today, that's an addressable market, 6.3 billion barrels. A certain percentage of that, assume what you want, will go towards desalination. Then assume those volumes can be treated to a desal spec for $1.50 to $2 a barrel. Then assume everything I've said today about TETRA's core competencies enables us to participate at a certain level in this market, okay? Again, make your own assumptions.

So I would suggest that regardless of what assumptions you make, this is an overall meaningful opportunity for TETRA. As Brady mentioned, we are targeting 500,000 barrels a day by 2030. During our recent Q2 earnings call, Brady and Elijio announced that we are in the process of finalizing the engineering design for a 25,000 barrel a day desalination facility, specifically for the Permian, okay?

The design will be scalable to address much larger volumes in the future. With respect to capital, that's the next question that Elijio gets, and we'll leave him to cover that at the end of the presentation. However, I would suggest that our customers have varying capital strategies in terms of how they deploy their money. So as such, we're going to have flexible commercial models. Again, we're a service and technology provider. So some models in order to deploy this very, very quickly to market, we're going to have long-term agreements that have both an operation and maintenance component in there along with a licensing fee. Again, we'll touch on this model a little bit later in Elijio's presentation.

All right. We're getting near the end. And of course, we have a break. So we're almost there, bear with me. So really, why TETRA? Why now? As you heard from both Chairman Wright and Kelly with B3, again, the cost and risk associated with disposal are increasing. The poor space is being exhausted and the downhole pressures continue to rise. The demand for this water continues to increase while the regulatory framework evolves to enable various industries to use this reclaimed water in their operations. Mineral extraction provides an opportunity to further improve overall project economics while in parallel, addressing an area of strategic importance here in the U.S. and other places in the world, and all of this aligns again with TETRA's core competencies around service, technology and saltwater or fluid chemistry.

All these market forces are converging at exactly the right time. So in terms of next steps, we'll finish the engineering design for the 25,000 barrel a day plant. We'll continue to move the ball down field towards our stated targets of processing 500,000 barrels per day of produced water by 2030.

As Brady mentioned, we'd suggest that's a relatively conservative estimate. It's a relatively small volume when you consider the overall produced water volumes that are being disposed of today. However, it's a start. And I would suggest, as you can see on the screen, this would be a meaningful opportunity for TETRA.

So in summary, unconventional oil and gas production generates a massive amount of water. Permian, 100 NFL football fields every single day, causing significant issues like you heard from the Chairman. An increasing amount of that water is being recycled and treated for reuse and frac. That's an opportunity for TETRA itself. However, again, the vast majority of this water is being disposed of as a waste. The risk and costs associated with that disposal continue to rise to the point that the disposal capacity in the Delaware Basin could be exhausted in less than 4 years. You heard that from Kelly.

TETRA Oasis TDS is a viable alternative that transforms this waste into a resource with broad market applications. TETRA's unique set of core competencies, customer base, coupled with the markets that we already serve, position us well to participate in a meaningful way in this market opportunity.

So in closing, I appreciate your patience. It's a cramped room. It's been a long morning. We're going to take a break. But I suggest that as you sit here today, the information and data presented might seem overwhelming and sometimes even complicated. However, I'd offer to you that the One TETRA 2030 vision is really quite simple. Again, focus on service, technology, saltwater chemistry. That's how we're applying it into all these opportunities. That's the basis for what the company is paid for today and the basis for what we're going to be paid more for in the future, okay? Thank you.

[Break]

Okay. So good morning again, and thank you all for joining. We've had the Gigabyte Mega Whistle folks in, and we're going to see if this works a little better. So my name is Tim Moeller. I'm the Senior Vice President for our Industrial Chemicals and our low-carbon energy activities, and my 40-year career has spanned over upstream oil and gas, industrial manufacturing, as well as oilfield services before getting to TETRA in 2018.

Point in my career in terms of coming to TETRA, why? Like many teams, first, it was a coach. A lot of confidence in this coach. As you've heard from my two Canadian colleagues, we've been fairly successful in our prior careers. Before coming to TETRA, I was the Chief Commercial Officer for Halliburton, had over 5,000 people and responsibility for about a $10 billion checkbook. But it was the coach. It was the atmosphere, my 40 years in terms of this team, the collaboration, we're all competitive, we'll challenge. And the other piece is the opportunity that this company has, and I'll talk some about that.

So first question is, I'm going to talk about our industrial chemicals and our low-carbon energy activities. On the industrial chemical side, how many people in the room think a significant piece of the revenue for industrial chemicals is oil and gas focused. A few. I'd advocate that our industrial chemicals business is probably perhaps the most misunderstood and maybe the least appreciated in terms of the company's portfolio today. Over the next 45 minutes, though, I hope to change that.

Unlike the conversations prior to the break, I want you to take note in terms of how much we talk about oil and gas versus other industries. We definitely have exposure to the oil and gas side and our industrial chemicals, but I think you're going to -- we're going to show you in terms of what else we're exposed to that you may not be aware of.

Today, our global calcium chloride business and its 10 plants roll up and make a significant piece of our Industrial Chemicals segment. We'll provide deeper insights, and we'll talk about the value that it's not only delivering today, but more importantly, in terms of the future. We'll talk about our low carbon energy segment, which we're pretty excited about that includes our new stationary energy storage products. We'll talk about our 40,000 acres of brine leases in Southwest Arkansas and the richness that they are and what they bring. And we're going to talk about our new bromine extraction plant that we're building south of Stamps, Arkansas that's under construction currently.

It's scheduled to be mechanically complete by late 2027 and first production in 2028, which will be a meaningful transformation for this company, because starting in 2028, that plant will start supplying tetrabromine to our existing West Memphis, Arkansas plant, where we've been producing all of our brominated completion fluids for the past 35-plus years and where we produce our stationary energy storage products today.

So the -- in 2028, which today, we -- as you heard earlier, we get our elemental bromine from third parties through a long-term agreement, starting in 2028, that will be a meaningful step change when we start utilizing our own and something Brady will speak to more later. So as Brady highlighted earlier, our transformation from a predominantly oil and gas service company to a more diverse value enterprise is well underway. I asked a question in terms of -- earlier in terms of the industrial chemicals.

As we walk through the information ahead of us, I think you'll start to understand and appreciate and recognize just how far TETRA has come and all the exciting things ahead of not just for the company, but for our shareholders. This transformation has required new thinking, new horizons and new product offerings and now a new organizational structure, as we've told you.

I will have the honor of the responsibility for our new TETRA Specialty Chemicals & Minerals segment, which will combine our calcium chloride business and our energy storage products business along with our Mineral Extraction business into a segment that will have stability from our calcium chloride business, but also have sustainable growth from that stationary energy products and mineral extraction business.

Earlier in my career, I was fortunate to be a part of another company that went through a pretty significant transformation. We took the company from $2 billion in revenue to $50 billion in revenue in a handful of years. By anyone's standard, that was a significant transformation. It was an exciting time, and I would tell you the transformation underway here at TETRA has a lot of similarities to me, and I'm really excited about being a part of it personally and a big reason I came to TETRA.

So let's look at the strength of this new segment and what it will enjoy. Our calcium chloride business has been known historically for fairly consistent financial performance. In fact, over the past several years, the business has been -- the business has been delivering at all-time highs. That's pretty impressive when you consider the business has been around for 40-plus years.

Our energy storage products business has meaningful traction through our newest product offering, TETRA PureFlow. I'm going to tell you a lot more about that, but it's an ultra-high purity zinc bromide that's utilized in the feedstock for zinc bromide battery electrolytes. Today, we are 1 of 2 in the world, the only U.S. manufacturer in the world that can make that high-purity zinc bromide, right?

If you kind of look at how we got there is that, that journey started about 4 years ago, as you heard earlier. It hasn't always been smooth, and it hasn't always been straight. But I would tell you that relentless dedication and that strong technical capability and collaboration we've talked to and partnerships like we have with Eos Energy has gotten us there. Put it in perspective, Eos' stated objective is to scale their production to 8 gigawatts per hour. If they're successful, just to put in perspective, that represents somewhere around $250 million a year in terms of revenue for TETRA.

Equally exciting is that 40,000 acres of Smackover brine leases in Southwest Arkansas that we control. It contains extremely high levels of bromine, lithium, magnesium and manganese, 3 of these 4 are on the U.S. critical minerals list. This brine is arguably some of the richest mineral -- some of the richest brine in terms of mineral content in the Lower 48, and we're fortunate to have it. And it's not just the value of those minerals by themselves, but it's the value of what we as TETRA can do with them.

We talk about our bromine in terms of we take that bromine and we turn it into completion fluids and my colleagues talk to you about where we are in terms of leading on the completion fluids side. We've talked in terms of the energy storage products, and we're going to talk about how we're continuing to lead in the market position we have there. So as evidenced by this slide, our transformation is more -- our transformation is a more diversified enterprise is well beyond just a vision. For instance, today, most don't realize, but 85% plus of our revenue for our calcium chloride business does not come from the oil and gas industry, but rather from other industries.

We generate our revenues from places like food, agriculture, industrial and road. Oil and gas is definitely a piece of our revenue stream, but these other industries, we participate in heavily. And as you recall earlier from Brady and Roy's commentary is that the chemicals is a meaningful portion of the portfolio, right?

Our vertical integration and geographical presence and capabilities enable us to service and grow a global business, 40 years of delivering quality and operational excellence has given us strong customer relationships, which bring us a higher barrier to entry, if you will, in terms of others. Today, we enjoy the #1 market share position in Europe, the #2 market position here in the States and the leader globally overall as it relates to calcium chloride.

TETRA has long been known for its ability to deliver custom engineered solutions. You heard about some of them in terms of Neptune, SandStorm versus just the products that we produce. Nowhere is that more evident than in our food and agricultural industry offerings. I think all of us would agree in this room, there's probably nothing more critical around the globe than the world's global food chain and the quality of TETRA's calcium chloride product offerings are contributing meaningfully to that.

I can confidently say that everyone sitting in this room today has consumed product that TETRA calcium chloride enabled. Matt relieved you and told you that wasn't our desal water, but I can tell you that I can't tell you, although tried is that whether or not that water in front of you, those paper products in front of you have TETRA calcium chloride involved in them.

But TETRA's calcium chloride today in terms of these spaces, everything from canned tomatoes, cherries, nuts, cheeses, bottled water and many leading breweries around the world all utilize TETRA calcium chloride. While our TETRA label may not be on it, recognize that TETRA calcium chloride is making them happen. Beyond that is that our calcium chloride also enables the world around us.

I talked about the water. Many of municipal water treatment facilities utilize our calcium chloride for pH adjustment. The pulp and paper industry utilizes our calcium chloride to make all kinds of paper products. In the construction industry, our calcium chloride enables the concrete that we're standing on and the roof tiles that are up over our head.

Industrial dehumidification, those little white bags that you get in your Amazon box and you wonder what's in that and where did it come from, calcium chloride. Road surfaces, especially in this part of the world in terms of de-icing in the wintertime, dust control in the summertime. Our calcium chloride also enables the production of Kevlar that makes bulletproof vests, protecting our militaries around the world and all our law enforcement officers every day.

While it may not be overly visible to you, TETRA calcium chloride is in the shadows of the world, and we're enabling a lot of critical needs around us every day. These maps on the right show where our 8 calcium chloride plants are located in our numerous terminals around the world. These manufacturing and distribution facilities allow us to produce and deliver product globally and diverse customer bases in the most efficient and cost-effective manner. They're -- thinking differently always doesn't come easy to a 40-year-old business, but we're proud of what we've done and what we've accomplished over the years because we've worked hard to optimize our assets and our operations. We've learned how to do more with less and solve customer problems differently and more efficiently.

Our supply chain expert in TETRA is meaningful. Several of our senior leaders prior to coming beyond myself, managed multibillion-dollar supply chains in their prior careers. We've leveraged that talent and that knowledge, resulting in long-term contracts for not only our raw materials, but our services, and that's resulted in competitive advantages for the company. These are our largest -- 5 largest -- actually 6, if you will, calcium chloride of the 8 around the world.

Our Kokkola, Finland, our Lake Charles, Louisiana and our Parkersburg, West Virginia plants use what's called a dissolution process. We take hydrochloric acid, we take and react it with high-purity limestone and it makes calcium chloride. TETRA is the largest consumer of hydrochloric acid in the Lower 48, bigger than the oil and gas industry. And my former colleagues back at Halliburton happen to know that given being the former Chief Procurement Officer.

Amboy, Cadiz, California. These are our solar evaporation plants in the middle of the Mojave Desert. Solar evaporation, nothing else. The only organic calcium chloride in the globe, right? So they look like blue swimming pools. So this is -- that's actually -- as they go -- the brine goes through the actual 18-month process, it changes colors.

Matt talked to you about the El Dorado facility and our mechanical evaporation process there. So we have two others dissolution plants in Europe. But what you can see here is that we manufacture our calcium chloride in a variety of ways, and we have flexibility and that brings us advantages.

We spoke about the historical consistency of our financial performance coming from the calcium chloride business. A meaningful contributor to that is the diversity of the industries and the customers in which we serve, which gives us the ability to provide a more stable and consistent business result. I'd advocate that capability. It comes -- becomes the most important to us when we hit our times of challenge.

No more challenging 2020 in the COVID crisis, right, is a big piece of the reason that we stay cash flow positive, our calcium chloride business. In fact, in 2020, our European operations set an all-time record. They've set several cents, right? But in time of need, the calcium chloride business has held strong for us. Taking and looking at history, our calcium chloride business has grown faster than GDP since 2016. In fact, 4 out of the past 8 years, we've grown more than 10% year-over-year. That doesn't just happen.

Both our European and North American businesses have performed well and delivered -- have performed well in delivering these historical results. Those results are largely grounded in a continuous improvement mindset and culture of not just the company, but our employees. We've talked about the One TETRA employee, of all the places I've been, this staff and our employees around the world truly believe it's a powerful advantage for us.

We continuously challenge ourselves internally around our organizational and operational paradigms while trying to keep an eye focused on the windshield in terms of new opportunities. I spoke of our supply chain execution and how our negotiations and execution of long-term raw material agreements have provided us competitive advantages and supply continuity, allowing us to provide longer-term pricing and supply surety to our customers, again, an advantage.

You put all these together, and we've become better, faster and more efficient across all of our businesses, creating that competitive advantage against any others across the globe. While we're very proud of what we've accomplished, if you will, in the rearview mirror in terms of the Industrial Chemicals segment, -- we're about -- we're equally as excited about the opportunities in front of us. We still believe we have unmet needs in upselling our product in terms of higher technology and more demanding operational needs that are yet unmet.

U.S. chip and data center expansions are providing us with a meaningful opportunity of growth, and we're pursuing those. All these things combined will allow us to continue to grow not only our top line, but also more importantly, our bottom line in the calcium chloride business as we transition to the new segment.

So as we turn the page and sort of look at our low-carbon energy products, this is probably one of the most exciting verticals around stationary energy storage and our new product offerings. This new vertical presents a meaningful and sustainable growth opportunity for our Specialty Chemicals and Minerals segment that's ahead of us. As I said some 4 years ago, we identified a new growth opportunity vertical where we felt we could apply our core competencies and capabilities to create a product that would -- to meet a critical need. As you know, that need was in stationary energy storage space and the product that was required was an ultra-high purity zinc bromide. We're talking parts per billion level of impurities, extremely -- even to be able to detect at that level is an art, right? And we're able to do it. And how do we get there?

We've been making zinc bromide for 35 years for the oil and gas industry. As Brady talked to, our fluids chemistry expertise, we believe, is as good as anybody, if not second to none. We leverage those two, and we developed in short order what the industry knows today is TETRA PureFlow and PureFlow Plus. We have a strong conviction these two products based on testing and customer feedback are superior to any others in the marketplace.

Purity is one of the #1 critical enablers in zinc bromide battery performance, and PureFlow and PureFlow Plus are leading the way. So the stationary energy storage vertical is a multibillion-dollar market today and growing rapidly. Utility scale storage has had an impressive growth and behind me is a chart for the U.S. market alone, which has grown 70% of CAGR over the past 5 years. Even more encouraging is forward-looking, that growth is projected to -- over the next 10 years to be 25% CAGR. That's a meaningful market to go after, and we're well positioned with our energy storage product offerings and our blending capabilities to capitalize on this growth.

Our PureFlow and fully blended battery electrolyte business has seen meaningful traction already today and growth. And we're excited about the business opportunities that are ahead and the market position that we've established. This picture on the right is our West Memphis, Arkansas bromine conversion plant I spoke to earlier. This is a plant where all of our brominated completion fluids for the oil and gas industry as well as our Tetra PureFlow, PureFlow Plus and fully blended electrolytes. It all happens right here.

This team has done a remarkable job. As you can see on the slide, in terms of the innovation, our TETRA PureFlow Plus is patent pending given the unique manufacturing process that our team came up with that was needed in terms of supporting the full battery electrolyte. Today, we utilize both TETRA PureFlow and our PureFlow Plus as main feedstocks for that fully blended electrolyte. There are other elements that go in it. It's kind of like the Coca-Cola formula. In fact, we have to, by name to Eos, tell who actually gets to see the formula. I can tell you of all the executives and management team in the room, I'm the only one that has seen that formula. So -- but we take all that, put that together and we send back, if you will, a complete electrolyte.

So let's talk about the advantages of the zinc bromide battery versus the traditional lithium ion battery and why we have -- we're encouraged in terms of this space, is that when you look in terms of, for instance, in terms of duration, zinc bromide-based zinc remote-based battery technology just simply is much more suited for this type of long duration, 6 hours and down, right, is a sweet spot in terms of lithium. When you push it past that, you get into sort of operational challenges, such as thermal runaway that you probably have heard of and know of.

if you're not aware, 50% of all bromine produced in the world today goes to make brominated fire retardant. All those cell phones you have in your hand, the plastic around them have a brominated fire retardant around them. This TV and this monitor have a brominated fire retardant around them. Every coating on every electrical wire has a brominated fire retardant around them. Silicon chips, the injection molded plastic in your car, all have brominated fire retardant in them to keep them from catching on fire.

What does that mean? That means that zinc bromide-based electrolyte has literally no threat of a thermal runaway that lithium-ion batteries are known for and are experiencing. Just some 45, 60 days ago, the second largest lithium stationary energy storage facility in California caught fire, right? Probably problem is, when they overheat and self-ignite, there's not enough water to put them out. Secondly, the thermal fumes off of them will clear a place like New York, will clear 50 or 60 blocks because of the fumes that are put off of them. So some real advantages from that standpoint as it relates to the zinc bromide battery technology.

As it relates to recyclability, TETRA has been taking and recycling brominated fluids out of wellbores for 40 years, right? Real forward, zinc bromide electrolyte, we have one of the battery cases for Eos, as you can see. We put it into an injection molded case. They put an injection molded case, put it on the shelf, bring it back to us after 10 or 20 years versus taking and putting that fluid down a wellbore and everything mother nature can throw at it. We have 40 years of experience and capability that we're going to apply in terms and are applying in terms of the ability to take and recycle that electrolyte.

If we can't bring it all the way back to part per billion level, my colleagues on my left, you're right in terms of the completion fluids, we can use it every day and all day in deepwater. So we have that ability to take and bring the total recyclability to the zinc bromide battery electrolyte as well.

In terms of -- as you can read here and understand to some in terms of why they're continuing to gain more and more traction. Some of those are the benefit of being 100% manufactured in the U.S. with 91% domestic content adds to that appeal. They're one of few, if you will, in terms of alternatives at a commercial scale to non-lithium ion energy storage technology.

I talked to you in terms about we're 1 of 2 in the world that can produce the high-purity zinc bromide. We're the only U.S. manufacturer that can produce that product. We contribute meaningfully in terms of that 91% content. A lifespan of 20 years, coupled with deep charge and discharge cycles without degradation. I think back to the purity of our product, adds to the 25% lower levelized cost of storage.

Our electrolyte volumes have increased meaningfully. We started way back with totes. This picture on your right is now bulk trucks. So we now send bulk truckloads of electrolyte to Eos in their Pittsburgh plant from our West Memphis plant, which is another advantage in terms of we don't put it on a train, we don't put it on sea, et cetera, is that it leaves our West Memphis, Arkansas plant and drives straight to the Pittsburgh facility, unloads. That's about as short a supply chain as you're going to get.

This is the chart from Eos' Q2 earnings presentation. We'll defer any validation questions to our Eos colleagues. But as you can see by the numbers, the meaningful commercial traction that Eos has made. Their transformation continues and is progressing and is encouraging as it relates to us as TETRA.

Eos' stated objective in terms of the -- for this year is to have their first production line up and fully automated, resulting in having 2 gigawatts of production annually in place as they turn out of 2025. That, coupled with a backlog of $670 million plus and almost a $19 billion pipeline, along with data centers continuing to ramp and expand as well as the capabilities and safety aspects of Eos all becoming recognized and realized gives us confidence in our energy storage future ahead.

So the zinc bromide energy storage battery market is a major opportunity for TETRA. Make no mistake about it. We are one of only 2 global OEMs in the world capable of producing this at scale today and the only U.S. manufacturer. Our partnering with Eos has resulted in a long-term supply agreement between the two companies where TETRA supplies 100% of our TETRA PureFlow, that high-purity zinc bromide and a minimum of 75% of their blended electrolyte needs.

If Eos is successful, as I said earlier, in hitting that 8 gigawatt capacity, that equates to $250 million of revenue opportunity annually for TETRA. The energy storage market is growing rapidly and TETRA's vertical integrated supply chain and technical expertise provide us a real competitive advantage in this space. We have every reason to be optimistic given where we are and the capabilities that we possess. We have just begun, and I would advocate you need to stay tuned. Thank you for your time. I'm going to turn it back over to Brady.

Thanks, Tim. Before turning things over to Elijio for a financial recap, I'm going to close out our segment discussions by covering our critical minerals and where we are with our Arkansas bromine project. So I think one of the smartest decisions that former TETRA executives ever made was securing a key Arkansas brine acreage back in the 1980s.

At the time, TETRA was starting to use bromine in its completion fluids business, and when Dow Chemical put its bromine plant and acreage up for sale, due to the high concentration of a very few number of bromine suppliers, the DOJ intervened and prevented further concentration of existing suppliers by forcing it to go outside to another party.

Ultimately, because TETRA was a major user of bromine for energy production, the acreage was awarded to TETRA. Over the years, TETRA negotiated favorable bromine supply contracts with the existing suppliers, so the acreage was never developed until now. The acreage shown on this map is strategically located with Albemarle to the East, ExxonMobil for their lithium interest to the South. And what isn't shown here is Chevron's latest acquisition leases to the West. Our acreage is divided into two parcels. There's a 6,900-acre evergreen unit parcel, which is a partnership with ExxonMobil, where we own 65% of the minerals and Exxon retains the other 35%.

The other parcel to the north of about 35,000 acres is where TETRA negotiated a royalty agreement with Standard Lithium who have now formed a partnership joint venture with Equinor to develop the lithium out of our acreage. We get a 2.5% royalty from future products from that lithium production. We'll talk a little bit more about that. But it's important also to know that TETRA retains all the ownership of all the other minerals in that acreage. It's just the lithium where we have the royalty agreement.

As mentioned, the Smackover brine has very high salt saturation, and it contains a wealth of minerals. For all the reasons we've discussed, the mineral we find most valuable short-term to TETRA is bromine. However, lithium, magnesium and manganese exist at very attractive volumes. The lithium concentrations are among the highest recorded in U.S. brines. And although lithium prices have been under pressure for the past few years, the demand outlook remains strong and there are many reasons the U.S. will want to secure its own source of supply.

What might not be widely known is that magnesium and manganese are essential to U.S. industry and various government agencies, including the Department of Defense. Currently, there is almost no U.S. production of magnesium or manganese with about 80% of the world's magnesium supply coming from China.

As noted on this slide, all 3 minerals, lithium, magnesium and manganese, are listed as critical minerals by 3 U.S. agencies, all 3 agencies: the Department of Commerce, the Department of Defense and the Department of Interior.

Earlier this week, we released an updated definitive feasibility study with updated and upgraded resource values that are displayed on this slide. This was a very positive report further verifying that the mineral richness in our acreage. In summary, we've further upgraded the bromine resources by increasing the measured and indicated by 173% and the lithium resources by 163%, also measured and indicated. We've also added new resources of magnesium and manganese to the report, which were not previously published.

On September 3, Standard Lithium and Equinor released their definitive feasibility study on the TETRA lithium acreage, which included proven and probable lithium reserves as well as measured and indicated. As noted on the slide, these are the reserves and resources where TETRA receives the 2.5% royalty on all future production.

I'll provide a brief update on our bromine project shortly. But since TETRA is going to be in the bromine -- the elemental bromine business, we thought it would be valuable to give a quick overview of the global bromine market. In 2024, the global bromine market was estimated at about $2 billion, with roughly 60% of the world's bromine production going into the fire retardant markets, as Tim highlighted. But other segments include consumer polymers, tires, energy, and others like pharma.

Looking ahead the electrification of everything, including EVs, is expected to be a major growth driver due to bromine's valuable fire-retardant properties. As Roy discussed, growth from deepwater completions are going to continue to require more bromine. As Tim mentioned, energy storage is also a whole new market for our future bromine growth. The supply side of bromine is interesting, but I would say somewhat worrisome.

As I mentioned, TETRA was awarded the bromine-rich brine leases in Arkansas through a DOJ consent decree back in the 1980s. That figures back then and even now an estimated 77% of the global bromine supply comes from 3 companies, Israeli Chemical Company and Albemarle from the Dead Sea and Albemarle and Lanxess Chemical from the Arkansas Smackover brines. The largest contribution estimated at 54% of the global supply comes from the Dead Sea, where the main concern is its ongoing shrinkage, which poses a serious environmental challenge.

Water levels in the Dead Sea have been decreasing since the 1960s and are currently receiving about one meter per year. As this graphic on the slide shows, if this trend continues, there are real risk to future bromine supplies from the Dead Sea. Another estimated 21% of global supplies comes from China, which is expected to continue to decline and another 15% comes from the Arkansas Smackover brines, where production from the existing producers has been ongoing for almost 50 years. That longevity bodes well for TETRA's next 50 years with our virgin brine, but the resources from the existing acreage is well into their decline curves.

The demand for deepwater completions and estimated future demand is forecasted to nearly double TETRA's bromine demand from today to 2030. Again, while existing supplies look challenging, it's one of the reasons, clearly why we have decided the need to develop our own bromine -- elemental bromine supply.

In August of last year, we published a comprehensive SK 1300 definitive feasibility study for the TETRA Evergreen Brine project in Arkansas. The key economic analysis as shown on this slide for a total investment of roughly $270 million for bromine plant and upstream wells and pipelines, TETRA is estimating an incremental midpoint revenue increase of about $230 million and a midpoint $105 million increase in EBITDA.

The bromine plant capacity of 75 million pounds per year will provide TETRA with more than twice our current long-term supply agreements with bromine. It will enable our Completion Fluids business to continue growing with the deepwater markets and help us keep pace with the substantial electrolyte the most demand growth that is forecasted. The EBITDA improvement not only comes from additional volumes, but from a lower cost base compared to our long-term contracts and the spot market supplies we are buying.

We're progressing well with the construction of the plant. By the end of this year, the bromine tower that's shown on the left will be installed and erected at our plant site just outside of Stamps, Arkansas. That marks Phase 1 of our project, which is on schedule and fortunately, under budget for completion by year's end. Phase 2 will include the tower and all the major equipment supporting the bromine plant with completion projected by the end of 2026, as shown in the middle picture. The final phase, Phase 3 will involve completing the rest of the plant, including transporting brine to and from the wells and delivering elemental bromine to our manufacturing facility in West Memphis. This project is on track for completion by the end of 2027. Our current plan is to have the plant ready for startup at the beginning of 2028.

Some of the latest updates from the project. Again, we announced earlier this week the updated resource report showing the substantial 173% increase in bromine resources. As discussed, we are on track for completion and start-up in '28. But one significant opportunity for the project is aligning our upstream requirements with standard lithium and Equinor. Remember, TETRA owns all the bromine and all the other minerals in the standard lithium acreage as they are required to make that brine flow available to us after extracting the lithium.

As of now, standard lithium in Equinor plan to bring their lithium plant online in 2028, same timing as our bromine plant. If standard lithium stays on that schedule, TETRA could potentially avoid a substantial portion of the $84 million that was shown in the previous slide in our upstream and pipeline costs. Now there may be some offsetting expenses for reheating the brine before the bromine processing, and those engineering studies are underway. But a Standard Lithium and Equinor approach FID for their project we will complete the engineering to match that time line, and we'll update our DFS report accordingly.

Now moving on to lithium. We mentioned that we have 2 different acreage parcels, each of them has a different economic benefit to TETRA. The Standard Lithium Phase 1 unit is projected to produce 22,500 metric tons of lithium carbonate per year, applying the 2.5% royalty to their estimated LCE price of $22,400 per metric ton, yields a cash contribution to TETRA of $12.6 million annually. We have included that number in our 2030 targets that we shared with you.

The other future contribution comes from our 6,900 acre partnership with ExxonMobil. Again, TETRA is the operator of the unit and controls 65% of the minerals while ExxonMobil controls the remaining 35%. The lithium resources from this unit have been increased by 163% from our previous resource study to 585,000 tons of LCE. We're currently drilling the unit's first production well and expect to complete it sometime in October. Although considerable work has been done to complete test and validate several direct lithium extraction technologies, a final decision along with our partnership in ExxonMobil has not been made yet.

Since we're using our cash flow -- back one here. Since we are using our cash flow to fund the bromine project, we'll continue to assess lithium prices before deciding on a development time line. For now, we are not including the financial benefits of a future lithium plant, but we have modeled the capacity of the Evergreen unit to produce roughly 10,000 metric tons per year. At a 65% ownership using the same futures price as standard lithium, this has the potential to generate another $150 million in revenue at very attractive margins.

The future plans for other mineral extraction are still in development, but the main advantage for TETRA as it is other minerals like magnesium and manganese are found in the same Smackover brine flow that will be used to produce bromine and lithium. We've shown that although a small company, we have the wherewithal to form key relationships with strategic companies. We intend to continue that trend of forming partnerships for the development of other key minerals, and we're currently in discussions with companies for the extraction of manganese and magnesium from our Smackover brine as well as iodine on the back of our TETRA OASIS solution for produced water.

Closing out for the segment discussion. The new future segment of Specialty Chemicals and Minerals, we see a near-term target to get our bromine tower erected before year-end, deliver 2 gigawatts of electrolyte to EOS in 2026, established partnerships with the extraction of magnesium and iodine finalized the bromine plant and reap the many benefits that we've discussed. The 2030 target for this segment of over $400 million does not include future lithium of nearly $150 million or the magnesium or manganese opportunities that we discussed. But ultimately, we believe is that all 4 minerals will eventually be extracted from our same rich brine flow of the TETRA acreage.

Thank you, and I'll turn it over to Elijio.

Thank you, Brady. Good morning, everybody. Why did we select today as the day to have our Investor Day? I had mentioned to many of you that over the last couple of years, that only when we had made significant progress on our key growth initiatives, will we host an Investor Day and lay out management targets and goals. Before then, we're going to focus on engineering efforts, financial analysis, gaining customer traction and preparing the balance sheet to achieve our goals. We've accomplished that, and here we are now ready to commit to targets.

For those of you that I have not yet met, let me give you a quick background on myself. I started my career in the chemicals industry working for Dow Chemical. And like Matt, I also had a long career working almost 18 years at Schlumberger, becoming controller for their global seismic business based out in London, before being promoted to our western hemisphere seismic General Manager. I then worked for a publicly traded company where we grew revenue from $600 million to $3.1 billion in a short time period. I've seen and been part of a high-growth transformational story that created significant shareholder value. And I'll also worked as CFO for two private equity-sponsored companies who are managing cash was the key objective.

I'm going to close out the session with a summary of the key financial targets that we are working towards. At the beginning of the session, Brady laid out the goals and targets. Roy, Tim and Matt went through the specifics of our market position, our technology advantages and how we can take advantage of our fluids chemistry to transform TETRA to create significant and sustained shareholder value.

Matt broke it.

It was like that when I got it.

All right. Roy broke it then. Let me go back to my -- all right. Here we are. Our objective is to more than double revenue by 2030 and do it gradually over the coming years. Our objective is to increase adjusted EBITDA to over $300 million with margins increasing from 18.9% to approximately 26%. This would result in earnings per share between $1.20 and $1.30. And free cash flow in excess of $100 million by 2028 after the bromine plant comes online, growing to approximately $145 million by 2030. The free cash flow yield based on the current share price could approach 20%.

How do we get to $1.25 billion? This is the waterfall graph that I had mentioned to many of you that at one point, we would publish. This graph brings together what you heard from Matt, Tim and Roy and lays out the path to $1.25 billion in revenue. For the existing businesses, we have of energy services in calcium chloride, we are conservatively making an assumption of mid-single-digit organic annual growth.

Our two new revenue streams of electrolyte sales and water desalination plant will drive the expected significant increase in revenue. Note that we are assuming some of our current lower-margin business, mainly the water transfer business will be rationalized as it does not meet the earnings and cash flow performance that we are expecting from all our future segments.

Note also that we have not assumed that we are producing and sell lithium from our dedicated Evergreen unit that we share with ExxonMobil, as Brady mentioned earlier. When it comes to fruition, it could add $150 million per year in revenue for TETRA's share of that unit.

And how do we get to the EBITDA targets? This waterfall graph provides a path towards taking our adjusted EBITDA to over $300 million. I will go over each of the segments in more details in the next few slides.

It is our expectation to begin reporting 3 segments most likely in 2027. The new segments are intended to increase the visibility to our shareholders of each of the existing businesses and the growth segments. The first segment will be specialty chemicals that includes our current calcium chloride business and long-duration battery storage electrolyte sales. And in the future, will include revenue from minerals extraction and from lithium. As I mentioned, this does not include the potential revenue and earnings from the sale of lithium from our Evergreen unit, but it does assume expected royalties from Standard Lithium/Equinor.

We are very encouraged by the progress we are seeing by EOS, both in raising capital and in automating the first line, then taking steps to begin the second line. We are conservatively assuming that we will be shipping electrolyte equivalent to 8 gigawatts of production for 2030, but it is very likely that they will get there sooner than 2030. Between now and then, we are assuming a gradual ramp-up to 8 gigawatts by 2030. We expect to bring our bromine plant online at the end of 2027 and in 2028, will see a full year benefit of additional volumes with lower cost of goods sold as we phase out our LANXESS volumes and eliminate open market purchases. The sum of all 3 reflects a revenue CAGR of over 25% with EBITDA margins above 28%.

The next segment will be water treatment and desalination. This includes our current water treatment business and the water desalination plants. You heard Matt earlier, the demand is there. The regulatory environment is there to the point that at our request, the Chairman of the Texas Railroad Commission recorded a video communicating the commission's views and urging the industry to embrace technologies to address the challenge.

Based on discussions with many customers, there is an appetite for operators and midstream companies to fund the capital as they have a lower cost of capital than TETRA does. We assume that gradually and by 2030, we will deploy a total of 10 plants processing 500,000 barrels of water per day, with 5 of those plants being the license model where the customers fund the capital and 5 being the service model where we fund the capital.

And based on discussions we have had and are having with capital providers, there is strong interest from multiple capital providers to provide off-balance sheet financing at the project level on the back of 10- to 20-year take-or-pay agreements with our customers, counterparties who have very strong balance sheets. This is expected to create a segment with revenues of between $340 million and $360 million by 2030 with adjusted EBITDA margins above 28%.

Our Energy Services segment will include our offshore completion fluids plus our flowback, sand filtration and early production facilities.

You heard Roy lay out a strategy of capitalizing under the deepwater market, partially driven by the lower tertiary deepwater demand. The bromine plant will further improve our margins as bromine from our new plan will be much lower cost than the current LANXESS agreement and open market purchases. The revenue growth does not appear to be as significant as the other 2 segments. But keep in mind, we'll be replacing over $100 million of revenue from our water transfer business.

We're also very conservatively projecting only mid-single-digit annual revenue growth with upside depending on how many CS Neptune wells we complete. Remember, we completed 3 CS Neptune wells in the first half of this year that again demonstrated the earnings power of our Neptune technology.

So how should our future earnings be valued? We consulted multiple financial advisers to identify a group of companies that each of the segments would be benchmarked against to assist the buy and sell side in arriving at some of the parts for TETRA.

This slide lays out the group of companies, we believe represent the EBITDA multiples for the specialty chemicals on the left side which is about 12.4x EBITDA. In the middle, the group of companies for water treatment and desalination of 12.7x EBITDA and the Energy Services business is slightly below 6x. We believe this group of companies have matching growth and margin profiles that will match our future business.

When one does assemble the parts for each of the segments, you will arrive at a potential target share price that is very attractive, even if the sum of the parts is heavily discounted. This is why we have been so focused on the growth initiatives and have been and will invest heavily through 2027. We believe this path creates significantly more shareholder value in the coming years versus any other path we could have pursued.

Between now and 2030, how can you monitor our progress? To get to the 2030 targets, we have identified some near-term milestones that we can be measured against. The first is to continue to exceed expectations. We beat consensus in the first and second quarters of the year. We provided guidance for the total year of 2025, and we believe we're on track to meet or exceed those targets. The other targets, Matt, Roy and Tim touched upon during their presentations. These are a combination of progress with certain customers and internal initiatives such as completing the bromine plant.

The progress we are seeing with our desalination technology being embraced by customers is also very encouraging. And the progress we are seeing with Eos is equally encouraging. These two were critical requirements for us to host an Investor Day to communicate 2030 targets.

And how does our capital allocation evolve? Our capital philosophy has been very straightforward. First, strengthened the balance sheet by improving our net leverage ratio, build cash and push out maturities. We achieved those with a current net leverage ratio of 1.2x. We are generating free cash flow from our base business in the first half alone over $52 million. We are investing to create a new revenue and earnings stream. Based on discussions with capital providers, there is non-dilutive project level capital for both the bromine plant and the desalination plants. We are working on finalizing those. And none of those solutions will put our balance sheet at risk. And as important, none of those solutions will increase the TETRA share count.

Once our bromine plant is completed, we'll shift from an investment phase to a return of capital phase. We believe that beginning in 2028, we can generate approximately $100 million of free cash flow for TETRA in total, including the growth initiatives increasing thereafter, allowing us to pay down existing debt and either doing share repurchases and/or dividends.

Our objective has been to capitalize on the base business to execute on the growth initiatives, position us to return more capital to shareholders and attain a higher valuation from the new revenue and earnings streams than what we could have done with the existing segments. And recall, we have a $100 million tax loss carryforward that can offset almost $400 million of pretax income in the future.

In summary, our goal is shareholder value creation by evolving to a business that is higher growth, better margins, less dependent on oil and gas activity and more predictable than today. As we make progress, I expect we will attract sell-side coverage from outside the oil and gas sector. They will attract clean tech, chemicals and water technology investors, plus growth-oriented investors and that we will be pulled into indices in those areas.

The TETRA management team and the Board of Directors collectively hold approximately 7% of the outstanding TETRA shares, high for a publicly traded company without a founder. You have seen buying -- insider buying in the last couple of years, including this year. Our interests are aligned towards the attainment of One TETRA 2030 to create significant shareholder value. And in case I didn't mention it, our objective is to create significant shareholder value.

All the material that we've shared and we've put a lot in front of you is available on our website. I encourage you to download it. I encourage you to reach out to Kurt and I and we'll be more than glad to follow up with additional color.

Before we go to Q&A, for our audience here at the conference room, let me cover a couple of logistics. For Q&A, we have some of our team members with microphones that will be brought to you so that everyone can hear the question. Please raise your hand, and they'll bring the microphone to you. State your name, please, and your affiliation when you do so. After Q&A, lunch will be served. I hit on the right. I encourage you to grab some lunch and come back to your spot.

And for those of you that have the individual meetings with us here this afternoon, we have reserved the courtroom that you can hang out until your scheduled time and return calls or catch up in e-mails. It's right outside the hallway. Our first session that we had scheduled at 1:30 will begin instead at 1:15. And also today, for the ringing -- for the closing bell at the New York Stock Exchange, the TETRA management team and the Board have been invited to ring the bell. So I would encourage you to go to CNBC or whichever other channel you view for the closing of the bell.

So with that, Brady, maybe we'll open it up for questions.

Absolutely.

Marty Malloy, Johnson Rice. I really appreciate all the additional information you gave us on the desalinization platform. In the $1.50 to $2 per barrel, that's still maybe a little bit more than kind of the $1 to $1.25 that E&P companies are paying to have their produce water taken away. Could you maybe talk a little bit more about the economics and what drives them to go ahead and use the TETRA solution going forward? And maybe -- also, could you talk about -- do you think it's midstream or E&P companies that are going to take the lead in using the TETRA solution?

Okay. I'll take that one, Marty. Thank you. Look, the $1.50 to $2 a barrel, we've already been socializing that with our customers, and they're prepared to start the process of getting these plants in place, proving them out over time. Because they know that their current, let's say, $1.25 disposal cost. But by the way, it started at $0.25 and is now $1.20 or $1.25 just due to the -- what you heard from the feedback is coming from. But that's going to continue to go up, Marty.

And so that convergence that Jim Wright, Chairman Wright talked about is already happening. We think over time, we'll be able to learn enough to continue to bring the cost down of desal and being the first ones out there with the commercial plant, I think, gives us an advantage to do that. But like I said, the operators and the midstream guys are both talking to us, waiting to get our first plant completed to start commercial discussions.

Now will it be midstream guys or will it be operators? I would say both right now are engaged with us. We talk about the number of NDAs that we have in place to carry out these discussions. And I don't know, Matt, it was half of them, midstream guys, half of the E&Ps at this point, it's somewhere along that line.

Yes, Stephen?

Stephen Gengaro, Stifel. A lot of great information here. So two things. One, can you talk a little bit about the deepwater completion fluids business? I mean over the last 4 or 5 years, you've kind of especially Neptune sort of been episodic and the other business has been more stable. Can you talk about the visibility you have on those products over the next couple of years?

You guys -- one of you guys want to take it or you want me to?

You go ahead.

Yes. So look, one of the, I think, charts that we thought was most compelling when we put together Roy's presentation, bromine completion fluids, you can almost directly link 100% to deepwater completions. That's the type of density and chemistry that you need for a deepwater completion. If you track our bromine revenue that was on that slide against both the rig count and the subsea trees, we are way exceeding that growth trajectory. So we're seeing not only an increase in deepwater completions, higher densities, as Roy pointed out.

Now the Neptune is a special case. I understand that. But most of our deepwater fluids are bromine-based. Neptune is a special case but we're -- as we get into this next frontier, the 20,000 rigs that Roy talked about, zinc bromide is a great solution for deepwater completion. But when you get to these temperatures and those pressures, especially these temperatures, zinc is highly corrosive. And so what we are seeing is these 20,000 projects, zinc is not going to be applicable because of its corrosiveness and more and more Neptune jobs are going to start developing because of that.

So last couple of years since COVID, no question, the number of Neptune jobs has been sporadic. But we do see that changing with the lower tertiary development in the Gulf of America.

And just the second question, we were in Turtle Creek last week, so we got to see the facility. They're obviously pushing automation, they're pushing to try to lower their costs, et cetera. How long is your agreement with them? And how much of it is like the total electrolyte versus just, I guess, the zinc bromide piece where they can work to save costs? I'm just trying to understand the dynamic there. And obviously, you have a lot in the numbers off of that business.

So our agreement is 5 years. And the terms of the agreement, which we made public, we have 100% of the zinc bromide, what we call PureFlow. And we have 75% minimum of the full electrolyte. So that's why we've modeled in our growth over the next few years to account for both those contractual terms and our current agreement. Once we get our bromine plant up and running, we intend to open discussions up with EOS again to extend that contract over an additional period of years. And we feel quite confidently we'll be able to do that.

Tim Moore from Clear Street. Great presentation today. It was nice to see the goals laid out for 2030 and the ramp there. I just have two questions. The first is around the 10 facility account on the desalination. Just wondering if there's a lot of upside for that number because I've been forecasting like even if there's 25% adoption and you take 30% market share, that could be 25 facilities for you? I know you can't do them all at once, obviously, but is the 10 kind of the minimum?

We were very conservative, quite frankly, in our view of by 2030. If we just do the 500,000 barrels per day that we have modeled. If you listen to Kelly from B3 Insight, his view is 5 million barrels a day of produced water will be stranded by 2030. So we'd be 10% of the market. Well, obviously, the position we're in right now, we think we should be a lot more than 10% because we don't see anybody else right now that have announced the full commercial end-to-end solution designing a 25,000 barrel per day commercial plant. But so we were fairly conservative in our estimates. So we definitely think there's some upside on that.

Great. That's good to hear. And the other question I had is around our exciting bromine project, and there's clearly a runway and addressable market for that. When you kind of think out later years, let's say that, that ramps up with production revenue in 2028. If you kind of get to 2029 or so, can you -- will you have capacity to take on another customer besides Eos? I'm just wondering how much you think in 2029 Eos might be consuming from our Arkansas supply?

Yes. So the -- we mentioned the bromine plant can handle GBP 75 million pounds per year. That's currently more than double what we have from our current supply. If U.S. ramps up to the 8 gigawatts, they will be slightly over 1/3 of that demand. So we would still have 2/3 available to either grow with another electrolyte customer or continue to grow our deepwater market, hopefully, all 3. So that's the intention.

Bobby Brooks from Northland Capital Markets. You mentioned the Sandstorm trial in Saudi Arabia. I was just curious, any update or insight when that test gets completed and potential more commercial orders come through?

Yes. I'll start that and then ask Roy to finish it. So we did the trial with -- in Saudi Arabia. Was it earlier this year or last year we actually did the trial? First quarter of this year, we actually did the trial and received a favorable report due to the results. And we just recently were awarded an award now, and maybe let Roy give you an update on that.

Sure. Yes, Brady. So like Brady mentioned, in the first quarter, we concluded all the technical trials, received all the sign off. We've been working with the unconventional team over there. But we've also got a contract where we provide well testing and flowback services with the conventional team. And so recently, we've been awarded the opportunity to go deploy our Sandstorm technology with Aramco. So I anticipate by the first quarter of '26, we'll actually have the sandstorms working on live contracts in Saudi. So that's pretty exciting for us. And what we're seeing over in the Middle East right now is a lot of what's happening in Saudi is being replicated in the UAE. And so in Abu Dhabi. So similar conversations happening with counter parties there.

And we're really pleased. We've been with Sandstorm in Argentina now for 2, 3 years. Just recently awarded, I think, 100% of customers -- major customers Sand management requirements.

Yes. And then one follow-up on Oasis. During the multiple conversations you're having with E&Ps and midstreams, obviously, you presented that you guys are looking at both the license model and a service model. Is it pretty evenly split between the groups of which they're preferring?

Elijio, you want to take that?

Yes. So we're giving them the option. Obviously, our cost of capital is going to be higher than our counterparties. And when you look at the spread between $1.50 and $2, assume that, that represents the cost of capital delta. If they want to bring the capital, it will be at the lower end. If we're bringing the capital, it will be on the higher end. And clearly, a lot of our customers, it's simply going to be a reallocation of capital. Matt mentioned that they're building pipelines to take it to the next county and the next county and the next county. They're spending capital to saltwater disposal wells. So instead of spending new money, they're simply going to reallocate capital from saltwater disposal wells and pipelines over to water treatment plants.

In our model, just to finish up on that, we assume the 50-50 ratio of our capital versus license model.

And it's 50-50, like midstream, both 50-50 between service and the license...?

Right now, that's how we see the market evolving is a 50-50 split.

Brady, one thing that's interesting to add we've had conversations with, obviously, the E&P and with the midstream. And there is competition out there. Something that's very unique about TETRA is the fact that not only do we design, own, but we operate these plants. And it's come down from multiple companies where they've actually expressed interest of would you guys operate other facilities because the other solutions that are in the market are product sales. They don't want to offer a solution. They want to sell a product, and they don't want to operate it. They don't want to maintain it. They don't want to service it. And so that's something else that's unique about TETRA.

Stephen?

Two more if you don't mind, Brady. First, on the bromine side, and maybe it might be for you Elijio, but when -- I think the LANXESS agreement ends in '28 or '29?

Towards the end of this...

End of '29.

Okay. What are the economics for you on the margin side of vertically integrating and controlling the bromine versus the current agreement that's in place? And is that embedded in the margin profile you gave?

Let me take that first and -- when you think about our current bromine supply, there's a couple of layers of bromine that we get today. So we have a LANXESS supply, which is inflation variable formula-based that is pretty attractive for us. But that's only 30 million pounds. We have to go out on the spot market today for an additional 10 million to 15 million pounds in spot market prices to support our current business. And that's at a pretty significantly higher.

So when you blend those two together, we're playing a pretty significantly high priced for bromine compared to what we will be able to do when we have our own tower. And that's when you see the economics that we put in the $230 million revenue growth and $100 million of EBITDA, there's a decent chunk of that comes from improved profitability.

Elijio, you want to add?

It's a combination of lower cost plus higher volumes.

Okay. And the other quick one, and this is my ignorance. When we look at the water desal business, I mean, we're hearing about all of these massive data centers being built throughout Texas, both planned and underway. Does this water have an application to those data centers? And is there anything on the books yet? Or are the people you're talking to about that opportunity? How does that -- how is that working?

Yes, absolutely. The data centers need water. They need cooling water, a lot of that water evaporates. So you got to continue to replace it. Now one thing to keep in mind, it's important, our model is a per barrel fee. We're not going to own the water. The operator or the midstream guys are still going to own the water. So they are the ones actually having the discussions with the ranchers or the data centers or the utility applications, municipal type applications. We're not involved in that because they own the water. We're just providing the fee, the service fee to do that. But what they tell us especially a couple of the midstream guys we're dealing with, they are in negotiations with data centers now for that type of application.

And I don't know about the water content, but do they have to desalinate with your technology [indiscernible]?

Well, they don't have to use our technology, but it's got to be desalinated for it to be used in a cooling environment.

Stephen, you raised a very good question. So this is not just a cost gain for the operators. So today, they pay somebody to dispose of the water. Tomorrow, they eliminate that cost and then they've got a revenue stream of selling the water. Whatever concentrations are left, if we extract minerals from that concentration, they can sell those minerals. So now it goes from a cost waste product into a potential revenue generator that helps them with the economics of the desalination.

One of the other things to add to that in terms of if you look at the amount of water Chairman Wright talked about in terms of agriculture wise, you'd add 10% to the irrigated water needs of Texas. So that agricultural value of dry land versus actual irrigated is also got to be factored into the economics.

Ted Warner with Northland.

I had a question on the beneficial reuse side related to norm. I didn't see that mentioned at all in the presentation. I know that in a basin like the Permian compared to Appalachia, beneficial reuse makes a lot more sense there given the lack of fresh and your customers' ability to go sell it from various uses. Also know that Appalachia has a material amount of norm as compared to the Permian Basin. But are you seeing levels? Does your technology actually deal with that? I didn't see it sort of listed. I know it can get removed with solids sometimes, but if it was going to go for an agricultural use, I would think that they want to go to drinking water standards and wondering if that's an issue.

Yes. I'm trying to recall what was on the slide when you looked at seawater versus produced water, our technology absolutely deals with it. For those that are not familiar with what he's referring to, [ Norm ] is not the guy from cheers, okay? It's naturally occurring radioactive material, right? Don't get on the rock and the subsurface, some of this stuff can show up. In our flowback business today, which we've been in for a long time, this is pretty typical, right? We deal with it all the time. We've been dealing with it for 30-plus years.

In terms of our desalination solution, I mentioned we're concentrated up different minerals. Any sort of naturally occurring radioactive material in that process is dealt with and stays in that concentrated water, some of which is then going to be disposed of back in the ground where it came from. So not concerned about that at all.

On the desal, maybe another point that I'm not sure we emphasize as much. But desalinated water, we're not desalinating at 100% of that water. Traditional reverse osmosis type technology can take about 50% of that water, desalinate it and then you have a highly concentrated volume of water that has high salt saturation, right, that still gets disposed, as Matt talked about.

The one thing unique about our technology where we showed the combination OARO. I make sure I got that right. And the vacuum membrane distillation, that combination allows us to go up as high as 65%, maybe even higher desalinated water out of that 100 barrels, maybe we get to 70 barrels that's desalinated and that other 30% has to be dealt with either disposed or something done with it. So that's another advantage. I'm not sure it came out in our presentation.

Yes. I'll just clarify something Brad just said in terms of the water that we extract from that produced water stream, that percentage that he just referenced, it depends on the starting point of the total dissolved solids in the water, okay? So the numbers he's referring to around the Permian Basin, I'll call it, the tougher water, right? The total dissolved solids are much, much higher. The field pilot that we performed in South Texas over 3 years ago, I'll call it, easier water, lower total dissolved solids in there.

And if you look back at our press release from back in 2022, we referenced we could extract over 92% of freshwater because, again, the starting point of the total dissolved solids in that water, much, much lower. So it all depends on kind of what your starting point is and really designing a treatment process to look at it, optimize the economics, which as Elijio mentioned, that's really the value that end-to-end solution rather than just taking discrete components, none of them actually solve it. You really need that kind of end-to-end solution to address all of it to make the economics work, some of which is, again, on the back end, identifying what kind of water be used for, what are the other minerals in the water, where there's an opportunity to exploit those and improve the economics.

Thanks, Matt.

Samantha Hoh from HSBC. I wanted to get some more information on that first desal plant. I think you said that you're in the engineering phase. What should we look for in terms of timing as to when it will begin? You're funding it out of cash, but are you going to take like reservation slots or how are you thinking about that?

Yes. So good question. So that rendering you saw in Matt's presentation, but that actually is the engineering work that is being done on that 25,000 plant. So now they're essentially what is kicking off the final detailed design engineering. And it's important for us to get to a stage of the engineering that we're really confident in the OpEx and the CapEx numbers before we sit down and start negotiating contracts.

We actually have several customers right now that are waiting on us to get to the stage where we can sit down and have commercial discussions. But we want to get to a point where we're confident enough with the engineering that's being done, it's completed enough that we can have those commercial discussions. We expect to have -- I think before the end of the year, I think we're pretty confident that we will be at a point on the engineering side, confident enough that they progress derisk the OpEx and the CapEx enough to where we can have those commercial discussions. That's our expectation.

And that's -- once we've gotten to that point, then when I think we can kind of build on those discussions with multiple customers going into next year. That's our intention.

I think the other thing to add there, Samantha, is if you look back at some of our earnings calls from earlier in the year, we were sort of in the windshield view anticipating doing more field pilots this year. We announced some collaboration that we're doing early on in the year with some folks. And that got a lot of attention. So quickly, the discussions moved from pilots to small-scale commercial facilities. So some of that accelerated. I think we touched on that on some of the earlier earnings calls.

So this facility, like we tried to outlay the initial engineering design, again, it's for a relatively small amount, 24,000 barrels a day, but it's scalable to address much higher volumes. And as you get up into those higher volumes, the economies of scale benefit as well in terms of the economics.

And Samantha, to your other question, this customer has indicated a strong preference toward the license model.

Good questions. Thank you for the questions. Any additional questions?

How should we think about the engineering design, maybe even through our R&D expense intensity is -- we're in this development phase, but then if you start adding a number of plants, is that margin impact?

I think right now, we have two pretty major engineering plant designs ongoing. Our bromine plant as we get into the construction phase, there's detailed engineering going on in that as well. That will be part of the $270 million capital that we have been discussing in our DFS. So we're capitalizing most of that engineering cost. On the plant side, we will also have that engineering cost ongoing. We are -- I believe we are expensing that today. That's in our earnings today and our EBITDA margins results.

Now once we have that first plant completed, which we think by the end of the year, the engineering company that we've hired, we have a very good relationship with, and they've done a great job, quite frankly. They're very encouraged and ready to move on to, okay, let's take this 25,000 building block and now let's get a 50,000. Let's get a 75,000. Let's get 100,000 plant design that is going to be somewhat building blocks but also taking additional costs out of the system, and we'll be probably expensing that level of cost through 2026, quite frankly, Jim, as part of our earnings. I don't think we've quantified or release that number publicly, but it's in our earnings right now.

Otherwise, lunch is available here, I encourage you guys to grab a bite, and then the management team and our Board of Directors are also in the back. We will be more than glad to exchange in further dialogue with the guys.

Thank you very much for coming today. Really appreciate it.