Tetra Technologies, Inc. · NYSE:TTI
Tetra Technologies — The Microcap Rodeo – The Best Ideas Bowl 2020
42 slides from Tetra Technologies's conference presentation, Oct 14, 2020
Slide 1: The Microcap Rodeo – The Best Ideas Bowl
THE MICROCAP RODEO The Best Ideas Bowl October 14, 2020 ©2020 TETRA Technologies, Inc. 1
Slide 2: Forward Looking Statements & Non-GAAP Measures
Forward Looking Statements & Non-GAAP Measures 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,” “see”, “expect,” “intend,” “estimate,” “projects,” “anticipate,” “bel
Slide 3: Corporate Profiles
Corporate Profiles NYSE: NASDAQ: Listing and Ticker Symbol TTI CCLP Recent Share Price(1) $0.53 $0.87 Market Capitalization(1) $67M $41M Enterprise Value(1,5) $272M $679M Number of Shares/ 125.8M 47.3M Units Outstanding(2) Average Daily Trading volume 2,573,970 71,795 (last 3 months) (1) Distributio
Slide 4: TETRA Technologies Business Segments
TETRA Technologies Business Segments Focused on high growth, higher margin segments Water & Flowback Services Completion Fluids & Products Compression • Differentiated offerings • Industry leaders, >30% market • Wide range of horsepower to address for produced water, recycling, share* and growing, f
Slide 5: Q2-2020 Highlights - TETRA Only, Excluding CSI Compressco
Q2-2020 Highlights - TETRA Only, Excluding CSI Compressco • Generated adjusted free cash flow of $31M and $68M improvement H1-2020 vs H1-2019 » Also positive free cash flow excluding the benefit of monetizing working capital • Five consecutive quarters of Completion Fluids & Products adjusted EBITDA
Slide 6: Outperforming Peers & Competitors
Outperforming Peers & Competitors Q2-2020 Adjusted EBITDA(1) ($M) $10 $9 $6 $6 Diversity of TETRA’s market exposure (oil & gas, industrial, onshore and offshore, international and $5 domestic) provides financial stability during North $1 America onshore down cycles. $- $(0) $(5) $(8) $(8) $(10) $(9)
Slide 7: Q2-2020 Highlights - CSI Compressco
Q2-2020 Highlights - CSI Compressco • Adjusted EBITDA of $27.0M vs $27.8M in Q1, when the sequential decline in market activity was very significant • Two largest customers have started bringing production back online in Q3-2020 • Compression Services margins improved sequentially by 300 basis point
Slide 8: Environmental Focus
Environmental Focus We are at the forefront of addressing the industry’s increasing water requirements. By recycling and re-using produced water, TETRA helps minimize the need for additional fresh water and the disposal of wastewater. Additionally, our leak-resistant water transfer system is the ind
Slide 9: Completion Fluids & Products
Completion Fluids & Products ©2020 TETRA Technologies, Inc. 9
Slide 10: Growing Share While Improving Financial Performance
Growing Share While Improving Financial Performance Completion Fluids & Products Revenue & Adjusted EBITDA ($M) vs. Global Deepwater Rig Count High value, high density $300 $280 $284 completion fluids gaining market share. Revenue and Adjusted EBITDA $M 190 $258 $257 Global Deepwater Rig Count $250
Slide 11: TETRA Worldwide Operations
TETRA Worldwide Operations Offshore Bases in Top Four Deepwater Markets North Sea & Europe Middle East Corporate Headquarters & All North America Technology Center Shale Basins Locations Manufacturing Locations Clear Brine Fluids Facilities West Africa Deep Water Brazil Argentina Deep Water Vaca Mue
Slide 12: Diversity of Completion Fluids & Products
Diversity of Completion Fluids & Products TTM Revenue Ending Q2 2020 • Only vertically integrated completion fluids Stable Non-Oil and Gas Revenue ($M) provider $70 Onshore & » Long-term raw material acid supply agreement to feed North America chemical process production $60 Shallow Water » Plants a
Slide 13: TETRA CS Neptune Fluids Update
TETRA CS Neptune® Fluids Update • Received prestigious E&P Special Meritorious for Engineering Award, Innovation for Drilling Fluids and Stimulation category • Executed Q4-2019 deep water Gulf of Mexico project contributing to a 35% Adjusted EBITDA margin quarter for Completion Fluids and Products s
Slide 14: Completion Fluids & Products
Completion Fluids & Products Diversified segment with the least dependency on North America shale market Revenue ($M) $100 290 Key Financial Drivers $77 $80 $79 $75 $80 $71 260 $63 $65 $62 $59 $53 $60 230 • Q2-2020 Adjusted EBITDA margin of 25.7% $40 200 $20 170 $0 140 • International completion flu
Slide 15: Water & Flowback Services
Water & Flowback Services ©2020 TETRA Technologies, Inc. 15
Slide 16: Water Management Services Market
Water Management Services Market Water Services Market (2019) Capital Intensity Service Segment Market Size % 2020 – 2025 CAGR Market Disposal 33% 2% $24.3 Billion Acquisition 8% 7% Focused on the highest Hauling 26% 1% growth, lowest capital Treatment 7% 9% intensive segments **Flowback & PT 15% 8%
Slide 17: Integrated & Automated Water Management Solution
Integrated & Automated Water Management Solution Oil Recovery Recycling Sourcing Temporary Transfer Storage Pit Lining Poly Pipe & Pipeline Treatment Flowback Blending Distribution Automation (Real-Time Monitoring & Control) ©2020 TETRA Technologies, Inc. 17
Slide 18: Lowest Cost per Barrel Water Management Solution
Lowest Cost per Barrel Water Management Solution % Job Cost Savings Personnel savings 27% $150,000 Sourcing, Trucking, Disposal Savings 21% Automation & Recycle Costs +15% $95,000 Total Job Savings 33% 2 People 2 People 2 People Integrated Projects Growth Trend 2 People 4 People 6 People ©2020 TETRA
Slide 19: Differentiating through Technology and Automation
Differentiating through Technology and Automation TETRA SteelTM 1200 BlueLinxTM Automated • Leader in produced water market Control System • Moved ~ 100M bbls of produced • Safer and improved service quality water in Permian in 2019, 40M bbls • Entire system automation reduces in rest if U.S. operat
Slide 20: Water & Flowback Services
Water & Flowback Services Adapting to current market conditions through automation, technology & cost-cutting Revenue ($M) $100 1,500 Key Financial Drivers $84 $80 $79 $79 $80 $73 $73 1,200 $61 $57 $57 $60 900 • Positive Adjusted EBITDA through exceptional cost management, $40 600 $25 market share g
Slide 21: Compression
Compression ©2020 TETRA Technologies, Inc. 21
Slide 22: Compression Market
Compression Market • Despite a 2.9% forecasted dip in 2021 vs 2020, installed compression services HP remains relatively stable long term • Centralized Gas Lift is now the largest segment of the compression services market • Gas Lift will continue gaining market share in the artificial lift segment
Slide 23: CCLP is Well Positioned for the Coming Market Cycle
CCLP is Well Positioned for the Coming Market Cycle Compression Services is a cost effective solution for producers to increase base production, both liquids and gas, • E&Ps drastically reduce capital budgets in a capex constrained environment = lower drilling and completion activity • As existing w
Slide 24: Compression Services Fleet
Compression Services Fleet Q2 2020 HP Deployed By Size 64% Utilization 88% Utilization 9% >1,000 HP 101-1,000 HP 0-100 HP 35% 56% 79% Utilization >1,000 HP 101-1000 HP 0-100 HP Deployed HP & Utilization Trends 1,100 100% 1,050 95% • Large unit (>1,000HP) utilization remained 1,000 above 85% during p
Slide 25: Evolution of Compression Fleet
Evolution of Compression Fleet Compression Services Margins % Migrating Towards Larger HP Units Total HP by Category (23)% (9)% +31% (1) Margin Improvement strategy based on unit clustering, • Focused on Permian Basin and South Texas leveraging technology, or automation of processes, and aggressive
Slide 26: Focused on Most Prolific Producing Basins
Focused on Most Prolific Producing Basins Focused on key shale oil plays with customers with strong balance sheets ~75% of horsepower located in Permian, Eagle Ford, and SCOOP/STACK Bakken 6% 7% Niobrara 43% Utica Marcellus 20% Woodford Monterey SCOOP/Stack 3% San Juan 22% Barnett Haynesville Permia
Slide 27: Compression Financial Summary
Compression Financial Summary Short-term outlook for compression has weakened but long-term fundamentals are intact Well positioned to capitalize on the growing compression market Revenue ($M) $160 $138 $136 $124 Key Financial Drivers $115 $114 $120 $100 $103 $96 $85 $90 $80 $40 • Adjusted EBITDA in
Slide 28: Financial Overview
Financial Overview ©2020 TETRA Technologies, Inc. 28
Slide 29: Financial Overview
Financial Overview Strong execution and the diversity of our end markets generate strong Adjusted EBITDA and free cash flow Revenue ($M) $350 $282 $289 1,400 Key Financial Drivers $300 $260 $257 1,200 $244 $246 $259 $250 $223 1,000 $199 $192 $200 800 $150 600 $100 400 • Even without the benefit from
Slide 30: Financial Overview
Financial Overview Focused on cost management and differentiation through technology to drive results Revenue ($M) TTI Only Adjusted Free Cash Flow ($M) $1,200 1,200 $60 $46 $999 $1,038 $28 $31 $1,000 $40 $723 900 $14 $800 $617 $10 $20 $36 $600 600 $14 $3 $400 $0 300 ($21) $200 ($20) $0 (1) - ($40)
Slide 31: Debt Profiles
Debt Profiles TETRA Only CSI Compressco Only • No near-term maturities • Recent refinancing of $215M of bonds • TTI asset-based credit agreement and term • $81M, 7.25% unsecured notes due Aug 2022 loan with minimal maintenance covenants • S&P Rating – CCC, Moody’s Rating – Caa3 • Flexible asset base
Slide 32: Appendix: Reconciliation Tables
Appendix Reconciliation Tables ©2020 TETRA Technologies, Inc. 32
Slide 33: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation includes non-GAAP financial measures, such as adjusted EBITDA, adjusted EBITDA margin, enterprise value, CCLP net leverage ratio, TETRA only free cash flow from continuing operations, liquidity, consolidated results for TETRA, excluding discontinued oper
Slide 34: Market Capitalization and Enterprise Values
Market Capitalization and Enterprise Values (thousands, except per share amounts) (thousands, except per unit amounts) Market Capitalization: TTI Market Capitalization: CCLP Market price per share on 10/12/2020 $ 0.53 Market price per unit on 10/12/2020 $ 0.87 Shares outstanding as of 08/06/2020 125
Slide 35: Non-GAAP Reconciliation
Non-GAAP Reconciliation Completion Fluids & Products - Adjusted EBITDA and Adjusted EBITDA Margin Reconciliation '($ in Millions) Q1-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Income (Loss) Before Taxes $2.4 $8.7 $9.5 $6.2 $14.6 $11.3 ($66.1) $19.4 $13.2 Interest Income/Expense ($0.2) ($0.1)
Slide 36: Non-GAAP Reconciliation
Non-GAAP Reconciliation Compression - Adjusted EBITDA Reconciliation '($ in Millions) Q1-18 Q3-18 Q4-18 Q1-19 Q2-19 Q3-19 Q4-19 Q1-20 Q2-20 Income (Loss) Before Taxes ($14.0) ($7.8) ($3.3) ($7.8) ($3.5) ($3.5) ($1.3) ($12.8) ($23.0) Interest Income/Expense $11.2 $13.7 $13.4 $13.2 $13.0 $12.9 $12.9 $
Slide 37: Non-GAAP Reconciliation
Non-GAAP Reconciliation TTI Consol. - Continued Operations - Adj. EBITDA and Ad. EBITDA Margin Reconciliation '($ in Mil) 2016 2017 2018 2019 Income (Loss) Before Taxes ($223.2) ($44.0) ($36.4) ($144.1) Interest Income/Expense $57.4 $57.2 $70.9 $73.2 DD&A $117.1 $104.1 $114.9 $124.2 Stock Option exp
Slide 38: Non-GAAP Reconciliation
Non-GAAP Reconciliation TETRA only Adjusted Free Cash Flow Reconciliation From Continuing Operations (in $ Millions) 2019-Q1 2020-Q1 2020-Q2 TTI Consolidated Cash from operations $ 7.4 $ 22.2 $ 38.2 Capital Expenditures, net of sales proceeds (32.0) (11.0) (3.3) Free Cash Flow before ARO settlements
Slide 39: Non-GAAP Reconciliation
Non-GAAP Reconciliation TETRA only Adjusted Free Cash Flow Reconciliation From Continuing Operations (in $ Millions) 2020-Q2 2016 2017 2018 2019 YTD TTI Consolidated Cash from operations $ 55.7 $ 64.6 $ 46.6 $ 90.2 $ 60.4 ARO Setttlements $ 4.0 $ 0.6 $ 0.0 $ - $ - Capital Expenditures, net of sales
Slide 40: Non-GAAP Reconciliation
Non-GAAP Reconciliation CSI Compressco - Adjusted EBITDA Reconciliation (In $ Millions) 2020-Q1 2020-Q2 Net Loss $ (13.6) $ (24.6) Interest expense, net 13.2 13.6 Provision of income taxes 0.2 1.0 Depreciation & amortization 19.9 20.1 Impairments & other charges 5.4 9.0 Non-cash cost of compressors
Slide 41: Non-GAAP Reconciliation
Non-GAAP Reconciliation CSI Compressco - Net Loss to Adjusted EBITDA fir Net Leverage Ratio Calculation 2019-Q3 Net Loss $ (43.8) Interest expense, net 53.8 Provision of income taxes 0.9 Depreciation & amortization 79.1 Non-cash cost of compressors sold 7.4 Equity Compensation 0.9 Impairments and ot
Slide 42: Non-GAAP Reconciliation
Non-GAAP Reconciliation June 30, 2020 Net Debt - Reconciliation (In $ Millions) TETRA CCLP Consolidated Non-restricted cash $ 50.0 $ 6.8 $ 56.7 Carrying value of long-term debt: Asset-based credit agreement $ - $ 0.7 $ 0.7 Term credit agreement $ 205.7 $ - $ 205.7 Senior notes outstanding $ - $ 636.
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