Good morning, and thank you for joining TETRA's First Quarter 2023 Results Call. The speakers for today's call are Brady Murphy, Chief Executive Officer; and Elijio Serrano, Chief Financial Officer. I would like to remind you that this conference call may contain statements that are or may be deemed to be forward-looking. These statements are based on certain assumptions and analysis made by TETRA and are based on several factors. These statements are subject to several risks and uncertainties, many of which are beyond the control of the company. You are cautioned that such statements are not guarantees of future performance and that actual results may differ materially from those projected in the forward-looking statements. In addition, in the course of the call, we may refer to EBITDA, adjusted EBITDA, adjusted EBITDA gross margins, free cash flow, net debt net leverage ratio, liquidity or other non-GAAP financial measures. Please refer to yesterday's press release or to our public website for reconciliations of non-GAAP financial measures to the nearest GAAP measures. These reconciliations are not a substitute for financial information prepared in accordance with GAAP and should be considered within the context of our complete financial results for the period. In addition to our press release announcement that went yesterday, we encourage you to also refer to our 10-Q that we also filed yesterday. I will now turn it over to Brady.

Thank you, Rigo, and good morning, everyone. Welcome to TETRA's First Quarter 2023 Earnings Call. I'll summarize some highlights for the first quarter, discuss our near-term market outlook and provide an update on our strategic initiatives before turning the call over to Elijio to discuss first quarter financials and provide an update on our second quarter financial outlook. With the exception of some one-time legal and employee benefits costs, first quarter results were in line with our internal expectations, including stronger EBITDA margins in both of our segments. Adjusted EBITDA, excluding gains or losses on investments, increased by 6% quarter-over-quarter and by 8% year-over-year and was the highest adjusted EBITDA since the first quarter of 2020. Revenue from our international locations grew by 9% from the fourth quarter, including strong performance by our European industrial chemicals business, where operations have nearly returned to pre-Russia-Ukraine conflict levels, coupled with stronger pricing. Revenue from international markets grew by 17% as compared to the first quarter of 2022, driven by stronger activity in Latin America as well as the contribution from strategic investments announced at the end of last year. We recently completed another completion fluids investment, this one in Brazil, that will more than double our deepwater operational capacity ahead of the well-communicated growth in the deepwater Brazil market. With the Brazil expansion, we have now completed our investment plans for our key offshore market expansions that also includes the Gulf of Mexico and North Sea. As mentioned in our first quarter press release, we feel these investments are very well timed to support our significant revenue and adjusted EBITDA projections for the second quarter. If realized, our second quarter projections will be the highest revenue quarter for our Completion Fluids segment since the third quarter of 2015, when there were more than 50% more active deepwater rigs operating globally. The outlook in the international and offshore markets remain strong. And as communicated previously, we feel we're still in the early days of a longer-term deepwater market upcycle. Our strong second quarter forecast reflects the most recent capacity investments, market share gains from our recognized service performance as well as innovation leadership, such as CS Neptune. The combination of these has positioned us very well for this upcycle. Domestically, despite near-term volatility in commodity prices, particularly natural gas, we remain encouraged in the resiliency of activity and continue to expect double-digit growth for our overall Water & Flowback Services segment in 2023. While TETRA does not have significant exposure to the gas markets, we believe the softness in those markets will be balanced by growth in the oil basins and our continued market share gains in production-based services, including water recycling and sand management with TETRA SandStorms. Our strategic priority for 2023 is to continue driving margin expansion, maximize returns on capital and generate meaningful cash flow. Now turning to the segments. Completion Fluids & Products first quarter 2023 revenue of $69 million increased 4% sequentially despite significant projects that had previously moved up from the first quarter of '23 into the fourth quarter of '22. Adjusted EBITDA of $18 million increased $2 million sequentially, with adjusted EBITDA margins of 26.1% compared to 24.2% in the fourth quarter of 2022. Adjusted EBITDA margins improved by 110 basis points sequentially when excluding unrealized gains and losses from both periods. For the quarter, we benefited from strong sales in the Middle East and positive manufacturing variances across all of our plants. As a reminder, we estimate that 70% of the deepwater wells completed in the Gulf of Mexico use bromine-based completion fluids. So the deepwater activity increase that we are seeing globally is resulting in very high demand for our high-value bromine-based completion fluids, which includes TETRA CS Neptune. We're currently executing a CS Neptune job in Norway and feel there is a high probability we will execute a second North Sea CS Neptune job during the quarter. Our market-leading European industrial chemicals business is nearly back to pre-Russia-Ukraine conflict levels and is well-prepared for the seasonal second quarter activity peak contributing to the strong second quarter forecast. Shifting to our Water & Flowback Services segment, revenues of $77 million improved $20 million or 36% year-on-year while adjusted EBITDA of $12.9 million improved by $4.7 million or 57% year-on-year. Revenue decreased $4.1 million or 5% quarter-over-quarter due to the timing of certain customer completion schedules. Water & Flowback Services adjusted EBITDA margins of 16.7% improved 180 basis points as we execute on our strategic priority of margin expansion. Market penetration and customer adoption of our differentiated SandStorm advanced cyclone technology continue to improve as revenues associated with this product offering grew by 40% as compared to the same quarter last year. In addition, we signed an agreement with a valuable customer to supply a fleet of SandStorms for their production facilities, which is a new application and new market avenue for growth. Based on our current utilization and discussions with key customers, we expect to remain at near sold-out levels throughout the year on 20% higher average fleet count versus 2022. The third early production facility in Argentina is expected to come online in the second quarter. We continue to drive operational efficiencies and automation in our water management businesses, all of which support double-digit growth for the year and our goal of achieving adjusted EBITDA margins from the range of 18.5% to 20.5% by the end of the year. Our water desalination initiatives also continue to progress as we're making engineering improvements to our proprietary pretreatment process that feeds our exclusive desalination technologies. We are targeting to complete a commercial plant design by the end of this year. Finally, in the first quarter, we continue to make good progress on our low carbon energy initiatives. We're currently drilling a delineation well on our estimated 5,000-acre section in Southwest Arkansas with the intent to improve the accuracy of our lithium and bromine resource estimates and progress from a bromine preliminary economic assessment towards a feasibility study. We also continue to evolve our long-duration energy storage electrolyte formulation to include chemistry beyond the zinc bromide pure flow component to cover the broader electrolyte chemistry. Additionally, we are also in the process of selecting an engineering, procurement and construction contractor for a Front-End Engineering Design or FEED study for our lithium project, which has an estimated inferred resource of 234,000 tons of lithium carbonate equivalent. As a reminder, TETRA decided to approve a development project for lithium, bromine or both, the capital required for the wells and pipelines would support the production of brine with both minerals where the inferred resource report lists an average of 416 milligrams per liter of lithium and 5,370 milligrams per liter of bromine. With that, I'll turn it over to Elijio to provide some additional commentary, then we'll open it up for questions.

Thank you, Brady. Cash flow from operating activities was $9 million in the first quarter compared to our cash used in operating activities of $7 million in the fourth quarter of last year. Adjusted free cash flow from continuing operations was a use of $3.7 million after funding capital expenditures of $12.5 million. The first quarter has traditionally used cash on the timing of property tax and employee incentive cash bonus payments for the prior year. In the first quarter, we received $2.85 million in cash proceeds for an insurance settlement on a prior year claim. We did not include this $2.85 million of proceeds in our free cash flow nor in adjusted EBITDA for the quarter. Inventory expanded in the first quarter in anticipation of the second quarter seasonal peak in the European industrial chemicals business. Working capital at the end of the first quarter was $109 million. Working capital consumed $5.3 million of cash in the first quarter as compared to a use of cash of $18.8 million in the fourth quarter of last year. At the end of the first quarter, unrestricted cash of $17 million and availability under our credit agreement was $69 million. Liquidity at the end of the first quarter was $86 million, a slight improvement over the fourth quarter. Long-term debt with a September 2025 maturity was $163 million, while net debt was $144 million. Our net leverage was 2.0x at the end of the first quarter. In addition to the liquidity and cash I mentioned earlier, we are also holding marketable securities. We received another 400,000 shares of Standard Lithium, bringing our total share count to 800,000 shares with a market value of approximately $2.7 million based on Friday's closing price. We are also holding approximately 5.1 million common units of CSI Compressco with a market value of approximately $6.2 million, also based on Friday's closing price. We don't have any restrictions on selling the CSI Compressco units, the 400,000 Standard Lithium shares we received in April of last year. Our investment in CarbonFree is currently valued at approximately $6 million, which is now publicly traded. Combined, these investments totaled slightly less than $15 million. The earnings power of both of our segments is continuing to strengthen. And as highlighted in Brady's remarks, we anticipate further revenue growth and margin expansion in the second quarter. Based on current visibility, we anticipate revenue in the second quarter to be between $165 million and $175 million, income before taxes to be between $11.5 million and $13.5 million. And adjusted EBITDA to be between $27 million and $30 million compared to $21 million in the first quarter. This excludes any impact from gains or losses on investments. Total year 2023 capital expenditures are projected to be between $30 million and $35 million. Please note that we are providing second quarter guidance given the expected material sequential change that we are anticipating. Going forward, we do not expect to provide annual or quarterly guidance unless we expect to see a significant or material change in our quarterly performance. We would also point out that the second quarter forecast includes offshore fluids projects. They moved from the first quarter into the second quarter and approximately $12 million to $15 million sequential revenue increase due to the seasonality of our calcium chloride business in Northern Europe. In the third quarter, we expect to see an equal downward change in our European industrial business. Our adjusted EBITDA margins for our European calcium chloride business approximate our total segment margins. The strong ramp-up in our European business and the strong deepwater fluids activity are expected to generate significant free cash flow in the second half of the year as we convert inventory to accounts receivable and then monetize those receivables in the second half of the year. With respect to the process we discussed on our last call to seek strategic partners to develop our Arkansas assets, we continue to work with identified potential strategic partners and with the Department of Energy for our bromine project. We will not be publicly commenting on the progress of those discussions until we have something definitive to announce. All the engaged counterparties, etc. are under confidentiality agreement, and we intend to respect those. I'll turn the call back to Brady for closing comments before we open it up to questions.

Thank you, Elijio. So in closing, we're off to a good start for the year and anticipate a very strong second quarter. While the outlook remains positive for the markets in which we operate, we will continue to execute on our strategic priorities of increasing margins and cash flow with steady progress on the engineering and economic feasibility of our Arkansas bromine and lithium resources. We've invested in international markets via the deployment of early production facilities as well as expansion of our completion fluids businesses in the midst of a deepwater market recovery. These investments made during the last several quarters are well-timed and are already contributing to our earnings base while driving returns on capital. With that, I'll open the call up for questions.

Our first question comes from Martin Malloy with Johnson Rice.

My first question, I wanted to ask about the water technology. Could you maybe give us a little bit of an overview in terms of the competitive environment, how differentiated it is? And I thought I heard you say you expect to have a commercial plant by the end of this year. Is there a targeted customer for that plant?

Yes, Martin. As previously announced, we have signed exclusive technology agreements for the oil and gas industry related to water desalination with both KMX and Hyrec. Each technology serves different applications: the KMX unit is designed for higher TDS levels, while the Hyrec unit targets mid to lower solidity markets. Our pilot project conducted earlier this year was very successful, sponsored by one of our key customers. We are currently working on engineering improvements to TETRA's proprietary front-end treatment of the fluid prior to utilizing the technology I mentioned. We are confident that we will complete these engineering enhancements. Additionally, we are planning a scale project, as the initial pilot utilized a smaller unit, and scaling these operations will require further engineering. By the end of the year, we aim to have a commercial plant design finalized, and we are optimistic about securing a contract, either with our current customers or with other engaged and interested clients in this technology field. We are in a strong position due to our agreements and expertise in treating produced water and brines. That is our current situation.

My follow-up question is about Neptune. I'm trying to understand the market opportunities in 2024, particularly in regions like the Gulf of Mexico where there is higher revenue potential per well. Can you also discuss other markets? Is there potential beyond the Gulf of Mexico, such as in the North Sea or Brazil?

Yes. So what we're seeing right now is the North Sea is kind of leading the way in terms of the new opportunities for us. And as we've stated previously, the North Sea jobs are typically smaller volumes. So they are smaller compared to the Gulf of Mexico, which are very large volumes. As it relates to Gulf of Mexico, we have several projects that we are tracking with customers. It's possible that we could execute a well before the end of the year, but very likely that will fall into 2024, and then there are a series of potential projects, longer-term deepwater projects Gulf of Mexico that we're hopeful for. But nothing at this point that we can give a specific date for. So right now, those two markets are driving the Neptune opportunities. Brazil's market has some potential. But for the most part, the pressure levels in Brazil are not as high as what we see in the Gulf of Mexico, North Sea, and some other markets that we think would be a big CS Neptune. Now it's a big market for our normal completion fluids business, but not necessarily a big market for Neptune opportunities.

The next question comes from Stephen Gengaro with Stifel.

I have two main points to discuss. First, looking at the bigger picture for the second half, it seems from your comments that there is a $5 million EBITDA headwind expected in the third quarter compared to the second quarter. This appears to be influenced by the European calcium chloride business and some volume that was pulled from the first quarter into the second quarter. Based on your observations so far, do you anticipate that growth in the underlying businesses will help mitigate at least part of that headwind?

Yes. We believe that the facility for early production coming online in Argentina will begin in the second quarter, and obviously, it carries into Q3 and Q4. We believe that the progress that we're making, moving more towards the production side, cleaning water on the onshore side will continue to give us progress. And we're just seeing an overall strong market on the deepwater side. Especially on the completion fluids' side. So we think there's an opportunity to mitigate some of the seasonal drop in Q3 from Q2.

Okay. And then my other question is probably a two-parter. But when you think about the IRA and some of the regulations around electric vehicles in the U.S. as far as critical minerals being sourced domestically. Has that impacted your thinking or potential partners' thinking on moving forward maybe more rapidly with the lithium side of the projects in Arkansas?

Yes. Steve, there's no question. And I would add to that, the recent news of nationalization of the lithium business in Chile, the lithium business in the U.S. is going to be a very important market and a booming market in the future. I think for our project, there's a certain cadence we have to follow. We have to prove up the resource level. We're doing that now as we're drilling our second well. But there's no question in my mind that the bromine, which is also used in electrical vehicles for the fire-retardant side of things as well as the lithium asset that we have. If we're able to prove those assets up, I think we're in very good shape as it relates to identifying a partner to work with, but we still have to complete that exercise. But we're very optimistic about the future outlook for that for our business.

Just a quick question about PureFlow. Based on what we're hearing from the Eos side, it seems like a late 2023 and early 2024 event when we can expect to see the revenue from that stream. Would you agree with that perspective?

Yes. We don't want to get ahead of Eos because we're pretty well tracked their forecast. So we'll let them communicate to the market what that looks like. But I mean, you can assume our increase in PureFlow. And quite frankly, some broader electrolyte components that we have developed will track Eos' demand.

Next question comes from Tim Moore with EF Hutton.

Thanks for providing second quarter guidance in details. From Water & Flowback specifically, what could be the aspects or swing factors that could cause the difference between the bottom end and the top end of the EBITDA margin guidance of 18.5% and 20.5%? Is it more driven by the early production facilities in Argentina? Or is it more driven by the SandStorm fleet?

There are several factors contributing to this. First, our team is focused on improving margins. They have implemented various initiatives to enhance automation and remote monitoring, which will help reduce personnel costs at well sites. We also discussed using SandStorms for purposes beyond sand filtration for new wells coming online and for early production facilities. I believe these three factors will primarily drive margin enhancement. Even if we see a slight decrease in gas-related drilling activity, most of our business is centered around oil. So, a small pullback in gas could lead to increased competition from the gas sector to the oil sector, but we are confident that our internal initiatives can address this effectively.

And as a follow-up to an earlier question regarding CS Neptune. It's very interesting that you might be executing two jobs in the same quarter with different customers. Can you just maybe provide a little more color on your line of sight for additional Neptune products over the next 12 months where we know there could be maybe one in the Gulf of Mexico starting helpful next year. But if you could talk about anything else.

Yes. Tim, we are really pleased with the momentum we are beginning to see in the North Sea. We have always recognized it as a strong market for Neptune. It has taken us some time to complete the necessary testing and introductions with customers, but we are now witnessing that progress. There is a clear path for Neptune jobs, particularly in the U.K. and Norway segments of the North Sea market. The Gulf of Mexico is where we initially launched Neptune with some significant projects, but following the market collapse and deepwater market decline, those opportunities have been on our radar without much progress. However, we are starting to see those projects move forward. I believe there is a chance we could execute a job by the end of this year, though it is more likely to occur in 2024, and we are optimistic that these will also be multi-well campaigns. That's all we can share at this stage.

That's helpful, Brady. And just maybe switching gears to your bromine development project evaluation. Just theoretically, if the Board and you approve the project after the feasibility study comes out, whatever that might be, September. How many months later do you think you can maybe begin construction of that project? Is there a long lag or could it be a couple of months later?

Yes. We have already been identifying the long lead items and components. We have a strong understanding of the timeline, and if we receive Board approval for this project, we will be ready to launch the long lead items and move forward with the plant project right from day one.

Tim, the key thing we want to work on is that we're not going to over-leverage the company. We're not going to put debt on TETRA that would put us at risk in case there's a change in the market. So now it's also a matter of finding the right strategic partner to source some of this capital as part of our process.

No, that sounds great. I like the color on that in minimizing the leverage impact. But I mean NPV and IRR is just quite attractive and amazing. Elijio, I know you mentioned some of the earlier comments about free cash flow. It sounds like it's second half timing. How should we think about the June quarter? Are some of those remaining extra drilling costs for the bromine project, do they fall mostly in the June quarter? Or will some of them fall in the September quarter? Was that something like $5 million? I can't remember the exact total. I know you only spent less than $1 million in the March quarter.

Yes, the flow will probably be somewhere around half of that number. And most of it we expect to fall into the second quarter. Now with respect to free cash flow, we convert inventory into in the second quarter in our European business. And then we begin those collections in June but primarily in Q3. That's why we expect strong free cash flow in the second half of the year. And we earlier published a list of the deducts to arrive at free cash flow. We'll let you make your own total year EBITDA assumptions. But that list of deducts that we published in our investor presentation remains good to give you a sense as to what we think we can achieve in free cash flow this year.

Great. That's helpful. My last question is regarding the sales guidance for calcium chloride in the second quarter and the anticipated decline in the third quarter. However, it seems that your press release indicates a strong confidence in your inventory and sourcing preparations. As you look ahead to the second half of the year, are you securing some backup suppliers? Should we assume that calcium chloride sales will increase year-over-year this year, considering some supply chain challenges from last year?

That's correct. We expect calcium chloride in the industrial business to be up sequentially. Also recognize that we do sell calcium chloride throughout the year in Europe. But obviously, the peak is always in the second quarter. What our European operations normally do is as soon as the peak season ends in June, they start gradually building inventory from July all the way into March of next year to meet that peak demand, but they do continue to sell some decent volumes each quarter leading up again to the peak of the year.

The next question comes from Samantha Hoh with Evercore ISI.

I have a quick question about the Brazilian acquisition where you're increasing capacity for completion fluids. That sounds significant. Could you provide more information about the Brazilian market's historical performance for your company? It hasn't seemed like a major contributor in the past, so it would be helpful to understand what doubling capacity there would mean.

We have been operating in the Brazil market for some time and have announced several significant awards over the past year, leading to an increase in our market share that is now testing our capacity limits. The Brazilian market is expected to see a meaningful increase in activity, prompting us to seek additional capacity. Fortunately, we found some favorable capacity that aligns well with our existing deepwater plant, making the acquisition a perfect fit. While this market hasn't played a major role in TETRA's business historically, we anticipate it will become a much more significant part of our operations moving forward.

Okay. Great...

I'm sorry. As you mentioned, it hasn't been a significant part of TETRA's business in the past, but we anticipate it will become a much more important aspect of our business moving forward. Sorry, I didn't mean to interrupt you.

Not at all. The other question I had was about the contract for SandStorm. I was wondering how that works in terms of providing a dedicated fleet to a customer. Do you need to add units? And what is the visibility like for those units in terms of the contract you signed?

Yes. So the one we had mentioned, Samantha, is a unique application. We have not contracted with a customer before on their actual production facilities. As you know, our flowback technology, our SandStorm technology is normally at the well site, where the flowback is. We're taking sand out of the flow stream as the oil and gas and sand is produced on location. This actual project is putting the SandStorms with customers' production facilities, which is way further downstream because they just don't want any sand at all getting into their production facilities. And so this is a new application. That's a long-term contractual agreement. I expect these types of agreements will take on either long-term lease arrangements or in some cases customers may even want to buy these SandStorms as part of their production facilities. But this is a new market for us. And so it's still a little bit early days, but it's obviously got some significant potential for us.

Okay. And then just one last one. I believe you were expanding capacity in Europe for your chemicals business. Is that all like on track to contribute this quarter? And any sort of things that we should look out for or be mindful of that would cause any sort of interruptions in the Europe business?

So we had announced, I think the year before last that we were going to expand capacity in our calcium chloride business, and that was right before the Ukraine-Russia conflict sort of slowed down everything. As we see business ramping up, we're ramping up into a production opportunity here, where now we've got the capacity to produce beyond the volumes that we're producing in calcium chloride in Northern Europe. Then we also mentioned that we had done a small acquisition to support our fluids business. The first quarter is where we got the first 3, 4 months of benefit of having that business perform and it performed above our expectations. So those two expansions, one on the industrial chemical side, which we have not yet fully exploited; and one on the completion fluids side that we're now seeing the full benefit on.

The next question is a follow-up from Stephen Gengaro with Stifel.

When considering your equity holdings in CCLP and a small amount in another entity, how do you assess those? Is there any consideration of selling them to reduce debt?

Our objective is to do what we did with Standard Lithium: try to hit the peak and then sell at peak. We believe that our investments in Standard Lithium or investments in CSI Compressco today do not reflect the value that is attainable for those companies. So at this point, we have a higher expectation that we're going to monetize it. We are not yet having to source capital to build our Arkansas assets. You can imagine that as we go through that process, that will be a source of capital available to us. And as you mentioned, not big, big numbers. But $50 million is not something to sneeze at.

Yes. Okay. And how do you think about your target leverage ratio?

Yes. We prefer that in difficult times, we're no worse than 2.5x. And in solid times to where earnings are being maximized with significant investments already behind us, closer to 1.5x. So that's the band that we would like to stay with. We don't see us going above 2.5x to monetize or to bring our assets in Arkansas to market.

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Brady Murphy for any closing remarks.

Thank you very much for participating in our first quarter 2023 earnings call. With that, we will conclude the call. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.