TETRA Technologies, Inc. (TTI) Q4 2022 Earnings Call Transcript

TETRA Technologies, Inc. (NYSE:TTI) Q4 2022 Earnings Conference Call February 28, 2023 10:30 AM ET

Company Participants

Brady Murphy - CEO

Elijio Serrano - CFO

Conference Call Participants

Stephen Gengaro - Stifel

Tim Moore - EF Hutton

Martin Malloy - Johnson Rice

Samantha Hoh - Evercore ISI

Operator

Good morning, and invited to TETRA Technologies Fourth Quarter 2022 Results Conference Call. The speakers for today's telephone are Brady Murphy, Chief Executive Officer; and Elijio Serrano, Chief Financial Officer. [Operator Instructions] Please statement this arena is being recorded.

I would now for illustration to move nan convention complete to Mr. Serrano. Please spell up sir.

Elijio Serrano

Thank you, [indiscernible].Good morning, and convey you for joining TETRA's Fourth Quarter 2022 Results Call.

I would for illustration to punctual you that this convention telephone whitethorn incorporate statements that are aliases whitethorn beryllium deemed to beryllium forward-looking. These statements are based connected definite assumptions and study made by TETRA and are based connected respective factors. These statements are taxable to respective risks and uncertainties, galore of which are beyond nan power of nan company. You are cautioned that specified statements are not guarantees of early capacity and that existent results whitethorn disagree materially from those projected successful nan forward-looking statements.

In addition, successful nan people of nan call, we whitethorn mention to EBITDA, adjusted EBITDA, adjusted EBITDA gross margins, free rate flow, nett debt, nett leverage ratio, liquidity aliases different non-GAAP financial measures. Please mention to yesterday's property merchandise aliases to our nationalist website for reconciliations of non-GAAP financial measures to nan nearest GAAP measures.

These reconciliations are not a substitute for financial accusation prepared successful accordance pinch GAAP and arsenic should beryllium considered wrong nan discourse of our complete financial results for nan period. In summation to our property merchandise announcement that went retired yesterday, we promote you to mention to our 10-K that will beryllium revenge yesterday.

Brady I will move it complete to you.

Brady Murphy

Thanks, Elijio, and bully morning, everyone. Welcome to TETRA's 4th fourth 2022 net call. I'll summarize immoderate highlights for nan 4th quarter, remark connected nan existent outlook arsenic good arsenic provided an update connected our strategical initiatives earlier turning it backmost to Elijio to talk rate flow, moving superior and nan equilibrium sheet, liquidity and adhd immoderate colour to nan SK 1300 conception 19 economical study that we issued past night.

We closed retired a beardown twelvemonth successful 2022 pinch a beardown 4th fourth increasing gross sequentially 9% complete nan 3rd 4th and 42% for nan afloat twelvemonth complete 2021. Adjusted EBITDA of $20.3 cardinal accrued from $18.6 cardinal successful nan 3rd 4th and for nan afloat twelvemonth excluding market-to-market gains successful 2021. Our adjusted EBITDA for 2022 much than doubled, expanding by 112% complete 2021 pinch almost a 30% travel done connected incremental EBITDA to incremental revenue.

Despite immoderate headwinds during nan 4th quarter, that we mentioned that our past quarterly call, including nan postponement of axenic travel orders, and nan request to acquisition further bromine astatine spot marketplace prices, we much than overcame these challenges by capturing aggregate precocious separator completion fluid income successful an progressively and strengthening offshore market.

For nan mixed markets of nan Gulf of Mexico and our world offshore businesses we summation quarterly sequential gross by 20% and much than 50% year-on-year. The completion of our first UK Neptune occupation on pinch continued improvements to nan disrupted proviso concatenation for our European chemicals business contributed to our successful Q4 results were scheduled for different North Sea Neptune occupation successful nan 2nd 4th this clip successful Norway.

We proceed to judge we're entering a multiyear maturation rhythm for nan offshore markets and nan increases successful floater time rates, statement durations and subsea character orders are underpinnings for that belief. As a consequence of nan offshore deepwater marketplace attraction complete nan past 8 years definite oilfield services segments are already successful a tight proviso situation. This is why I opportunity that power services is projecting a 25% summation successful deepwater floater rigs by 2025.

In nan 4th quarter, we took steps to further fortify and grow our offshore completion fluids business pinch 2 cardinal investments pinch nan acquisition of nan North Sea completion fluids business and acquiring New Parks Completion Fluids inventory and deepwater guidelines successful Port Bucha and Louisiana, servicing nan Gulf of Mexico. These investments will summation TETRA's fluid capacity by 70% successful nan UK assemblage of nan North Sea and by almost 15% successful deepwater Gulf of Mexico operations.

Both operations contributed financially upon close, and astir 40% of nan acquired caller parkland inventory has already been sold. The conception results for completion fluids and products 4th fourth of 2022 gross of $66 cardinal summation from nan 3rd 4th of 2022 by 12%. Adjusted EBITDA of $16 cardinal accrued $1.3 cardinal sequentially, while conscionable nan EBITDA margins improved by 40 ground points sequentially erstwhile excluding connected realized gains and losses from some periods.

Shifting to our Water and Flowback conception revenues of $81 cardinal grew 52% year-on-year and 7% quarter-on-quarter, and a level nan somewhat down progressive frac fleet marketplace successful nan 4th quarter, somewhat owed to twelvemonth extremity weather. This marks nan seventh consecutive 4th of sequential gross increases and nan highest quarterly gross since nan 2nd 4th of 2018. Adjusted EBITDA of $12.1 cardinal improved by $5.2 cardinal aliases 75% year-on-year. Although adjusted 4th fourth EBITDA margins of 14.9% fell somewhat from Q3 chiefly owed to a operation of little separator services.

For nan afloat twelvemonth Water and Flowback gross for 2022 grew by 66% and adjusted EBITDA accrued by 191% for a autumn done a somewhat complete 25%. We achieved our target group for 2020 to a 15% adjusted EBITDA margin, pinch adjusted EBITDA of $43.4 cardinal aliases 15.5% of revenue. Growth was driven by superior investments made successful exertion to grow our fleet of TETRA sandstorms done world description from nan deployment of nan early accumulation accommodation successful Argentina and leveraging our investments successful automation by reducing operations unit astatine nan occupation site. We expect adjusted EBITDA margins to rebound successful nan first 4th and beyond for nan afloat twelvemonth of 2023.

International publication is besides expected to summation successful 2023 arsenic we bring online an further EPF successful Argentina successful nan 2nd quarter. To-date, nan 2 operating EPS person been operating accordant pinch expectations. For 2023 we will proceed to optimistically put successful caller superior projects pinch short word returns. But our attraction will beryllium connected EBITDA separator description and rate procreation unless each caller maturation arsenic we've achieved complete nan past mates of years.

As antecedently announced successful December, we're very pleased pinch nan results of our first section aviator task for desalination of produced h2o for beneficial reuse successful Texas for a awesome lipid and state operator. The results yielded arsenic precocious arsenic 92% desalinated h2o from nan reduced h2o pinch full dissolved solids beneath that of nan mean municipal pat water. The instrumentality has returned to our R&D installation and is undergoing further enhancements for a last commercialized works design. With nan caller and progressively seismicity events successful nan Permian Basin, on pinch expected summation successful produced h2o and disposal restrictions, we proceed to spot important customer liking successful produced h2o beneficial reuse, including mineral extraction.

Finally, successful nan 4th quarter, we continued to beforehand our strategical initiatives including nan method and financial study for nan improvement of our bromine and lithium brine resources successful nan smackover statement successful southwest Arkansas. We issued a property merchandise yesterday announcing nan advancement connected our bromine task pinch an SK-1300 conception 19 study disposable now connected our website for review.

A fewer cardinal points regarding this imaginable task that supports our continued efforts to afloat measure this assets development. Our existent agelong word bromine proviso statement has plentifulness of runway. So we will beryllium very methodical astir our information and finance decision.

As a reminder, nan inferred assets study provides estimates for some bromine and lithium wrong our targeted 5000 acres. And though our SK-1300 conception 19 study focuses connected bromine, 35% of nan estimated task CapEx successful our conception 19 study would beryllium for wells and pipelines for brine accumulation that would person some bromine and lithium successful nan brine. The projected bromine works arsenic portion of nan Hardgrove provender study would initially support 45% to 50% much measurement than our existent agelong word proviso agreement.

However, nan bromine building itself is designed to accommodate up to 150% of our existent proviso agreements. If nan aggregate conditions that are laid retired successful our property merchandise from yesterday are met that would support america moving guardant connected this task we could meet our projected lipid and state request for this upcoming offshore cycle, arsenic good arsenic what we judge to beryllium a blimpish estimate of nan power retention demand. Although methodical successful our evaluation, we are committed to putting up nan correct effort and correct resources to afloat research this important opportunity.

Finally advancement pinch our Woodlands Texas R&D halfway continues connected lithium extraction exertion arsenic we're establishing aviator units to reside each shape of nan process. Starting pinch our earthy smackover brine from our good successful Arkansas to occurrence simply producing a lithium carbonate, which we've already demonstrated astatine laboratory scale. We will proceed to pass our advancement arsenic this activity advances.

With that, I'll move it complete to Elijio to supply immoderate further commentary. Then we'll unfastened it up for immoderate questions.

Elijio Serrano

Thank you Brady. Cash from operating activities was nan usage of $7 cardinal successful nan 4th fourth while adjusted free rate travel from continuing operations pinch nan usage of $14 cardinal successful nan quarter. Accounts receivable accrued by $24 cardinal from nan extremity of nan 3rd 4th to nan extremity of nan 4th quarter, reflecting nan beardown ramp up successful activity by nan extremity of nan quarter, driven by immoderate ample fluid income successful December that Brady antecedently mentioned.

Working superior astatine nan extremity of nan twelvemonth pinch $101 cardinal and compares to $87.5 cardinal astatine nan extremity of nan 3rd quarter. Working superior consumed $18.8 cardinal of rate successful nan 4th fourth arsenic compared to a usage of rate of $8.6 cardinal successful nan 3rd quarter.

Capital expenditures were $7.2 cardinal and compared to $12 cardinal successful nan 3rd quarter. Total twelvemonth superior expenditures were $38 cardinal and bespeak nan investments made pinch speedy payback investments specified arsenic [indiscernible] Sandstorm filtration exertion and to fortify our agelong word position successful world and offshore markets to nan finance successful early accumulation accommodation successful Argentina and summation capacity for our short completion fluids business.

The payback connected this connected nan sandstorms successful nan early accumulation accommodation was very evident if our quarterly EBITDA margins summation materially successful nan 2nd half of nan year, compared to nan first half of 2022. In 2023, we expect to execute beardown gross maturation connected little CapEx investments while monetized overmuch of nan accounts receivable that was built astatine nan extremity of nan year. These combinations will consequence successful important free rate travel procreation successful 2023. Capital expenditures successful 2023 is expected to beryllium beneath wherever we expended successful 2022. At nan extremity of nan 4th quarter, unrestricted rate was $14 cardinal and readiness nether our in installments agreements was $72 million.

As of yesterday, liquidity had improved by nan extremity of nan twelvemonth by $10 cardinal to $95 cardinal pinch nary borrowings nether our existing plus based lending facility. Long word indebtedness pinch a September 2025 maturity is $156 million, while nett indebtedness is $143 million. Net indebtedness nett leverage ratio was 1.99 times astatine nan extremity of nan 4th quarter. Outstanding borrowers nether our word indebtedness person been reduced by complete $57 cardinal from $220 cardinal September 30, 2020 to $163 cardinal arsenic of September 31, 2022.

In summation to nan liquidity and rate I mentioned earlier, we are holding immoderate important marketable securities. We're presently holding 400,000 shares of modular lithium, pinch a marketplace worth of astir $1.7 cardinal based connected yesterday's closing price. We do not person immoderate restrictions connected trading nan shares. We expect to person different 400,000 shares successful May. We are besides holding astir 5.1 cardinal communal units of CSI compressed code, pinch a marketplace worth of astir $7 cardinal based connected yesterday's closing price.

We besides don't person immoderate restrictions from trading this communal units. And our finance successful CarbonFree is presently weighted astatine astir $6 million. This 1 is not publically traded. The full of these investments is somewhat little than $15 million. Recall that successful precocious 2021 we sold nan 1.6 cardinal shares that we had accumulated successful modular lithium is somewhat nether $11 per share, generating almost $18 cardinal of rate proceeds.

Also arsenic a reminder, we accumulated astir $411 cardinal of taxation nonaccomplishment carryforwards successful nan United States that tin offset early taxable income. In summation to nan $411 cardinal of national nett operating nonaccomplishment carryforwards we besides person important authorities income taxation nonaccomplishment carryforwards and immoderate world taxation nonaccomplishment carryforwards. This will go very important arsenic we proceed to amended our profitability allowing a higher conversion of nett income to rate flow.

In 2022, we generated complete $11 cardinal of pre-tax income and paid income taxes overseas but nary U.S. income taxes. These taxation nonaccomplishment transportation forwards will besides beryllium valuable to america arsenic we look for profits from our Arkansas bromine and lithium investments successful nan future.

I for illustration now to walk a fewer minutes connected nan different property merchandise that we issued past night. Brady mentioned that immoderate of nan activity that we person been focused upon utilizing a important magnitude of soul and outer resources person been accomplished.

We are taking a very methodical and measurement process to measure our Arkansas assets. I want to beryllium judge that our investor guidelines afloat understands this process is location are nary imminent important investments to beryllium made. We'll purpose to beryllium very transparent arsenic we spell done various gates. We antecedently announced that we had completed an inferred assets study. We estimated nan imaginable magnitude of bromine and database them connected our database acreage. And inferred assets is 1 that is based connected constricted sampling, and is based connected reasonably presume but constricted information.

Sample mightiness see information that is publically available. Previous geological maps and good information from nan surrounding area let for reasonable assumptions astir nan size and scope of this resource. We drilled a trial good successful 2022, that allowed america to seizure incremental information points, different than to make immoderate expenditures to further measure this assets, we would not make immoderate important finance decisions simply connected nan ground of an inferred assets study.

One measurement up from an inferred assets is an parameter assets study aliases nan quantity, people and quality, shape, size and contiguity tin beryllium much confidently reported. We are drilling a 2nd good to get to this stage. Then nan adjacent measurement is simply a awesome assets which represents nan highest level of geological knowledge and competence successful a resource. At this stage, nan assets characteristics are good established to elaborate and reliable exploration work. Economic and method factors tin beryllium much competently applied. Mining and accumulation readying tin springiness much elaborate estimate of economical viability. The economical study we published connected our website yesterday is from nan inferred assets analysis, from nan reservoir modeling that we person done, and from a beforehand extremity engineering instrumentality study we did pinch a 3rd statement engineering firm.

The economics are preliminary and location is nary certainty that nan economics contained successful nan study will beryllium realized. However, nan result was specified that it gives america assurance to put astir $5 cardinal to get to nan adjacent stage, inclusive of nan 2nd trial good and further economical assessments. Note that nan stages that I conscionable mentioned each get astatine an estimated resource, each pinch a greater grade of confidence, and each pinch incremental information points.

To move from resources to reserves further activity is required beyond proving nan quantities of minerals disposable to us. To move from resources to reserves, we now request to do further engineering economical appraisal to show that we tin return this resources and commercialize them successfully. Inferred mineral resources are considered to person nan lowest level of geological competence of each mineral resources. Inferred mineral resources person a precocious grade of uncertainty arsenic their beingness and to whether they tin beryllium economically aliases legally commercialized. A important magnitude of exploration activity must beryllium completed successful bid to find whether inferred assets mineral tin beryllium upgraded to a higher category.

The quality betwixt a assets and a reserve comes down to a feasibility study, which takes into relationship non-geological factors. These see method factors, which see extracting nan brine and processing nan bromine. This besides includes further economical planning, specified arsenic item engineering design, and biology accusation analysis. Our reserve is nan finest pop-up successful economical extraction tin beryllium justified. Our reserve is defined arsenic proven erstwhile economical extraction is justified.

Our adjacent measurement is to stitchery incremental information points to move from inferred to indicated and to complete a feasibility study. This will return respective months. From present we tin person much assurance that we tin successfully from an economical constituent of view, proceed pinch an finance successful wells, pipelines and a processing plant. The truth that Lanxess and Albemarle are doing precisely what we are evaluating gives america assurance that we are apt to person a successful task if and erstwhile we make a determination to move forward. And arsenic a reminder, nan process and past what knowledge has been successful believe for galore years, and nary caller technologies aliases processes request to beryllium developed to execute what we're after.

The section study we completed pinch nan engineering patient estimated that nan costs of nan wealthiness assets of brine, inject a leftover aliases nan tail brine build nan pipelines and conception nan brine to bromine processing installation could beryllium astir $280 cardinal inclusive of $35 cardinal of contingencies and inclusive of astir an estimated $20 cardinal of activity to let america to upsize nan installation successful nan early for imaginable higher volumes of bromine processing.

And arsenic Brady mentioned earlier, nan $99 cardinal identified for wells and pipelines. We extract and move nan brine tin besides beryllium utilized for lithium successful nan future. Thus $280 cardinal entailed an finance that includes what we judge to beryllium important contingencies. Investments laic nan groundwork to summation accumulation successful nan future, and arsenic good arsenic successful pipelines that tin leverage early lithium production.

The bromine scheme arsenic we mentioned successful our property merchandise has a multipurpose focus. The first measurement to summation nan magnitude of costs effective bromine disposable to TETRA supra nan volumes presently disposable to america from our agelong word statement to reside an expected multiyear maturation successful nan offshore lipid and state marketplace assuming commodity prices stay comparatively constant. TETRA is already experiencing an summation successful request that exceeds measurement disposable nether agelong word proviso agreement.

The 2nd is to reside emerging request for zinc bromide based artillery storage, which whitethorn beryllium important TETRA axenic for customers are successful successful ramping up their operations. The 3rd is to trim TETRA's dependence connected unfastened marketplace acquisition 3rd statement purchases of bromine by producing bromine and perchance materially little accumulation costs. And nan 4th and last nonsubjective will beryllium to power our ain proviso concatenation for nan longer word and beyond nan life of our existent multiyear agreement, we still person respective years to go.

We besides mentioned that we person engaged successful finance banking patient to thief america place imaginable strategical partners should we make nan determination to perchance proceed aft completing an indicated assets study pinch a feasibility study to move from resources to reserves.

At this point, we person not made a determination to proceed pinch this investment. The economics based connected preliminary activity look charismatic for america only to move to nan adjacent shape of study and to scope retired to place imaginable partners. The determination to partner pinch personification will beryllium based connected whether we place imaginable partners pinch nan building we judge it's due for TETRA successful our investors.

Given nan size of nan finance required and realizing we will not put excessively overmuch leverage connected TETRA's equilibrium sheet. We judge identifying imaginable strategical partners will beryllium nan champion way forward. We are besides successful preliminary discussions pinch nan Department of Energy discussing opportunities for loans and grants for our bromine project.

The last point I for illustration to adhd is that we'll beryllium participating astatine nan Scotia Howard Weil Conference adjacent Tuesday, hosting 1 connected ones and making a position Tuesday day that will beryllium webcast. If you'd for illustration to participate, please scope retired to maine aliases Brady. Again, I promote everyone to publication our news merchandise that we issued yesterday. The bromine task study we posted to our website and nan 10-k that we revenge yesterday for each nan supporting specifications and further financial and operational metrics. Please telephone maine if you would for illustration to talk immoderate of these items further.

I will move it backmost complete to Brady for closing comments.

Brady Murphy

Thank you, Elijio. To recap 2022 Not only did our guidelines business execute very well, but we've besides made important investments successful our business to grow our net guidelines successful nan coming years. Over nan past respective quarters, we've astir doubled our fleet of TETRA Sandstorm precocious cyclone exertion which remained astatine a very precocious utilization. We've besides invested successful world markets nan deployment of EPS arsenic good arsenic our completion of fluids business description .

And we person invested to boost our capacity successful nan Gulf of Mexico to support expanding deepwater activity. While accrued offshore activities already contributing very meaningful to our earnings. Significant upside remains pinch deepwater projects owed CS Neptune offering. As Elijio mentioned, we expect to execute beardown maturation and '23 complete 2022. That coupled pinch our attraction connected separator description and rate procreation to thrust meaningful rate travel procreation successful 2023. We're excited and committed to afloat evaluating nan Arkansas brine resource, and we'll proceed to pass updates arsenic appropriate.

With that, we'll unfastened up to questions.

Question-and-Answer Session

Operator

Thank you. We will now statesman nan mobility and reply session. [Operator Instructions] Our first mobility comes from Martin Malloy pinch Johnson Rice. Please spell ahead.

Martin Malloy

Good morning.

Brady Murphy

Good morning.

Martin Malloy

Good morning. I want to inquire bully morning. I want to inquire astir nan offshore completion fluids marketplace and surely seems for illustration there's a inflection constituent present and activity going on. Could you possibly talk astir nan pipeline and nan visibility arsenic you talk pinch customers and possibly successful peculiar connected nan Neptune product?

Brady Murphy

Yes. Martin So arsenic we mentioned, we covered our first UK Neptune job. We've antecedently performed Neptune occupation some successful nan Gulf of Mexico and successful Norway. We person different Norway task that we scheme to beryllium executing successful nan 2nd quarter. And really, our nonsubjective has been to get much repetitive projects successful our business, arsenic opposed to nan lumpiness that we've seen successful nan past, and I deliberation we're getting immoderate traction pinch that, surely successful nan North Sea. And I deliberation we expect to person much repetitive jobs successful nan North Sea business. The Gulf of Mexico, obviously, these are overmuch larger projects, those 4 pipelines, wherever we're very engaged pinch our customers connected those projects. We whitethorn spot immoderate projects travel guardant successful earlier nan extremity of this year. But it's much apt that we won't spot a meaningful uptick successful our Neptune opportunities until we get into nan '24 and beyond.

Martin Malloy

Great, convey you. And my 2nd question, want to inquire astir your flow. And your expertise to ramp up assuming that your customers are capable to summation capacity and throughput and get nan authorities backing that they're looking for. Can you possibly talk astir your expertise to ramp axenic travel and immoderate further CapEx would beryllium required?

Brady Murphy

Yes. Our expertise to ramp up accumulation of PureFlow done our West Memphis installation we request very small to nary superior astatine our West Memphis accumulation facility. We person plentifulness of capacity astatine that plant. The rumor really for [careful] longer word is nan ramp up and power storage, if our customers are successful, arsenic you noted successful ramping up nan request levels were beautiful dramatically transcend our existent proviso statement for bromine, which is 1 of nan reasons why we're looking truthful cautiously astatine our Arkansas task and nan timing of that Arkansas task arsenic it relates to nan success, imaginable occurrence of our Pureflow customers because if they are successful based connected nan request opportunities that are there, it will person a meaningful effect to nan bromine market.

Martin Malloy

Great, convey you. I'll move it back.

Operator

The adjacent mobility comes from Stephen Gengaro pinch Stifel. Please spell ahead.

Stephen Gengaro

Thanks. Good morning, everybody. Morning. Two things for me. And pardon if you perceive inheritance sound because I'm successful a lobby of a hotel. So I'm sorry astir that. When we deliberation astir nan 4th was evidently very bully connected nan apical line. And I was arsenic I started to deliberation astir nan progression going forward. Was location thing successful nan 4th that I should beryllium benignant of contemplating arsenic I deliberation astir sequential capacity successful nan first 4th of 2023? And possibly successful summation to that, really should we deliberation astir nan h2o and flowback business if we fixed benignant of a plateauing successful North American activity correct now?

Brady Murphy

Yes. Yes Steven I will screen nan h2o travel backmost first. I'd mentioned we've had important maturation successful this business for us, rather frankly, nan gait of maturation that we achieved successful 2022 good exceeded nan market. And erstwhile you turn for illustration that, you typically return connected immoderate costs, and it's difficult to beryllium arsenic businesslike arsenic you would for illustration to beryllium pinch your business. And that caught up a small spot pinch america successful nan 4th quarter, immoderate of it was a operation rumor wherever we dropped somewhat connected our margins, but we afloat spot a rebound to backmost to expanding margins arsenic we spell guardant successful Q1 and beyond for nan afloat year.

I deliberation from a separator expectation, we would build connected nan 2nd half of nan margins for our h2o and travel business, nan activity that you saw. So we consciousness beautiful bully astir that, arsenic good arsenic getting further publication from international, peculiarly Argentina, arsenic we get afloat years of maturation and margins from nan 2 EPS that we person deployed arsenic good arsenic a 3rd 1 that is owed to travel online successful astatine nan extremity of nan 2nd 4th commencement of nan 3rd quarter.

So we afloat expect to turn successful 2023 based disconnected nan investments that we made successful 2022 contributions from world but besides get backmost to expanding our origins arsenic we person them. Probably nan completion fluid broadside of nan business successful Q1. But past erstwhile nan marketplace tin stay strong, there's ever a small spot much lumpiness successful larger projects that travel and spell and nan completion fluid side, but we consciousness highly good positioned to return advantage of this marketplace arsenic we spell done nan afloat twelvemonth of 2023.

And there's thing exceptional astir nan Q1 comparative to our Q4 that I would note. We do scheme to ramp up successful our emblematic 2nd 4th pinch our TCE European chemicals business. That business has recovered very nicely, not backmost to 100% yet owed to nan proviso concatenation disruption that we had. But we are good connected our measurement to getting backmost to that conscionable successful clip for our 2nd 4th ramp.

Stephen Gengaro

Thank you. And past 2 different things. One beautiful straightforward. Do you deliberation nan target for 100 cardinal EBITDA successful '23 is reasonable? That's not your target nan streets target I mean that's successful nan ballpark? You think.

Elijio Serrano

We're going to refrain from providing I'm sorry, we're going to refrain from providing afloat twelvemonth guidance. We judge that there's still excessively galore economical factors that move astir it unpredictable, specified arsenic nan caller driblet successful nan value of state that is retired there. So we won't beryllium commenting connected afloat twelvemonth guidance.

Stephen Gengaro

Okay, acknowledgment Elijio and past 1 for -- erstwhile we deliberation astir your opportunities, and obviously, you person a mates of really breathtaking things going connected correct now. If we're sitting down successful 24 months, and it's nan opening of 2025. Where would you spot nan company? Like what do you deliberation are nan biggest cardinal drivers of net and really do you? What do you envision for TETRA 2 years down nan road?

Brady Murphy

Yes. So I mean, I deliberation we're very pleased pinch nan existent position of our 2 business segments. I deliberation our h2o and flowback business moreover though frac activity whitethorn person plateaued some, we still person a sizeable maturation opportunities connected nan produced h2o broadside peculiarly pinch our desalination, and beneficial reuse and mineral extraction. I deliberation that's a full caller marketplace that nary 1 is benefiting from today. And we really deliberation we person a really bully activity position successful that abstraction to nan use from whether it's 24 months, whether it's 48 months that will beryllium remaining to beryllium determined, but nan opportunities are there. And we consciousness bully astir our expertise to lead successful that effort. On our completion fluid side, arsenic I said, I deliberation we're nan early stages of a really beardown offshore market. I deliberation our Neptune projects will beryllium hitting pinch a higher cadence, surely successful that play of time.

And I'm hopeful that our Arkansas task will beryllium afloat evaluated. And we will person met nan criteria that we've listed to move guardant pinch that project, which if we're successful pinch that, and that projects approved, will beryllium somewhat crippled changing for nan company.

Stephen Gengaro

Thank you. I'll get backmost successful line.

Operator

Next mobility comes from Tim Moore pinch EF Hutton. Please spell ahead.

Tim Moore

Thanks. And it was bully to spot nan elaborate preliminary economical appraisal connected nan bromine project. My first mobility Elijio, really should we deliberation astir free rate travel procreation anticipation for this twelvemonth that you could you won't person arsenic overmuch moving superior drain aliases superior expenditures arsenic nan past Latin American projects. But possibly you could person a small spot much calcium chloride proviso build up. Just benignant of wondering is 30 cardinal free rate travel successful nan realm of anticipation fixed each nan puts and takes?

Elijio Serrano

So we expect EBITDA '23 to beryllium supra '24. We expect superior expenditures to beryllium little '23 versus '22. While we will beryllium pleased to spot a spike successful yearend activity, for illustration nan extremity of 2020, for illustration we saw astatine nan extremity of '22. We don't deliberation that's going to happen. So we deliberation moving superior will beryllium neutral, worst case, affirmative champion case. So we expect that we will beryllium powerfully free rate travel affirmative successful 2023.

Tim Moore

Yes. That's helpful. And you reported nan measurement imaginable for nan bromine task compared to your agelong position apply. It was bully to spot that it was 45% to 50% more. Can you springiness america immoderate unsmooth group consciousness of possibly really overmuch little your costs of bromine could beryllium aft nan project's done, I don't know, a twelvemonth retired aft it's proficient and operating well, compared to your proviso now. I mean, we talking for illustration a 30% savings.

Brady Murphy

Yes Tim. We -- for competitory reasons, we're not giving nan specifics connected that. Hopefully, you tin show from nan financial accusation that we included successful our economical appraisal what nan profitability of nan task could beryllium if we're successful. But we're not giving circumstantial specifications connected bromine costs aliases acquisition prices that pay.

Tim Moore

Understood. I had to try. But I heard your comments earlier. [indiscernible] has mentioned, possibly I misunderstood that did you expect to walk 5 cardinal much for benignant of a 2nd shape drilling and immoderate consciousness of possibly what your exploration pre-development costs could beryllium this year, and I judge they were 6.6 cardinal past year.

Elijio Serrano

So we're going to drill an exploration well, that's astir apt going to tally into $2.5 cardinal to $3 cardinal range. But we person immoderate different efforts that we scheme to footwear disconnected this year, perchance a pre feasibility study, immoderate further engineering that is accounted for successful our afloat fund for this twelvemonth for our consultant. Our volition is really to guarantee we get to an indicated assets report. We've sewage 1 good scheme for that. And we're hopeful that that will beryllium capable accusation to get america to an indicated assets report. But until we drill that good and get nan results location could ever beryllium different well, we whitethorn person to get that to yet get there. But that's our expectations.

Tim Moore

That's helpful. Thanks for that color. And I’m conscionable funny connected how's that caller automated drill retired exertion going and erstwhile do you deliberation possibly those income could beryllium worldly figure? Do they footwear successful much outpouring aliases summer?

Elijio Serrano

Yes. We really person a batch of liking successful that unit. We, astatine this point, because of nan superior associated pinch a term, we're astir apt only going to do return aliases salary for agelong word contracts for that portion we are successful discussions pinch respective operators successful that regard. But that's an area we're going to beryllium ensuring we person agelong word commitments earlier we commencement putting further superior into it. And we deliberation we'll get there. But those are ongoing discussions.

Tim Moore

That's helpful. And past conscionable lastly, my past mobility is connected nan desalination and nutrient water. I'm ever funny astir this. I've sewage a 2 portion question. Is location immoderate update connected nan regulatory agencies reappraisal and imaginable support timing and past it besides sounds for illustration you've learned a fewer things, doing that pilot. Just wondering if you tin elaborate connected that you refine nan membrane sizes for pretreatment, aliases do immoderate mini tweaks that are showing amended efficiency?

Brady Murphy

Right. So connected nan regulatory side, it's evident that each usability of nan produced h2o is going to person to get their ain permits for nan produced h2o projects. The task that we activity connected pinch our pinch our aviator task is successful process. We've seen nan requirements for nan regulatory and we consciousness very assured that our exertion will meet those requirements, but each usability is going to person to spell done a permitting process earlier we tin deploy a desalination portion to nan project.

As acold arsenic nan aviator goes itself, nan membrane technologies, whether it's nan KMS, aliases nan precocious [indiscernible] that we person negotiated agreements pinch performed highly well, [indiscernible] successful this case, nan pretreatment besides performed well, but we've sewage to do immoderate section worthiness and benignant of agelong word works creation upgrades to some chiefly nan pre-treatment. That's beautiful captious to nan process. And that's nan shape that we're performing correct now earlier we would beryllium fresh to return connected a agelong word plan.

Tim Moore

Good to know, thanks. That seems for illustration that's progressing well. That's it for my questions.

Brady Murphy

Thanks, Tim.

Operator

Your adjacent mobility comes from Samantha Hoh pinch Evercore ISI. Please spell ahead.

Samantha Hoh

Hey, guys, truthful astir of my questions been answered, but I wanted to drill down a small spot much connected this nutrient h2o initiative. So you mentioned that each usability needs their ain licence for their ain projects. I'm benignant of wondering really you're reasoning astir that, successful position of arsenic you do commencement to deploy this technology? Are you taking a akin exemplary arsenic for illustration really you deploy nan sandstorm exertion wherever you're conscionable going to lease it. Or do you request to partner up pinch ample shaper to person much scale, arsenic you commencement to rotation retired that caller initiative?

Brady Murphy

Yes. Samantha, bully morning. So, each project, I think, is going to beryllium very circumstantial to that operator. I deliberation you're going to spot projects scope from a 10,000 tube a day, which will beryllium a smallish project. But again, this is simply a 10, 15 year, 20 twelvemonth perchance type of scheme and up to perchance 100,000 barrels a time aliases more. And truthful and nan superior costs associated pinch each of those are going to beryllium very different. Whether nan customers will money nan superior for nan projects aliases we will money them if they're smaller, we're going to return that connected a lawsuit by lawsuit ground Samantha, based connected really we spot nan opportunity and nan operators that benignant of business agreement.

Samantha Hoh

Okay. And past you benignant of mentioned that there's still a batch of uncertainty retired location mostly pinch state activity. I'm benignant of wondering wherever your vulnerability is connected nan U.S. onshore broadside for state isn't beautiful easy conscionable to like, move immoderate of that sandstone fleet and hoses astir to for illustration an oily basin?

Brady Murphy

Yes. So we do person a bully cognition successful nan Marcellus. TETRA has been location a agelong time, pinch a beardown Water business and a Flowback business. We person not seen immoderate meaningful results aliases changes yet. But it's thing we're going to support an oculus on. The bully news is that our request for each of our assets, whether it's h2o flowback aliases sandstorms are each very precocious successful nan Permian aliases South Texas, aliases mid Qcon wherever again, we person beardown marketplace positions. I'm not concerned astatine each astir moving those assets if we request to, but truthful far, we haven't seen immoderate worldly alteration that would warrant that type of movement.

We don't person a large beingness successful nan Haynesville. So little vulnerability connected that, but we person plentifulness of different marketplace extracurricular of nan Marcellus that if we do spot thing back, we'll be, we deliberation we'll beryllium successful awesome shape.

Samantha Hoh

Okay, and past if I could conscionable compression 1 much in. I'm benignant of funny connected nan deepwater completion fluid side, for illustration you guys been, truthful benignant to supply nan breakout of fluid gross mix. I was wondering if you had a akin type of pastry chart, for example, for nan separator trends for illustration is it a akin type of profitability, depending connected nan 3 different for illustration successful markets that you guys use to connected nan fluids business? And past really do you position for illustration your marketplace stock amongst for illustration nan offshore for illustration nan deepwater rigs, for example? Can you supply immoderate benignant of, for illustration stock based connected nan information for us?

Brady Murphy

Yes. Samantha truthful for deepwater I deliberation we gave an illustration successful our property merchandise yesterday our squad estimates astir 70% of nan deepwater wells successful nan Gulf of Mexico arsenic an example, require a bromine based completion fluid. And we person we estimate we person a astir a 30% marketplace stock of nan what we telephone precocious worth completion fluids, which typically incorporate bromine and that would beryllium North Sea heavy h2o deepwater. That would beryllium Gulf of Mexico deepwater. That would beryllium a Brazil deepwater. A small little truthful successful different markets, but overall, we deliberation we person a very beardown position pinch our what we telephone precocious worth completion fluids business. If that's helpful. On nan separator side, I'm not judge we would stock nan specifications of a breakdown, family breakdown of our products. If I understood nan mobility correctly. Was that nan question?

Samantha Hoh

No, that's ace helpful. Thanks truthful much.

Brady Murphy

Okay.

Operator

The adjacent mobility is simply a travel up from Martin Malloy pinch Johnson Rice. Please spell ahead.

Martin Malloy

Thank you conscionable had 1 travel up CarbonFree. I saw nan announcement that they made pinch respect to collaborating pinch BP connected processing solutions for business facilities. Anything to study location successful position of nan imaginable request for calcium chloride from for these type of projects?

Brady Murphy

Yes. We saw nan announcement arsenic well. And we cognize caller nan CarbonFree had been moving pinch BP for immoderate clip is really 1 of our investors successful CarbonFree. And we proceed to prosecute very cautiously pinch CarbonFree arsenic they look for nan deployments of their plants. I cognize you person a enactment successful touch pinch their CFO rather a spot immoderate update from your side?

Elijio Serrano

Yes, truthful CarbonFree from our speech pinch them continues to make advancement pinch their aviator plant, whether nan creation of technology. Clearly nan announcement pinch BP is further endorsement of their technology. We judge that their adjacent measurement is to unafraid nan due capital, past motorboat their program. And erstwhile they get to that stage, we expect to participate from them pinch them. But practically speaking, we deliberation that immoderate important calcium chloride income to them is still rather a spot retired a minimum of a twelvemonth earlier they person immoderate important impact.

Martin Malloy

Thank you.

Operator

Again, [Operator Instructions] This concludes our question-and-answer session. I would for illustration to move nan convention backmost complete to Mr. Murphy for immoderate closing remarks.

Brady Murphy

Thank you very overmuch for your joining america connected our call. That concludes our Q4 net call. Thank you.

Operator

The convention has now concluded. Thank you for attending today’s presentation. You whitethorn each now disconnect.