Tetra Technologies, Inc. Stock

Hello, everyone. Thank you for joining us, and welcome to the TETRA Technologies, Inc. Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Kurt Hallead, Treasurer and IR. Kurt, please go ahead.

Thank you, Christine. Good morning, everyone, and thank you for joining TETRA's Third Quarter 2026 Earnings Call. Today's speakers will be Brady Murphy, President and CEO; and Matt Sanderson, CFO; and during the call, we will be referring to certain non-GAAP financial measures. Please see our press release for reconciliations to the most directly comparable GAAP measures. I would also like to direct your attention to the safe harbor statement in our press release and Form 10-Q -- some remarks today may be forward-looking subject to the risks and uncertainties described in our SEC filings. Actual results may differ materially from those expressed or implied. After Brady and Matt's comments, we will open the line for Q&A. I will now turn the call over to Brady.

Thanks, Kurt, and good morning, everyone. Our third quarter was highlighted by some really exceptional performances across a broad range of our company's geographies and product lines, including excellent execution of our bromine construction project in Arkansas, which I'll discuss later. Third quarter revenue of $168 million was up 10% year-over-year and was our highest third quarter revenue in the past 10 years. International revenue reached $68.8 million or 41% of consolidated revenue, also our strongest third quarter in a decade. Adjusted EBITDA of $25.1 million was our second highest third quarter over the past 10 years. This strong performance was achieved despite lower deepwater activity in 1 of our strongest markets, our completion fluids in the Gulf of America. As customers were cycling through a drilling heavy lower well completion quarter.

Our record level revenue was highlighted by continued growth in international markets, accelerated growth in our Industrial Chemicals segment and continued strength in global deepwater markets. Industrial Chemicals generated its strongest third quarter revenue in a decade with 32% year-over-year growth and accounted for more than 50% of the Completion Fluids & Products third quarter revenue. This growth was supported by an expanding U.S. industrial market, including semiconductor manufacturing, which was up 48% year-over-year for us and by electrolytes for energy storage. Although gas and diesel price inflation has affected our international fluid shipment delivery cost. It does provide a cost advantage in markets with proximity to our chemical plants, both in the U.S. and in our market-leading position in Europe.

Within Water & Flowback, production testing also achieved a 10-year high in third quarter revenue and adjusted EBITDA. Duxon testing grew 9% quarter-over-quarter, driven largely by AutoStand term market share gains in the U.S. and grew 60% year-over-year, driven by growth across all of our international regions. This strong performance supported water and flowback revenue growth of 21% year-over-year and an adjusted EBITDA margin increase of 480 basis points to 16.7%. In aggregate, our international business accounted for 41% of total company revenue, led by Argentina, as our early production facilities ramped up and our patented TETRA SandStorm technology achieved strong utilization in the Vaca Marda.

We expect continued growth across all our international markets in 2027. We continue to extend our technology lead in production testing with the introduction of echo Sandstorm, a nonintrusive technology that provides real-time sand measurements during flowback. In field operations, Echo Sandstorm has reduced sand dumping cycles by 92%, lowering personnel costs and equipment wear. Another key benefit is reduced customer methane emissions a joint program with a major Appalachia operator demonstrated that Echo Sandstorm achieved a 95% reduction in methane emissions. These innovations continue to expand our addressable market and support our higher margin, high returns share gains.

As we look ahead to Q4, we anticipate another strong quarter with revenue and adjusted EBITDA projected to be up double digits compared with Q4 2025. We are scheduled to execute our first of 3 Neptune Z-Lite wells during the quarter as we continue to see a growing decline of Neptune projects. Over the past several days, the largest oilfield service companies have described an outlook that aligns very well with TETRA's portfolio. The common message is that 2027 growth and beyond will be led by offshore markets with increased technical expertise needed to address HP, HT and complex deepwater reservoirs. That matters for TETRA because it is where our base business is positioned and consistent with the view that we communicated at our One TETRA 2030 Investor Day in September of last year.

Our high-value completion fluids franchise has built for technically demanding Deepwater wells. Based on conversations with our customers, we expect Completion Fluids revenue and EBITDA to increase in 2027, driven by the U.S., Gulf, Norway, West Africa and the Mediterranean. Now I'd like to turn to our strategic initiatives, supporting our One TETRA 2030 strategy and goals. A key driver of our long-term growth and margin expansion for deepwater fluids and industrial chemicals is our Arkansas Bromine plant, which continues to advance on schedule and on budget. We're now 12 months away from the plant being mechanically complete and for commissioning and start-up operations to be well underway with our first production in early Q1 2028. This is a major project by any standard. And our team and contractors have done an exceptional job managing every phase. Thus far, we have logged over 60,000 man hours with 0 safety incidents and completed over 2,200 wells covering more than 5,000 feet with 0 defects or rework.

All mechanical equipment has been engineered and is either delivered or under confirmed purchase orders for delivery. In total, the equipment is below our FID approved total installed cost estimate. Our team has done an exceptional job managing inflationary pressures while keeping the project on its original schedule and within approved capital spending limits. Detailed engineering is in the final stages and is expected to be completed in the first quarter of 2027. The next phase of well development is scheduled to begin in mid-November. We remain on track to begin Bromine production at an annualized rate of 37 million pounds at the start of 2028 and ramp up to the facility 75 million-pound capacity by 2030.

The Arkansas Bromine project serves as a bridge between our base business and our growth platforms. That provides us a lower cost, secure bromine supply for our deepwater fluids and our PureFlow zinc bromide electrolyte. 2 businesses where we expect demand to grow well beyond 2030. As we move closer to plant start-up operations, I'd like to discuss how we view the global bromine market and our participation. The global bromine market is estimated at about $2.1 billion annually and is expected to exceed $3 billion by 2033, driven by a diverse range of growing markets, including electronics, oilfield completions, water treatment, energy storage and other specialty applications.

Chinese bromine prices have surged Chinese bromine prices surged in 2021 and again this year, and they remain roughly twice their late 2024 levels underscoring the need for reliable tier supply. Our evergreen bromine asset addresses that need with a newly developed high-quality resource. For TETRA, our primary channel target will continue to be our industry-leading completion fluids business. For context, in full year 2026, our completion fluids will consume significantly more than the 37 million pounds of planned first year production. As a result, in 2028, we will supplement our bromine plant production with our long-term supply agreement, which extends through 2029. With Pureflow electrolyte demand continuing to accelerate -- by 2030, the combined requirements of our completion fluids and electrolyte businesses are expected to exceed our planned 75 million-pound plant capacity.

It's important to note that if these markets grow below our full plant capacity, we have the opportunity to participate in other attractive bromine segments, which, as mentioned, is expected to grow over 50% by 2033. On TETRA Oasis, the quality and breadth of our customer engagement continues to encourage us. Rising constraints on produced water disposal in the Permian Basin, combined with large water requirements from data center development, have created an opportunity significantly larger than we initially envisioned. We now have 7 projects in our pipeline, 4 of which are tied to data centers and behind-the-meter power requirements. The remaining 3 projects focus on reducing produced water disposal. While the data center application has shifted the timing of our commercial -- first commercial plans from what we had originally anticipated, it has meaningfully expanded the opportunity. I'd like to emphasize that, although we're excited about the data center opportunities, the industry's primary challenge in the coming years remains reducing poor space, which is causing overpressurized disposal wells.

I'd like to acknowledge the company B3 Insight for its extensive work mapping subsurface over pressurization and modeling potential outcomes. According to its August 2026 report, all 10 core oil-producing counties in the Permian Basin, which account for 93% of the basin's production show pressures well above the normal pressured gradient. Loving County, for example, the highest disposal county at 3.1 million barrels per day shows pressures 21% above the normal pressure gradient. This is obviously not sustainable. Permitting remains the primary next step towards commercialization with 6 beneficial reuse applications pending before the TCEQ. Although our customers are the permits, we continue to engage with the TCEQ and the EPA providing detailed responses to their questions and results from our pilot operations, including successful outcomes for every requested water quality test.

As the regulatory agencies become more familiar with the technology and the water quality results, we're optimistic that approved permits are forthcoming. Filling in early October, we amended our term loan agreement, which gives us additional flexibility to fund Arkansas and our other growth initiatives. Matt will cover the details. With that, I'll turn it over to Matt.

Thank you, Brady, and good morning, everyone. As Brady mentioned, our third quarter revenue of $168 million was a 10-year high for the quarter, and was up approximately 10% year-on-year. Income from continuing operations was $6.8 million or $0.05 per share compared with $4.2 million or $0.03 per share a year ago. Net income includes $2 million of unusual charges. Adjusted net income per share was $0.06 compared with $0.04 a year ago. Adjusted EBITDA for the quarter was $25.1 million, which was flat with the third quarter of 2025 and as Brady mentioned, was our second highest Q3 in the past 10 years. Completion Fluids and fixed revenue was $91.9 million, up 2% year-over-year and the highest third quarter in 10 years. This strong performance was achieved despite lower deepwater activity in the Gulf of America, 1 of our strongest markets as customers were cycling through a drilling heavy lower oil completion quarter. .

Gulf of America completion activity is expected to increase later this year and carry well into 2027. Our Industrial Chemicals revenue continues to grow at an accelerated pace up 32% year-over-year, and for the first time, represented more than half of the segment revenue. As Brady mentioned, part of this growth was driven by a 48% year-over-year increase in semiconductor manufacturing sales or calcium chloride is used to treat wastewater. Adjusted EBITDA was $20.3 million or 22.1% margin. Lower deepwater activity in the Gulf of America and significant shipping cost increases on the last of our contractually obligated Middle East deliveries were the primary factors impacting margins. We view these as timing and mix factors and expect CFP segment margins for the year at the lower end of the 25% to 30% guidance range.

Water & Flowback services revenue was $76.1 million, up 21% year-over-year. Growth was led by international markets and increased adoption of our patented Sandstorm technology. Production testing grew 9% sequentially and 60% year-over-year driven largely by auto sand store market share gains in the U.S. and growth across international regions. International revenue accounted for 33% of the segment total, up from 15% for all of 2025. Adjusted EBITDA was $12.7 million, up 69% year-over-year, with margins of 16.7% and an increase of 480 basis points. This segment is a strong example of how technology and international expansion are creating growth opportunities beyond the U.S. and broadening our earnings base.

Corporate expense was $7.9 million for the quarter compared with $10 million a year ago. These savings are due in part to the move to our new corporate office in November of last year. Net interest expense was $2.4 million, net of capitalized interest and interest income on our short-term investments. For the first 9 months of the year, cash provided by operating activities was $31.3 million and capital expenditures were $77.6 million, reflecting the step-up in Arkansas construction spending. 2027 represents the final major investment year for our bromine project. With the completion of the project, we expect the benefits of our vertically integrated bromine supply to drive a meaningful step-up in free cash flow generation begin in 2028.

We ended the quarter with $84 million of cash and equivalents and $42 million of short-term investments. Total debt was $184 million, net debt was $58 million. Liquidity was $208 million, and our net leverage ratio was 0.7x. As Brady mentioned, in early October, we amended our $190 million term credit agreement. The agreement extends maturity from January 12, 2030 to December 31, 2030, it reduces the interest rate margins by 75 basis points, down to SOFR plus 5% and defers approximately $19 million of principal amortization payments out to 2030.

Given our base business cash flow, the June equity offering, the amended term loan and our existing ABL facility, we have the financial flexibility to fund the Arkansas Bromine project while supporting our growth initiatives. I'll now turn the call back to Brady for his final remarks.

Thanks, Matt. So summarizing our strategy rests on 2 layers. The first is a strong technology-led oil and gas business with growing international and deepwater exposure that is visible earnings-generating foundation. The second is the company-specific growth from bromine, electrolytes, water and critical minerals. For Q4 '26, we expect consolidated revenue and adjusted EBITDA to be up double digits year-on-year. As we look to '27, we expect revenue and EBITDA to increase relative to '26 again driven by deepwater lesions international production testing, sandstorm adoption, electrolyte demand and industrial chemicals.

Our 2027 base business outlook does not depend on the U.S. land activity improving. Any improvement there would be upside. Let me close with an update on our One TETRA 2030 strategy. At our Investor Day last September, we laid out targets of over $1 billion of revenue and over $300 million of adjusted EBITDA. Since then, we have grown our base business, approved and funded the Arkansas Bromine project, keeping it on schedule and on budget, built on Oasis pipeline and strengthened our capital structure. Every quarter, the base business gets stronger, and we continue to check the box with key milestones for achieving our One TETRA 2030 targets. With that, operator, please open the line for questions.

[Operator Instructions] Your first question comes from the line of Martin Malloy with Johnson Rice.

Congratulations on the strong quarter. .

Thanks, Marty. .

My first question, just on the desalinization project side. Could you maybe help us a little bit with what we should be looking for in terms of time line on the permitting side. It seems like you all have been working with the regulatory authorities in Texas for a considerable mid period of time on your technology and -- maybe just kind of give us an update there on where you are and time line -- expected time line for permits being received?

Yes, Marty, it's very difficult for us to project when the permitting process will really start flowing approvals. That's not our -- within our control, obviously. It's also where the technical expertise that the EPA and the TCEQ and somewhat commercial piece of their questions that we help them with -- but at the end of the day, just to remind our audience that our customers are the permits, the operators, the midstream companies. They are the ones who have to obtain the permits. We're providing a technology and a service to them to treat this water for desalination purposes. So we're heavily engaged on the technology side, obviously, heavily engaged on the commercial side. But it's really the operators and our customers and the midstream companies dealing with the TCEQ for the final approval process, which we don't control.

Although the messaging that we're getting is encouraging that they know this is important. They know that this is an issue that there's a tremendous opportunity to take advantage of this produced water for beneficial reuse. So although we're encouraged, we don't control it. So it's difficult for us to predict exactly when it will happen.

Okay. And then my follow-up question, I just wanted to ask about the deepwater completion market. I think you mentioned in your prepared remarks, growing pipeline for the Z-Lite product. And maybe could you expound a little bit more on that, maybe the geographies that you're seeing the demand in?

Yes. So as you know, Z-Lite uses Neptune chemistry. It is -- it is a different Neptune product than our initial release of Neptune. But since it uses Neptune chemistry, we classify it as a Neptune product. And so when we look at the whole opportunity set for Neptune. Clearly, the Gulf of America is a key market for us for both Neptune and Z-Lite Norway is a very encouraging market for us for Z-Lite in Norway. And really, as you look across the globe in terms of the deepwater international markets there are candidates for Neptune across the board.

Now some of those are going to be on different time lines. Some might be multiyear projects. Some may get pulled in sooner rather than later. It is clearly a growing opportunity set for us, Marty, as we think about our completion fluids business and an important pipeline of projects for us.

Your next question comes from the line of Patrick Ouellette with Stifel .

It's Pat on for Stephen Duero. So just to start, could you talk about the impact of the third-party bromine purchases and maybe how we should think about the margin impact in '27? And then maybe on the flip side, the positive impact once your internal production comes online? .

Yes. So Clearly, we are buying third-party bromine today because our demand is well above the baseline long-term supply agreement that we have. We have secured bromine that we need for 2026. We are in process of securing the volumes that we need for 2027 and of course, as you know, purchasing above our long-term supply, which is more aligned with spot prices, those costs do increase for us as we supply more and more third-party -- but again, that really is the business case that supports our bromine project, Patrick, which will really allow us to supply long-term supply of low-cost bromine -- but we are navigating the third-party purchases through '26, which you've seen in our results and through 2027.

And as we've projected, we still expect increased revenue and EBITDA for our fluids business in '27.

Okay. And then maybe piggyback a little bit off of Marty, you talked about the pipeline of the Oasis projects with permitting for the next step. Could you just maybe talk about potential structure of a decel contract? And then what do you think the key milestones needed to sign the first deal? .

Well, I think the key milestones are the permitting process has to start happening. I think from our perspective, we're deeply engaged with these 7 different projects from both a technical design the water treatment specs that are required, the commercial discussions, all of those discussions are happening at different points in time for each of these 7 projects. Again, the data centers are going to be somewhat different in our view from the traditional just reducing volume of disposal. And I think we've talked about this before, the data centers are looking -- our customers are looking at a data center solution we call a water hub. And that water hub may start out with treating brackish water and then over time, replacing that brackish water treatment with produced water. .

And so that model for the data centers is evolving, but we think there's some good traction behind that model that makes a lot of sense. And of course, for TETRA, we benefit both ways by treating the brackish water as well as the produced water over time. And it does derisk some of the large-scale volumes of water that these data centers require they're quite different than how we see the other projects evolving, which I think will be -- will typically be smaller scale, not really dealing with brackish water at all but treating produced water for reducing disposal volumes.

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

First, -- just a little bit better. I wanted to get a little clarity on the standing of the pipeline. So those 6 beneficial reuse applications of the TC all 6 of those Irminapplicants are within your 7 project pipeline? And then maybe remind us, are those permits to measure with a certain technology to be used? Or is it technology agnostic?

Yes. I don't know. We said before that we are not identifying the specific 7 projects that we have, whether they are part of the TCEQ 6 or not. But the TCEQ 6 is public information. You can go on their website and see the permits, but we're not we're not disclosing whether we're part of those initiatives or not because those -- we have NDAs with our customers on those. And so that's really not something we're going to be able to disclose, Bobby. .

Not shipping gears, the U.K. approved drilling in the Jack do field in the North Sea a couple of weeks ago or last month. I know it's a gas field, but it appears to have pretty similar pressure temperature dynamics as ultra deep wells in the Gulf of Mexico. That would lead me to believe this could be a Neptune or Neptune light opportunity. Or am I off base in my understanding? Just want to hear more thoughts there. .

Yes, Bobby, this is Matt. Good question. So -- we're obviously encouraged by some of those permitting activities that are now starting back up on the U.K. side of the North Sea. I think you're aware, we have quite a strong market position in the U.K. And then also, as Brady referenced ever-growing opportunities in the Norway market as well. So -- in the past, I think we've mentioned that we have deployed Neptune chemistry beyond the Gulf. In fact, I think we may have mentioned that we've deployed it in the North Sea in the past. So as activities start to potentially ramp back up on the U.K. side. I think we're very well positioned to participate in those activities.

That's terrific to hear. And then -- just last 1 for me is, obviously, our net business has been a really nice driver of growth this year. And as we close out 2026, could you just speak to maybe what the business -- like what your visibility on growth is for 2027 maybe it's not a doubling, but is there still an expectation for really strong growth out of there? Or maybe that kind of flattened a bit. But you mentioned how that first Sandstorm is deployed in the Middle East and then the growth factor kind of shifts in Middle East becomes a really nice growth market for you guys. Just want to hear more about how you're thinking there. .

Yes, I think that's a good way to look at it. I think there's a couple of growth trajectories for us for our PT business next year. One is our eco sand storm is really getting a lot of attention that we think will help us get significant market share even in the U.S. We still have a lot of share to gain in the U.S. market. Argentina, we are expecting more growth. Obviously, we won't be doubling our growth again in '27, but we do anticipate double-digit growth in Argentina in 2027. And then the other big potential for us is growing Middle East unconventional business. That market has also seen what we're offering with our auto Sandstorm and now even the echo coupled with that, and we think that will be a pretty significant draw from a market perspective for us in growth in '27. .

The other thing I'll add there, Bobby, because you brought up Argentina, is you can reference this well, obviously, it's an unconventional development. You can see industry bodies like the produced water society, which are quite active here in places like the Permian Basin for reasons we talked about. They're now active in Argentina. So that market is going to continue to evolve. So technical solutions such as Oasis are going to be very well positioned in places like Argentina as that market evolves and as that industry down there deals with weather. And as you know, we're already in that market today with a very strong reputation. That's a great add on.

Your next question comes on the line of John Tanwanteng with CJS Securities.

I was wondering if you could give us a little bit more color on the Oasis pipeline of 7 projects you have -- do the elections that are happening today make a difference in the probability and the timing of those being approved, number one? And then number two, could you just size up the total capacity or revenue amount? Do you expect those projects to have assuming all of them are approved?

Yes. I don't think the elections -- my personal opinion will have much of an impact on the short-term permitting status. The TCEQ operates somewhat independently along with the EPA to move these projects forward. So we're not -- I'm not anticipating any change 1 way or the other depending on the election. .

As far as the projects go, we've stated previously, Jon, that these data center opportunities, 4 of the 7. These are very large volume type projects. But because the projects are going to start with brackish and move to produce water. It's a little bit difficult to predict exactly what the revenue profiles will look like until all those parameters are nailed down but there are very large volumes of water to be treated. Different from the other 3 that are just purely produced water treatment, which are probably pretty similar to the financials that we discussed when we presented our Investor Day but anyway, it's a mix. It's hard to project at this point until we get the permitting moving and the contracts in place, we won't be giving any specific revenue and EBITDA targets in the short term until that happens.

Okay. Understood. I was also wondering if you could give us a little bit more detail on the semiconductor business. How much is it today in terms of either dollars or a percent of total sales or segment sales? And how sustainable is that 40% plus growth rate as you go forward? .

Yes. This is a really exciting opportunity for us. Florin is used in etching of semiconductor manufacturing, but it has to -- flooring is obviously a hazardous material and it has to be treated for hazard purposes -- hazard waste purposes. Our technology, our chemicals that we're using is part of that solution. So it's still a relatively small part of our business, less than -- certainly less than 5% of our overall chemicals business in North America. But obviously, the growth trajectory that we see looks quite sustainable as more of the semiconductor plants get set up.

We are working on some additional chemistry to make our offering quite unique in the marketplace. And so yes, very optimistic about how we view that market going forward.

Got it. And if I could sneak 1 more in there. Could you update us on the battery electrolyte space and what you see as the outlook there, especially as some of these maybe not specifically grid, but some of these higher multiple data center plays, higher growth data center-related place has had concerns regarding financing and credit?

Yes. Could you repeat that one, Jon, didn't come across totally. .

Yes. Just an update on the battery electrolyte business given order concerns on credit risk and financing in the high-growth energy data center space?

Yes. So our -- our major customer today on the energy storage side is EOS, and we don't want to get out ahead of them in terms of anything they might say about how they view the market. But clearly, what they've said publicly is they're ramping up their production to get their second 2-gigawatt manufactured capacity line up before the end of the first quarter and how we see that business growing is pretty aligned with the public statements that they have made in that regard. I think they'll be able to give you probably more color in terms of how they see their end markets when -- if you get a chance to catch their earnings call.

I do want to mention on the lithium side because we've mentioned it before that, that continues to be a very interesting opportunity for us. I think when we did our Investor Day for 2030, we had put that out beyond the year 2030. And we've mentioned before that because of the investments that we're making in Arkansas, the synergies that we will get through having the infrastructure of the wells, a lot of the common and shared facilities at that site in Evergreen. The lithium project looks extremely attractive to us. So we are looking at potential ways to accelerate that. But we're not prepared to give any definitive time lines on that, but that is 1 where we see an opportunity for TETRA to participate again in the energy storage side of the marketplace.

Your next question comes from the line of [ Stephen Sevillia] with Berenberg Capital Markets.

Brady, Matt and Kurt. Congrats on a solid quarter.

Thanks, Stephen. .

I wanted to ask a question related to bromine. And I guess, just getting a better understanding of end markets and that chemicals. In terms of thinking about the future, I realize you're not going to be first production until 2028. And currently, your uses in completion fluids and battery electrolytes. What are your other options in converting bromine into other products or other end markets? And I ask that in the sense of getting investors to think longer term when you look at 2 large bromine suppliers like Albamar and ICL, those guys are afforded some pretty decent margins between the high 20s to 30% range. So if you could talk a little bit about maybe some plans on some end markets or other product uses for bromine, I'd love to hear it. .

Yes. So as you're probably aware, Stephen, when we participate in the oilfield side of bromine demand as well as the energy storage side, but the biggest market for bromine is in fire retardants by far. And because our planned growth for our bromine requirements for completion fluids and energy storage will take us to our capacity of the plant we're not, at this point, developing any additional applications, but it is something that we can do. And we can also sell elemental bromine into the market if we desire to do so. As I mentioned, Chinese prices have more than doubled recently as it relates to bromine prices. So that's another opportunity for us to serve -- or get the plant utilization if we need to, where it needs to be is selling into the elemental bromine market.

And we're looking at other potential end markets. But right now, it's not a priority for us because of the demand profiles that we currently see.

Yes, Stephen, I'll just add to that as well. I'll point out that I've been at the company now for 10 years. We've been pretty open that we have a base contract around bromine. We go to the market. We purchased third-party bromine up to a point. We've been asked by our customers to participate in some of the traditional deepwater offshore markets. And quite frankly, we haven't been able to in the past simply because we haven't had that supply capacity, at least at a price where we can be competitive. By having our own vertically integrated supply, some of the volumes now we're going to have access to. Our cost of goods and the differentiation that TETRA brings into those, I'll call the more traditional markets that we haven't been able to participate in the past, but we've been asked to. We're very excited about that. .

One I will point to is things like frac fluids for offshore. They use bromine derivatives in those fluid chemistries. Those are markets we haven't been able to participate in the past. There's geographical markets we've been asked to participate in for the differentiations we have. But quite frankly, we haven't had the material. So we're very excited about having a vertically integrated supply chain to participate in these markets where we do bring differentiation where our customers are asking us to come. But as Brady mentioned, overwhelmingly, the bromine market itself is sizable, and we're not even talking about participating in what today represents more than half of the bromine market.

And just a follow-up. I think you guys have mentioned this in the past. Tower 1, we'll start off at 37 million tons, if I remember correctly, with a capacity of up to $75 million, but it sounds like this market, if it stays as strong as it will or could there's always optionality to build another tower, I would assume. And I'm obviously looking right out to the future so...

Yes. And I think that's an important point because the investment that we're making right now in Evergreen obviously includes a lot of the surrounding infrastructure, a lot of the wells and pipelines. As you're well aware, Standard Lithium, their plans are to bring their lithium plant up -- I believe it last communicated with sometime in 2029, 2030. We get all of the brine from their lithium plant, which obviously is -- contains bromine. So all of that infrastructure will be built out. So we don't have to replicate that additional cost we'll be able to get the bromine from that brine. And our investment really would be limited to an additional bromine power without a lot of the additional surrounding infrastructure that we've had to build out now.

So the future after the 75 million-pound tower looks quite bright as well.

Yes. The follow-up to that as well, Stephen, is today, we have our existing conversion facility where we take elemental bromine, and we converted into these high-value derivatives. It's up in West met as Arkansas that has existing capacity is permitted for and can handle well over the 75 million pounds. So as you said, as the market evolves, we believe our asset of resource, the numbers we publish can support production well beyond that. And really, it would require a second tower, not a second plant. And then our existing conversion facility in West Memphis has capacity to handle that of course, then we get further benefit around the planned absorption put more material through there. .

That's great. Just -- last comment, and I'll jump off. Sorry, I'm going to miss you guys at the U.K. Fairhome Conference on December 2, but it looks like it's going to be a great turnout. So enjoy. I wish I could have squirreled my way that I won't. And back to you guys.

We'll miss you there, Stephen. .

Your next question comes from the line of [ Colby Caso ] with Daniel Energy Partners.

Could you speak to the outlook for deepwater completions, rig market is tightening and subsea orders remain strong. So all indicators -- so all indications that we will see a multiyear strength coming in completions. How are you positioning for this? And maybe could you go into how you expect the business to trend over the next couple of years with this backdrop?

Yes. So clearly, we -- I think you probably have heard from the larger oil service companies talk about the strength of the deepwater market, the subsea companies talk about their backlogs and projected growth. So all of those stories align with how we view the market and what we're hearing from the market. When we did our Investor Day last September, we had laid out how we saw the market and our participation in that growing through 2030, it was about an 8% compound annual growth rate. I think if anything, since we did our Investor Day last September, our outlook has strengthened as it relates to how we see the deepwater market.

And the other thing I would add to that, it's not just about the number of wells that are drilled, it's the types of wells that are drilled with higher pressures, higher temperatures, getting into the higher-density chemistry that where TETRA really excels. So potentially a compounding impact for us on the deepwater market, but certainly very consistent with how we're hearing rest of the energy industry and our customers speak to that market, Colby.

So staying kind of on that same note, with deepwater developments moving towards the higher pressure and higher measure reservoirs and Neptune Z-Lite securing its initial bulk project our operations requirements for completion fluids changing? And is the greater technical complexity making product performance and reliability, more important contract awards? Or does pricing still remain the dominant consideration? .

Yes. Good follow-up question, Colby. And you touched on Z-Lite as we announced, we're going to be deploying that here in the fourth quarter, we expect on a 20,000 project in the Gulf of America. So that's just a further example that these wells are getting deeper. They're getting hotter. As Brady said, not only compound, it's a little bit of a hattrick right? There's more activity. These are deeper, they require more fluid. The type of fluid is a little more bespoke. So really, that's where again, TETRA differentiates the purity of the fluids that we manufacture. That matters when you get into high-temperature environments, it affects corrosion. So we certainly have an advantage there.

And then these different bespoke solutions where, again, this is the fairway that TETRA focuses on in terms of our chemistry of research. This is where we really excel. So I'd reference you to some of those third-party market analysts such as Kimberlite which referenced some of the technical prowess that [indiscernible] brings the service quality. And really, when customers are getting into those kind of projects, ultimately, that's what they're looking for. right? They want the service. They need the technology, they need the security of supply, and they need a trusted partner. And TETRA has a 50-year history of demonstrating that really we're the premier provider in that space.

I look forward to seeing you at our conference in December in New York. I'll turn it back.

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

Two or 3 for me. The first, when we think about the Z-lite product, we think about sort of the margin profile for Fluids in 2027. Can you just talk a little bit about how we should think about the impact Z-Lite has on '27? And is this a product that is kind of -- you've talked about how it fits into the portfolio, but kind of does it replace? Does it supplement? How do we think about the impact it has on the top line as well? .

Yes, Stephen, I think we've articulated previously, when you think about Z-Lite when you've seen results when we have our Neptune wells in the Gulf of America, what that generates for us in terms of revenue and EBITDA. And you compare that to, say, a standard calcium bromide or zinc bromide fluid in the Gulf. Z-Lite is kind of in that midpoint. -- both from an overall revenue perspective between the standard well and a Neptune well as well as from a margin profile. So that's as much color as I think we would we probably want to give at this point.

But clearly, we've got 1 well in the fourth quarter. We've got 2 additional wells through the Beacon award that are planned in the first half of 2026 and additional opportunities that Matt talked about earlier that are starting to shape up in various markets. So Until we actually have -- like we announced the Beacon until we actually have the contract and we know when those wells were planned. We won't be communicating those. But the pipeline is certainly healthy. .

Okay. Great. And my other question, it's a bigger picture question. But when we think about sort of the 2030 aspirations and you mentioned, I think, some of the things that were going really well. How would you sort of think about the biggest risks to get there and the smaller -- and I guess I'm specifically thinking about bromine decel and electrolyte. Would you be willing to give a view on most versus least likely or which ones keep you up with the most at night? .

Yes. Well, certainly, the things that we can control would go to the top of the list. I think what we've shown is the things that we can control, we can execute on extremely well as we're doing with our base business our Arkansas project, et cetera. But I fully expect this to be resolved, the permitting, I guess, rises to the top for desal. But as mentioned, I fully expect that will be resolved certainly before we get to 2030 by all means. But that's 1 that we don't control the timing on.

We've already talked about that, but we're optimistic that, that will get resolved. It almost has to get resolved given the circumstances that we're facing. The bromine market for us -- again, we feel very strong about where as we've mentioned, our demand profiles for oil field and energy storage take us well beyond the plant capacity. But if those we've seen cycles before. If those demands do not materialize, we're very well positioned to supply bromine into other markets, as we've talked about. So that 1 we feel good about that 1 we can control even if we see some changes in the 2 end markets that we're currently targeting.

But I guess those would be the things Stephen, the oil and gas industry has seen cycles many times, although we're projecting a very healthy international deepwater market through 2030, there's always a cycle that could come through. But those are the top of list of things that we can't control, but we have the ability to navigate through them very well.

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

Thank you very much for participating with us. And -- we feel very good about where the company is positioned, how we're progressing against our 2030 strategy, and we will update you as in the coming quarters. Thank you very much. .

This concludes today's call. Thank you for attending. You may now disconnect.

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.