Tetra Technologies Q3 2026 Earnings Call Transcript

Quartr
Provided by Quartr
November 3, 2026

Key Takeaways

  • Positive Sentiment: Third-quarter revenue reached a 10-year high of $168 million, up 10% year over year, while adjusted EBITDA was $25.1 million and adjusted EPS rose to $0.06 from $0.04.
  • Positive Sentiment: Water and flowback revenue increased 21% year over year, supported by international expansion and SandStorm adoption; production testing revenue rose 60%, while margins expanded 480 basis points to 16.7%.
  • Positive Sentiment: Management expects fourth-quarter revenue and adjusted EBITDA to grow double digits year over year and projects further 2027 growth from deepwater completions, international production testing, industrial chemicals, and electrolytes.
  • Positive Sentiment: The Arkansas Bromine Project remains on schedule and below its approved cost estimate, with first production targeted for early 2028 and capacity expected to ramp from 37 million to 75 million pounds annually by 2030.
  • Negative Sentiment: TETRA’s Oasis water-reuse opportunity has expanded to seven projects, but commercialization remains dependent on regulatory approvals that management cannot control, and the company is not yet providing revenue or EBITDA targets for the pipeline.
AI Generated. May Contain Errors.
Earnings Conference Call
Tetra Technologies Q3 2026
00:00 / 00:00

There are 11 speakers on the call.

Operator

Hello, everyone. Thank you for joining us, and welcome to the TETRA Technologies, Inc. third quarter 2026 earnings conference call. After today's prepared remarks, we will host a question-and-answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. I will now hand the conference over to Kurt Hallead, Treasurer and IR. Kurt, please go ahead.

Speaker 1

Thank you, Christine. Good morning, everyone, and thank you for joining TETRA's third quarter 2026 earnings call. Today's speakers will be Brady Murphy, President and CEO, and Matt Sanderson, CFO. During the call, we will be referring to certain non-GAAP financial measures. Please see our press release for reconciliations to the most directly comparable GAAP measures. I would also like to direct your attention to the safe harbor statement in our press release and Form 10-Q. Some remarks today may be forward-looking and are subject to the risks and uncertainties described in our SEC filings. Actual results may differ materially from those expressed or implied. After Brady and Matt's comments, we will open the line for Q&A. I will now turn the call over to Brady.

Speaker 2

Thanks, Kurt, and good morning, everyone. Our third quarter was highlighted by some really exceptional performances across a broad range of our company's geographies and product lines, including excellent execution of our bromine construction project in Arkansas, which I will discuss later. Third quarter revenue of $168 million was up 10% year-over-year and was our highest third quarter revenue in the past 10 years. International revenue reached $68.8 million, or 41% of consolidated revenue, also our strongest third quarter in a decade. Adjusted EBITDA of $25.1 million was our second-highest third quarter over the past 10 years. This strong performance was achieved despite lower deepwater activity in one of our strongest markets, our completion fluids in the Gulf of America, as customers were cycling through a drilling-heavy, lower well completion quarter.

Speaker 2

Our record-level revenue was highlighted by continued growth in international markets, accelerated growth in our industrial chemical segment, and continued strength in global deepwater markets. Industrial chemicals generated its strongest third quarter revenue in a decade, with 32% year-over-year growth, and accounted for more than 50% of the completion fluids and products third quarter revenue. This growth was supported by an expanding U.S. industrial market, including semiconductor manufacturing, which was up 48% year-over-year for us, and by electrolytes for energy storage. Although gas and diesel price inflation hasn't affected our international fluid shipment delivery costs, it does provide a cost advantage in markets with proximity to our chemical plants, both in the U.S. and in our market-leading position in Europe. Within water and flowback, production testing also achieved a 10-year high in third quarter revenue and Adjusted EBITDA.

Speaker 2

Production testing grew 9% quarter-over-quarter, driven largely by auto SandStorm market share gains in the U.S., and grew 60% year-over-year, driven by growth across all of our international regions. This strong performance supported water and flowback revenue growth of 21% year-over-year, and an Adjusted EBITDA margin increase of 480 basis points to 16.7%. In aggregate, our international business accounted for 41% of total company revenue, led by Argentina, as our early production facilities ramped up and our patented TETRA SandStorm technology achieved strong utilization in the Vaca Muerta. We expect continued growth across all our international markets in 2027. We continue to extend our technology lead in production testing with the introduction of Echo SandStorm, a non-intrusive technology that provides real-time sand measurements during flowback. In field operations, Echo SandStorm has reduced sand dumping cycles by 92%, lowering personnel costs and equipment wear.

Speaker 2

Another key benefit is reduced customer methane emissions. A joint program with a major Appalachia operator demonstrated that Echo SandStorm achieved a 95% reduction in methane emissions. These innovations continue to expand our addressable market and support our higher margin, high returns share gains. As we look ahead to Q4, we anticipate another strong quarter, with revenue and Adjusted EBITDA projected to be up double digits compared with Q4 2025. We are scheduled to execute our first of three Neptune Z-Lite wells during the quarter, as we continue to see a growing pipeline of Neptune projects. Over the past several days, the largest oil field service companies have described an outlook that aligns very well with TETRA's portfolio. The common message is that 2027 growth and beyond will be led by offshore markets, with increased technical expertise needed to address HPHT and complex deepwater reservoirs.

Speaker 2

That matters for TETRA because it is where our base business is positioned and consistent with the view that we communicated at our ONE TETRA 2030 Investor Day in September of last year. Our high-value completion fluids franchise is built for technically demanding deepwater wells. Based on conversations with our customers, we expect completion fluids revenue and EBITDA to increase in 2027, driven by the U.S., Gulf, Norway, West Africa, and the Mediterranean. Now I would like to turn to our strategic initiatives supporting our ONE TETRA 2030 strategy and goals. A key driver of our long-term growth and margin expansion for deepwater fluids and industrial chemicals is our Arkansas Bromine Project, which continues to advance on schedule and on budget. We are now 12 months away from the plant being mechanically complete, and for commissioning and startup operations to be well underway, with first production in early Q1 2028.

Speaker 2

This is a major project by any standard, and our team and contractors have done an exceptional job managing every phase. Thus far, we have logged over 60,000 man-hours with zero safety incidents and completed over 2,200 welds, covering more than 5,000 feet with zero defects or rework. All mechanical equipment has been engineered and is either delivered or under confirmed purchase orders for delivery. In total, the equipment is below our FID-approved total installed cost estimate. Our team has done an exceptional job managing inflationary pressures while keeping the project on its original schedule and within approved capital spending limits. Detailed engineering is in the final stages and is expected to be completed in the first quarter of 2027. The next phase of well development is scheduled to begin in mid-November.

Speaker 2

We remain on track to begin bromine production at an annualized rate of 37 million pounds at the start of 2028 and ramp up to the facility's 75 million-pound capacity by 2030. The Arkansas Bromine Project serves as a bridge between our base business and our growth platforms. It provides us a lower-cost, secure bromine supply for our deepwater fluids and our PureFlow zinc bromide electrolyte, two businesses where we expect demand to grow well beyond 2030. As we move closer to plant startup operations, I'd like to discuss how we view the global bromine market and our participation. The global bromine market is estimated at about $2.1 billion annually and is expected to exceed $3 billion by 2033, driven by a diverse range of growing markets, including electronics, oil field completions, water treatment, energy storage, and other specialty applications.

Speaker 2

Chinese bromine prices surged in 2021 and again this year, and they remain roughly twice their late 2024 levels, underscoring the need for a reliable, cost-effective supply. Our evergreen bromine asset addresses that need with a newly developed high-quality resource. For TETRA, our primary channel to market will continue to be our industry-leading completion fluids business. For context, in full year 2026, our completion fluids will consume significantly more than the 37 million pounds of planned first-year production. As a result, in 2028, we will supplement our bromine plant production with our long-term supply agreement, which extends through 2029. With PureFlow electrolyte demand continuing to accelerate, by 2030, the combined requirements of our completion fluids and electrolyte businesses are expected to exceed our planned 75 million-pound plant capacity.

Speaker 2

It's important to note that if these markets grow below our full plant capacity, we have the opportunity to participate in other attractive bromine segments, which, as mentioned, is expected to grow over 50% by 2033. On TETRA Oasis, the quality and breadth of our customer engagement continues to encourage us. Rising constraints on produced water disposal in the Permian Basin, combined with large water requirements from data center development, have created an opportunity significantly larger than we initially envisioned. We now have seven projects in our pipeline, four of which are tied to data centers and behind-the-meter power requirements. The remaining three projects focus on reducing produced water disposal. While the data center application has shifted the timing of our first commercial plants from what we had originally anticipated, it has meaningfully expanded the opportunity.

Speaker 2

I'd like to emphasize that although we're excited about the data center opportunities, the industry's primary challenge in the coming years remains reducing pore space, which is causing over-pressurized disposal wells. I'd like to acknowledge the company B3 Insight for its extensive work mapping subsurface over-pressurization and modeling potential outcomes. According to its August 2026 report, all 10 core oil-producing counties in the Permian Basin, which account for 93% of the basin's production, show pressures well above the normal pressure gradient. Loving County, for example, the highest disposal county at 3.1 million barrels per day, shows pressures 21% above the normal pressure gradient. This is obviously not sustainable. Permitting remains the primary next step towards commercialization, with six beneficial reuse applications pending before the TCEQ.

Speaker 2

Although our customers are the permittees, we continue to engage with the TCEQ and the EPA, providing detailed responses to their questions and results from our pilot operations, including successful outcomes for every requested water quality test. As the regulatory agencies become more familiar with the technology and the water quality results, we are optimistic that approved permits are forthcoming. Finally, in early October, we amended our term loan agreement, which gives us additional flexibility to fund Arkansas and our other growth initiatives. Matt will cover the details. With that, I will turn it over to Matt.

Speaker 3

Thank you, Brady, and good morning, everyone. As Brady mentioned, our third quarter revenue of $168 million was a 10-year high for the quarter, was up approximately 10% year-on-year. Income from continuing operations was $6.8 million, or $0.05 per share, compared with $4.2 million, or $0.03 per share a year ago. Net income includes $2 million of unusual charges. Adjusted net income per share was $0.06, compared with $0.04 a year ago. Adjusted EBITDA for the quarter was $25.1 million, which was flat with the third quarter of 2025, and as Brady mentioned, was our second-highest Q3 in the past 10 years. Completion fluids and products revenue was $91.9 million, up 2% year-over-year, and the highest third quarter in 10 years.

Speaker 3

This strong performance was achieved despite lower deepwater activity in the Gulf of America, one of our strongest markets, as customers were cycling through a drilling-heavy, lower well completion quarter. Gulf of America completion activity is expected to increase later this year and carry well into 2027. Our industrial chemicals revenue continues to grow at an accelerated pace, up 32% year-over-year, and for the first time, represented more than half of the segment revenue. As Brady mentioned, part of this growth was driven by a 48% year-over-year increase in semiconductor manufacturing sales, where calcium chloride is used to treat wastewater. Adjusted EBITDA was $20.3 million, or a 22.1% margin. Lower deepwater activity in the Gulf of America and significant shipping cost increases on the last of our contractually obligated Middle East deliveries were the primary factors impacting margins.

Speaker 3

We view these as timing and mix factors and expect CFP segment margins for the year to hit the lower end of the 25%-30% guidance range. Water and flowback services revenue was $76.1 million, up 21% year-over-year. Growth was led by international markets and increased adoption of our patented SandStorm technology. Production testing grew 9% sequentially and 60% year-over-year, driven largely by auto SandStorm market share gains in the U.S. and growth across international regions. International revenue accounted for 33% of the segment total, up from 15% for all of 2025. Adjusted EBITDA was $12.7 million, up 69% year-over-year, with margins of 16.7%, an increase of 480 basis points. This segment is a strong example of how technology and international expansion are creating growth opportunities beyond the U.S. and broadening our earnings base.

Speaker 3

Corporate expense was $7.9 million for the quarter, compared with $10 million a year ago. These savings are due in part to the move to our new corporate office in November of last year. Net interest expense was $2.4 million, net of capitalized interest and interest income on our short-term investments. For the first nine months of the year, cash provided by operating activities was $31.3 million, and capital expenditures were $77.6 million, reflecting the step-up in Arkansas construction spending. 2027 represents the final major investment year for our bromine project. With the completion of the project, we expect the benefits of our vertically integrated bromine supply to drive a meaningful step-up in free cash flow generation beginning in 2028. We ended the quarter with $84 million of cash and equivalents and $42 million of short-term investments. Total debt was $184 million. Net debt was $58 million.

Speaker 3

Liquidity was $208 million, and our net leverage ratio was 0.7 times. As Brady mentioned, in early October, we amended our $190 million term credit agreement. The agreement extends maturity from January 12, 2030, to December 31, 2030. It reduces the interest rate margins by 75 basis points, down to SOFR plus 5%, and defers approximately $19 million of principal amortization payments out to 2030. Given our base business cash flow, the June equity offering, the amended term loan, and our existing ABL facility, we have the financial flexibility to fund the Arkansas Bromine Project while supporting our growth initiatives. I'll now turn the call back to Brady for his final remarks.

Speaker 2

Thanks, Matt. Summarizing, our strategy rests on two layers. The first is a strong technology-led oil and gas business with growing international deepwater exposure that is visible earnings-generating foundation. The second is the company-specific growth from bromine, electrolytes, water, and critical minerals. For Q4 2026, we expect consolidated revenue and Adjusted EBITDA to be up double digits year-on-year. As we look to 2027, we expect revenue and EBITDA to increase relative to 2026, again driven by deepwater completions, international production testing, SandStorm adoption, electrolyte demand, and industrial chemicals. Our 2027 base business outlook does not depend on the U.S. land activity improving. Any improvement there would be upside. Let me close with an update on our ONE TETRA 2030 strategy. At our investor day last September, we laid out targets of over $1 billion of revenue and over $300 million of Adjusted EBITDA.

Speaker 2

Since then, we have grown our base business, approved and funded the Arkansas Bromine Project, keeping it on schedule and on budget, built an Oasis pipeline, and strengthened our capital structure. Every quarter, the base business gets stronger, and we continue to check the box with key milestones for achieving our ONE TETRA 2030 targets. With that, operator, please open the line for questions.

Operator

We will now begin the question-and-answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question comes from the line of Martin Malloy with Johnson Rice. Martin, your line is now open.

Speaker 4

Oh, good morning. Congratulations on the strong quarter.

Speaker 2

Thanks, Marty.

Speaker 4

My first question, just on the desalination project side, could you maybe help us a little bit with what we should be looking for in terms of timeline on the permitting side? It seems like you all have been working with the regulatory authorities in Texas for a considerable period of time on your technology, and maybe just kind of give us an update there on where you are and expected timeline for permits being received.

Speaker 2

Yeah, Marty, it's very difficult for us to project when the permitting process will really start flowing approvals. That's not within our control, obviously. It's also, we're the technical expertise that the EPA and the TCEQ, and somewhat commercial piece of their questions that we help them with. But at the end of the day, just to remind our audience that our customers are the permittees, the operators, the midstream companies. They are the ones who have to obtain the permits. We're providing a technology and a service to them to treat this water for desalination purposes. So we're heavily engaged on the technology side, obviously heavily engaged on the commercial side, but it's really the operators and our customers and the midstream companies dealing with the TCEQ for the final approval process, which we don't control.

Speaker 2

Although, the messaging that we're getting is encouraging, that they know this is important, they know that this is an issue that there's a tremendous opportunity to take advantage of this produced water for beneficial reuse. Although we're encouraged, we don't control it, so it's difficult for us to predict exactly when it will happen.

Speaker 4

Okay. My follow-up question, just wanted to ask about the deepwater completion market. I think you mentioned in your prepared remarks, growing pipeline for the Z-Lite product, and maybe could you expound a little bit more on that, maybe the geographies that you're seeing the demand in?

Speaker 2

Yeah. As you know, Z-Lite uses Neptune chemistry. It is a different Neptune product than our initial release of Neptune, but since it uses Neptune chemistry, we classify it as a Neptune product. So when we look at the whole opportunity set for Neptune, clearly the Gulf of America is a key market for us, for both Neptune and Z-Lite. Norway is a very encouraging market for us, for Z-Lite in Norway. And really, as you look across the globe in terms of the deepwater international markets, there are candidates for Neptune across the board. Now, some of those are going to be on different timelines, some might be multi-year projects, some may get pulled in sooner rather than later. But it is clearly a growing opportunity set for us, Marty, as we think about our completion fluids, but it's an important pipeline of projects for us.

Speaker 4

Great. Thank you. I will turn it back.

Operator

Your next question comes from the line of Patrick Ouellette with Stifel. Patrick, your line is now open.

Speaker 5

Hey, good morning, everyone. It is Pat on for Stephen Gengaro. Thanks for taking the questions.

Speaker 2

Sure.

Speaker 5

Just to start, could you talk about the impact of the third-party bromine purchases, and maybe how we should think about the margin impact in 2027, and then maybe on the flip side, the positive impact once your internal production comes online?

Speaker 2

Yeah. So, clearly we are buying third-party bromine today, because our demand is well above the baseline long-term supply agreement that we have. We have secured the bromine that we need for 2026. We are in process of securing the volumes that we need for 2027. And of course, as you know, purchasing above our long-term supply, which is more aligned with spot prices, those costs do increase for us as we supply more and more third party. But again, that really is the business case that supports our bromine project, Patrick, which will really allow us to supply a long-term supply of low-cost bromine. But we are navigating the third-party purchases through 2026, which you've seen in our results, and through 2027. And as we've projected, we still expect increased revenue and EBITDA for our fluids business in 2027.

Speaker 5

Okay, thanks for that. And then maybe piggybacking a little bit off of Marty, you talked about the pipeline of the Oasis projects with permitting for the next step. Could you just maybe talk about potential structure of a desal contract, and then what do you think the key milestones needed to sign the first DLR?

Speaker 2

Well, I think the key milestones are the permitting process has to start happening. I think from our perspective, we're deeply engaged with these seven different projects from both a technical design. The water treatment specs that are required, the commercial discussions, all of those discussions are happening at different points in time for each of these seven projects. Again, the data centers are going to be somewhat different in our view from the traditional just reducing volume of disposal. And I think we've talked about this before, the data centers are looking, or our customers are looking at a data center solution that we call a water hub. And that water hub may start out with treating brackish water, and then over time, replacing that brackish water treatment with produced water.

Speaker 2

And so, that model for the data centers is evolving, but we think there's some good traction behind that model that makes a lot of sense. And of course, for TETRA, we benefit both ways by treating the brackish water as well as the produced water over time, and it does de-risk some of the large-scale volumes of water that these data centers require. They're quite different than how we see the other projects evolving, which I think will typically be smaller scale, not really dealing with brackish water at all, but treating produced water for reducing disposal volumes.

Speaker 5

All right. Thanks a bunch, Brady. I'll turn it back.

Operator

Your next question comes from the line of Bobby Brooks with Northland Capital Markets. Bobby, your line is now open.

Speaker 6

Hey, good morning, team, and thank you for taking my questions.

Speaker 2

Good morning, Bobby.

Speaker 6

Just to get you back on the line, good morning. Just a little bit of better, wanted to get a little clarity on the understanding of the pipeline. So those six beneficial reuse applications with the TCEQ, all six of those permit applicants are within your seven-project pipeline? Then maybe remind us, are those permits submitted with a certain technology to be used, or is it technology agnostic?

Speaker 2

Yeah, we said before that we are not identifying the specific seven projects that we have, whether they are part of the TCEQ six or not. But the TCEQ six is public information. You can go on their website and see the permits, but we're not disclosing whether we are part of those initiatives or not, because we have NDAs with our customers on those, and so that's really not something we're going to be able to disclose, Bobby.

Speaker 6

Fair enough. Thank you for reminding me. Then shifting gears, the U.K. approved drilling in the Jackdaw Field in the North Sea a couple weeks ago or last month. I know it's a gas field, but it appears to have pretty similar pressure, temperature dynamics as ultra-deep wells in the Gulf of Mexico. That would lead me to believe this could be a Neptune or Neptune Z-Lite opportunity, or am I off base in my understanding? Just want to hear more thoughts there.

Speaker 3

Yeah, Bobby, this is Matt. Good question. So, we're obviously encouraged by some of those permitting activities that are now starting back up on the U.K. side of the North Sea. I think you're aware we have quite a strong market position in the U.K., then also, as Brady referenced, ever-growing opportunities in the Norway market as well. So, in the past, I think we've mentioned that we have deployed Neptune chemistry beyond the Gulf. In fact, I think we may have mentioned that we've deployed it in the North Sea in the past. So, as activities start to potentially ramp back up on the U.K. side, I think we're very well positioned to participate in those activities.

Speaker 6

That is terrific to hear. Then this last one for me is, obviously, the Argentinian business has been a really nice driver of growth this year, and as we close out 2026, could you just speak to maybe what your visibility on growth is for 2027? Maybe it is not a doubling, but is there still an expectation for really strong growth out of there? Or maybe that kind of flattens out a bit, but you mentioned how that first SandStorm was deployed in the Middle East, then the growth vector kind of shifts, and the Middle East becomes a really nice growth market for you guys. Just want to hear more about how you are thinking there.

Speaker 2

Yeah, I think that is a good way to look at it. I think there are a couple growth trajectories for us for our PT business next year. One is our Echo SandStorm is really getting a lot of attention that we think will help us get significant market share, even in the U.S. We still have a lot of share to gain in the U.S. market. Argentina, we are expecting more growth. Obviously, we will not be doubling our growth again in 2027, but we do anticipate a double-digit growth in Argentina in 2027. Then the other big potential for us is the growing Middle East unconventional business. That market has also seen what we are offering with our auto SandStorm, and now even the Echo coupled with that, and we think that will be a pretty significant draw from a market perspective for us in growth in 2027.

Speaker 3

The other thing I will add there, Bobby, because you brought up Argentina, is you can reference this well. Obviously, it is an unconventional development. You can see industry bodies like the Produced Water Society, which are quite active here in places like the Permian Basin for reasons we talked about. They are now active in Argentina. So, that market is going to continue to evolve. So technical solutions such as Oasis are going to be very well positioned in places like Argentina as that market evolves and as that industry down there deals with water. As you know, we are already in that market today with a very strong reputation.

Speaker 6

That is a great add-on. Appreciate the color, team. Thank you.

Operator

Your next question comes from the line of Jon Tanwanteng with CJS Securities. Jon, your line is now open.

Speaker 7

Hi, good morning. Thank you for taking my questions. I was wondering if you could give us a little bit more color on the Oasis pipeline, the seven projects you have. Do the elections that are happening today make a difference in the probability and the timing of those being approved, number one? Number two, could you just size up the total capacity or revenue amount that you expect those projects to have, assuming all of them are approved?

Speaker 2

Yeah, I don't think the elections, my personal opinion, will have much of an impact on the short term permitting status. The TCEQ operates somewhat independently along with the EPA to move these projects forward. I'm not anticipating any change one way or the other depending on the elections. As far as the projects go, we've stated previously, Jon, that these data center opportunities, four of the seven, these are very large volume type projects. Because the projects are going to start with brackish and move to produced water, it's a little bit difficult to predict exactly what the revenue profiles will look like until all those parameters are nailed down.

Speaker 2

There are very large volumes of water to be treated, different from the other three that are just purely produced water treatment, which are probably pretty similar to the financials that we discussed when we presented our investor day. Anyway, it's a mix, so it's hard to project at this point until we get the permitting moving and the contracts in place. We won't be giving any specific revenue and EBITDA targets in short term until that happens.

Speaker 7

Okay, understood. I was also wondering if you could give us a little bit more detail on the semiconductor business. How much is it today in terms of either dollars or percent of total sales or segment sales, and how sustainable is that 40%+ growth rate as you go forward?

Speaker 2

Yeah, this is a really exciting opportunity for us. Fluorine is used in etching of semiconductors manufacturing, but it has to Fluorine is obviously a hazardous material, and it has to be treated for hazard purposes, hazard waste purposes. Our technology, our chemicals that we're using is part of that solution. So it's still a relatively small part of our business, certainly less than 5% of our overall chemicals business in North America. But obviously, the growth trajectory that we see looks quite sustainable as more of these semiconductor plants get stood up. We are working on some additional chemistry to make our offering quite unique in the marketplace. So yes, very optimistic about how we view that market going forward.

Speaker 7

Got it. Thank you. If I could sneak one more in there, could you update us on the battery electrolyte space and what you see as the outlook there? Especially as some of these, maybe not specifically grid, but some of these higher multiple data center plays, higher growth data center-related plays have had concerns regarding financing and credit.

Speaker 2

Yeah, could you repeat that one, Jon? Didn't come across totally.

Speaker 7

Yeah, just

Speaker 2

Can you repeat the question?

Speaker 7

just an update on the battery electrolyte business

Speaker 2

Yeah

Speaker 7

given broader concerns on credit risk and financing in the high growth energy data center space.

Speaker 2

Yeah. Our major customer today on the energy storage side is Eos, and we do not want to get out ahead of them in terms of anything they might say about how they view the market. But clearly, what they have said publicly is they are ramping up their production to get their second 2 GW manufacturing capacity line up before the end of the first quarter. And how we see that business growing is pretty aligned with the public statements that they have made in that regard. I think they will be able to give you probably more color in terms of how they see their end markets if you get a chance to catch their earnings call. I do want to mention on the lithium side, because we have mentioned it before, that that continues to be a very interesting opportunity for us.

Speaker 2

I think when we did our investor day for 2030, we had put that out beyond the year 2030. And we have mentioned before that because of the investment that we are making in Arkansas, the synergies that we will get through having the infrastructure, the wells, a lot of the common and shared facilities at that site in Evergreen, the lithium project looks extremely attractive to us. So we are looking at potential ways to accelerate that. But I am not prepared to give any definitive timelines on that, but that is one where we see an opportunity for TETRA to participate again in the energy storage side of the marketplace.

Speaker 7

Understood. Thank you.

Operator

Your next question comes from the line of Stephen Sibilia with Berenberg Capital Markets. Steven, your line is now open.

Speaker 8

Hi. Good morning, Brady, Matt, and Kirk. Congrats on a solid quarter.

Speaker 2

Thanks, Stephen.

Speaker 8

Hey. I wanted to ask a question related to bromine, and I guess just getting a better understanding of end markets and that chemical. In terms of thinking about the future, I realize you're not going to be first production until 2028, and currently your use is in completion fluids and battery electrolytes. What are your other options in converting bromine into other products or other end markets? I ask that in the sense of getting investors to think longer term. When you look at two large bromine suppliers like Albemarle and ICL, those guys are afforded some pretty decent margins between the high 20s to 30% range. If you could talk a little bit about maybe some plans on some end markets or other product uses for bromine, I'd love to hear it.

Speaker 2

Yeah. As you probably are aware, Stephen, we participate in the oil field side of bromine demand as well as the energy storage side, but the biggest market for bromine is in fire retardants by far. Because our planned growth for our bromine requirements for completion fluids and energy storage will take us to our capacity of the plant, we're not at this point developing any additional applications, but it is something that we can do. We can also sell elemental bromine into the market if we desire to do so. As I mentioned, Chinese prices have more than doubled recently as it relates to bromine prices. That's another opportunity for us to serve or get the plant utilization if we need to, where it needs to be, is selling into the elemental bromine market.

Speaker 2

We are looking at other potential end markets, but right now it is not a priority for us because of the demand profiles that we currently see.

Speaker 3

Steven, I will just add to that as well, point out that I have been at the company now for 10 years. We have been pretty open that we have a base contract around bromine. We go to the market, we purchase third-party bromine up to a point. We have been asked by our customers to participate in some of the traditional deepwater offshore markets, and quite frankly, we haven't been able to in the past simply because we haven't had that supply capacity, at least at a price where we can be competitive. By having our own vertically integrated supply, some of the volumes now we are going to have access to, our cost of goods, and the differentiation that TETRA brings into those, I will call them more traditional markets that we haven't been able to participate in the past, but we have been asked to, we are very excited about that.

Speaker 3

One I will point to is things like frac fluids for offshore. They use bromine derivatives in those fluid chemistries. Those are markets we haven't been able to participate in the past. There is geographical markets we have been asked to participate in for the differentiations we have, but quite frankly, we haven't had the material. So, we are very excited about having a vertically integrated supply chain to participate in these markets where we do bring differentiation where customers are asking us to come. As Brady mentioned, overwhelmingly, the bromine market itself is sizable, and we are not even talking about participating in what today represents more than half of the bromine market.

Speaker 8

Thank you for that. Just to follow up, I think you guys have mentioned this in the past. Tower one will start off at 37 million tons, if I remember correctly, with a capacity of up to 75 million. It sounds like this market, if it stays as strong as it will or could, there is always optionality to build another tower, I would assume. I am obviously looking quite out to the future, so.

Speaker 2

Yeah. I think that's an important point because the investment that we're making right now in Evergreen obviously includes a lot of the surrounding infrastructure, a lot of the wells and pipelines. As you're well aware, Standard Lithium, their plans are to bring their lithium plant up, I believe the last communicated was sometime in 2029, 2030. We get all of the brine from their lithium plant, which obviously contains bromine. All of that infrastructure will be built out, so we don't have to replicate that additional cost. We'll be able to get the bromine from that brine, and our investment really would be limited to an additional bromine tower without a lot of the additional surrounding infrastructure that we've had to build out now. So, the future after the 75 million pound tower looks quite bright as well.

Speaker 3

Yeah. The follow-up to that as well, Steven, is today we have our existing conversion facility where we take elemental bromine and we convert it into these high-value derivatives. It's up in West Memphis, Arkansas. That has existing capacity, is permitted for, and can handle well over the 75 million pounds. So, as you said, as the market evolves, we believe our asset or resource, the numbers we publish can support production well beyond that. Really, it would require a second tower, not a second plant. Then our existing conversion facility in West Memphis has capacity to handle that. Of course, then we get further benefit around the plant absorption by putting more material through there.

Speaker 8

That's great. Thank you. Just a last comment, and I'll jump off. Sorry I'm going to miss you guys at the UK Berenberg Conference on December 2nd, but looks like it's going to be a great turnout. So enjoy it. I wish I could have squirreled my way, but I won't. Back to you guys. Thanks for the answering the questions.

Speaker 2

We'll miss you there, Steven.

Speaker 3

Thanks, Steven.

Operator

Your next question comes from the line of Colby Sasso with Daniel Energy Partners. Colby, your line is now open.

Speaker 9

Hi, thanks for having me on. Could you speak to the outlook for deepwater completions? Rig market is tightening and subsea orders remain strong, so all indications that we will see a multi-year strength coming in completions. How are you positioning for this, and maybe could you go into how you expect the business to trend over the next couple of years with this backdrop?

Speaker 2

Yeah, so clearly we I think you probably have heard from the larger oil and service companies talk about the strength of the deepwater market, the subsea companies talk about their backlogs and projected growth. So all of those stories align with how we view the market and what we're hearing from the market. When we did our investor day last September, we had laid out how we saw the market and our participation in that growing through 2030, which was about an 8% compound annual growth rate. I think if anything, since we did our investor day last September, our outlook has strengthened as it relates to how we see the deepwater market.

Speaker 2

The other thing I would add to that, it is not just about the number of wells that are drilled, it is the types of wells that are drilled with higher pressures, higher temperatures, getting into the higher density chemistry that where TETRA really excels. So, potentially a compounding impact for us on the deepwater market, but certainly very consistent with how we are hearing the rest of the energy industry and our customers speak to that market, Colby.

Speaker 9

So staying kind of on that same note, with deepwater developments moving towards the higher pressure and higher temperature reservoirs and Neptune Z-Lite securing its initial Gulf project, how are operations requirements for completion fluids changing? And is the greater technical complexity making product performance and reliability more important in contract awards, or does pricing still remain the dominant consideration?

Speaker 3

Yeah, good follow-up question, Colby. And you touched on Z-Lite, as we announced. We are going to be deploying that here in the fourth quarter, we expect, on a 20K project in the Gulf of America. So that is just a further example that these wells are getting deeper, they are getting hotter. As Brady said, it not only compound, it is a little bit of a hat trick, right? There is more activity. These wells are deeper, they require more fluid. The type of fluid is a little more bespoke. So really that is where, again, TETRA differentiates the purity of the fluids that we manufacture. That matters when you get into high temperature environments, it affects corrosion. So we certainly have an advantage there. And then these different bespoke solutions where, again, this is the fairway that TETRA focuses on in terms of our chemistry, our research. This is where we really excel.

Speaker 3

So I would reference you to some of those third-party market analysts such as Kimberlite, which reference some of the technical prowess that TETRA brings, the service quality. And really, when customers are getting into those kind of projects, ultimately that is what they are looking for, right? They want the service, they need the technology, they need the security of supply, and they need a trusted partner. And TETRA has 50-year history of demonstrating that really we are the premier provider in that space.

Speaker 9

Thanks for taking my questions. I look forward to seeing you at our conference in December in New York. I will turn it back.

Speaker 3

Thanks, Colby.

Operator

Your last question comes from the line of Stephen Gengaro with Stifel. Steven, your line is now open.

Speaker 10

Thanks. Good morning, everybody. Two or three for me. The first, when we think about the Z-Lite product and we think about the margin profile for fluids in 2027, can you just talk a little bit about how we should think about the impact Z-Lite has on 2027? Is this a product that is kind of You have talked about how it fits into the portfolio, but kind of does it replace, does it supplement? How do we think about the impact it has on the top line as well?

Speaker 2

Yeah, Steven, so I think we've articulated previously, when you think about Z-Lite, when you've seen results when we have our Neptune wells in the Gulf of America, what that generates for us in terms of revenue and EBITDA, and you compare that to, say, a standard calcium bromide or zinc bromide fluid in the Gulf, Z-Lite is kind of in that midpoint, both from an overall revenue perspective between a standard well and a Neptune well, as well as from a margin profile. That's as much color as I think we would probably want to give at this point. But clearly, we've got one well in the fourth quarter. We've got two additional wells through the Beacon award that are planned in the first half of 2026, and additional opportunities that Matt talked about earlier that are starting to shape up in various markets.

Speaker 2

Until we actually have, like we announced the Beacon, until we actually have the contract and we know when those wells were planned, we won't be communicating those. But the pipeline is certainly healthy.

Speaker 10

Okay, great. Thank you. My other question, it's a bigger picture question, but when we think about sort of the 2030 aspirations, and you mentioned, I think, some of the things that were going really well, how would you sort of think about the biggest risks to get there and the smaller risks? I guess I'm specifically thinking about bromine, desal, and electrolyte. Would you be willing to give a view on most versus least likely, or which ones keep you up the most at night?

Speaker 2

Yeah. Well, certainly the things that we can't control would go to the top of the list. I think what we've shown is the things that we can control, we can execute on extremely well, as we're doing with our base business, our Arkansas project, et cetera. But, I fully expect this to be resolved. The permitting, I guess, rises to the top for desal, but as mentioned, I fully expect that will be resolved certainly before we get to 2030, by all means. But that's one that we don't control the timing on. We've already talked about that, but we're optimistic that that will get resolved. It almost has to get resolved given the circumstances that we're facing. The bromine market for us, again, we feel very strong about. As we've mentioned, our demand profiles for oil field and energy storage take us well beyond the plant capacity.

Speaker 2

But if those We've seen cycles before. If those demands do not materialize, we are very well positioned to supply bromine into other markets, as we have talked about. So that one, we feel good about that one. We can control, even if we see some changes in the two end markets that we are currently targeting. I guess those would be the things, Stephen, the oil and gas industry has seen cycles many times, although we are projecting a very healthy international deepwater market through 2030. There is always a cycle that could come through. But those are the top of list of things that we cannot control, but we have the ability to navigate through them very well.

Speaker 10

Great. Thank you for all the details.

Operator

There are no further questions at this time. I will now turn the call back to Brady Murphy for closing remarks.

Speaker 2

Well, thank you all very much for participating with us, and we feel very good about where the company is positioned, how we are progressing against our ONE TETRA 2030 strategy, and we will update you in the coming quarters. Thank you very much.

Operator

This concludes today's call. Thank you for attending. You may now disconnect.

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