Tetra Technologies, Inc. · NYSE:TTI
Tetra Technologies — Investor Day (May 2018)
117 slides from Tetra Technologies's investor day presentation, May 31, 2018
Slide 1: CEO Overview
CEO Overview Stu Brightman CEO of TETRA Technologies, Inc. and Chairman of the Board of Directors of CSI Compressco LP NYC, May 31, 2018
Slide 2: Forward Looking Statement & Non-GAAP Measures
Forward Looking Statement & 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,” “expect,” “intend,” “estimate,” “projects,” “anticipate,” “believe,”
Slide 3: Agenda
Agenda CEO Key Message. . . . . . . . . . . . . . . . . . . . . . Stu Brightman Divisions Overview and Strategy. . . . . . . . . . . .Brady Murphy Growth Through Innovation Water & Flowback Services. . . . . . . . . . . . .Matt Sanderson Completion Fluids & Products . . . . . . . . . . Matt Sanderso
Slide 4: CEO Highlights – Key Message
CEO Highlights – Key Message Committed to Efficient Capital Allocation Divested operations not generating consistent and predictable free cash flow Directing capital towards quick payback shale services and predictable and consistent contract compression markets Positioned for Growth Focused on the
Slide 5: Flexible Business Models Deliver During A Downturn
Flexible Business Models Deliver During A Downturn During the 2015-2017 downturn period, TETRA and CSI Compressco generated Adjusted EBITDA and Free Cash Flow $s in M TETRA Only CSI Compressco Adjusted EBITDA(1) $195 $308 Capital Expenditures $63 $131 Free Cash Flow(1) $149 $71 (1) See appendix for
Slide 6: Actions to Simplify & Focus on Higher Returns Businesses
Actions to Simplify & Focus on Higher Returns Businesses Repositioning Portfolio to Enhance Shareholder Returns $1.0 B 2017 Revenue ($M) $0.8 B 2018 Revenue ($M) (Mid-Point Guidance) $1.0 B 2007 Revenue ($M) Discontinued Ops. 54% Completion Fluids & Products 25% Water & Flowback Services 13% Compres
Slide 7: Focused on Three Segments
Focused on Three Segments Completion Fluids & Products Limited number of competitors Size, scale and vertical integration provides a cost and logistics advantage Onshore, offshore and industrial markets balance cyclicality of the industry Introducing industry leading technologies, such as TETRA CS N
Slide 8: Capital Structure
Capital Structure TETRA has improved its balance sheet, dropping TETRA-only total debt from $430M plus $47M of Maritech's AROs in 2014-Q3 to $199M(1) at 3/31/18 Given our ability to generate free cash flow through all cycles, we are evolving our balance sheets to minimize maintenance covenants to av
Slide 9: Management Depth, Focus and Oversight
Management Depth, Focus and Oversight Recent significant additions to the management team to deliver during this upcycle Management incentive programs focused on shareholder returns with the key metric of generating free cash flow Strong board comprised of industry leaders with relevant and recent e
Slide 10: Experienced Management Team (today’s attendees)
Experienced Management Team (today’s attendees) Stu Brightman CEO of TETRA, Chairman of the Board of CCLP; previously Dresser Industries and Cameron Brady Murphy President and COO of TETRA; previously CEO of private equity portfolio company, ex-Senior VP Halliburton Elijio Serrano CFO of TETRA and C
Slide 11: Board of Directors With Relevant Industry Experience
Board of Directors With Relevant Industry Experience William Sullivan (1), (3) Previously EVP E&P Anadarko Mark Baldwin (1) Previously CFO Dresser-Rand and Veritas DGC Thomas Bates (1) Previously Lime Rock; President BHI; CEO Weatherford; ex-Schlumberger Jay Glick (1) Previously CEO Lufkin Industrie
Slide 12: Division Overviews and Strategy
Division Overviews and Strategy Brady Murphy President and COO
Slide 13: Business Segments
Business Segments Focused on high growth, higher margin segments Differentiated offerings for produced water, automation and sand management A leading position in the Permian Compelling integrated water solutions offering Water & Flowback Services Industry leaders, >30% market share for high value f
Slide 14: Business Segments
Business Segments 63% of last decade discoveries from deepwater wells (1) High value fluids for customers’ highest value wells Well positioned for deepwater market recovery Completion Fluids & Products Water volumes required for frac operations ~4:1 ratio of produced water to oil growing challenge W
Slide 15: Core Values are Intact
Core Values are Intact Our TETRA customer-centric framework allows us to drive key behaviors to build an accountability and performance-driven culture Customers ø Zero HSE Returns Employees R C ø E
Slide 16: Core Values are Intact
Core Values are Intact Customers Returns Zero (HSE) Employees 2015-2017 Completion Fluids & Products generated $233M adjusted EBITDA on $13M capital investment (1) Minimum ROIC threshold for 2018 capital spending of 20% Opportunity for growth Enhancing management talent Investing in training (1) See
Slide 17: Macro View of Global Oilfield Services
Macro View of Global Oilfield Services NA Oilfield Service Market Spend Intl Oilfield Service Market Spend 51 Mb/d – of global supply is assumed to be in decline by the IEA in 2017! 83% of the world’s oil production 17% of the world’s oil production Source: Spears and Associates $B
Slide 18: Lower U.S. Oil Production Outlook
Lower 48 U.S. Oil Production Outlook Lower 48 onshore crude oil production by region (reference case) million barrels per day Southwest Dakotas/Rocky Mountains Gulf Coast Midcontinent West Coast East Source: EIA Associated gas production from shale oil basins will grow twice the CAGR of shale gas ba
Slide 19: TETRA Market Segment Revenue
TETRA Market Segment Revenue Well positioned for highest growth markets TETRA’s 2017 % of Global Revenue
Slide 20: Deepwater Returns, Not If, When…
Deepwater Returns, Not If, When… Global Oil Discoveries Dominating new discoveries and reserve replacement this decade Operators' highest value wells require the most reservoir-friendly fluids (Drilling and Completions) Often the most overburdened pressures, requiring highest density and highest val
Slide 21: Strategy on a Page
Strategy on a Page Market Size Est $1B $9B $3B(2) 2018 Revenue(1) $283M $290M $393M Strategy Leverage innovation, vertical integration and plant capacity to grow with minimal investment Leverage differentiated offerings in water transfer, flowback and treatment/recycle Leverage vertical integration,
Slide 22: Summary
Simpler, focused, leveraging core competencies CøRE intact and central to our culture Geographic footprint aligned with projected market spend Positioned for growth and margin expansion Summary
Slide 23: Growth Through Innovation Water & Flowback Services
Growth Through Innovation Water & Flowback Services Matt Sanderson Senior Vice President
Slide 24: Financial Summary – Water & Flowback Services
Financial Summary – Water & Flowback Services SwiftWater acquisition, pricing momentum and high ROIC driving earnings $s in M Actual Guidance 2018 2016 2017 Revenue $105 $172 $285-$295 Adjusted EBITDA(1) $4 $20 $60 - $66 % of revenue 3.5% 11.9% 21.1% - 22.4% Capital Expenditures Growth $19 - $24 Mai
Slide 25: TETRA Market Segment Revenue
TETRA Market Segment Revenue Focused on value-added, differentiated, environmentally friendly offerings in the highest return on investment water market segments Water Market (2018) Source: Spears & Associates Service Segment Market Size % CAGR% 2017-2022 Disposal 23% 6% Acquisition 9% 21% Hauling 3
Slide 26: Strong North American Presence
Strong North American Presence Current TETRA Service Location Vernal, UT Greely, CO Wright, WY Williston, ND Crossfield, AB Jal, NM Elk City, OK Hinton, OK Greenbrier, AK Beckville, TX Midland, TX Pecos, TX San Antonio, TX Bridgeville, PA Mansfield, PA Grand Prairie, AB Well positioned in all major
Slide 27: TETRA Integrated Water Solutions
TETRA Integrated Water Solutions Service-Intensive, Differentiated Offerings Full Offering Services Only – no asset ownership No Offering Fresh Water Transfer Flowback and Testing Treatment and Recycling Produced Water Transfer Automation and Remote Monitoring Water Transfer Water Containment Pre-Fr
Slide 28: Lowest Cost per Barrel Fluid Solutions
Lowest Cost per Barrel Fluid Solutions
Slide 29: Lowest Cost per Barrel Fluid Solutions
Lowest Cost per Barrel Fluid Solutions
Slide 30: Leadership in Water Transfer
Lowest Cost per Barrel Fluid Solutions First mover in deployment of lay flat hose Differentiated TETRA Steel™ water transfer system Exclusive provider Only double-jacketed lay flat hose, UV-resistant hose on the market Reduced customer risk Highest flowrates and operating pressure Market leader for
Slide 31: Lowest Cost per Barrel Fluid Solutions
Lowest Cost per Barrel Fluid Solutions
Slide 32: Leadership in Sand Management
Lowest Cost per Barrel Fluid Solutions Unload more proppant faster without back pressure on the well 3x more efficient in sand recovery Minimize damage to customers’ facilities and production shutdown Data capture to improve overall frac design and flowback management Reduced personnel requirement A
Slide 33: Lowest Cost per Barrel Fluid Solutions
Lowest Cost per Barrel Fluid Solutions
Slide 34: Leadership in Treatment & Recycling
Lowest Cost per Barrel Fluid Solutions Blending Controller Conserves fresh water by blending reclaimed produced water “on the fly” Optimal fracturing fluid that meets customer water specifications Distribution Manifold Ensures frac tanks are optimally supplied with water Minimizes environmental and
Slide 35: TETRA’s Automation Solution
TETRA’s Automation Solution
Slide 36: TETRA’s Lowest Cost per Barrel Integrated Offering Solution
2 People 4 People 2 People 2 People 6 People 2 People % of savings based on 500,000 bbls; frac completed in 15 days and flowback completed in 10 days; 50/50 blend of fresh and produced water % Job Cost Savings Personnel savings 27% Sourcing, Trucking, Disposal Savings 21% Automation & Recycle Costs
Slide 37: Lowest Cost per Barrel Solution with Automation and Recycling
2 People 4 People 2 People 2 People 6 People 2 People % of savings based on 500,000 bbls; frac completed in 15 days and flowback completed in 10 days; 50/50 blend of fresh and produced water TETRA’s Lowest Cost per Barrel Solution with Automation and Recycling Benefits to TETRA Improved Personnel Ut
Slide 38: Water & Flowback Services Perspectives Beyond 2018
Water & Flowback Services Perspectives Beyond 2018 One of the best positioned segments for rapid growth and high returns Water volumes expected to remain high TETRA SteelTM water transfer system has proven to be a differentiator Introducing multiple technologies for further differentiation or to bec
Slide 39: Growth Through Innovation Completion Fluids & Products
Growth Through Innovation Completion Fluids & Products Matt Sanderson Senior Vice President
Slide 40: Financial Summary – Completion Fluids & Products
Financial Summary – Completion Fluids & Products Multiple opportunities to capture growing demand w/out incremental capital investment $s in M Actual Guidance 2018 2016 2017 Revenue $205 $258 $275 - $290 Adjusted EBITDA(1) $38 $67 $55 - $62 % of revenue 18.4% 26.2% 20.0% - 21.4% Capital Expenditures
Slide 41: Leading Global Completion Fluids Provider
Leading Global Completion Fluids Provider Innovation leadership Cost and delivery advantage through vertical integration Control of quality Assurance of supply Unique market insight from both supplier and service perspective
Slide 42: Basis of Completion Fluids is Clear Brine Fluids
Basis of Completion Fluids is Clear Brine Fluids (CBFs) Water-based fluid Dissolves salt(s) for density No suspended solids Tight specification on clarity Non-formation damaging TETRA manufactures higher value products Latest innovation (TETRA CS Neptune® Completion Fluids System) Product Max Weight
Slide 43: CBFs Applications
CBFs Applications Completion & Workover Fluid Density (well control) Casing and reservoir friendly Packer Fluid Maintains well hydrostatic pressure Requires temperature stability and low corrosion Drill-in Fluid Replace standard drilling muds in the reservoir section Minimize formation damage from f
Slide 44: Unique Position to Exploit Global Market Opportunities
Unique Position to Exploit Global Market Opportunities Preferred supplier agreements for completion fluids Exposure to large-scale, multi-year/service projects Leveraging global infrastructure and commercial organizations Commercial relationships with both operators and service companies “Win – Win”
Slide 45: TETRA Innovation Group (TIG)
TETRA Innovation Group (TIG) Innovation Solution TETRA CS Neptune® Completion Fluids System High-density, solids-free completion fluid (density up to 15.4 ppg) Zinc-free (environmentally friendly) Formate-free (cost effective) TETRA CS Neptune® Completion Fluids System HDD, HDM(1) 2nd generation sys
Slide 46: The Game Changer… TETRA CS Neptune
The Game Changer… TETRA CS Neptune® Completion Fluids System Multi-billion dollar capital investment to develop a major deepwater Gulf of Mexico field Host production facility could accept zinc-based completion fluid Alternative was to contract FPSO to flowback and store zinc-laden fluid In 18 month
Slide 47: Market for TETRA CS Neptune Completion Fluids System
Market for TETRA CS Neptune® Completion Fluids System Over 600 offshore leases with greater than 14 PPG fluid density equivalent reservoir pressure 1 4 1 6 1 1 2 25 1 1 7 2 11 2 9 1 6 1 1 1 8 2 47 1 143 3 10 224 25 6 3 10 15 Untapped Market Opportunity Source: IHS
Slide 48: Other Addressable Market Opportunities
…not to mention other Addressable Market Opportunities Reservoir Drill-in Fluids (RDFs) Drills with oil-based mud efficiency, but with the completion simplicity of a water-based drilling fluid Minimizes damage to the reservoir Frac-pack Fluid Method delivers consistently higher flow efficiencies in
Slide 49: Next Generation TETRA CS Neptune Opportunities
Next Generation TETRA CS Neptune® Completion Fluid System Opportunities The Challenge: Upcoming customer projects with increasingly hostile operating environments, with increased environmental concerns and reservoir sensitivity to drilling and completion fluids The Solution: TETRA Innovation Group’s
Slide 50: Completion Fluids & Products Perspectives Beyond 2018
Completion Fluids & Products Perspectives Beyond 2018 TETRA CS Neptune® Completion Fluids System projects, diversification and spare capacity positioned to capture growing market Strong returns on capital as volumes increase leveraging current infrastructure Expect to have 2 TETRA CS Neptune® Comple
Slide 51: Summary
High returns on capital Differentiated water solution technologies Compelling integrated fluids offering Innovation leaders in completion fluids Positioned for growth and margin expansion in U.S. shale plays and deepwater Summary Growth with a focus on highest return on capital investments
Slide 52: Chemical Advantage
Chemical Advantage Jim Funke Vice President
Slide 53: TETRA Chemicals
TETRA Chemicals Vertically integrated provider of clear brine fluids Strong market position in non-oil & gas markets High barrier to entry Bromine clear brine fluids Calcium chloride Significant footprint and plant capacity to grow with minimal investment Pipeline of growth opportunities
Slide 54: TETRA Chemicals Highlights
TETRA Chemicals Highlights Industrial market growth during the downturn helped offset energy market decline Adjusted EBITDA at the valley of the cycle remained above 15% Low annual maintenance CapEx Currently operating at ~60% of capacity with room to grow Expanded U.S. footprint in 2018 Corpus Chri
Slide 55: High-value Bromine Fluids Benefits of Vertical Integration
High-value Bromine Fluids Benefits of Vertical Integration Bromine supply Low-cost, long-term agreement Used for calcium, zinc and sodium bromide Bromine fluid production West Memphis manufacturing plant Patented / proprietary technologies Base fluids for TETRA CS Neptune® Completion Fluids System R
Slide 56: Calcium Chloride Market Diversification
Calcium Chloride Market Diversification Focused effort to grow industrial business Increased industrial segment volume by 24% from 2013 to 2017 Reduced reliance on cyclical business Steady and predictable demand Broad range of customer applications Water treatment, paper processing, Kevlar®, chemica
Slide 57: Calcium Chloride Manufacturing Platform
Calcium Chloride Manufacturing Platform Manufacturing processes 6 Plants – Neutralize hydrochloric acid with limestone 2 Plants – Solar evaporation 1 Plant – Mechanical evaporation Long-term low-cost HCl supply agreements Manufacturing plants Strategically located proximate to shale plays Currently
Slide 58: Calcium Chloride Europe Footprint
Calcium Chloride Europe Footprint 4 Manufacturing Plants 1 owned 3 exclusive supply position Added Hamm, Belgium supply in 2016 Exclusive marketer of calcium chloride No capital investment by TETRA Expanded TETRA Chemicals market share North Sea O&G Mid-Europe food grade, industrial, de-icing U.S. E
Slide 59: Calcium Chloride North America Footprint
Calcium Chloride North America Footprint Strategic supply position to all O&G shale basins and Gulf of Mexico Multiple manufacturing plants to meet cyclical O&G demand with ample available capacity Multiple supply locations to supply – “easy button” and reliability for our customers Liquid CaCl2 Pla
Slide 60: Quick Payback on Incremental Investments
Quick Payback on Incremental Investments $2M to $3M annual EBITDA with less than $2.5M total investment West Memphis, AR Tote packaging Further vertical integration Improves cost position Mojave Desert Sodium chloride Bulk salt loading operation Diversified customer base Leveraged existing asset El
Slide 61: TETRA Chemicals Growth Initiatives
TETRA Chemicals Growth Initiatives Completed May 2018 Lithium in Brines $1-2M EBITDA/year Lithium option agreements Potential royalty payments Commercialization Q4 2019 El Dorado Calcium Chloride Spray Drying In development Utilize existing asset Product diversification Commercialization 2020+ Shale
Slide 62: TETRA Chemicals Summary
TETRA Chemicals Summary Only producer positioned to supply all shale segments Unique CBF vertical integration position Well diversified calcium chloride position Plants have capacity to meet growing demand Growing share in sodium chloride market Good pipeline of growth opportunities
Slide 63: Permian Basin
Permian Basin Hunter Morris Vice President Permian Operations
Slide 64: Market Leader in Permian through SwiftWater
Market Leader in Permian through SwiftWater SwiftWater significantly expands TETRA’s presence in the Permian Basin Leading water service employer in the basin Strong, talented and proven leadership team 400+ employees Emphasizes TETRA’s strategic water management focus Nominal customer overlap betwe
Slide 65: SwiftWater Financial & Operational Highlights
SwiftWater Financial & Operational Highlights SwiftWater revenues grew over 3x during the downturn Post-closing projections of annualized $16M to $20M EBITDA(1) March 2018 SwiftWater results: $8.1M revenue $2.3M EBITDA (1) Successful integration (1) See appendix for reconciliation to nearest GAAP me
Slide 66: Positioned in all the Right Places in the Permian
Strategically located facilities covering the entire Permian Basin Track record of scaling Vertically integrated water service platform Portfolio of leading water service technologies Enhanced ability to cross sell TETRA’s offerings in the Permian Basin Positioned in all the Right Places in the Perm
Slide 67: Permian is THE Unconventional Basin
Permian is THE Unconventional Basin Globally 4 of the top 5 lowest breakeven basins Currently ~45% of the total U.S. land rig count and over 25% of global land rig count(3) Highest activity in U.S. land Has been the fastest growing shale play since the trough of the downturn Bottomed out at 132 in A
Slide 68: D&E Spend up 3X while DUCs continue to Grow
D&E Spend up 3X while DUCS continue to Grow (1) Source: EIA, As of February 20, 2018
Slide 69: Water Management in Permian – A Growing and Critical Challenge
TETRA’s solutions reduce costs and promote sustainable development Longer lateral wells Increasing water volumes per well Multi-well pad drilling Exploration to development Produced water TETRA’s full suite of services and leadership position in Permian Basin to meet these growing demands Water Mana
Slide 70: Produced Water – “The Tipping Point”
Produced Water – “The Tipping Point” Shifting toward a produced water “Tipping Point” Fresh water demands of ~500,000 to 600,000 bbls per well is unsustainable Stewardship of environmental and fresh water resources All of current customer base implementing or developing produced water strategies Tec
Slide 71: Our Permian Portfolio has Expanded
Our Permian Portfolio has Expanded Fresh and produced water transfer 300+ miles of temporary water line Flowback and testing Chlorine dioxide completion services Water treatment and recycling Containment and lining services Pump-manifold automation and remote monitoring Pipeline water midstream cons
Slide 72: Dynamic, Integrated Service Platform
Dynamic, Integrated Service Platform Increasingly complex water logistics Technologies reduce costs for operators, create differentiation Largest operators focused on sustainability and risk tolerance Tied to proliferation of full field development in Permian Basin Cross selling opportunities across
Slide 73: Aligned with the Most Active Permian Operators
Aligned with the Most Active Permian Operators Recurring revenue streams, consistent book of business Complemented by large, high-margin projects Large customers are increasingly focused on environmental stewardship and risk mitigation Platform and relationships to expand to other unconventional bas
Slide 74: Cross-selling TETRA Steel water transfer system
Cross-selling TETRA Steel™ water transfer system Leading SwiftWater water transfer client shifting from 100% freshwater and 0% produced water to 25 - 50% produced water in 2018 - 2019 Client requiring TETRA SteelTM water transfer system for all produced water transfer in Permian/Delaware Results: En
Slide 75: Produced Water Recycling on a 4-well zipper frac
Produced Water Recycling on a 4-well zipper frac Total produced water treated for reuse: 1.3 million bbls Client cost savings of ~$500,000 Elimination of fresh water Recycling was paired with TETRA SteelTM water transfer system and CLO2 services to increase market share with client Resulted in impro
Slide 76: Permian Summary
Permian Summary SwiftWater transaction positions TETRA as a leading player in the Permian Integrated shale strategy a compelling offering Realizing immediate cross-selling opportunities Pursue strategic acquisitions while organically developing new technologies Continued focus on profitable growth a
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Slide 78: Minutes
15 Minutes
Slide 79: Owen Serjeant, President, CSI Compressco
Owen Serjeant, President, CSI Compressco Levent Caglar, Vice President, Sales
Slide 80: Financial Highlights & Objectives CSI COMPRESSCO
Financial Highlights & Objectives CSI COMPRESSCO
Slide 81: Financial Summary - Compression
Financial Summary - Compression Well positioned to capitalize on the growing compression market $s in M Actual Guidance 2018 2016 2017 Revenue $311 $296 $385 - $400 Adjusted EBITDA(1) $90 $75 $93 - $98 % of revenue 28.9% 25.4% 24.2% - 24.5% Capital Expenditures Growth $1 $5 $75 - $90 Maintenance $11
Slide 82: Served Markets – Gas Supply Chain
Served Markets – Gas Supply Chain The largest vertically integrated end-to-end, fully connected, Compression Solutions supplier in North America: COMPRESSION SERVICES sizes for solutions – 20-2,500HP NEW COMPRESSION EQUIPMENT up to 5,000HP, from Midland, TX AFTERMARKET SERVICES supporting customers
Slide 83: Served Markets—Macro Outlook
Served Markets—Macro Outlook Technology and efficiency enhancements generating higher volumes per well Associated gas volumes driving record production levels and demand for gas gathering compressors New revenue opportunities with surface gas lift compression displacing ESPs Infrastructure growth an
Slide 84: Permian Basin HP Distribution by CCLP Region
Permian Basin West Region East Region South Texas Mid Continent Northern Rockies HP Distribution by CCLP Region as of 3/31/18 Focused on Most Prolific Producing Basins in USA Ideally positioned in the biggest growth markets in U.S. shale plays to participate in recovery Growing demand in these marke
Slide 85: Served Markets – The Gas Value Chain
Served Markets – The Gas Value Chain Sizes for Solutions – Compression Services offerings from 20-2,500HP from wellhead, gas lift and gas gathering applications. New Equipment Sales compression units up to 5,000HP sold for midstream applications, gas gathering and processing Since 1971 CCLP has deli
Slide 86: Served Markets – Growth
Served Markets – Growth Strategic focus on key shale oil plays of the Permian/Delaware, Eagle Ford and SCOOP/STACK where ~75% of our assets are located Six consecutive quarters of improved utilization Q3-2016 to current Large HP (>1,000HP) utilization improved to 93% in Q1-2018 Overall fleet improve
Slide 87: Diversified, Blue-Chip Customer Base
Diversified, Blue-Chip Customer Base E&P and Midstream Companies Major customers COMPRESSION SOLUTIONS Compression Services in gas applications across multiple basins New Equipment Sales available for customers that own their equipment Aftermarket services complete range of parts and services
Slide 88: Profitable Growth Strategies
Profitable Growth Strategies CSI COMPRESSCO Compression Services New Equipment Sales Aftermarket Services
Slide 89: Compression Services – Increased Growth
Compression Services – Increased Growth Strategic partnerships and customized solutions to grow market share Customer demand growing throughout full range of equipment from cross-selling Price leverage to increase rates Organic growth intending to add 115,000HP in major associated gas basins during
Slide 90: New Unit Sales – Increased Growth
New Unit Sales – Increased Growth With the largest compression fabrication facility in the Permian Basin, located in Midland, Texas, our vertically integrated business model is highly capital efficient Our growth strategy: Increasing sales from our customer base, expanding in core markets Offering i
Slide 91: Aftermarket Services – Increased Growth
Aftermarket Services – Increased Growth Implementation of strategies that increase our share of Aftermarket Services and Parts Market Drivers and Growth Strategy: Growing customer installed base Deferred maintenance and Idle equipment deployment Pull-through revenue from New Unit sales Utilize our t
Slide 92: Connected Enterprise Business Strategy Model
SALES OPPORTUNITY CONFIGURE, PRICE AND QUOTE TECHNICIAN CONTACTED AND EQUIPMENT DEPLOYED/SERVICED ASSET MONITORING SERVICE REPORTING AND INVOICING ORDER SIGNED SCHEDULING AND WORK ORDER ASSIGNMENT Connected Enterprise Business Strategy Model Operational Excellence Maximize efficiencies by focusing o
Slide 93: Success Stories The Gas Value Chain
Success Stories The Gas Value Chain CSI COMPRESSCO WELLHEAD PRODUCTION ENHANCEMENT GAS LIFT GAS GATHERING MIDSTREAM GAS PROCESSING PLANT
Slide 94: $50,000/year expense reduction (L.O.E. and Fuel)
$50,000/year expense reduction (L.O.E. and Fuel) E&P customer in SCOOP/STACK experienced decline in their horizontal shale well production 200HP gas compression used in gas assisted plunger-lift which was not efficient GOAL was to increase production and reduce lease operating expense (L.O.E.) There
Slide 95: Centralized Gas Lift Success Story
Customer began testing gas lift on new wells to compare production, reliability and costs against ESPs Goal: Lower L.O.E. (Lease Operating Expense) by maximizing production and reliability on horizontal wells in the Midland Basin Over 66,000 HP contracted to date in Permian. Significant footprint in
Slide 96: Satellite compressor stations Success Story
Design compression sites for a new production field to: Reduce the horsepower requirements for compression Deliver gas into two different pipelines to ensure access to the highest product price Increase production at each remote location through gas lift Delivered 10,000HP all in 1,000+HP units to t
Slide 97: Major Permian midstream player Success Story
Major Permian Basin midstream player sought new supplier Goal: To establish and grow business relationship as preferred supplier of large HP compression Broad opportunity pool for building and selling similar midstream compression equipment in Permian Basin Pull-through AMS and parts opportunities 5
Slide 98: Summary CSI COMPRESSCO
Summary CSI COMPRESSCO
Slide 99: Compression Perspectives Beyond 2018
Compression Perspectives Beyond 2018 Investing in high return projects, outgrowing the market and de-leveraging Market expected to grow 6-7% per year. CCLP poised to invest and grow above these levels Targeting ROIC target of 20% or higher on new investments Improving adjusted EBITDA margins for tot
Slide 100: Summary
SUMMARY Compression Solutions – We are the largest vertically integrated supplier Compression Services – Approximately 75% of HP is concentrated in the most prolific producing basins New Equipment – Our large scale fabrication facility is located in the heart of the Permian Basin, providing a huge a
Slide 101: CSI Compressco
&® compressco ir gMPRESSCO LP
Slide 102: Financial Position and Direction
Financial Position and Direction Elijio Serrano, Chief Financial Officer
Slide 103: Financial Overview – 2018 Guidance
Financial Overview – 2018 Guidance Projected 2018 Adjusted EBITDA at Pre Downturn Levels Key Financial Drivers Expecting 2 TETRA CS Neptune® completion fluid systems projects by year-end 2018 Pricing momentum in all segments ROIC of 20%+ on new investments Payback on incremental hose of 18 months, o
Slide 104: Two Distinct & Separate Capital Structures
Two Distinct & Separate Capital Structures TETRA Only CSI Compressco Only Completed $350M senior secured notes offering in March 2018 No maintenance covenants No near-term maturities $100M of cash available for capital investments TETRA 2.62x leverage ratio as of 3/31/2018 with liquidity of $134M Am
Slide 105: Balance Sheet Philosophy
Balance Sheet Philosophy Generated positive adjusted EBITDA and FCF for all segments during the down cycle Moving TETRA and CSI Compressco towards a debt structure with no material maintenance covenants TETRA total leverage goals of 2.0x peak cycle and 3.5x at the valley CSI Compressco leverage goal
Slide 106: Capital Allocation Considerations
Capital Allocation Considerations TETRA Focused on high return and quick payback Water & Flowback Services Will evaluate additional tuck-in acquisitions at attractive valuations Fluids network fully developed and built out requiring minimal incremental capital CSI COMPRESSCO – funding its requiremen
Slide 107: TETRA SOTP Valuation Considerations
TETRA SOTP Valuation Considerations TETRA’s ownership of CSI Compressco impacts SOTP analysis Sum of the parts valuation considerations Completion Fluids & Products EBITDA on a multiple to peers Water & Flowback Services EBITDA on a multiple to peers Take into account TETRA’s debt and cash CSI Compr
Slide 108: Closing Comments
Closing Comments Stu Brightman, CEO of TETRA Technologies, Inc. and Chairman of the Board of Directors of CSI Compressco LP
Slide 109: Closing Comments
Closing Comments Re-positioning of TETRA Proven to generate adjusted EBITDA and free cash flow during the downturn Divested low returns, unpredictable segments Investing in Water & Flowback Services and Compression to capitalize on major U.S. shale plays Reporting three segments to increase visibili
Slide 110: Q&A
Q&A Followed by reception at The Lamb Club 2nd floor, 132 W. 44th St
Slide 111: Appendix Reconciliation Tables
Appendix Reconciliation Tables
Slide 112: Non-GAAP Financial Measures
Non-GAAP Financial Measures This presentation includes non-GAAP financial measures, Adjusted EBITDA, Adjusted EBITDA margin, enterprise value, adjusted free cash flow, liquidity, consolidated results for TETRA, excluding the offshore division, distribution coverage ratio and debt to Adjusted EBITDA.
Slide 113: TETRA Only Liquidity & Leverage Ratio
TETRA Only Liquidity & Leverage Ratio
Slide 114: Non-GAAP Reconciliation
Non-GAAP Reconciliation TETRA Consolidated - Adjusted EBITDA Reconciliation "($ in Millions) 2015 2016 2017 2015-2017 Period (S51 ‘Net Income (Loss) ($209.5) ($239.4) ($62.2) 1.1) Income Taxes (87.7) ($23) ($1.2) ($11.2) Income (Loss) Before Taxes ($201.8) ($237.1) ($61.0) 9) Interest Income/Expense
Slide 115: Non-GAAP Reconciliation
Non-GAAP Reconciliation CSI Compressco - CCLP Adjusted EBITDA Recor n n($ in M Income (Loss) Before Taxes (8146.7) ($136.3) ($37.7) ($320.7) Interest Income/Expense $3 $43.1 DD& A $81.8 $72.1 $69.1 $223.0 Equity Compensation Expense $2.2 $46 $30 $9.8 Special Items $152.2 $1106 ($2.3) $260.5 Non Cash
Slide 116: Non-GAAP Reconciliation
Non-GAAP Reconciliation LE – Low End HE – High End MP – Mid-Point
Slide 117: Non-GAAP Reconciliation
Non-GAAP Reconciliation LE – Low End HE – High End MP – Mid-Point