TETRA Technologies, Inc. — Form 10-Q Summary
Reporting period: Three months ended March 31, 2022. The financial statements are unaudited and cover continuing operations unless otherwise noted. TETRA operates through Completion Fluids & Products and Water & Flowback Services, serving oil and gas, industrial chemicals, water management, and emerging lithium and bromine markets.
Financial Performance and Position
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Revenue | $130.0 million | $77.3 million | Up 68.2% |
| Gross profit | $32.4 million | $7.9 million | Up $24.6 million |
| Gross margin | 24.9% | 10.2% | Up 14.7 percentage points |
| Income before taxes from continuing operations | $8.9 million | $(11.8) million | Improved by $20.7 million |
| Net income attributable to TETRA stockholders | $7.7 million | $108.7 million | Down 92.9% |
| Adjusted EBITDA | $20.5 million | $9.0 million | Up $11.5 million |
| Cash provided by operating activities | $5.9 million | $5.8 million | Broadly stable |
- Completion Fluids & Products revenue was $73.2 million, up 57.3%, with a 35.7% gross margin and $19.3 million of pretax income.
- Water & Flowback Services revenue was $56.8 million, up 84.5%. Gross profit improved to $6.5 million from a $3.6 million loss, and pretax income was $2.7 million versus a $5.5 million loss.
- Net income attributable to TETRA was $0.06 per basic and diluted share. The prior-year result included a primarily non-cash $120.6 million gain from the GP Sale of CSI Compressco.
- Cash and cash equivalents were $32.9 million at March 31, 2022, compared with $31.6 million at December 31, 2021. Liquidity, defined by management as unrestricted cash plus available credit facilities, was $95.3 million.
- Total debt was $154.1 million on the balance sheet, including $152.5 million of term debt and $1.5 million under the Swedish facility. Principal debt disclosed for market-risk purposes was $165.4 million. The term credit agreement bears interest at 7.25% and matures in September 2025.
- ABL availability was $58.6 million, and Swedish facility availability was approximately $3.8 million. TETRA was in compliance with all debt covenants.
- Capital expenditures were $9.3 million, including $7.4 million for Water & Flowback equipment and $1.9 million for Completion Fluids & Products.
Material Changes Versus Comparable Periods
- Revenue growth reflected higher customer activity, improved commodity prices, increased completion services, higher SandStorm utilization, pricing recovery, and market-share gains.
- Margins benefited from a more favorable business mix, higher pricing, and a $3.8 million insurance recovery related to Hurricane Laura damage at the Lake Charles facility.
- Interest expense declined by $1.1 million year over year, primarily because TETRA repaid $50.5 million of term debt during 2021.
- General and administrative expense increased modestly year over year because salaries and benefits were reinstated, partially offset by lower professional fees related to the prior-year GP Sale.
- Compared with the fourth quarter of 2021, revenue increased 14.9%, gross margin increased from 17.0% to 24.9%, and adjusted EBITDA increased from $13.1 million to $20.5 million.
- Q1 2022 included $1.9 million of exploration and appraisal costs for an Arkansas brine well. These costs were not present in Q1 2021.
- The former Compression and Offshore divisions remain classified as discontinued operations. Q1 2021 included the large CSI Compressco deconsolidation gain, making reported net income comparisons unusually unfavorable for 2022.
Outlook, Commentary, Risks, and Unusual Items
- Management reported continued improvement in customer activity and pricing as oil averaged more than $95 per barrel and natural gas averaged $4.67 per million Btu during the quarter.
- Management expects shipments of TETRA PureFlow to Eos Energy Enterprises to increase as Eos expands production capacity, but the filing does not provide quantified revenue guidance.
- Water & Flowback Services faced capacity constraints in SandStorm equipment, while additional recycling awards and integrated projects supported growth.
- Supply-chain disruption related to the Russia-Ukraine conflict reduced hydrochloric acid deliveries to TETRA’s Finland plant and could affect Northern European calcium chloride production if it continues. Management stated that the first-quarter financial impact was not significant.
- TETRA completed drilling an Arkansas exploration well and is analyzing brine samples to support an inferred lithium and bromine resources report. A preliminary economic assessment is planned for approximately 3,600 net acres; economic viability and development timing remain uncertain.
- Key risks include commodity-price and customer-activity volatility, inflation and raw-material availability, supply-chain disruption, foreign exchange exposure, interest-rate risk, customer collections, debt covenant and borrowing-base limitations, and potential difficulty accessing capital markets.
- The company retained approximately 3.7% of CSI Compressco and held a $5.0 million CarbonFree convertible note. It expected to receive 400,000 Standard Lithium shares during Q2 2022 under existing arrangements.
- Management reported no material litigation developments, no material off-balance-sheet arrangements, and effective disclosure controls as of March 31, 2022.
Investor Verification Checklist
- Verify whether revenue growth and improved margins are sustainable without the $3.8 million insurance recovery and amid continued inflationary pressure.
- Reconcile carrying-value debt with disclosed principal debt and monitor the 7.25% term facility, required excess-cash-flow prepayments, maturity, and covenant compliance.
- Assess operating cash conversion relative to adjusted EBITDA and the elevated capital spending required for SandStorm capacity and fleet upgrades.
- Monitor hydrochloric acid and other raw-material availability in Northern Europe, including the potential effect of the Russia-Ukraine conflict.
- Evaluate the technical results, inferred resources report, preliminary economic assessment, permitting, financing needs, and development economics for the Arkansas lithium and bromine project.
- Distinguish continuing-operations performance from the prior-year CSI Compressco disposal gain when comparing earnings and cash flow.
- Review exposure to CSI Compressco, CarbonFree, Standard Lithium, and other investments whose values or future proceeds may fluctuate.