Tetra Technologies, Inc.

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 Petro Technologies Inc. 4Q25 and full year 2025 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, Simply press star, ending number one on your telephone keypad. I would now like to turn the call over to Kurt Hallad, Treasurer and Investor Relations. Kurt, please go ahead.

Thank you so much. And 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, Aligio 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, Alijo, 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 US oil and gas industry, marked by reduced levels of US 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 Leo 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 advance to 20K 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 three 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 American team drove our completion fluids and 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 fluid 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 pure flow 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 pure flow electrolyte to EOS and 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 RUS calcium chloride revenue, our tech grade for chip manufacturing grew by 144% in 2025 over 2024. The combination of these three 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 fluid 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 are still very well positioned to benefit from the multi-year 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 one of the planned three phases on time and materially below budget. We've advanced the detailed engineering design for phases two and three, 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 wellfield schedule for 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 smack over 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. For 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. McAthea has already secured Defense Production Act Title III funding from the Department of War to support its commercial phase one, planned to be onsite 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 reuse. We're very pleased with the results of our EOG commercial plant desalination operation in the Permian Basin. This phase two grassland study has been running with over 95% uptime for the past four months following completion of the greenhouse phase one 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 reuse. 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's far more water available by desalinating produced water. This is an extremely attractive option since operators need to reduce the amount of water they re-inject for disposal and converting it into a valuable 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, it 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 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 three 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 flow back margins and are more stable given the longer term nature of our contracts. On the completion fluid 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 in the stronger 2027 completions activity and our 2030 targets for this business are on track. Our US water onshore, our onshore water and flow back 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 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 and 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 seven years. The increased cost for additional bromine supply has been anticipated as a bridge until we have our bromine processing plant operational, but its 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 and flow back services, the continued focus on differentiated technology and our profitable international growth contribute to improve the adjusted EBITDA margins from 12% in 25 to the mid-teens in 2026. With that, I'll ask Matt Anderson, who has currently and for the past two years done a great job as our Chief Commercial Officer to update us on the fourth quarter highlights and then Alejo Serrano to close out with our balance sheet and update. Before turning the call over to Matt and Alejo, I'd like to again express my and the board's deep appreciation for Alejo's contributions and efforts over the past 13 years. Last October, we announced that Alejo had notified Tetra of its intentions to retire at the end of March. Over the past six months, Alejo has worked with Matt to ensure a seamless and orderly transition of the CFO responsibilities. Matt has been with Tetra for over nine years, and as stated most significantly as Chief Commercial Officer. The board and I spend a lot of time in 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. Alejo has agreed to remain available to Matt, me, and the board as an advisor 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 Alijo'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 preside some additional color on the fourth quarter results before handing over to Alijo.