Good morning, and welcome to TETRA Technologies Fourth Quarter 2023 Results Conference Call. Please note this event is being recorded. I will now turn the conference over to Rigo Gonzalez. Go ahead.

Thank you, Joel. Good morning, and thank you for joining TETRA's Fourth 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, including projections, financial guidance, profitability, and estimated earnings. These statements are based on certain assumptions and analyses made by TETRA and 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, returns on net capital employed, 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. In addition to our press release announcement, we encourage you to refer to our 10-K that we also filed yesterday. I will now turn it over to Brady.

Thank you, Rigo. Good morning, everyone, and welcome to TETRA's fourth quarter earnings call. 2023 was a historical year for the company. And despite higher-than-usual year-ending activity slowdowns in a few of our segments, we are seeing good activity recovery in the first half of 2024 and expect another year of growth. For 2023, we achieved numerous historical financial highs, but also achieved some strategic milestones that will benefit the company for many years to come. Our full year 2023 adjusted EBITDA, excluding mark-to-market, of $106 million, grew by 37% from 2022 and was nearly 3x higher than that of 2021, as both of our segments posted another year of strong returns. Our full year 2023 adjusted free cash flow of $41.1 million was 61.6% higher than 2022 and was slightly above our guidance from the beginning of the year, representing approximately a 40% conversion rate of adjusted EBITDA to adjusted free cash flow. This was achieved despite significant investments made in Arkansas and investments made to finalize the engineering design for our first ever commercial produced water for beneficial reuse project, a solution that we believe will be disruptive for the industry in transforming oil and gas well produced water from a waste into an important resource. Our strong 2023 adjusted EBITDA growth was achieved despite little contributions from TETRA CS Neptune and TETRA PureFlow, which we believe will be catalysts for further growth in 2024. For the full year, our Completion Fluids & Products segment grew revenue by $40 million or 15%, while adjusted EBITDA grew $22 million or 32%, representing an EBITDA fall-through of nearly 55%, driven by a strong performance in our industrial chemicals business and growth in our international offshore completion fluids operations. Full year Completion Fluids & Products revenue of $313 million was the highest since 2015, when we completed two large TETRA CS Neptune projects in the Gulf of Mexico. Our industrial chemicals business posted a historical year, achieving its highest revenue and adjusted EBITDA in our history. With 2023 revenue growth over '22 of over 18%, our Industrial Chemicals business is now 22% of the company's total revenue. And as we ramp up deliveries of zinc bromide-based electrolyte in the coming years, we expect this percentage to continue to increase. Our diversity and product offering, including grades for technology and food and superior product quality, allows us to participate in a wide range of markets and applications, as evidenced by our recent entry into the lithium production process in South America and chip manufacturing process in the United States. Our leading market positions in Northern Europe and the U.S. give us stable markets in which to operate with predictable revenue and earnings and strong free cash flow, allowing us to reinvest in our new high-growth opportunities. For Energy Services, total revenue attributed to offshore projects increased 11% year-over-year, and we anticipate another double-digit top line growth in 2024 as our pipeline of offshore projects continues to build. We have already recovered the investments made in recent years, where we strategically expanded capacity in key deepwater offshore markets and expect to continue to generate positive momentum in those markets. We have the intention to build our inventory levels to capture the upcoming growth in deepwater activity. Although floater utilization shows increasing rig availability through 2024, we expect operators will continue to exercise outstanding options and/or continue to recontract rigs currently under contract. Market utilization is expected to peak in 2028 at 91%, due to steady growth in project development activity. TETRA is well positioned to benefit from this multiyear growth trajectory. Our outlook for TETRA CS Neptune continues to improve, and we've secured a second quarter job in the North Sea, and we are in early discussions with two different supermajors for projects in the Gulf of Mexico that are scheduled for late 2024 or early 2025. Earlier this month, the executive team and I visited Eos' state-of-the-art automated manufacturing line at the Akros, Wisconsin facility, and came away with high confidence they will deliver to Eos' requirements. Earlier this year, Eos announced that it expanded its partnership with TETRA and designated the company as its preferred strategic supplier for the full electrolyte of its Z3 long-duration energy storage cube. The company was previously only providing TETRA PureFlow zinc bromide solution, which is only a portion of the full electrolyte. The evolution of increasing TETRA's participation with Eos from such a TETRA PureFlow to the full electrolyte will be accomplished without the need for incremental bromine and is a good fit within our chemistry expertise. TETRA is expected to supply a minimum of 75% of the total electrolyte product demand going forward, and we anticipate deliveries to be meaningfully higher than 2023, mostly in the second half of the year. This relationship and the timing of their expected growth also dovetails nicely with our Arkansas bromine production plants. Turning to our Water & Flowback Services segment. Despite declining rig activity and active frac fleets for most of 2023, all 2023 revenue was up $33 million or 12%, and adjusted EBITDA was up $10 million or 23%. The majority of the growth was driven by continued market share gains and high utilization within our fleet of TETRA Sandstorm and an increasing part of our business dealing with produced water, which despite declining U.S. drilling and completion activity in 2023, is only increasing along with oil and gas production. The market share gains and benefits of shifting our focus to production, rather than drill bit, can be seen by our 2023 revenue exceeding that of our previous high in 2018, but with 50% less rig activity. These market share gains were achieved as we improved our adjusted EBITDA margins from 15.5% to 17% in 2023. The international business, mainly Argentina, also drove some of the revenue increase. And although we strategically sold one of our EPS in the fourth quarter, we anticipate earnings to be flat year-over-year in that region. As previously mentioned, these projects are longer-term contracts with established day rates, which also provide a steady stream of cash flows. Over the last several years, we have deployed significant growth capital in this segment to build out our fleet of TETRA Sandstorms, introduce new technology to help drive efficiencies, increase our capacity for water treatment and recycling, and investments in EPS to grow beyond North America. These investments are paying off, as demonstrated by our improvement in return on net capital employed, as we expect that they will continue to drive higher returns. As we move forward with this segment, we will continue to invest in technology and automation, but we'll maintain our focus on returns rather than additional growth, as we plan to divert much of the growth capital to Arkansas and our produced water for beneficial reuse projects. In November, a 5.2 magnitude earthquake was recorded in the Permian Basin, marking the fourth strongest recorded in Texas. Just within the past few weeks, earthquakes over 4.0 magnitude were reported in New Mexico, South Texas, and Oklahoma. As earthquakes become more frequent and intense in areas of produced water disposal, regulators have increased the sense of urgency to limit volumes of produced water disposal and find alternative solutions. Multiple agencies across multiple states are now very active in defining regulatory specifications for using produced water for industrial, farming, and other applications. TETRA is engaging with regulatory agencies as well as operators to ensure our solutions will meet these requirements. We met our year-end target date to complete the engineering design for our first commercial produced water for beneficial reuse project. We are currently in advanced negotiations with one of the largest U.S. oil producers for their beneficial reuse project and have entered commercial discussions for a second high-salinity Permian Basin demonstration project. We are on track to deploy our first commercial project in the second half of this year. Lastly, in 2023, we significantly advanced our Arkansas lithium and bromine brine project. In June, we announced an MOU with Saltwerx LLC, a wholly owned subsidiary of ExxonMobil, to pull both of our acreage to form the Evergreen Brine Unit, which was subsequently and unanimously approved by the AOGC in September. In the fourth quarter, we launched and completed a technical resource study for the Evergreen Brine Unit, which advanced our prior inferred resources to include the measured and indicated category, reflecting higher confidence in the resources evaluated by the study. The study highlighted the highest lithium concentrations to date of any lithium brine resource in the U.S., for which an SK-1300, NI-43-101 or JORC-compliant technical report summary has been published. I'm also pleased to announce that yesterday, we closed on a 120-acre plant site that is ideally located just south of Stamps, Arkansas, that is within our 35,000 leased acres and 1 mile north of our Evergreen Brine Unit. We are currently performing soil sampling before planning to break ground later this year. Finally, we're currently focused on completing the lithium feed study as well as finalizing the negotiations for operating joint ventures and/or joint development agreements relating to the development of the Evergreen brine unit. Based on that report, plus the engineering studies that were previously completed, we were able to secure the remaining finances required to complete the bromine processing facility once we get to FID, which we expect to be later this year. Now I'll turn it over to Elijio to provide some additional commentary on the successful financing and our financial results. Then we'll open it up for questions.

Thank you, Brady, and good morning, everybody. 2023 was a strong year for TETRA. Adjusted EBITDA was up 37% and operating income was up 183%. Adjusted EBITDA margin of 17.1% increased 300 basis points year-over-year. More importantly, we generated over $40 million of free cash flow in 2023. We also significantly improved our balance sheet, ending the year with a net leverage ratio of 1.1x and a 27% reduction in net debt. As of February 26, liquidity was $212 million, inclusive of the $35 million delayed draw feature that is available to TETRA for the bromine project. In addition, based on Friday's closing prices, our holdings in Standard Lithium and CSI Compressco combined for a total market cap of approximately $12 million, and these investments can be monetized as necessary. Subsequent to the end of the quarter, we refinanced, extended, and expanded our term loan at a more attractive interest rate than our prior term loan, further strengthening our balance sheet and providing us the flexibility to execute on our growth initiatives. We were very pleased with the reception we got on the refinancing, which we reached out to a significant number of potential capital providers, including those in the oil and gas, mining, and chemicals sector, and received interest from over 60 capital providers. We received 11 term sheets, and 5 of those wanted on their own to help us refinance the entire term loan without partners, providing us the capital to help us with the bromine initiative and indicating a strong interest in supporting us with the required capital for the lithium initiative. In talking to those in the industry, getting 5 term sheets from capital providers willing to take on the entire opportunity on their own, plus another 6 willing to be part of a consortium is rare for a small or mid-cap oilfield services company in today's environment. We believe this demonstrates the value of a company like TETRA, with over $100 million of adjusted EBITDA, a leverage ratio of 1.1x, free cash flow of over $40 million, and working with a partner like ExxonMobil, plus an Industrial Chemicals revenue base of $130 million, not subject to the fluctuations of the oil and gas industry, plus our history of being free cash flow and EBITDA positive in the last two downturns, makes us an attractive partner to raise capital. Our term loan was refinanced 50 basis points below our prior term loan and the maturity is now January of 2030. Our balance sheet is nicely set to invest in lithium and bromine in Arkansas. Given our current liquidity, expected free cash flow in 2024 and 2025, plus the $75 million delayed draw feature available to us, we believe we have the capital necessary to complete the bromine project without having to issue equity. Our focus will now shift towards finding the capital for our 49% of the expected lithium joint venture with ExxonMobil. Just like we did with the bromine project, our objective is to source the capital for lithium without relying on the equity market. We will evaluate project financing at the JV level and government loans and grants for a portion of the lithium project. From an outlook perspective, we expect 2024 revenue, adjusted EBITDA, and free cash flow to be above 2023. Our base business free cash flow in 2024 is expected to be better than 2023 before investments in bromine and the lithium project in Arkansas. We don't expect our Arkansas investments in 2024 to be more than the free cash flow we generated from our base business, and we don't expect to use our delayed draw revolver until 2025. We believe we remain on plan to be generating revenue and EBITDA from the bromine and lithium projects in 2026. We also expect a ramp-up in electrolyte sales into the stationary battery storage market in the second half of 2024. We also expect to be generating revenue and EBITDA from the first desalination project in the second half of 2024. These will be the catalyst to our 2024 being stronger than 2023. In the first quarter, we expect Water Management to be stronger than the fourth quarter, due to the ramp-up in fracking activity that we saw earlier this quarter. We expect flowback services to be weaker in the first quarter, relative to the fourth quarter, as the flowback lags Water Management and fracking by 2 to 3 months. The sum total of this is Q1 Water Management and Flowback services EBITDA should be comparable to Q4, but stronger in the second quarter as flowback services rebounded from the stronger first quarter fracking activity. Also, remember that in the second quarter, we see a seasonal peak in the Industrial Chemicals business in Northern Europe, which has historically added approximately $50 million in revenue Q2 over Q1 and has added between $4 million and $6 million in EBITDA Q2 over Q1. We expect the second quarter of 2024 to be at or above the second quarter of last year. From an Investor Relations perspective, we have several events coming up to help us further communicate our initiatives. We will be hosting one tomorrow at the Scotia Conference in Miami. Northland Capital, who initiated coverage on TETRA last month, will be hosting us for a virtual fireside chat on March 14. And we will participate in a non-deal roadshow in New York City, Philadelphia, and Boston in the first week of April. Please reach out to me if you would like to participate in any of these events. The strong performance by our base business, our long-duration battery storage opportunity, and our lithium arrangements with ExxonMobil have created strong industry interest in TETRA. We now have 6 research analysts covering TETRA up from just a couple of years ago. I'll turn this back to Brady for closing comments before we open up our call to questions.

Thanks, Elijio. We're ending 2024 with a strong and growing base business, a solid balance sheet, over $210 million in liquidity, with a constructive outlook for our products and services. We anticipate further growth in '24 and expect to continue to generate strong free cash flow from our base business to fund our strategic growth investments. A combination of these plus advances in our produced water beneficial reuse solution, our Arkansas resource position, and strategic partnerships provides us with the opportunity to continue to drive long-term shareholder value. While '23 was a historical year for the company, we anticipate '24 to be both historic and transformational. With that, we'll now open up to questions.

We will now begin the question-and-answer session. The first question comes from Martin Malloy with Johnson Rice.

Congratulations on a strong 2023 and the free cash flow generation. My first question is about the timeline for the bromine project's capital expenditures and the expected amounts for the associated wells and pipes. I believe I heard that the final investment decision for the bromine project is planned for later this year.

Sure. Sure, Martin. I'll take the first part of that and then maybe ask Elijio to talk about the capital outlay. But as far as timing goes, as you know, we completed the bromine FEED study last year. And we have been layering over that FEED study with the lithium FEED study because they will be on the same plant site. And obviously, there are some synergies that we can gain by having two plants on the same site, which we mentioned we just closed on yesterday, 120 acres just south of Stamps, Arkansas. And so we hope to have the bromine cost analysis completed within the next couple of months, so that we can take that proposal to the Board with updated economics and get approval to move forward with the bromine portion of that project. The lithium, as you know, is with our JV partner or hopefully to be a JV partner. That one we think will follow after the bromine FID, probably late Q3, potentially Q4, and then we are obviously working with them once we get our final agreements in place to decide how the funding of that will be handled. And with that, I'll ask Elijio to give some more comments.

Yes, Marty, with respect to the capital for the bromine side, we'll start placing orders for long lead items. We'll begin and finish doing the detailed engineering design, and then we'll begin doing a lot of the civil work during this year. We don't expect a significant amount of the construction to begin until next year. On the lithium side, once we and our partner agree to approve the project and move forward, any investments that we make, remember are going to be shared between us and our partner. The sum total of all those is that expenditures this year, we believe, will be below the free cash flow that we generate from base business, keeping us from borrowing any on the delayed draw or our ABL facility this year.

And my follow-up question, I wanted to ask about the desalination of water reuse plant. Could you talk about ownership and CapEx related to it? And what the finished water after it comes out of this plant is expected to be used for?

Sure. So a couple of pieces of that question. In terms of this particular project, our first project, the way we are outlining responsibilities for the project, we will own the desal technology and equipment that is on location. Our partner will be providing the capital for the civil works and the site construction costs. So it will be a bit of a combined offering, but this is a multiyear targeted for over five years type of project, targeting between 20,000 and 25,000 barrels per day of produced water for desalination. Now the specifications of that water, if you remember, Marty, we completed last year a pilot project using the same technology, where we were able to desalinate 92% of the brine produced water inflow to freshwater specifications that ourselves and the regulators would meet the current regulatory environment and ourselves and our customers are very happy with. So that’s the commercial design that we have now built. And as I said, will be shared, we’ll be owning the equipment and the technology and our partner will be owning the site and civil works for that particular location.

Your next question comes from Bobby Brooks with Northland Capital Markets.

I kind of want to stick with the beneficial produced water project. So seems to continue to progress really nicely. And that's the most near-term of the emerging revenue opportunities you’re pursuing. Could you remind those some of those key milestones achieved so far? Obviously, you touched on those preliminary results last year. And then secondly, maybe could you talk about the next steps investors should be watching for on this project? And maybe just talk about the size of the opportunity and how you would anticipate you scale into it.

Certainly. Let me summarize the journey we've undertaken to reach this point. You may recall that about a year to a year and a half ago, we announced two strategic partnerships that are essential to our overall desalination solution. We selected Hyrec for reverse osmosis technology that aligns with our requirements, alongside our proprietary pretreatment technology, which we believe offers the best solution for lower total dissolved solids, around 60,000 parts per million and below, suitable for locations like South Texas and Colorado, but not for the Permian Basin where total dissolved solids are much higher. For that region, we partnered with KMX. Both partnerships utilize vacuum distillation technology and grant us exclusive rights for applications in oil and gas produced water beneficial reuse. Our pretreatment is critical, especially given the complex minerals and organics present in the fluids, distinct from desalinating ocean water. We have made significant progress with both partnerships, conducting extensive testing of produced water samples from various customers at our research facility. We are currently in negotiations with a major North American oil producer to develop a commercial project design and proposal for South Texas. This represents our first commercial project currently under discussion, which we anticipate will commence in the second half of the year. That same customer is also informed about our efforts concerning higher TDS levels in the Permian Basin using KMX technology. We are now discussing the launch of a pilot unit employing that technology and our pretreatment for the Permian Basin, which we also expect to initiate this year. We aim to have a full commercial production unit and a pilot commercial unit operational in the Permian. Interest from customers is significant given the current market conditions, making these two projects our immediate priorities.

Understood. Turning to the Industrial Chemicals segment. Destocking was a headwind in the fourth quarter, but you mentioned in the press release that in the second quarter, '24, you're expecting to see that traditional Northern European industrial chemical demand ramp up. Is there any more color on why you expect that rebound? And maybe just talk about the visibility you have on that trend in terms of destocking headwinds following?

Yes. So last year, as we mentioned, was a historical high for our industrial chemicals business. I think we said it grew 18% year-on-year, highest revenue and EBITDA numbers we have seen in that business. But we did see some year-end destocking, as customers kind of rebalanced their purchases with year-end targets to a higher level than probably than we have seen in past years. But we're very pleased to see that the start of the year reversed that trend quite sharply, and the order flow has been very consistent in the upward direction. As Elijio said, we expect Q2 to be very much in line with expectations. But we're also seeing, again, continued offshore completion fluids activity churn. It's a little lumpier, obviously, than our industrial chemicals business, so we can see more fluctuations quarter-by-quarter, but we expect the first half of 2024, in our completion services business, to be above the first half of 2023 at a double-digit pace. Combined with our industrial chemicals, it gives us a strong first half of the year outlook.

Okay. And just so I'm clear, first half '24 for completion fluids, above first half '23 at a double-digit pace. Did I hear that correctly?

That's correct.

Okay. And then last one for me, sticking with the completion fluids business, highest revenue, highest EBITDA since I think you mentioned since 2015, when you guys completed two large CS Neptune projects in the Gulf of Mexico. Could you maybe just remind us how many CS Neptune projects you did in 2023 and maybe just give some directional color on where that goes in 2024?

Yes, sure. So the Neptune jobs, we did have some jobs in the North Sea, but they are typically smaller volume jobs and sometimes it's difficult to actually see the impact of those jobs from the North Sea perspective relative to a normal large calcium bromide job, for instance, in the Gulf of Mexico. We're very pleased with the trend we're seeing in terms of our outside of the Gulf of Mexico Neptune. It's just that they're typically smaller jobs than what we see in the Gulf of Mexico. The jobs in the Gulf of Mexico are quite different due to the volume of the fluid. The jobs that we referenced in 2015, I think they were on the order of $15 million to $20 million each. Those are the types of jobs that we have in the Gulf of Mexico. We don't know what the jobs that we're currently in discussions with will be of that size or magnitude because we're still in early discussions with those customers, but it just gives you a sense of the types of size and scale of those jobs versus the North Sea. But we're simply very pleased to see the traction we're getting with the technology, and we know that activity will follow over the years.

Got it. I appreciate it, Brady, and look forward to hosting you guys on the upcoming roadshow.

The next question comes from Kurt Hallead with Benchmark.

I appreciate all that detail and info. So just Elijio, you gave some indications here that the first quarter may start off a little bit light, particularly in the water and flowback part of your business. But as you look out for the rest of the year and you kind of look at, I guess, the consensus EBITDA numbers out there at $120 million plus, do you have a good line of sight as to the progression that you feel confident that you can get to at least $120 million in EBITDA for the year?

Yes. I won't comment on the actual total year number because six months down the road is a long way down the road. I did say earlier that the combination of electrolyte sales into the stationary battery market plus the desalination and the deepwater activity, especially the projects Brady made reference to, give us confidence that 2024 is going to be stronger than 2023 for us.

Okay. All right. So I'm kind of curious in the context of your report that indicated that resource potential was three times your prior report. Can you put that into context for us, and how does that alter how much you think you might have to invest to ramp up production or get your facility going? Is it significantly larger requiring more capital?

So I'll speak to the resource and then touch on the capital and if Elijio wants to add any more. If you recall, initially, Kurt, we had applied to the Arkansas oil and gas—were preparing to apply— to the Arkansas Oil and Gas for our own acreage that TETRA had held, which was I think between 4,500 and 5,000 acres that we had applied for a unit. Right before that, our partnership evolved with ExxonMobil, and we decided to combine acreage for a larger unit. Right now, that unit is the Evergreen unit with 6,138 acres. An expansion of the original lithium in place, but more importantly, the lithium concentrations after we completed the Evergreen #1 well was well above expectations in terms of the concentration. The reservoir rock quality turned out to be exceptional as well. So all those factors combined, when you look at the resource report for lithium today versus what it was initially when we did our inferred study a couple of years ago, it’s nearly three times the volume. Volume of lithium translates into how much brine has to be processed, which also translates into financials. So again, we're quite encouraged by what we see. In terms of the capital, that's still under evaluation. We don't have a firm number to be able to provide yet. That's part of the FEED analysis that's ongoing. We think the synergies of having a bromine plant and a lithium plant on-site managed by one partnership are going to show some very attractive financials on both sides of the equation there.

And Kurt, I'll add that the upstream work, the work that we're doing with the source wells, the disposal wells, and the pipelines to move the brine from the wells to and from the processing facility is shared. So pulling brine is going to feed both the lithium and the bromine projects, also creating significant synergies on the upstream side.

Got you. Yes. Focusing on the emerging growth opportunities you have, again, on lithium, desalination, and reuse, you're supplying those electrolytes into the better energy storage systems. It looks like you have some revenue opportunities on the battery storage front coming. How many do you anticipate for this year, with some desal revenue opportunity beginning this year? What do you think the first revenue could be for lithium?

First revenue for lithium is more likely in late 2026 or early 2027 at this point.

Next question comes from Patrick Ouellette with Stifel.

It's Pat on for Stephen Gengaro. Given the U.S. land outlook right now, do you think you can grow the Water business faster than activity? And then on the margin side, during 2023, you had strong margin progression in the Water business. Obviously, fourth quarter dropped off a bit. Just curious how you could think about this as a high-teens margin business going forward or more around the levels seen in the fourth quarter?

Yes. So I'll take that and ask Elijio to add some color. If you look at our business, as I've mentioned, relative to rig count, we exceeded our revenue in 2023 over 2018, which was our previous high, by 12% on 50% less rig count. That shows an ability to continue to grow in a period of declining completion activity. A lot of that has to do with technology that we've deployed. The SandStorm has gained significant market share, continues to gain market share in North America. So that continues to be a growth catalyst for us. We won't get the benefit of the significant benefit of the desal project in 2024, but we still expect growth in our Water & Flowback segment in '24 over 2023. And then hopefully, as things progress with our desal, we would see a step change in desalination revenue in 2025.

And Pat, I'll add on the margins, to your question on the margins. We have spent quite a bit of time on automation and reducing the number of personnel at the well site. We've also focused aggressively on introducing technology that we believe creates some barriers to entry against some of our local and regional competitors, such as with the SandStorm technology. Just to give you a sense, a couple of weeks ago, I was out in the Permian Basin, and we had one of the largest produced water treatment jobs going on. We’re operating it with one person on site. The amount of revenue that we're generating relative to the number of personnel we have today versus what we had several years ago is a step change. The combination of those is what we think will make this EBITDA margin business, it will be in the high teens.

All right. That's helpful. This relates to an earlier question. So apologies if you had explicitly laid this out; I was just struggling to make out what you were saying. As we think about the global deepwater market, you noted that revenue attributable to offshore projects increased 11% year-over-year and expectations for continued expansion. Just curious, can the Completions business deliver mid-teens growth in 2024 similar to that of 2023?

We believe that it can. Brady mentioned some Neptune opportunities. We only saw a handful of smaller opportunities in the North Sea. The opportunities that we’re engaged with customers on are now in the Gulf of Mexico. Because of the depth and the volume of fluid that those projects take, that can be a significant contributor. A lot of the new rigs that are being introduced that are coming online in the Gulf of Mexico are for customers that we’ve got the contracts in place with. So we think the combination of those will allow double-digit growth year-over-year on the completion fluids side.

Your next question comes from Tim Moore with EF Hutton.

Congratulations on the overall 2023 organic sales growth and EBITDA margin expansion. It's really nice to see the free cash flow too and I'm glad Saltwerx is helping out with that. Most of my questions have already been asked, but let me just start off with completion sales. It seems like double-digit growth is possible this year, depending on the Gulf of Mexico Neptune project whether it falls in the December quarter or not. But just switching gears back to Water and Flowback sales growth this year. I know, Brady, you just mentioned the expectation is that it will grow. Do you think it could be mid-single-digit growth? Is that dependent on the earlier comments? You mentioned reallocating some growth CapEx to Arkansas and desalination. So even if it is a mid-single-digit growth this year, could the opportunity have been bigger had you reinvested more and not had those other projects?

Yes. So I think strategically, we will continue to invest in the automation technology and selective SandStorm customers where we're getting the pricing, the premium pricing that we want. We are focused more on returns. Can we achieve single mid-digit growth? Yes, we feel that's achievable in 2024. But again, we are really more focused on returns and margin enhancement with that business. We could grow more, but that's a strategic decision that we're taking at this point to use the free cash flow that we discussed for what we think will be longer-term, much higher return and growth businesses for us.

That makes sense, Brady. I'll have the ROI aspect in the self-help. I enjoyed seeing all the sandstorms when I was down in the Permian 1.5 years ago on-site. But actually, just switching gears to my favorite topic, they've been publishing on for maybe 15 months of desalination of produced water opportunity and have been putting an EBITDA estimate out there for over a year. But I know that's more second half-loaded. What about the progress being made, maybe with the Railroad Commission and the Commission of Environmental Quality? Have they established the purity levels of the TDS? I mean, I know you have the 92% desalination level reached, have they zoned in and finalized the purity level TDS hurdle?

Yes, that's a great question. Given the recent earthquake activity, there has been a heightened sense of urgency regarding this issue. Overall, our total dissolved solids level is well below what is typically expected. We are currently measuring very specific parts per million of various minerals and organics. We are actively working to determine the final regulatory requirements for each application, which will have distinct thresholds for industrial use and different ones for agriculture. Additionally, there are now defined beneficial reuse applications that require careful specification. Regulatory agencies are collaborating with operators and companies like ours that possess the necessary technology to help establish these standards. Progress is being made quite quickly at this point.

Great. That's really helpful. And very excited about that, given I was on site and saw what you can do with the pretreatment 1.5 years ago. But my last question is around the business, I think investors really aren't giving you any credit for. It's awfully stable and if not, growing quite nicely. The industrial calcium chloride business had a strong year last year, and I think you said it was up 18%. A little bit of that was lapping that supply chain raw material impact in Finland from the Ukraine the year before. But even when you strip that out, I mean, it's still double digits. Is there anything else you're doing there with the supply agreements and to really keep that up? I mean it's something almost like 30% EBITDA. So I'd just love to hear a little bit more about that business.

Yes. That business is running very, very well for us. A combination of good solid management teams that we have, great infrastructure that we have in place, but also finding new markets, as I mentioned, we penetrated two new markets in 2023. We're not significant, but they have significant growth potential for us. The calcium chloride usage in lithium processing in Latin America continues to have some traction. Although lithium, obviously, pricing-wise is down, we still see a longer-term view very positive, very constructive for lithium, and we see a role for calcium chloride with those operations. The other one is chip manufacturing. Here in the United States, which I'm not sure we fully appreciate until a lot of these chip manufacturers started coming online. They use a very high purity water in their process. They actually have to recalcify or remineralize that water before it can be put back into various applications, and that's a great opportunity for us on our calcium chloride business as well. Just a very well-run business for us right now and some new market opportunities that we think has some high growth potential.

Great, Brady. That business is an overlooked gem from investors. I hope that you and Elijio catch up on sleeping. You have an awfully busy year with Saltwerx and Exxon. So I think hopefully you can get rest after these trips.

Thanks, Tim.

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

Well, again, thank you very much. We’re very proud and pleased with what we accomplished in 2023. We have a fantastic employee base management team and great strategic partnerships that we’re very excited about with our current business performing extremely well and a great outlook going forward. So thank you for listening, and thank you for your interest.

This concludes our conference call for today. You may now disconnect.