Good morning and welcome to the TETRA Technologies Inc. Fourth Quarter and Full Year 2011 Results Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Stuart Brightman, President and CEO. Please go ahead, sir.

Thank you, Denise. And welcome to the TETRA Technologies fourth quarter and full year 2011 earnings conference call. Joe Abell, our Chief Financial Officer is also in attendance this morning and will be available to address any of your questions. Joe will give a brief overview of our fourth quarter results and I will follow with a brief presentation, which in turn will be followed by your questions. I must first remind you that this conference call may contain statements that are or may be deemed to be forward-looking statements. These statements are based on certain assumptions and analysis made by TETRA and are based on a number of factors. These statements are subject to a number of 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 those 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 net debt, revenues, gross profit or profit before tax, excluding the Maritech segment, profit before tax or diluted earnings per share, excluding the oil and gas derivative, ineffectiveness in the Maritech segment, or the non-GAAP financial measures. Please refer to this morning’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. With that, Joe, would you please start the financial overview?

Thank you, Stu. In my discussion I will refer to certain financial measures, which excluded Maritech, our E&P business that is in the process of being wound down. A reconciliation of non-GAAP financial measures is provided in a table on page 6 of our press release. Revenue in the fourth quarter was $186.2 million, 12.7% lower than the fourth quarter of 2010. However, excluding Maritech, revenues increased 15.5%, as shown in the table on Page 6 of the press release. The U.S. onshore revenues for our Completion Fluids and Production Testing business are at peak levels. We expect the gradual recovery of the Gulf of Mexico to contribute to revenue expansion over time. The GAAP loss before tax was $40.1 million and the after tax loss for discontinued operations for the quarter was negative $25.1 million or $0.33 per share fully diluted, excluding Maritech, income before tax was a positive $4.6 million and after tax earnings per share was a positive $0.05 per share. We incurred pre-tax charges of $1.2 million or a $0.01 a share after tax in the quarter preparing our new vessel, the Hedron, for work in the Gulf of Mexico and for asset impairments in offshore services. These charges together with the Maritech loss equaled approximately $0.39 per share and are included in the GAAP reported results. Our loss of $0.33 per share of GAAP earnings in the fourth quarter of 2011 compares to a loss of $0.83 a share fully diluted, in the same period of the prior year that contained $0.93 a share of special charges. For the year, revenue was $762.5 million and income before discontinued operations was $0.39 per share fully diluted, excluding Maritech. Once again, if you see the table on Page 6, these results include the negative impact of $0.03…

Thank you, Joe. Our fourth quarter results are based on several favorable trends that we noted during our 2012 guidance call on January 4. The highlights of these trends relate to continued strength in our onshore U.S. businesses driven by shale activity and continued strength in Latin America. These favorable trends have had particular benefit in our Fluids division and our Production Testing segment. During the fourth quarter, our Fluids division also benefited from the increase in activity in the Gulf of Mexico. We continue to see encouraging signs of increased activity in that area as we start the New Year. We also continue to see a strengthening in certain of our Eastern Hemisphere Fluids markets that bodes well for 2012. Over the past year, we’ve seen significant improvement in El Dorado, particularly as it relates to our plate production. We expect to see improving profitability in our Chemicals businesses during the year. In the fourth quarter, Production Testing reported another sequential improvement in earnings and in fact the fourth quarter results represent a record earnings level for this segment. This record performance was driven primarily by the continued strength of the U.S. markets as well as the benefits of capitals deployed during 2011. Also in the fourth quarter the segment did benefit from international projects. We continue to invest heavily in this business, and look to grow the segment by expanding our footprint, both domestically and internationally, as well as by adding additional services to our portfolio of capabilities. Compressco’s profitability improved sequentially in the fourth quarter due to increased utilization in our US operations and continued growth in international markets. We continue to be very focused on applications for nonconventional markets, and expect to see the impact of applications for associated gas from liquids production, vapor recovery and…

[Operator Instructions] And our first question this morning will come from Jim Rollyson of Raymond James.

Stu, on Offshore Services to start out with, obviously you had the seasonal slowness that you normally have. You had weather conditions on top of that plus the startup issues, costs with the Hedron and the write-offs. I would expect the seasonal side of that continues in 1Q. Curious how you’re seeing the weather so far in 1Q versus 4Q, and maybe, net with the charges, you’ve lost money slightly. Do you expect to be profitable in 1Q in the Offshore Services?

Yes, I mean, 2 or 3 questions embedded in that. One is, we certainly had the impact in the fourth quarter, the adverse seasonal. That is continuing in the first quarter and will have a similar effect. I do think we will be challenged to be profitable in that segment in the first quarter, based on that factor. Having said that, we still believe our guidance for the full year is appropriate, and we’ve always believed that the second and third quarters for Offshore Services would be where we make the vast majority of our profit for that business. As I indicated on my commentary, we are seeing a pretty good backlog developing and increasing on the Hedron, so I think that asset looks very encouraging for us. And we also have, as we said in the guidance, the impact in the first quarter of 2 of our assets are in for service, and we fully expect both of those will be finished within March and out working.

I won’t forget, I’m just trying to make sure we nail down the timing. And I also noticed you mentioned in the press release kind of a little bit of a bump-up in decommissioning and abandonment costs that happened 4Q that was attributable to some non-operated properties. What’s the risk of that happening in the future? I mean, do you think there’s much more room that that could inflate or just pretty minor stuff?

Yes, I mean, if you look at our overall Maritech commentary over the last few quarters, we’ve clearly been very focused on doing the work. And where it’s operated properties, where we control the assets. We’ve done a very good job of execution, getting the work done, having some variances but within a reasonable range. And the real challenges we have had there is in our working interest partner, ownership in some of those non-op’d. We certainly believe we have improved them up accurately at year-end. There’re been a couple of properties where there have been on-going challenges that we’ve taken several charges during the year. So to the best of our knowledge at year-end, they’re properly reflected on the balance sheet. And we continue to closely monitor those and feel they’re appropriately noted at year-end.

Understood. On the Fluids side, to the extent you guys have exposure on the North American land side of the business, can you maybe talk about if you’re seeing any short-term softness just related to the dry-gas rig count slowing down before it gets redeployed into the Oily side? Or is it held up fairly well? Just maybe...

Yes it continues to hold up reasonably well in all of our shale related activities. And again one of the common threads you hear in our segment discussion is we’ve benefited and continue to in the Fluid. And we’ve moved assets as appropriate to the areas where the rig count continues to be strong and is expected to, on the Liquid plays. We’re not seeing a big transition impact of that movement and I don’t anticipate we will. We also benefit in Testing from that and even within Compressco, as you listen to some of the comments we make, we’ve got a growing share of the Compressco business that’s allocated to the Oil and Liquid plays as well. So that continues to be a very important part of our portfolio across all 3 of those businesses.

And our next question will come from Joe Gibney of Capital One.

Just had a quick question on the Hedron. You referenced to being close to full utilization on that asset during 2Q and 3Q, is that full utilization on third party work? Or is there still some embedded internal work in that expectation for utilization?

Yes it’s a combination of both. We’ve got a good mix of internal work as well as third party. And we’ve got pretty good line sight into the summertime on that, and still have some ongoing quotation activity to supplement that. Caveat with that is there still are some large some permits required that we’re optimistic about and if they get turned around within the time period we’ve experienced over the last 6 to 9 months, then we’ll be in good shape. But the actual customer commitments that go with that statement are in very good standing.

Okay. Helpful. And then Joe, just one quick one for me, just on the $1.2 million in pre-tax charges within the offshore; how much of that was attributable towards the split between asset impairment and Hedron prep charges?

Oh, it was close to 50-50. I don’t recall the exact amount, Joe.

And our next question will come from Mike Harrison of First Analysis.

Was hoping that you could talk in a little bit more detail on the nature of improvement in offshore Gulf of Mexico activity in the Fluids business. Is that something that you think is going to be sustainable? Or is it just a project or 2 that got going here in the fourth quarter and maybe we’re still waiting until the second half to see sustained improvements?

I think it’s consistent, Mike, with what we’ve talked about is kind of the gradual increase in activity as the permitting has gotten better and the activity starts to pick up. I think we’ll sequentially improve during the year, slowly. And you know we still have, as we said on our guidance, property towards the end of 2013 before we’re back towards those run rates that we were pre-Macondo. But it’s encouraging to see in the fourth quarter as we start the New Year that we have seen a little bit of uptick in activity.

And in terms of the El Dorado facility, it sounds like that did improve quarter-on-quarter. Just sort of in terms of where you are now versus say the end of December, are you continuing to see improvements? Is the magnitude of improvement decreasing as we get toward where you would expect a normal or nameplate type of capacity on that?

Yes, I think we were pleased with the progress during the fourth quarter. And as we start the New Year, and look forward, we’re at the stage where we’ve pretty much gotten production and market demand pretty close to alignment. So we feel good about that. And now it’s more focused on how do you continue to squeeze cost out, operating efficiency, the normal start-up year 2 of a major plant like that? But I think, as I said before, the production increase, I think, will not need to be nearly the magnitude that we saw last year. But we still expect significant earnings uplift as we go forward just on getting better at running it day after day and not disrupting it the way we had to in past.

And you commented that at least in the testing business, you see benefits from the shift away from dry gas drilling and into liquid. Can you maybe just give some other high level commentary on how you guys are positioned to weather that shift if it does take place longer term away from gas?

I think one of the advantages that we have is we consider ourselves certainly one of the larger players in that space in the U.S. So with that I think we have a greater opportunity to move people and assets and leverage relationships across multiple districts and as I’ve said before, we’ve spent a lot of time over the last year to 2 as we’ve added capital, standardizing the equipment and making it more robust so we’re able to have better flexibility both within the U.S. and moving it internationally and keeping the utilization going. So we’ve moved people and assets over the last couple of quarters as necessary and haven’t seen any transitional deterioration on the business and we certainly watch closely the mix of activity by basin and think we have a pretty good handle on that and we’ll continue to move accordingly and we think we have opportunities to continue to grow the business, based on our overall market presence.

And then last question I have is just on Compressco, I guess a couple of questions. One, there was a comment that sales of units were sort of unusually high in the quarter. How much did that hurt the margins in terms of the mix impact to that, and then you also seem to be encouraged by the cost controls that you’re putting in place. Can you maybe give some more examples of some of the organizational changes you’ve made and the supply chain changes and what gives you confidence that that’s going to help on the cost front?

Yes. Couple of questions there. We did have a unusually high amount of unit sales in Compressco in the fourth quarter and as we’ve noted in some of the Compressco commentary, very much driven by international projects and as we’ve said consistently, that business is lumpy in terms of unit sales. That’s not our main focus in general but we do have some lumpiness to it. So I think obviously the top line and the associated earnings benefited from that in the fourth quarter. On a margin basis, the margins on the service side will typically be higher than the margins on the sales and we saw that. So, it was a definite positive in the quarter, probably a dilution to the margin as you define the calculation. As we said on the Compressco call yesterday, something that was probably atypically high in the fourth quarter, and wouldn’t expect to see that over the next couple of quarters in that business. On the cost side, again, we’re going through similar to what we discussed on the testing side, a little bit of a mix change where we have gotten a larger liquids component. So, we’ve taken the opportunities to assess the organization across where the activity is, redeploy some folks, look at opportunities to take some head count down in areas that aren’t quite as robust as they’ve been in the past. We continue to have Compressco integrally involved in our overall supply chain initiatives across the corporation, so we’ve had benefits that we’ve seen both in the operating, materials and supplies, as a result of that initiative. We’ve also had benefits on the cost of the product, as we’ve looked at the supply chain as well as the lean aspect of it and continue to expect that to go forward. We recognize that $2.50 gas at the time does put some pressures on that business and we’ve reacted aggressively. I think equally important in that business is our demonstrated ability to find new markets and applications at a time when our historically core business is being challenged.

[Operator Instructions]. Our next question will come from Bill Dezellem of Tieton Capital Management.

That’s Tieton Capital Management. A couple of questions here. First of all, relative to the Hedron, would you please discuss the net income or earnings per share contribution that you’re anticipating in the second and third quarters, given the level of backlog that you have for that business? And if you would please incorporate into that answer, any retired assets that are going to be a negative offset, so it’s more of a net number if you would please?

Yes, I think, Bill, we’ve been pretty consistent in our responses that we tend not to break out the underlying profitability in revenue by individual assets. I think what we have said is, given that we have a $70 million investment in that asset, that the returns are consistent with our internal objectives and we certainly feel strong that we’re going to meet and exceed those, and the second and third quarters would be the primary beneficiary of that return on that investment. But I really don’t want to go down the path of splitting that out separately. The second part of your question is the assets that we have -- I think if you look at 2011 and 2012, other than the Hedron, the diving assets will be consistent and will continue to have our other 2 heavy lift barges and we’ve sold a couple of non-core assets and other parts that really don’t have a material impact on results. So I think you should view the business as the same set of assets we had last year, plus the full impact of the Hedron.

Okay. Thank you for being consistent with your answer. We were hoping it might shift up this quarter. Next question is the first quarter, given as you do have the weather impact phenomenon there; it sounds like it’s similar to the fourth quarter. Would you please provide your general overall perspective of Q1 total company results relative to the Q4 total company results? I mean it sounds like they would be relatively similar. Are we missing something and there’s some swing factors?

I would say if you look at the main components of the business by segment I think I described the first quarter on offshore services similar to the fourth quarter. I think the fluids business, we view fairly similar to what we just had and have encouraging signs. The testing business I noted we did have one international project in the fourth quarter. Absent that, the rest of the elements of that should continue to go strong as we go through the first quarter. Compressco, we noted that in the fourth quarter we had a benefit of a very high mix of sales that we don’t see that continuing. So that impact would probably be appropriate for Compressco. But in general we said for our businesses, given the normal seasonality we have of offshore services as well, as the second quarter being our seasonal quarter of strength in our European chemicals, that we would see the first quarter being challenging, directionally similar to the fourth quarter, before we start to see the real strong parts of the year in the second and third quarter. So I think your assessment’s pretty accurate, Bill.

And then specific to the offshore services business, would you please discuss the backlog that you have in that business versus one year ago and customer discussions and just your general feeling at the robustness of that business now with permitting, sounding like it’s improving slightly versus a year ago, please?

Yes, let’s split that into 2 elements, kind of consistent with your question on the assets in place versus a year ago. Including the Hedran’s incremental I think we’ve been pretty transparent on our view that’s going to be very well utilized and we’ve got a strong backlog at the moment on that. So we feel good about that. The other assets that we have, I would say, in general the backlog, as we sit here at the end of February is similar to what we had last year, some up, some similar, some down a little bit but in aggregate, I’d say on the major assets we have other than the Hedron and the Heavy Lift and on the Diving side, similar. I’d say, the P&A activity was not as large as scale assets, not as heavy investment and our view is we probably see a little bit better activity level as we look through the first half of the year in that business. So overall similar, I would say plus the positive impact of the Hedron and discussions with customers, there’s a lot of projects being discussed at the moment. We continue to be very consistent in our risk tolerance, on how we contract. So in a market that’s somewhat choppy we have chosen to be on the conservative side of taking on some risks as we go out, which I think is still the appropriate thing for TETRA and we think we’ll start to see the non-Hedron assets continuing to grow backlog as we move into the second quarter.

And our next question will come from Joe Gibney from Capital One.

Just one quick follow-up. Joe, I was just wondering if you could give what PD&A was ex-Martiech for the quarter in 4Q?

Let me see if I can put my finger on that deal. The PD&A is $20 million and that should be primarily non-Maritech. We just had so few Maritech assets left. I’m going to speculate the vast majority of the $20 million is non-Maritech. And that’s pretty consistent, $80 million for the year. That’s what we’re guiding. So I think that’s a good number to run with.

[Operator Instructions] I'm showing no questions in the queue. This will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Stuart Brightman for any closing comments.

Thank you, Denise. We’ll look forward to updating the group on our first quarter results in early May. Thank you.

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