TETRA Technologies, Inc. (TTI) Q2 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to TETRA Technologies Second Quarter 2021 Results Conference Call. The speakers for today's call are Brady Murphy, Chief Executive Officer; and Elijio Serrano, Chief Financial Officer. All participants will be in listen-only mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I will now turn the conference over to Mr. Serrano. Please go ahead.

Thank you, Kate. Good morning. And thank you for joining TETRA second quarter 2021 results call. I would like to remind you that this conference call may contain statements that are or may be deemed to be forward-looking. These statements are based on certain assumptions and analysis made by TETRA and are based on a number of factors. These statements are subject to a number of risk 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 the actual results may differ materially from those projected in the forward-looking statements. In addition, and in the course of the call, we may refer to EBITDA, adjusted EBITDA, adjusted EBITDA gross margin, adjusted free cash flow, net debt, liquidity or other non-GAAP financial measures. Please refer to today's press release or to our public website for reconciliation of non-GAAP financial measures to the nearest GAAP measure. This reconciliations are not a substitute for financial information prepared in accordance with GAAP and should not be considered within the context of our complete financial results for the period. In addition to our press release announcement that went out earlier this morning and posted to our website, we also filed our 10-Q yesterday, that's available on our website. I'll now turn it over to Brady.

Thanks, Elijio. And good morning, everyone. And welcome to TETRA Technologies second quarter 2021 earnings call. As you may have seen from our recent press announcements, we've had a very busy few months. And so I will summarize some highlights for the quarter, as well as some additional color on our recent announcements before turning it back over to Elijio to provide some information on cash flow, the balance sheet and liquidity. For the second quarter financials, we grew revenue by 32% sequentially, with an adjusted EBITDA of $13 million, up 44% sequentially. The year-on-year Water & Flowback grew 53%, while completion - and while Completion Fluids were down 9% year-on-year, we finished the quarter with the month of June being the highest revenue and EBITDA for our Completion Fluids since February of 2020, as we saw a material increase in new activity in the latter part of the quarter. Our strategic equity investments in CSI Compressco and Standard Lithium continued to contribute as their equity values continue to increase. Year-to-date this has added $5.6 million of EBITDA with $1.6 million coming in the second quarter. While inflation pressures, particularly labor, fuel and materials impacted our Water and Flowback business in the second quarter. Ahead of our ability to get broad pricing increases in place, we have line of sight to much improve margins for the third quarter, supported by two recycling projects, to new recycling projects, a fully deployed Sandstorm project in Argentina, and pricing agreements for key customers that started in July. So while the second quarter results were much improved over the first quarter, it is the more recent uptick in our customer activity in June and July, as well as the significant number of positive news in our recent announcements that has us optimistic for our future outlook. Completion Fluids & Products adjusted EBITDA increased $6.8 million sequentially, inclusive of $1.5 million favorable mark-to-mark adjustment for our investment in Standard Lithium. Adjusted EBITDA margins for the quarter were 27.7%, marking the ninth straight quarter in a row above our 20% target, and in line with our previous guidance of EBITDA margins in the mid 20s. Revenue increased 39% from the first quarter due to the seasonal increase of our northern European industrial chemicals business and stronger offshore completion fluids compared to the first quarter. We're very pleased to announce that during the month of July, we completed our first international CS Neptune fluids job in the North Sea, which was also our first ever high-density monovalent operation. While this project was considerably smaller than our typical Gulf of Mexico project, it was a significant milestone highlighting the acceptance of our proprietary technology into new markets. And as we have discussed previously, most of the North Sea applications for Neptune will be smaller jobs with lower fluid volumes than our prior Gulf of Mexico jobs. But once accepted in the market, we believe there's potential for higher frequency of jobs. As a reminder, zinc is banned for use in the North Sea, leaving a zinc free solution, such as CS Neptune in a strong market position. Also during the second quarter, we secured two deepwater awards, one for the Gulf of Mexico and another for Brazil, which will increase our market share in both markets and gives us continued confidence in the strength of our Completion Fluids offering. Recall it, in the third quarter of last year, a well known independent industry research firm concluded that TETRA “delivered the best overall value for Completion Fluids in the Gulf of Mexico”. As the Gulf of Mexico represents some of the most complex deepwater wells in the world, we feel these recent awards helped validate this claim. TETRA will see the benefits of the Gulf of Mexico award starting in the third quarter. While the Brazil work will most likely start in the first quarter of 2022. We also received a major offshore award in Mexico that started in late June and will continue into the third quarter. This has been our first major Completion Fluids award in Mexico in over three years, and we believe that market will continue to open for our products and services. With these recent project awards and overall activity improvements, and our key international offshore markets, we are expecting our international and offshore completion fluid sales to increase materially in the second half of the year, compared to the first half. Also with the ongoing success of our northern European industrial chemicals business, we're moving forward with a relatively small capital investment in our Kokkola chemicals plant in Finland to increase capacity by over 25% by mid 2022. The Kokkola facility has about - that at full capacity for several years, and this investment will be a first major expansion in that facility in over a decade. The decision to increase our capacity was based on strong returns in this business and has been generating and growth opportunities that we see in the market. The Water & Flowback services second quarter revenue increased 22% sequentially and adjusted EBITDA increased to 123%, driven by rebounded activity from the first quarter that was negatively impacted by the winter storms in February. As mentioned in my opening comments, inflationary pressures impacted our profitability in the second quarter quicker than we were able to obtain price increases with our customers. Regarding customers, we've been very fortunate over the years to enjoy a very strong, well-capitalized customer base comprised largely of the majors and super major publicly traded companies. This is pointed out by the data that in the first half of 2021 34% of our revenue was derived from large publicly traded operators that by the end of June comprised only 12% of the US rig count. In this market recovery, we're clearly seeing the privately held and independent operators lead this increase in activity. We responded well with this change. As in the second quarter, we were awarded multiple integrated water management jobs, including two new produced water recycling projects for privately held independent operators, and we continue to grow our customer base. In fact, as we close out July, we're running at or near maximum asset utilization for our water recycling, water transfer, water treatment, and our sand management with Sandstorm. The clear priority is pricing that will allow us to generate an acceptable rate of return before we will add new assets to the operations. Also in the second quarter, we were actively deploying a fleet of Sandstorm units for our first ever international sand management contract to Argentina. To meet the deployment dates of these contracts, we pulled existing assets from our US operations, absorbing mobilization cost and without revenue for the second quarter in Argentina. However, by mid July, all of our Argentina assets are in full revenue. And our US fleet has been replenished the second quarter Sandstorm CapEx, and we're now operating again at maximum utilization. For these reasons, we have a good line of sight of continued growth in the third quarter, but with much improved and expanding margins. With regards to our low carbon energy business initiatives, as you may have seen from our announcement, we've been very active with a lot of new developments, all of them we view as very positive. Addressing the news release from yesterday first, as announced, we completed a preliminary technical assessment by an independent geological consulting firm to assess lithium and bromine exploration targets of the companies approximate 31,100 net acres of brine leases in the Smackover Formation in Southwest Arkansas. We view this report is very positive supporting our expectations that our acreage is very rich in bromine and lithium concentrations. As a reminder, with respect to approximately 27,500 acres of that total, TETRA had previously entered into an option agreement with Standard Lithium, whereby Standard Lithium has the option to acquire lithium rights. Standard Lithium must make annual cash payments to TETRA to maintain the option to acquire these rights. Pursuant to the option agreement after Standard Lithium initiates commercial production, a royalty payment will replace the annual cash payments. As previously announced by Standard Lithium this acreage has 890,000 tons of LCE equivalent in the inferred resource category. In the second quarter, Standard Lithium announced the commencement of work on a preliminary economic assessment on the TETRA leases and Standard Lithium indicated that assessment is expected to be completed sometime during the third quarter. To further clarify, the scope of the TETRA initiated exploration target assessment. This is where the mineral assets wholly owned by TETRA, which includes all of the bromine and approximately all the 31,000 net acres, and lithium for the acreage where TETRA holds the lithium rights not subject to the Standard Lithium option. For bromine, the technical assessment has identified a brine exploration target estimated to contain between 2.54 and 8.58 million tons of elemental bromine and for lithium the exploration target is estimated to contain 16,000 and 53,000 tons of elemental lithium. Using an elemental to Lithium Carbonate Equivalent conversion of 5.3, the lithium amounts to between 85,000 and 286,000 tons of LCE. The current market price of LCE is approximately $12,000 per ton, and the current market price of bromine is approximately $3,174 per ton in the U.S and $7,882 per ton in China. These exploratory target estimates and current market prices represents significant potential source of future value to TETRA. And so with these developments, we plan to accelerate our evaluation of a full economic feasibility of these assets. Related to our bromine initiatives, we continue to evolve the discussions with multiple energy storage companies that utilize zinc-bromide as a key part of their electrolyte chemistry. Our PureFlow high purity zinc bromide has been qualified by three energy storage manufacturers and we've received our first commercial purchase order well ahead of our year end expectations. With what we believe to be a multi year recovering oil and gas market, with TETRA's bromine base Completion Fluids continuing to grow in market share, combined with the forecast with outlook [ph] of PureFlow based on customer projections, it is clear we need to develop plans for considerably more bromine to meet our future growth potential. Accordingly, yesterday, we announced that we executed a memorandum of understanding to work with Anson resources, an Australian publicly traded minerals company, to explore a business relationship for lithium and bromine extraction from their Paradox Basin Brine Project in southern Utah. The collaboration will include, among other things, a potential off-take agreement for bromine to meet our growing demands for both oil and gas and energy storage, and the potential for TETRA to bring our patented zinc-bromine manufacturing process through a licensing arrangement or operational management of the plants. Finally, I'm excited to announce that after considerable due diligence and successful CO2 mineralization to the design specifications in a San Antonio SkyCycle plant, pilot plant, we have agreed to make a $5 million investment in CarbonFree in the form of a convertible note. This will allow us to participate in the equity upside as CarbonFree continues to make progress in commercializing its SkyCycle proprietary technology and we continue to advance our long term business relationship, jointly working on plans to source and provide substantial volumes of calcium chloride. CarbonFree recently announced a strategic engagement with Fluor, a leading engineering construction company to help manufacturer it SkyCycle plants and industrial plants around the globe. In closing, overall, we had a solid quarter, sequential improvements in our segments, and with the increased activity we are seeing for our international and also our Fluids, business, and continued pricing improvements for Water and Flowback services, we fully expect this to continue in the second half of the year. Our base business is showing clear signs of improvement and what we believe will be a multi year recovery. On top of that, our multiple low carbon energy opportunities are moving at speeds faster than what we had been anticipating, potentially putting us in a position in the near future to communicate to the market the potential revenue, EBITDA and cash flow from these initiatives. With that, I'll turn it over to Elijio to provide some additional and then we'll open it up for questions.

Thank you, Brady. In the second quarter, we incurred $4.7 million of non-recurring charges. This charges include $2.7 million of non-cash stock warrant fair value adjustment expense, $714,000 of non-cash stock appreciation right expenses, $627,000 of expenses related to long term compensation, and $688,000 of restructuring and other expenses. The second quarter also included a $1.6 million gain on mark-to-market adjustments to the common units that we own in CSI Compressco, and to the 1.6 million shares that we own in Standard Lithium. We will continue to see mark-to-market adjustments for the equity we own [ph] of these two publicly traded entities. The market value of this investments, as of the close of the market yesterday was $17.8 million. We do not have any restrictions that might prohibit us from monetizing this holdings in CSI Compressco or Standard Lithium. From the beginning of the year to the end of June, the value of this equity holdings have increased by $5.6 million, or 51%. As you evaluate our balance sheet, liquidity and cash position, one must recognize that we have almost $18 million of marketable securities available to us to monetize at the appropriate time. In July, the value of this investments increased another $1.8 million, does now reflected in the numbers I just mentioned. Given this are marketable, we're including this mark-to-market adjustments in our adjusted EBITDA. Second quarter adjusted free cash flow from continuing operations was a use of cash of $4.5 million and compares to $5.4 million of adjusted free cash flow that we generated from continuing operations in the first quarter. Despite the rapid read [ph] up in revenue this year, we are free cash flow positive on a year-to-date basis. We saw a build up in working capital in the second quarter, mainly accounts receivable toward the end of the quarter. To give you some perspective, revenue in the month of June was 25% higher than the month of April. We have reduced our term loan by $36.3 million from $220 million as of September 30, 2020, to $184 million as of June 30, 2021, and have reduced it by another $8.2 million in July. This reduction of $44.5 million in the recent months will save us approximately $3.2 million of cash interest expense per year on an annualized basis. In July, we amended our ABL, extending the maturity by over two years to May 2025 and increased our availability on our ABL by approximately $9.4 million. In the next month, we expect to further increase the availability as part of the amendment pendings and post-closing requirements. With this amendment, we do not have any maturities until May 2025. Other than potential payments on a term loan based on excess free cash flow. Total debt outstanding was $171.8 million at the end of June before the $8.2 million pay down in July, while net debt was $121.4 million. Again all this is excluding the value of our investment and CSI Compressco and Standard Lithium. Liquidity at the end of the second quarter was $82 million. And we defined liquidity as unrestricted cash available, plus borrowing under the revolving credit facility. And again, this is before the ABL amendment that increased our borrowing base by $9.4 million. And before the $8.2 million further paid down, I just mentioned. Into the second quarter, we had unrestricted cash of $50.3 million available under our credit facility was 31.7. Brady mentioned earlier, that we're making an investment to increase capacity in our Kokkola facility. We do not expect this CapEx to be significant. And our calcium chloride production operations in Northern Europe consistently produced predictable steady cash streams to TETRA. Also last week we received a $547,000 payment from Spartan for the sale of our controlling interest in CSI Compressco earlier this year. This payment was scheduled on a six month anniversary of the transaction. We have an additional payment due to TETRA in 2022 of $3.1 million of Spartan, upon the obtainment [ph] of CSI Compressco achieving a trailing 12 month EBITDA of $107 million and after the refinancing of the notes due in 2002. And also Brady mentioned earlier, that we had agreed to make a $5 million investment in CarbonFree. We expect this payment to be made before the end of the third quarter of this year. This provides us an opportunity to participate in the equity upside as they commercialize their SkyCycle carbon capture technology. In addition to providing TETRA [ph] an opportunity to potentially sell significant volumes of calcium chloride jointly developed that with CarbonFree. And finally consistent with what we have been communicating on June 25, we were added that to the Russell 3000. And we have seen a positive impact to our stock price. We welcome all our new stockholders, many of which were previously stockholders, including the passive index base holders who have taken positions in TETRA. I encourage you to read our press release that we issued yesterday, and the 10-Q that we filed last night, for all the supporting details and additional financial and operational metrics. Kate, with that, we'll open it up for questions.

[Operator Instructions] The first question is from Stephen Gengaro of Stifel. Please go ahead.

Thanks, and good morning, gentlemen.

Morning.

I have a few things if you don't mind. And what I would like to start with you. You talked about the expectations on both I guess, Fluids and on Water & Flowback for the second half of the year. And I think particularly on the Water & Flowback margin front, you expect a pretty good step up. But can you give us a sense? Maybe with - maybe with ranges around it, on the kinds of revenue and margin expansion you expect in the third and fourth quarters? I know you don't want to give precise guidance. But it just seems like there's a lot of moving pieces here that impacted the second quarter and should have positive impacts on the third. And can you help with some parameters around those two segments?

Yeah. Sure, Stephen. And we do have some pretty good line of sight of the third quarter. What we see from Water & Flowback is again, double-digit growth for our Water & Flowback business in the third quarter over the second quarter. And we also feel potentially doubling or close to doubling the EBITDA margins from where we ended Q2, and what we see in Q3. Again, a lot of moving parts associated with that, that we have spoken about. But we feel fairly confident in that range for the third quarter. I'll hold off on the fourth quarter for now. But we think we'll continue to make progress as we go through the year. On the Completion Fluid side, you know, we talked about the two - the two awards that we've had. For the Gulf of Mexico award, we will definitely see material impact, in our positive impact for us in Q3 and Q4, for the rest of this year, and throughout the three year period. The Brazil award will most likely not see an impact until Q1 of next year. But I can tell you that the Gulf of Mexico award, plus the increase in activity that we see for our Completion Fluids business, and you combined will overcome you know the reduction that we'll see in our seasonality from Europe, as we go through the rest of the year. If that helps.

Yeah, that does help. And speaking to that season, was the second quarter a normal sort of European chemicals quarter? Or was there anything, because the margins look pretty good?

Yeah, we've done a lot to improve our profitability and margins in that business. Stephen, and so it was pretty much a normal quarter for our Q2, European business.

Great, thank you. The other thing I was curious about and I know we spoke a little bit about this when we were together recently. But when you think about what you announced in the release last night. And when I think about the timing of some of the low carbon initiatives and how they sort of unfold on the income statement over the next, you know, several quarters, to couple years. Can you give us any guidance on how we should think about the three main components of the low carbon niches?

Sure. And we'll speak to them in general terms. We're not prepared to give you a specific guidance on revenue or EBITDA at this point. We hope to be able to do that shortly. But in general terms, we'll walk through that. I think it's important to note that the Standard Lithium agreement, you know, we're seeing meaningful benefit to that today. And we'll continue to see. We've accumulated a 1.6 million shares at yesterday's close price, that's an $11 million value to TETRA. Over the next three years, we had the potential to acquire another 1.8 million shares. If we just take that closed price yesterday, that's another $12.5 million of value, plus the million - $1.2 million in cash we get for the next three years. That's another $3.6. So if I - if I add up what we've already accumulated and what we see over the next three years, assuming it takes Standard Lithium that amount of time to get ready for production. We're talking about up to $28 million of potential value to TETRA before they start producing lithium. And then, of course, when they start producing lithium, those numbers escalate meaningfully. On the PureFlow side, that's advanced, as we've mentioned now on two calls, much quicker than we've anticipated it would. We believe talking to the energy storage companies, based on their demands that we will see a meaningful and material orders start to come in Q1 of 2022. And again, that could be very material to us for our business in 2022, and carried into 2023 with additional ramp. It's at that point that we will really need to have secured additional bromine supply, which is why we've announced these strategic opportunities, both with our own leases, mineral leases in Arkansas, as well as the agreement with Anson. As we get to that 2023 period, we will clearly need that additional bromine supply. Our plant capacity still has capacity to build, you know, well above that. But the actual bromine itself is where we will need the additional capacity. And then as we look at CarbonFree, they've demonstrated the pilot plan to the specifications. They've selected Fluor as their contractor. We expect them to be signing their first plant construction project between now and the end of the year, with potential startup operations by the end of next year, or the first quarter of 2023. And again, if as that rollout plan, looking forward if they're successful, as we fully expect they will, because of the unique solution that they offer, you know, within the next two to three years after that our calcium chloride production and sales could double. So again, material types of opportunities for us as these low carbon energy projects play out.

And Stephen, I had a couple of data points that I think are relevant. Number one, we have communicated previously that globally we produce until about $100 million of revenue from calcium chloride. So that will give you some context to Brady's earlier comment. And then also, one of the things in talking to investors that I think is still not fully understood and appreciated is, in Arkansas, we've got leased acreage, of which not all of it is under the Standard Lithium agreement. And the press release that we issued yesterday morning indicated that we've got between 85,000 and 286,000 tons of lithium carbonate equivalent outside the Standard Lithium agreement of which TETRA owns a 100% of those rights that we could mine and sell into the future. And at 12,500 a ton that's significant value that I think is not understood or yet fully appreciated.

Okay, great. No, that's very helpful. I'll get back in line. Thank you.

Thanks, Stephen.

The next question is from Samantha Hoh of Evercore ISI. Please go ahead.

Hey, guys. Thanks for providing the EBITDA margin guidance on the Water and Flowback segment. Brady, maybe asked another way, I was wondering what the impact you know, from moving some of your assets from - on the Sandstorm side to Argentina was to 2Q if you have that handy, maybe just impact to revenue and EBITDA margin?

But the main impact Samantha was obviously for the equipment was in transit, and then clearing customs and getting set up with the customers is that we probably lost about two months of revenue for a significant number of units, and then we backfill those units. We believe that for the month - for the quarter, the third quarter, we'll have all of those units back in full production.

Okay, great. And then just maybe a little bit more on the things bromine [indiscernible] order. So you got your first order in the books, what was the mechanics in terms of getting that fulfilled? Do you have that, you know, some inventory of that available that you can actually just start delivering on that or is there some sort of production time lag before we see that hit revenue?

Right. Thanks, Samantha. So, the first order was significant, because firstly, it confirms the technical qualification of our PureFlow for their energy storage systems and it also sets you know, a benchmark, commercial terms for delivery, you know, which we're pleased with. Obviously at this point is a bit of a smaller order to get things started into both of our systems. But it sets where we think we will be as the - as they ramp up their larger order quantity, starting in, what we believe at this point will be the first quarter of next year.

And Samantha just to make sure that it's understood and appreciated, today we produce and sell significant volumes of zinc bromide into the oil and gas sector. The benefit that we have is that we apply our patented [ph] process to take that zinc bromide and convert it into PureFlow to meet some of the immediate opportunities.

Do you have to change the chemistry for the different customers?

No, we don't expect the chemistry will change there. There is a change in the purity level, as Elijio highlighted between what we supplied to the oil and gas market, and what we supplied to the energy storage, the energy storage specifications for purity are significantly higher than what's required for oil and gas.

Right, for the CarbonFree investment, how does that change the discussion around the MLU? Do you guys still think that you'll have terms finalized by the end of the year?

Yeah, we do. That the collaboration with CarbonFree is excellent. The MOU set some kind of guidelines and parameters that we would work towards, some general concepts of what we want to work towards. And I would say the collaboration at this point, in working with CarbonFree, understanding their specifications, understanding their volumes, you know, on the TETRA side, making sure we can source the volumes of calcium chloride that are going to be provided in various places around the world, to our specifications, to their specifications, is all working very well. So we would fully expect the way things are progressing to have a definitive agreement in place, certainly before the end of the year.

And then maybe just to stay on the new energy topic, for the Standard Lithium piece, or even actually, on the Arkansas reserves. What's the next step in terms of, you know, your assessment of this business that you have and you would take to actually develop them yourself?

Right, right. So you'll notice it was the exploration target estimates that were provided, the next step for us based on these results, is we will go ahead and move to an inferred resource effort with the geological company that we have deployed. That's going to require some sampling of some of the fluids in the wells in our leases. So be a little bit of time involved with that, but not extensive. And then they will execute the inferred resource report for both the bromine in our leases, as well as the lithium in the leases that we have outside of the Standard Lithium agreement. Now recall that, within the Standard Lithium agreement for the acreage that they have, they've already completed a inferred resource report, which is the 890,000 tons of lithium, a step substantial amount of lithium. And they're moving into the, you know, economic feasibility study, which we expect to have in the third quarter. So they're a little bit ahead of us, at least in terms of progressing down that development path, but we're excited to see them moving, you know, sooner rather than certainly the agreement would expire.

Okay, great. And maybe just one final one. On the calcium chloride plant expansion in Finland, I know you said that it was a very small capital investment. Can we assume that your CapEx stay at about this run rate, you have to include that? And then no, would you have that incremental capacity available in time for next summer?

Right. And so the CapEx will not be significant, it will be spread between this year and next year. And we expect to have it fully operational by about this time next year, to be able to participate in the peak season, the subsequent year. So it's not going to be – not going to move the needle on the CapEx.

And we'll see it really more in 2023 numbers. Thank you so much, guys.

Thank you, Samantha.

The next question is a follow up from Stephen Gengaro of Stifel. Please go ahead.

Thanks. It's two more if you don't mind. The one is, I know Elijio you referenced a bit. But how should we think about free cash generation in the back half of the year and, and going forward just kind of based on the different moving pieces. And I know that working capital has been a bit of a drain, year-to-date, I think, I know receivables are up. But how do we think about that?

So, Stephen, as Brady mentioned, with the awards in the offshore side, and some of the opportunities that we've got in terms of pricing on the onshore side, we expect EBITDA to continue to ramp up during the year. And then, depending on the rate of growth, if activity continues to spike all the way until the end of the year, in December, and December remain strong, we might not have an opportunity to monetize all that AR, before we close December. If it pulls back - pulls back modestly in December, as has occurred in prior years, it'll allow us to monetize some of that AR. So some of it will depend on the speed or the ramp up, and the timing at the end of the year, to determine the magnitude of how much of that AR we can monetize. We have demonstrated that we can invoice timely collect, quickly, we've got a very strong customer base out there that doesn't present concerns from an AR site. So it really depends on the speed of the uptake and activity.

Okay, thanks. And when you - when we think and I'm going back to the Fluids margins here, I know. But when we think about, you know, the prior quarters, when you'd have CS Neptune jobs, you obviously have these, you know, these sharp rises in margins for core. And I know the job that you referenced, that you completed in July wasn't of that magnitude. And I know the - I think the broader projects that you've announced in Brazil and the Gulf [ph] are a bit different. But will we see a meaningful jump in Fluids margins be sustained here over the next year plus because of these deepwater contracts?

So I think for the quarter, we reported 27.7%, almost 28% EBITDA margins. Our guidance really Stephen at this point is to certainly maintain over our target of 25% EBITDA margin. We could see some spikes, where we're over our Q2 numbers of 27.7%. But we won't see until we deliver some of the Gulf of Mexico wells, which right now on the schedule looks like more 2022, you won't see that, you know, jumped to mid 30s, that we've seen in prior large Neptune type of the jobs.

Okay. All right. So we're still thinking mid 20s plus-ish in the back half a year. And then it may be improvement from there based on the time.

Right.

But the Gulf, I thought the Gulf awards were going to start helping in the third quarter.

I don't believe we committed any Neptune jobs for the year. We had visibility of a couple of projects, Stephen, but at this point, I would say first quarter of next year is most likely for the Gulf of Mexico, Neptune opportunities.

Okay. But the Gulf deepwater project that you just awarded does help. It's just not as - it is not as eye opening about margin impact. It's not Neptune job.

Yeah, I'm sorry. I will clarify. I was speaking about Neptune specific. Such a big impact on our margins we will definitely see, and we're already seeing the impact of the awards in the Gulf of Mexico on our Q3 and Q4 results, which will maintain our mid 20s type EBITDA numbers.

Okay, okay. And then one more, and I'm not sure if you're willing to take a shot at this or not. But if you - just give or take you do $50 million plus-ish in EBITDA and adjusted EBITDA this year, that's kind of based on my model, but we're still working on that. But net-net, if you if you use that as a reference point, in 2024 could these new carbon initiatives match that, i.e., if everything else stayed the same could EBITDA double just based on? Or am I way off? Is that reasonable? Is that too low?

So Stephen, let me reiterate a couple of data points that I think Brady made that are important. He indicated that if the low carbon initiatives with CarbonFree take off and we can double our calcium chloride profitability, you can see that we've been generating consistently mid 20% type EBITDA margins in our Fluids business, and in the past, we've indicated that the calcium chloride business is in that ballpark. That's a significant step up. To the opportunity to gain value from the Standard Lithium agreement, then the opportunity to sell quite a bit of PureFlow into the data [ph] storage market there. So I think when you add up all those, collectively, there's a significant opportunity there for us.

Yeah, I would agree with that. The PureFlow projections right now, itself will be pretty material by 2024. I think it'd be hard pressed to say we're actually getting any lithium royalties by 2024, although it's possible. But the main two components that will be - we think will be contributing pretty meaningfully will be CarbonFree and PureFlow by 2024. We have a model, you know, all the numbers yet from our forecasts. We're not prepared to lay those out yet, but I don't think you're too far off what's possible.

Yeah, no. And I understand it's a long one. It does help. So, you've given a lot of good color around it. So that's very helpful.

Okay. Thank you.

All right. Thank you.

[Operator Instructions] There are no other questions at this time. This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Murphy for closing remarks.

Thank you, Kate. We appreciate everyone's attention and interest in TETRA. And for now, we will close the call. Thank you.

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