TETRA Technologies (NYSE: TTI) reported Q2 EPS of ($0.09), in-line with the analyst estimate of ($0.09). Revenue for the quarter came in at $192.44 million versus the consensus estimate of $186.39 million.

Financial Highlights

• Completion Fluids & Products income before taxes was $16.0 million, or 22.4% of revenue, while Adjusted EBITDA was $18.3 million, or 25.7% of revenue.
• Water & Flowback Services loss before taxes was $8.4 million, while Adjusted EBITDA remained positive at $400,000 despite a 57% sequential decline in revenue and a 64% decline in the US onshore rig count.
• TETRA only adjusted free cash flow from continuing operations was $31.2 million in the second quarter, an improvement of $26.8 million from the first quarter of 2020 reflecting improvements in working capital.
• Consolidated cash from operating activities was $60 million in the first half of the year while TETRA only adjusted free cash flow from continuing operations through the first half of 2020 was $36 million, a year-over-year improvement of $68 million compared to the first half of 2019.

Brady Murphy, TETRA's Chief Executive Officer, stated, "Our second quarter results reflect exceptional execution by our management team and employees. By working safely under extraordinary conditions due to the COVID-19 pandemic and while continuing to service our customer's requirements, we were also able to deliver strong financial results given the historical decline in drilling and completion activity during the quarter. On a consolidated basis we were able to improve Adjusted EBITDA margins compared to the second quarter of last year while also generating stronger free cash flows. Our Completion Fluids and Products segment and Compression Segment maintained strong Adjusted EBITDA margins relative to the first quarter while both improved year on year. Water Management and Flowback Services maintained slightly positive Adjusted EBITDA. Despite the rapid decline in activity, the financial stress that our customers are encountering, and restructuring costs that we incurred, we generated $38 million of consolidated cash from operations and $31 million of TETRA only adjusted free cash flow from operating activities, both very significant improvements over the first quarter of this year and second quarter of last year.

"Completion Fluids & Products segment second quarter income before tax margin was 22.4% while Adjusted EBITDA margin was 25.7%. This is the fifth consecutive quarter that Adjusted EBITDA margins for this segment have exceeded our internal management target of 20% despite very difficult market conditions. We continue to see the benefit from our market diversification as approximately half of the second quarter revenue came from industrial chemicals. Our European Chemicals business ended the quarter with its highest Adjusted EBITDA since the second quarter of 2015. Revenue for this segment declined by only 5% in contrast to the dramatic decline in overall operator spend and activity during the quarter, reflecting the resiliency of our revenue stream. The second quarter also benefited from strong Gulf of Mexico completion fluids activity, which was up sequentially and from the same quarter of last year.

"Water & Flowback Services segment second quarter revenue of $24.7 million decreased 57% sequentially compared to an estimated 80% reduction in active frac crews. We were able to maintain a slightly positive Adjusted EBITDA through exceptional cost management, market share gains and customer adoption of our latest technology. In the second quarter, our revenue per active frac crew has more than doubled in the two years since we first deployed our Integrated Water Management strategy. Our BlueLinxTM automation solution, which allows us to remotely and efficiently deliver services to our customers with less field staff, is now deployed on all of our Integrated Water management projects. We also maintained full utilization of our SandStormTM sand separation technology through most of the quarter.

"Second quarter 2020 Compression segment performance exceeded internal expectations with a loss before taxes of $23 million and Adjusted EBITDA of $26.3 million, up 1% from the first quarter. Compression Services margins improved sequentially by 300 basis points to 54.9% - the highest in CSI Compressco's history driven by aggressive cost reductions. Utilization declined from 86.5% at the end of the first quarter of 2020 to 82.1% at the end of the second quarter. Approximately 15% of our US domestic fleet was on standby during the quarter as customers shut in production given the low oil prices. The majority of the shut-ins were from two of our largest customers, both supermajors, that have the balance sheet to shut in production in anticipation of higher oil prices. Starting August 1st, we began returning to service most of units on standby with one of those two customers. CSI Compressco announced yesterday that the Midland fabrication real estate and buildings had been sold for gross proceeds of $17 million in early July. Additionally, CSI Compressco announced that it expects to receive $9 million in cash proceeds in the third quarter from the sale of idle compressor units. This $26 million of gross proceeds will further strengthen CSI Compressco's balance sheet.

"Going in to this historic downturn, we knew that by executing the strategies we have worked on for the past two years and by taking quick and decisive cost reduction actions beginning at the executive management level and then throughout the organization, that we would come out the other side of this pandemic very well positioned. I'm very pleased to say that we are on track to achieve that objective. Strong execution and the diversity of our end markets, including industrial chemicals, offshore, international and a technology differentiated North America water and flowback business, has allowed us to keep Adjusted EBITDA positive and to generate free cash flow in a very difficult environment.

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