Tetra Technologies, Inc. · NYSE:TTI
Tetra Technologies — Investor Day (November 2015)
83 slides from Tetra Technologies's investor day presentation, Nov 12, 2015
Slide 1: CEO Message
CEO Message Stu Brightman
Slide 2: Forward Looking Statements
Forward Looking Statements Forward-Looking Statements: This presentation includes certain statements that are or may be deemed to be forward-looking statements. Generally, the use of words such as “may,” “will,” “expect,” “intend,” “estimate,” “projects,” “anticipate,” “believe,” “assume,” “could,”
Slide 3: Strong 2015 Financial Performance
Strong 2015 Financial Performance Q3 10% DEDICATED HE CORE 2014 $305 $57 19% $12 4% $4 1% $ In Millions Revenue") % Change Adjusted EBITDA“) % Change % of Revenue Adjusted Profit Before Taxes() % Change % of Revenue Free Cash Flow®) % of Revenue (1) TTlexcluding Maritech(MRI) and unusual items. See
Slide 4: TETRA's Improving Credit Profile
TETRA‘s Improving Credit Profile In $ Millions $500 $400 $300 $200 $100 & Debt and Liquidity) oan $395 $397 $379 $358 $358 $331 $190 $178 149 | ll I I ] I $166 20 sont? soph? sora O™ sor6-O" sors? sore? mmm Liquidity ——Debt Leverage Ratio@) 4.00x 3.38x 3.50x 2.94x 3.00x ae 2.73Xx 2.50x 2.00x 1.50x 1
Slide 5: Realizing Our Vision
Realizing Our Vision q> WHERE WE’ RE GOING ae “7, 4 Transformation of TETRA ¢ Long-Term Fluids Strategy « Allocated Capital to Areas of Strength and Divested Non-Core Businesses ¢ DEDICATED TO THE C@RE « Enhanced Leadership ¢ Proactively Reduced Cost and Build Into the Culture ¢ Created Operational
Slide 6: Transformation and Evolution
Transformation and Evolution 2007 Where We Were 55% Total Offshore Svcs & MRI Revenue —_ $ millions DEDICATED TO THE CORE COMPRESSION OFFSHORE SERVICES $341M 34% FLUIDS $283M 28% MARITECH $214M 21% PRODUCTION TESTING
Slide 7: Transformation and Evolution — Key Milestones
Transformation and Evolution — Key Milestones TETRA E Purchased TETRA IPO of A Completed Acquisition of Guiding Towards 4 Chemicals Europe Compressco : Acquisition Compressor $80M+ of FCF, i H of 3 PT Systems, Inc. $1.00/share : = Businesses Acquired : ; Compressco . . H Developed New Clear Calcium
Slide 8: Transformation and Evolution
Transformation and Evolution = — #1 and #2 in all key i TTM 20 1 5 services segments TETRA As of 9/30/15 on $ millions 0 citral ne of the largest OFFSHORE ‘ Where We Are Today SERVICES - North American $128M wn production testing 10% ow companies The largest vertically .see00., COIMIPFIRESS S12)4I I
Slide 9: Successfully Executing
Successfully Executing q* A A A Significant Competitive Advantage in our Two Largest and Core Businesses Allocation of Capital Towards Higher Return Fluids and Compression Two Separate Capital Structures to Support And Grow the Two Core Businesses Be the #2 Compression Services Company DEDICATED TO
Slide 10: Uniquely Positioned for Continued Growth
Uniquely Positioned for Continued Growth Solid Financial Results, Strong Free Cash Flow Generation, Debt Reductions, Strong Balance Sheet Industry Market Dynamics DEDICATED TO THE CORE fea 77% of Revenue is from Segments with Competitive Advantages with Smaller Competitive Base Management Team is Dr
Slide 11: Closing Remarks
Closing Remarks Stu Brightman
Slide 12: Closing Comments
Closing Comments q> = Key themes for TETRA in 2015 and beyond: o Strong free cash flow generation o Strength in fluids o CCLP provides stable cash flow o Flexible Offshore services cost structure o Production testing geographically balanced & has operating synergy with Fluids DEDICATED TO THE CORE 1
Slide 13: Closing Comments
Closing Comments q> = Geographically diversified with < 34% of revenue dependent on U.S. onshore shales Technology focused — developing differentiated, value-added products = Diverse group of blue chip customers in oil and gas, industrial and other markets Strong cost discipline Solid balance sheet
Slide 14: Closing Comments
Closing Comments = Ability of execute = Demonstrated results Strong leadership Delivers results DEDICATED TOTHE CORE
Slide 15: COO Perspective
COO Perspective ‘Going beyond the Tactical Execution’ Joseph Elkhoury
Slide 16: The Tactical Execution Journey
The Tactical Execution Journey What did we achieve? DEDICATED TO THE CORE f' Why did we do it? What did we do? Can we sustain it?
Slide 17: YTD Q3 2015 Key achievements
YTD Q3 2015 Key achievements OVER $55M in documented cost savings ¢ From cost reduction initiatives and cost avoidance actions DEDICATED TO THE CORE OVER 38% Reduction in OPEX dollars spend ¢ Over 13% reduction in our cost baseline OVER 20% Total Headcount reduction in 2015 * 15% G&A Headcount : red
Slide 18: The Outlook entering 2015
The “Outlook” entering 2015 Oil prices to average $70 to $80 in 2015 DEDICATED TO THE CORE f' The continued drop in Oil prices to reduce visibility to E&P spend plans + Sustained oil prices at < $70 to trigger noticeable spend adjustments The 2014 fourth quarter O&G equities sell-off to change spend
Slide 19: The Impact has been severe
The Impact has been “severe” Over 55% drop in Oil prices since last year, mainly driven by: The imbalance created by marketed supply The actual production The softening demand projections And since last year, the rig count has dropped: * 60% in US Land + 55% in Canada * 40% in Gulf Of Mexico * 15% I
Slide 20: What did we do?
What did we do? = Started earlier with our ‘Tactical Execution’ @® @© Continued our pro-active engagement © Aggressively drove the process at all levels © Assigned tasks and meaningful cost targets Monitored the progress and tracked the results DEDICATED TO THE CORE 6
Slide 21: The Tactical Execution playbook
The Tactical Execution playbook q* + Fix financial performance «Improve utilization * Reposition crews « Focus on profitable jobs Restore Profitability * Optimize footprint « Streamline operations + Fit equipment to market needs « Reward outstanding performance Eliminate Redundancy « Reduce operatin
Slide 22: YTD Q3 2015 Documented impact
YTD Q3 2015 Documented impact q* TETRA — 2015 PBT Achieved Restore Profitability Achieved $2.8M ToBe 2015 PBT Achieved Eliminate Redundancy Achieved $24.2M 2015 PBT . . ito; Be Optimize Achleved 4 Costs “Achieved $28.7M 2015 = Revenue = PBT Grow Profitably In 2015 plan —_ Not Included DEDICATED TO T
Slide 23: Eliminating Redundancy (example)
Eliminating Redundancy (example) = Headcount reductions * 20% Total HC reduction in 2015 (24% from peak 2014) * 15% G&A HC reduction in 2015 (18% from peak 2014) 5000 Headcount 4000 24% Total HC reduction from peak 2014 3000 —— —— Eee 28% excluding CCLP 2000 ae 1000 () Peak 2014 End 2014 End Q3-2015
Slide 24: Optimizing Costs (examples)
Optimizing Costs (examples) = Impact from some documented savings and cost avoidance actions mAchieved by 9/30/15 mTo be achieved Property Price Reductions Lube oil savings for Compression fleet Acid Pricing savings Vendor/Supplier Discounts Fuel Savings Fleet reduction Travel and related expenses A
Slide 25: Can we sustain these results?
Can we sustain these results? TETRA How can we go ‘beyond’ the Tactical Execution?
Slide 26: What was our reputation?
What was our reputation*? Commodity services Well Maintained Equipment Safety focused Little differentiation FOCUSED ON ENERGY. DEDICATED TO SERVICE AND SAFETY.
Slide 27: The Tactical Execution playbook
The Tactical Execution playbook q* + Fix financial performance «Improve utilization « Reposition crews « Focus on profitable jobs Restore Profitability * Optimize footprint ¢ Streamline operations + Fit equipment to market needs « Reward outstanding performance Eliminate Redundancy « Reduce operatin
Slide 28: Can these tactics lead to a Continuous Improvement Framework?
TETRA Can these tactics lead to a Continuous Improvement Framework?
Slide 29: Tactics to Continuous Improvement Framework
Tactics to Continuous Improvement Framework Safety Re Utilization = 3 5 Market analysis Training Service delivery Communication Stop Loading Restore Profitability Rrorttalis Resources management Risk Assessment Requirements Diversity Policies Suppliers Achievement Health Share Competency segmentatio
Slide 30: Can this Framework be part of our Culture?
TETRA Can this Framework be part of our Culture?
Slide 31: Our Drive to ZERO incidents is essential
DEDICATED TO THE CORE ft Our Drive to ZERO incidents is essential Our Employees are the key TETRA 17
Slide 32: Our Customer-Centric Culture
Our Customer-Centric Culture DEDICATED TO THE CORE / DEDICATED TOTHE CORE
Slide 33: Our behaviors should help drive significant change
TETRA Our behaviors should help drive significant change
Slide 34: Our Key Behaviors
Our Key Behaviors q* TETRA ¢ Build internal and external customer relationships « Understand customer needs to provide solutions « Exceed the customers’ expectations « Grow revenue with new business opportunities * Drive to ZERO incidents * Stop the job if necessary Cultivate Attend Retain Expand Ze
Slide 35: Customer-Centric framework
We are perma DEDICATED TO THE CUSTOMER DEDICATED TO THE DRIVE TO ZER@® DEDICATED TO THE RETURNS DEDICATED TO THE EMPLOYEES Our TETRA Customer-Centric framework is allowing us to drive key Behaviors to build an Accountability and Performance driven Culture DEDICATED TO THE CORE 21
Slide 36: Fit-For-Customer Solutions (examples)
DEDICATED TO THE CORE (examples) = Introduced multiple Products and Services that provide Fit- For-Customer Solutions = Achieved diversification through targeted Customer tactics —e—AUTO == MEDICAL DEDICATED TO THE CORE fea 22
Slide 37: Aligned Metrics and Incentives
TETRA = Aligned Metrics & Incentives to ‘DEDICATED TO THE CORE’ and Financial performance = Rolled out Rewards & Recognition programs = Multiple employees have been recognized for implementing Cost Savings Initiatives DEDICATED TO THE CORE i 20
Slide 38: Can we sustain our performance?
Can we sustain our performance? = Stay laser-focused with our Tactical Execution « Manage what we control to safeguard and improve margins * Leverage our Franchise to continue to diversify our customer base = Continue to invest in Differentiation to provide Fit-For-Customer Solutions = Drive ‘DEDICA
Slide 39: Fluids
Fluids Jim Funke, Vice President and General Manager Keith Schilling, Senior Vice President
Slide 40: Slide 40
Slide 41: Fluids
Fluids Chemicals/Completion Fluids = Only vertically integrated service provider globally = Seamless supply channel from manufacturing plants to CBF blending facilities = Significant infrastructure = Strong global competitor = Advantaged cost position in non-oil and gas markets proximate to manufact
Slide 42: Calcium Chloride Strengths
Calcium Chloride Strengths q* = Leading producer and marketer o Europe o North America = Significant footprint and capabilities : q o Manufacturing Amboy, California Plant o Logistics = Diverse customer base o Oil and Gas: Drilling and completion fluids o Industrial applications OH eweiOzs o Road ma
Slide 43: Brominated Clear Brine Fluids Strengths
Brominated Clear Brine Fluids Strengths = DEDICATED TO THE CORE fea
Slide 44: Recent Capital Improvements
Recent Capital Improvements West Memphis, AR Kokkola, Finland Expanded CaBr capacity = Production = Storage Replaced filter press = Reduced filter cake >66% = Resulted in higher yields DEDICATED TO THE CORE fea
Slide 45: Calcium Chloride Footprint
Calcium Chloride Footprint Leading supplier in Europe and North America 2 DEDICATED TOTHE CORE Production Capacity 1.5. Million, Tons, iquie 200,000 Tons Flake @ Liquid Cacti, Plant ® Liquia/Dry CaCl, Plant | Third Party Supply Agreements O New Supply — Hamm, Belgium
Slide 46: Brominated Clear Brine Fluids Footprint
Brominated Clear Brine Fluids Footprint == Long-termebroraine.supply agreement North o Stable, owe cost advantage Middle East Gulf of Mexico ww G@@roducer swap and toll agreements re) Brazil O TETRA's markets for CBFs C ) TETRA’s plant and supply location @ CBF Plant 8
Slide 47: Chemicals/Fluids North America Footprint
Chemicals/Fluids North America Footprint = = Strong Market Network and Presence 280 Leased Cars 1 2 Barges | 3 Terminals 5 Warehouses o A A A Ae a ® e ’ 8 A aot » DEDICATED TOTHE CORE A @ Liquid Caci, Plant ® Liguia/Dry Cacl, Plant AX Liquid Terminal A Dy Terminal @ cBF Plant
Slide 48: Chemicals Competencies
Chemicals Competencies = Significant market presence o Europe and North America Q3 2015 Revenue YTD o Brominated CBFs and CaCl, 7 _ : Water = Balanced revenue diversification Management Oil & Gas « Long-term secure supply agreements 12% Onshore 21% o Bromine — Chemtura o HCI - various producers Non-
Slide 49: Value Proposition
Value Proposition Utilize global network Cost advantaged delivery Bundled service offerings DEDICATED TO THE CORE fea
Slide 50: Completions Fluids — Invested in Technology
Completions Fluids — Invested in Technology | = TETRA Invested in technological differentiation across the fluids business Technology Center proves the focus on research and development » TETRACS Neptune™ System - potential to change offshore completion market * Numerous U.S. and foreign patents and
Slide 51: Water Management
TETRA Additives Filtration and Wellbore Cleanup = Automated Blending Control and Manifold Water o Measures input and output and mixes produced and fresh water for optimal tracing o Patented technology * BioRid® Chemical o Used as slimicide and controls bacteria and algae DEDICATED TO THE CORE 13 Man
Slide 52: Fluid Management Around the Wellhead
Fluid Management Around the Wellhead TETRA . Water Transfer Flow Line . BioRid® / TETRAClean™ Treatment . Blending Manifold . Working Tanks . Well Live Water Transfer . Flow Back eS a <4 . Recycle 5 Lola % . Water Source . Pumping 0. Filtration Yi 9. Pumping Remote Above ground portable storage Lab
Slide 53: Market Infrastructure
Market Infrastructure @ of © @__Gulf of Mexico 2) DEDICATED TO THE CORE fia\ x TETRA = Leverage international footprint fom expansion ®~ Fluid management around the wellhead North Sea Po = Bundling services ‘= = Utilize differentiated technology ™ Solid position for activity recovery @ eu ‘x ) 1° >)
Slide 54: Fluids — Financial Overview
Fluids — Financial Overview 7 $140 $120 $100 $80 $60 $40 $20 $0 Adjusted EBITDA and Margins $50 38, 45% $40 35% $30 25% $20 15% $10 5% $0 5% International 28% nited States 72% 67 23.6% 25.0% 22.2% 22.8% 9974, 238% Offshore 43% Onshore 57% Adj. EBITDA Adj. EBITDA Margin Margin improvement sequentiall
Slide 55: Production Testing
Production Testing Keith Schilling, Senior Vice President
Slide 56: Highlights
Highlights = Balanced domestically and internationally = Saudi Arabia and Permian Basin represent biggest areas of concentration = Customer base is the better capitalized operators that value HSE&Q = Focused on completions that will rebound wie a before drilling does (DUC’s) bios ‘| = Have meaningfu
Slide 57: Production Testing
Production Testing Frac Flowback Production Testing Access and evaluate well performance under various conditions DEDICATED TOTHE CORE gy Optima Offshore Rig Cooling suppresses heat generated by high-rate flaring Early Production Facilities Deliver engineered customized process solutions
Slide 58: Production Testing services
TETRA Rig Cooling Early Production Facilities = Extended flowback capabilities Production Testing " Trained experts = Quality Management System Compression DEDICATED TO THE CORE :
Slide 59: Focused on Key Markets
Focused on Key Markets = United States — one of the largest production testing companies operating in all shale basins = Saudi Arabia — 100% owned, 12 year presence, multiple onshore/offshore contracts = Mexico — over a 20 year presence « Early production facilities in select Latin America and Middl
Slide 60: Customer Base
Customer Base qa = TETRA’s HSE&Q standards represent a competitive advantage = Balanced customer base: 2015 Q3 Production Testing o National oil companies Revenue Mix by Customer o Majors o Independents 15% 17% : ‘ National Oil Servi o Service companies Companies S bie = Customer mix is evolving wit
Slide 61: Financial Performance
Financial Performance Strong Cost Discipline and Customer Diversification Tactics North America Rig Count -58% Revenue (YTD 2015 Q3) -26% YTD Adjusted EBITDA Margins 2014 2015 17.8% 18.0% Decremental Margins 17.0% Capital Expenditures YTD 2015 vs 2014 -$10M (65%) Adjusted EBITDA Margins have held de
Slide 62: Offshore Services
Offshore Services Peter Pintar, Senior Vice President
Slide 63: Highlights
Highlights Ability to reduce/flex costs #1 or #2 in all our key sectors Cash flow positive in the valley of the c
Slide 64: Offshore Services' Turnaround
Offshore Services’ Turnaround qn Strengthened link across sales and operations Fe tet Feroateliliy Inserted higher profitability jobs into schedule Eliminate Reduced management layers, combined operating units Redundancy Streamlined administrative support Achieved supply chain cost reductions Opus C
Slide 65: Gulf of Mexico Shelf Decommissioning Market
Gulf of Mexico Shelf Decommissioning Market qn ~3,000 . ptt. 3 ; Idle Wells NOW DSM Idle Structures $18 Billion Asset Retirement Obligation DEDICATED TO THE CORE Source: D Offshore De ing report 2015
Slide 66: Business Model
Business Model Cutting Downhole Services Services Superior HSE&Q culture and operating performance Advanced engineering and project management capability Unique integrated service offering Asset light approach with total investment of $117 million Highly variable cost model 5 DEDICATED TO THE CORE r
Slide 67: Financial Performance
Financial Performance A strong culture of cost discipline with a variable cost model Q3 2015 2014 $38 $62 (39)% $30 $58 (48)% $8 $4 99% 6.5% (1) See appendix for reconciliation to GAAP. DEDICATED TO THE CORE $ In Millions Revenue % Change Adjusted Operating Costs“ % Change Adjusted EBITDA” % Change
Slide 68: Financial Overview
Financial Overview Elijio Serrano — Chief Financial Officer
Slide 69: Strong 2015 Financial Performance
Strong 2015 Financial Performance Q3 $30 10% 2014 $305 $57 19% $12 4% $4 1% $ In Millions Revenue") % Change Adjusted EBITDA“) % Change % of Revenue Adjusted Profit Before Taxes() % Change % of Revenue Free Cash Flow®) % of Revenue 2015 $870 15% $200 63% 23% $39 86% 5% $67 8% 2014 $758 $123 16% $21
Slide 70: TETRA Earnings Trending Up
TETRA Earnings Trending Up q> TETRA Adjusted EBITDA") + CSI Compressco Distributions Trailing Twelve Months - Millions $190 $170 $150 $130 $110 $90 $70 13-Q3 13-Q4 = 14-Q1 14-Q2 14-93 14-Q4 15-Q1 15-Q2 15-Q3 TETRA adj. EBITDA =CCLP Distributions Cumulative Impact of Many Actions Positively Impacting
Slide 71: Two Distinct & Separate Capital Structures
Two Distinct & Separate Capital Structures $ Millions —As of 09/30/2015 Unrestricted Cash Revolver Availability Liquidity?) Revolver Outstanding") Current Portion of LT Debt Long Term Debt Total Debt (1) Excludes letters of credits (2) Liquidity is sum of revolver availability and unrestricted cash.
Slide 72: TETRA's Improving Credit Profile
TETRA‘s Improving Credit Profile In $ Millions $500 $400 $300 $200 $100 & Debt and Liquidity) oan $395 $397 $379 $358 $358 $331 $190 $178 149 | ll I I ] I $166 20 sont? soph? sora O™ sor6-O" sors? sore? mmm Liquidity ——Debt Leverage Ratio@) 4.00x 3.38x 3.50x 2.94x 3.00x ae 2.73Xx 2.50x 2.00x 1.50x 1
Slide 73: No Significant Short-Term Maturities
No Significant Short-Term Maturities, = Projected for $125M Refinancing TETRA TETRA excl. CSI Compressco CSI Compressco $400 $400 $350 $350 $300 $300 $250 $250 $200 $200 $150 $150 $100 I $100 $50 $50 $0 a | $0 2015 2016 2017 2018 2019 2020 2021 2022 2015 2016 2017 2018 2019 2020 2021 2022 Revolver [
Slide 74: Capital Allocation Philosophy
Capital Allocation Philosophy q> = Organic growth targeting mid-teen returns and quick payback = Reduce outstanding debt, leverage ratio targets: o TETRA’ ~2.0X .... but comfortable increasing to 2.5X for the appropriate investments o CSI Compressco’s <4.0X ..... but comfortable up to 4.7X for short
Slide 75: Management Perspective - Valuation
Management Perspective - Valuation qn = Projected EBITDA of the individual business units (Fluids, Production Testing and Offshore Services) at peer multiples (Adjusted for corporate G&A, ebitda equivalent) « Adjusted for TETRA’s debt ($331M) and Maritech ARO ($50M) = Plus 42% of the market cap of C
Slide 76: Appendix
DEDICATED TOTHE CORE Appendix
Slide 77: GAAP Reconciliations
GAAP Reconciliations ions) Q3-14 Income (Loss) Before Taxes Interest Income/Expense DD&A Stock Option expense Unusual Items Adjusted EBITDA $28.9 $23.6 Revenue $231.1 $208.6 $221.1 $254.3 $225.4 $212.9 $242.5 $306.4 $315.9 $251.1 $316.3 $305.1 Income (Loss) Before Taxes Interest Income/Expense DD&A
Slide 78: GAAP Reconciliations
GAAP Reconciliations TETRA excl. Maritech- Adjusted EBITDA Reconciliation '($ in Millions) Q4-12 Q1-13 Q2-13 Q3-13 Q4-13 Q1-14 Q2-14 Q4-14 Q1-15 Q2-15 Q3-15 Income (Loss) Before Taxes S178 $8.1 $19.3 $34.1 $2.6 ($4.1) $8.2 ($1.9) ($88.9) ($3.0) $184 $17.1 Interest Income/Expense $45 $4.2 $4.2 $4.2 $
Slide 79: GAAP Reconciliations
GAAP Reconciliations TETRA TTl Free Cash How Reconciliation Q1-14 Q2-14 Q3-14 Q1-15 Q2-15 Q3-15 TTI Consolidated Cash from operations 36.1 46 11.3 27.8 54.3 36.1 ARO settlements $13.3 $16.5 $10.5 $0.6 $3.8 $0.8 Capital Expenditures, net of sales proceeds (24.8) (23.2) (31.1) (46.1) (23.2) (21.9) Fre
Slide 80: GAAP Reconciliations
GAAP Reconciliations Senior Notes Revolver Outstanding Total Debt Total Revolver Revolver Outstanding Revolver Availability Revolver Availability Cash excl. Restrcited Cash TTl excluding CCLP Liquidity Reconci Q1-14 $305.0 52.8 $357.8 225.0 (52.8) 172.2 1722. 12.7 Q2-14 $305.0 74.2 $379.2 225.0 (74.
Slide 81: Reconciliations
Slide 82: Reconciliations
Slide 83: Reconciliations