Earnings Call Transcript - TTI Q3 2023

Operator, Operator

Good morning and welcome to TETRA Technologies Third Quarter 2023 Results Conference Call. All participants will be in a listen-only mode. Please also note that this event is being recorded today. I will now turn the conference over to Rigo Gonzalez, Manager of Corporate Finance and Investor Relations. Please go ahead.

Rigo Gonzalez, Manager of Corporate Finance and Investor Relations

Thank you, Joe. Good morning, and thank you for joining TETRA's third 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 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're 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. 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, we encourage you to also refer to our 10-Q that we filed yesterday as well. I will now turn it over to Brady.

Brady Murphy, CEO

Thanks, Rigo. Good morning, everyone, and welcome to TETRA's third quarter 2023 earnings call. Our third quarter delivered solid financial results in our base business with adjusted EBITDA of $26.1 million, the highest third quarter since the third quarter of 2015, while significantly advancing our strategic initiatives. Because of the second quarter seasonal peak in our Northern European Industrial Chemicals business, the underlying strength of our business is highlighted by our year-on-year growth and our progression from the first quarter. Year-on-year, we grew revenue 12% and adjusted EBITDA by 40%. Compared to the first quarter of '23, we grew revenues by 4% and adjusted EBITDA by 27%. Our 2023 year-to-date adjusted EBITDA of $83 million already well exceeds our full-year 2022 adjusted EBITDA of $78 million. As of the end of the third quarter, our trailing 12 months adjusted EBITDA was $103 million. Furthermore, as of September 2023, our trailing 12 months return on net capital employed or RONCE, a non-GAAP measure was 20.7%, highlighting our focus on driving returns above our cost of capital to enhance shareholder value. I'll provide additional color on our overall Q3 performance, but first, I'd like to highlight a historical milestone for the company. As a reminder, on June 26th of this year, TETRA announced that it had entered into a memorandum of understanding with an indirect wholly owned subsidiary of a Fortune 500 company for the purpose of pooling respective bromine mineral rights in the Arkansas Smackover formation. This was done in support of an application for a 6,138-acre brine production unit with the Arkansas Oil and Gas Commission for the purpose of bromine and lithium extraction from the brine. In September, the unit application was unanimously approved by the AOGC giving TETRA and our partner the rights to develop and produce the brine for bromine production and future lithium production once the lithium royalty is established by the AOGC. With this approval, the binding terms of our MOU have become effective and TETRA and our partner have entered into joint venture negotiations for operating and joint development agreements relating to the development of the brine unit with the anticipation of having these agreements in place by the end of the year or early in 2024. In addition, we completed the data gathering and sampling operations for the second test well with results yielding lithium measurements in the upper Smackover as high as 646 milligrams per liter or 35% higher than the first test well, which was located on the southern end of the unit that we reported in September of 2022, and bromine values of 5,890 milligrams per liter, which are in line with the first test well. These strong concentration results, along with very positive porosity and well testing data, are being used to update the lithium and bromine resource report for our approved brine unit, which we plan to complete and release shortly. The updated resource report will update the estimated volumes of lithium and bromine in our unit and will classify those between measured, indicated, and inferred. Moving back to our third quarter business results. Our Completion Fluids & Products segment continues to see the benefit of strong industrial chemical margins as well as the offshore and deepwater market recovery. We executed a moderate size TETRA CS Neptune job in the U.K. sector of the North Sea for a deepwater super major operator, the first TETRA CS Neptune job for this customer. The segment year-on-year revenue growth was 24% with adjusted EBITDA up 42%. The recovery in growth in the offshore market that we've been forecasting is also supported by a Rystad report, which highlights that for the first time since 2014, the average contract duration for high-spec drillships has surpassed 12 months and committed utilization for ultra-deepwater rigs is approximately 90%. In line with this data point, our pipeline of deepwater opportunities for offshore completion fluid projects continues to grow. And although the overall activity trend is upward, because deepwater completions for TETRA can be as much as 5x to 10x the value of a non-deepwater well, our revenues will experience fluctuations depending on the overall number of customer deepwater wells completed in a given quarter. For example, although the deepwater rig count has remained consistent in the Gulf of Mexico, the number of deepwater completions is down in the second half of '23 compared to the first half, with nine jobs completed compared to 15 in our record set in Q2. This is driven by the timing of our customers' well drilling operations versus completion activity, which depending on the project can be separated by months. For this reason, as deepwater continues to ramp up, it's important to look at TETRA Completion Fluids & Products over a longer time horizon than quarter-by-quarter. Year-to-date, TETRA Completion Fluids & Products are up 16% on revenue and 59% on adjusted EBITDA without mark-to-market losses. I'm also pleased with the results of the 2023 Completion Fluids offshore supplier analysis reported by Kimberlite International Oilfield Research. TETRA remained ranked as the top supplier in the Gulf of Mexico for product quality and overall performance. This report indicated that TETRA continues to receive the highest customer loyalty rating as measured by the Net Promoter Score. In the third quarter, we were awarded a multi-year, multi-well contract extension with one of the most active deepwater super majors in the Gulf of Mexico, further validating our market position and strength in the region. Our chemicals business also posted a strong quarter as manufacturing utilization and production volumes remain strong. Our TETRA Chemicals Europe business recently entered into a distribution agreement with European-based GC Rieber focusing on calcium chloride extracted from Fly Ash with no CO2 emissions. This agreement will provide us with incremental volumes of sustainable and more environmentally friendly calcium chloride to supply to our network of customers. In our Water & Flowback Services segment, we continued the strong momentum by focusing on margin enhancement, achieving adjusted EBITDA margin of 19%, which was our fourth consecutive quarter of margin expansion and within our previously announced year-end 2023 adjusted EBITDA margin target. Year-over-year, our U.S. revenue was relatively flat, even though the U.S. onshore average rig count was down nearly 15% and active frac fleets down nearly 5% from the third quarter of last year. Sequentially, our U.S. activity was also flat as demand for our products and services has remained resilient in this slight downturn. Our target to have the engineering completed for our first produced water desalination plant for official reuse applications is on track for year-end or early in 2024. In parallel to the engineering design work, we are in commercial discussions with one of the largest North American shale producers for their beneficial reuse projects in multiple unconventional basins and expect to have our first project awarded shortly. We continue to see strong customer interest and regulatory support for bringing a solution to market not only to reduce the volume of freshwater for fracking operations but also reducing the number of disposal-related seismicity events and bringing a valuable resource to local communities and industries. Finally, in the third quarter, we received notice from Standard Lithium exercising the lithium extraction option in the identified acreage outside of the approved brine unit, consistent with our 2017 agreement. Based on the assumptions in Standard Lithium's preliminary feasibility study of their Southwest Arkansas project, which includes a base case production of 30,000 tonnes per year of battery-quality lithium hydroxide monohydrate with a long-term selling price of $30,000 per metric ton of LHM, TETRA's illustrative royalties would be $22.5 million per year based on our 2.5% royalty on gross lithium revenues, without any investments required by TETRA. From this study, Standard Lithium is targeting construction in 2025 and commencing production in 2027. Now, I'll turn it over to Elijio to provide some additional commentary, and we'll open it up for questions.

Elijio Serrano, CFO

Thank you, Brady. Completion Fluids & Products segment revenue was $73 million, representing an increase of 24% year-on-year. Sequentially, revenue decreased $25 million reflecting the seasonal decline in our Northern Europe industrial calcium chloride business in addition to two large deepwater projects that we expected in the third quarter that did not materialize. Adjusted EBITDA margins, excluding unrealized losses on investments was 30.2% and our second consecutive quarter above 30% without the benefit of any large CS Neptune projects. These margins reflect a vertically integrated business model that we have that has significant leverage to higher volumes. The value of our long-term supply agreements that protect us during inflationary periods and our strong market positions that allow us to pass along price increases. We have not yet seen a ramp-up in activity for our PureFlow long-duration battery storage electrolyte. Our main customer for PureFlow recently received a conditional award for a Department of Energy loan that is expected to support them as they ramp up production in 2024. In the meantime, all available zinc bromide fluids are being directed towards high-pressure deepwater wells. Water & Flowback Services revenue improved 3% year-on-year and was flat sequentially despite the pullback in the U.S. onshore drilling and completion activity. Adjusted EBITDA margins improved by 13% year-on-year and by 4% quarter-on-quarter. Adjusted EBITDA margins further improved by 60 basis points from 18.4% in the second quarter to 19% in the third quarter of 2023, which is the highest adjusted EBITDA margin since the fourth quarter of 2018 and is consistent with the goals we set earlier this year. We remain focused on operational efficiencies, margin expansion and returns on capital. In October, we sold one of the three early production facilities in Argentina to the operator for an amount between $5 million and $6 million with full payment received in October. TETRA will continue to operate and maintain the EPF on behalf of the operator for a fixed monthly fee. We are also currently in the process of expanding that same EPF to process greater volumes of oil and are in discussions with the same operator to potentially construct one to three additional facilities in the future. The sale of the EPF will be reflected in our fourth quarter results as a low margin as we unwind the net book value associated with the assets. However, the key thing here is the cash inflow will fully recover our original investment, which was a very attractive return on capital. Cash flow from operating activities was $40 million in the third quarter of 2023 compared with cash flow from operating activities of $2.1 million in the third quarter of 2022 and compared to $28.4 million in the second quarter of 2023. Adjusted free cash flow from continued operations was $7.1 million. Working capital at the end of the first quarter was $110 million and represents a slight increase over the second quarter due to a temporary build in inventory. At the end of the third quarter, unrestricted cash of $34 million and availability under our credit revolver was $73 million. Liquidity at the end of the third quarter was $107 million. Net debt at the end of the third quarter was $125 million. Our net leverage ratio further improved to 1.4x, down from nearly 2x just nine months ago. In addition, based on Friday's closing prices, our holdings in Standard Lithium and CSI Compressco combined for a total market value of approximately $9.5 million and our investment in CarbonFree is currently valued at approximately $6.6 million. Combined, these investments totaled almost $16 million. Finally, we anticipate strong cash from operating activities and adjusted free cash flow in the fourth quarter, driven by the cash proceeds from the EPF sales and working capital improvements. Total year 2023 cash from operating activities is expected to be between $70 million and $79 million, while adjusted free cash flow is expected to be between $35 million and $40 million. This translates to free cash flow of between $15 million and $20 million in the fourth quarter, driven by improvements in working capital, plus the cash proceeds from the sale of the EPF I previously mentioned. Our goal coming into this year was to improve the balance sheet and generate $30 million to $40 million of free cash flow to position us to begin developing and investing in our assets of bromine and lithium in Arkansas. I would suggest that we are on track to achieve this objective. The expected $35 million to $40 million this year of free cash flow is after investing over $14 million in 2023 on test wells, reservoir analysis, engineering studies, all preparedness for a final investment decision in 2024. We have also built-up liquidity of almost $125 million when taking into account our marketable securities and have improved our net leverage ratio to 1.4x. Shortly, we will refinance our $163 million term loan to extend the maturity and create even more liquidity. When you combine the improvements in the balance sheet and the liquidity with the MOU with Saltwerx and the joint venture arrangements we are finalizing with them, and as a reminder, Saltwerx is a wholly-owned subsidiary of our well-capitalized Fortune 500 company. One will appreciate that we have neatly positioned ourselves to begin developing our Arkansas bromine and lithium assets without diluting our shareholders. Our focus is shareholder value creation by generating strong returns on capital from our base business, leveraging our base business to generate cash to invest in bromine and lithium without diluting our shareholders. I'll turn this back to Brady for closing comments before we open the line for calls.

Brady Murphy, CEO

Thank you, Elijio. I think we'll open up for Q&A, and then we'll have some closing comments.

Operator, Operator

We will now begin the question-and-answer session. And our first question will come from Martin Malloy with Johnson Rice. Please go ahead.

Martin Malloy, Analyst

Good morning.

Brady Murphy, CEO

Good morning, Martin.

Martin Malloy, Analyst

My first question is regarding the outlook for deepwater activity. Could you provide some insights basin-by-basin, specifically for the North Sea, Gulf of Mexico, and Brazil, in terms of your expectations for 2024 and the number of Neptune projects?

Brady Murphy, CEO

Sure. So it's a little early for 2024 until we see customers' budgets that we expect to see over the coming months. But in general, we feel very good about our position in the key markets where we expect to see growth, Brazil certainly being one of them. North Sea, obviously, a second one for us and the Gulf of Mexico. We expect to see growth in each of those markets and our market position is strong in each of those markets to benefit from that growth. But in terms of specific numbers at this point, it's a little premature for us to talk about that. We're really excited about the fact that now pretty much quarter-on-quarter, we're seeing CS Neptune jobs in the North Sea. And again, as a reminder, those jobs are typically a bit smaller, medium to smaller size jobs compared to the big deepwater Gulf of Mexico jobs. But we are tracking several projects that we expect to materialize in 2024 for Neptune, obviously, both in the North Sea on a continuous basis and also in the Gulf of Mexico.

Elijio Serrano, CFO

And Martin, I'll also remind everybody, we made three key investments at the end of last year and early this year. We expanded our storage and blending capacity in the Gulf of Mexico and Brazil. And then we picked up a tuck-in acquisition in the North Sea. We've also positioned inventory into each of those key markets. So I would suggest that we are prepared to take advantage of the ramp-up in deepwater activity.

Martin Malloy, Analyst

Great. And then for my follow-up, I wanted to ask about the desalination technology that you have. And I think I heard you say that with this first customer, there could be multiple basins involved. I was wondering if you could maybe give us some additional color in terms of the level of customer interest here?

Brady Murphy, CEO

Sure. Yes. I mean, there's tremendous customer interest. We have been partnering with a major U.S. North America shale producer as we've gone down this journey. As we have mentioned before, we have two different solutions, one for what we call low salinity produced water, and then one for high salinity, which the lower TDS salinity waters are with our high-rank partnership with our proprietary pretreatment solution. And then for the higher salinities such as the Permian Basin, which is obviously a larger overall market with our KMX relationship, again with our pretreatment proprietary solution. So the engineering on both of those is progressing very well. We're still on target to either have it wrapped up by end of the year or potentially bleed into the first part of 2024, but this is very important for us to get this right. But we have a very supportive customer that is working with us and the regulatory authorities making very good progress on getting the regulatory authorities to not only create beneficial reuse water, but be able to use it in various applications in both the Permian Basin and in South Texas project.

Martin Malloy, Analyst

Thank you. I'll turn it back.

Operator, Operator

And our next question will come from Stephen Gengaro with Stifel. Please go ahead.

Stephen Gengaro, Analyst

Thanks. Good morning, everyone. Elijio, you mentioned that a couple of jobs you were anticipating for the quarter didn't materialize. As we look toward the fourth quarter, how should we consider the progression, and could one or two of those jobs have a positive impact on the results?

Elijio Serrano, CFO

Yes. So, Stephen, we tried to emphasize that as deepwater jobs account for a larger share of our revenue, we will experience some fluctuations from quarter to quarter. In our record-setting second quarter, we completed 15 deepwater jobs in the Gulf of Mexico and nine in the third quarter. This shows that the rig count and activity levels have remained stable; it’s more about scheduling. These deepwater jobs generate five to ten times more revenue for TETRA compared to non-deepwater jobs, significantly affecting our execution numbers. We did have an unusual cancellation of a job due to a dry hole, which is quite rare for a development project. Unfortunately, that well is not going to return. However, such cancellations are quite uncommon. Looking ahead to the fourth quarter, I anticipate that our deepwater completion activity will be closer to the levels we saw in the third quarter rather than the record levels of the second quarter. Therefore, it’s essential to view TETRA's business over a longer timeframe now due to the scheduling of these deepwater jobs. This includes developments in Brazil and an increase in deepwater jobs in the Eastern Hemisphere as well.

Stephen Gengaro, Analyst

Thanks. Regarding the water side, it was impressive that your performance was strong, especially considering the current short-term log activity in U.S. land. Can you clarify the portion of that business coming from U.S. land? Also, do you believe that the outperformance compared to U.S. land activity levels can be maintained?

Elijio Serrano, CFO

The Argentina business is in the mid-$20 million a year revenue range with three early production facilities. Q4 is clearly going to be different because we're selling; it's a one-off opportunity, the early production facility. And the operating fee on a monthly basis to continue to operate the facility will decline. But the vast majority of our business is U.S. shale plays, highly concentrated in the Permian Basin, where we think we've got a strong presence and with the SandStorm Technology and the water chemistry that we're using on the water side. We believe those have represented competitive advantages, and we have been able to gain market share without deteriorating pricing which is evident from the margin improvement that we've seen.

Stephen Gengaro, Analyst

Got it. Thanks. And if you don't mind one more from me. When we think about the strength in your Fluids business, obviously, we talked about the deepwater side. And when you think about raw material supply demand, usage of bromine, the potential ramp in PureFlow in 2024 and then sort of the development of the bromine opportunities, how should we triangulate all that around your supply, your margins and maybe the CapEx needs you may have in '24?

Brady Murphy, CEO

Yes, so Stephen, as you know, we have a long-term supply agreement with one of the producers in Arkansas. But our demand well exceeds that contract. We have been fortunate to get spot bromine prices that have been fairly attractive this year relative to the prior year. Some of that is just driven by the global bromine market, which because of China's economy being down, etc., those prices have come down and there's more material available. But we expect that to be a fairly short-lived window for us to be able to acquire the volumes at the pricing that we need for bromine, which again is another reason why by 2026, we really want to have our own supply coming online to keep pace with our oil and gas business as well as the projections from Eos.

Stephen Gengaro, Analyst

Got it, great. Thank you for the color.

Brady Murphy, CEO

Sure, thanks Stephen.

Operator, Operator

And our next question will come from Tim Moore with EF Hutton. Please go ahead.

Tim Moore, Analyst

Thank you and congratulations on the hearing outcome last month. It was great to see the multi-year multi-well Gulf of Mexico contract extension. I also appreciated Elijio's clear comments about having enough liquidity to avoid equity dilution, especially since I know a few investors were concerned about that last year. I want to follow up on something Elijio mentioned about the buyout of the early production facility in Argentina. Just out of curiosity, how have the EBITDA contributions from that facility compared to your expectations over the past nine months or year? When do you anticipate that another one or two facilities might come online, next summer or next fall?

Elijio Serrano, CFO

So the EBITDA contributions are significantly higher in our base water management and flowback business because they're more capital-intensive. And obviously, we're only making the investment to achieve a return on capital. Now after the first two, we communicated to the market that we will continue to build and operate early production facilities, but we were not going to fund the CapEx on behalf of the customers. We believe that our CapEx will be better served by directing it to our investments in Arkansas that we think have a significantly longer tail to it. We expect that by maybe the back end of next year, we could add a fourth EPF because remember, even though we sold this early production facility, we will continue to operate on behalf of the customer. We just won't get the income associated with the capital invested, but we will continue to get income associated with people and maintenance of that facility. So we're dropping to two owned EPF and one client-owned EPF that we're providing people and equipment, and we'll probably add another one late next year or the year after that.

Tim Moore, Analyst

Great. That makes a lot of sense, Elijio. It might be helpful to hear from Brady regarding the timeline. As we shift focus to the bromine and lithium carbonate equivalent development projects, you're making significant strides. The FEED study will be completed soon, followed by the preliminary economic assessment. Can you outline the milestones and approximate timing? If everything proceeds smoothly and contracts are signed, when do you anticipate starting the construction of some infrastructure, possibly around December next year?

Brady Murphy, CEO

Well, we certainly feel the construction will start well before that, Tim. So timing-wise, the way we see things playing out. First, now that our binding terms of our MOU go into effect with the unit approval, we are in negotiations with our partner for the joint venture operating agreements, responsibilities, etc. between the partners. That's a critical issue. We like to think we can have that done if not by the end of the year or early in 2024. In the next couple of weeks, we expect to have our resource report completed. Again, that will quantify the amount of bromine and lithium in our Evergreen unit, which will be an important milestone. The FEED study, we're anticipating to have completed for lithium within plus/minus 10% from detailed engineering in the first quarter. And then from that time point, obviously, we'll be working with our respective Boards, both our Board and our JV partner's Boards for an FID decision point. But in parallel to all of that, we're looking at all the long lead items that we would need to account for, if we were to start early on this project and understand what those long lead items would look like. Obviously, we've not made any decision on investment on those long lead items, but we're going to be taking a careful and close look at that as we finish up the year as well. So that's kind of the timing of things. But we would certainly be thinking about starting construction well before the second half of 2024.

Elijio Serrano, CFO

And Tim, our shareholder base does not have a mining background or a large construction background. So I think it's important to keep reiterating the process and the steps of what we've achieved to get there. We want to make a decision with as much data to manage the risk of such projects. And again, just to make sure that everybody is on board, a quick recap is last year, we published a preliminary economic assessment on the bromine project, and that was after drilling one test well. We laid out in our investor presentation the expected economics on bromine by itself. This year, we've just now completed the second test well. From there, we're going to be able to move from inferred resources, which is the least defined category. Shortly, we'll publish measured and indicated volumes of bromine and lithium. From there, we can evolve it to move toward the economic assessment on the lithium side once we complete the engineering study. There are a series of methodical steps and gates we're going through to get to a final investment decision, and we're going to stick to that discipline to make sure that we manage the risk and fully outline everything that's required to get this done. Now as part of that, we expect that between last year and this year, we will have spent $19 million of cash to do that, some of which we've shared with our joint venture partner. The cash flow number I talked about earlier is after spending $19 million over the last couple of years, which tells you how strong the base business is performing, setting us up to invest in Arkansas.

Tim Moore, Analyst

Great. Well, Brady and Elijio, that was very helpful color and the details and the timing of everything. I just had one more question since my desalination question already got asked. One question that I had was just maybe jumping ahead on bromine-related products, that seems like if things go well, that production will probably come on a little bit before lithium. How far in advance would you start having discussions with potential customers to maybe offtake supply tied to those prime leases in bromine? Would that start next summer? Or do you have to wait more until you have things in place?

Brady Murphy, CEO

Yes. Tim, I think we're well ahead of you on your projected timelines for some of this stuff because clearly, Eos, we see as a key offtake provider, and we're having great discussions with them in terms of meeting their new Z3 ramp-up battery demand. So that's one for sure. We have another PureFlow customer that we're in discussions with that we've not announced publicly. So that's part of this demand requirement for bromine. But on the oil and gas side, we are also having some kind of longer-term offtake discussions as well because we've never had our own bromine supply. These are new discussions for us, but now that we'll be completely integrated from the bromine supply all the way to the end products, these are discussions that are pretty meaningful for us on the oilfield services side as well.

Tim Moore, Analyst

That's terrific. I always like it when companies exceed my own expected timeline. That's great to hear. And that's my questions.

Brady Murphy, CEO

Thanks, Tim.

Operator, Operator

Our next question will come from Stephen Gengaro with Stifel. Please proceed.

Stephen Gengaro, Analyst

Thanks. Two follow-ups for me. In the last couple of quarters, and I know there were some circumstances you guided and I was wondering if you had a view of the current consensus, which is around $27 million in EBITDA for the fourth quarter?

Elijio Serrano, CFO

Yes. So Brady mentioned earlier that on the water flowback side, we believe that we can stay approximately at the levels that we're at, assuming that there's no material pullback at the end of the year that we've seen historically, even though the last couple of years, we're not there. The fourth quarter is really going to depend on the timing of some of the big projects that we have anticipated, whether they straddle Q4 and Q1 is to be determined. It's hard to predict with some of the big projects that we have out there.

Stephen Gengaro, Analyst

Got it. That makes sense. And then just a final one for me is when you've reduced leverage a lot, and I know there's differences clearly in the business models. But a lot of the, at least, oil service peers have been ultra-focused on free cash flow generation and returning capital. I understand you guys have a use for that capital as far as investment. But when you think about free cash generation, is there a measure we should use when we think about free cash flow conversion relative to EBITDA? Or any kind of guidelines you could put around how you think about free cash generation on an annual basis as I look out to next year?

Elijio Serrano, CFO

Yes. I would suggest, Stephen, that in 2022 and 2023, those were significant investment periods for us, especially on the onshore site. We were building up capacity in the Permian Basin. We built three EPF in Argentina. And then on the fluid side, we expanded blending and storage capacity in Argentina, in Brazil, and then we did a small tuck-in acquisition in the North Sea. I would suggest that the last two years were heavy investment periods. We're going to pull back on those to accelerate free cash flow to direct toward the bromine and lithium assets in Arkansas. I would expect that in the coming years, free cash flow will be in the $40 million range from the base business to help us invest in Arkansas without diluting shareholders.

Stephen Gengaro, Analyst

Excellent. Thanks for the color.

Elijio Serrano, CFO

Thank you, Stephen.

Operator, Operator

And this concludes our question-and-answer session. I'd like to turn the conference back over to Mr. Murphy for any closing remarks.

Brady Murphy, CEO

Well, thank you. In closing, we're very pleased with our third quarter results as the best EBITDA third quarter that we've had in eight years since 2015. I'm very, very pleased with where our two businesses stand, Water & Flowback as well as our Completion Fluids & Products heading into 2024. And clearly, very pleased with the major milestones that we continue to achieve and the strategic opportunities that the company has and the partnerships that we're developing along the way. So we'll keep you posted. But thank you all very much for your participation today.

Operator, Operator

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