Tetra Technologies Inc (TTI) 2003 Q2 法說會逐字稿

Good morning. My name is Roderick and I will be your conference facilitator today. At this time, I would like to welcome everyone to the TETRA Technologies second-quarter conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer period. (Caller Instructions). I would now like to turn the call over to Mr. Geoff Hertel, Chief Executive Officer of TETRA Technologies. Fir, you may begin.

Thank you. On behalf of TETRA Technologies, I would like to welcome you to our second quarter 2003 conference call. This call will include statements that are deemed to be forward-looking and based on certain assumptions and analyses made by TETRA. You are cautioned that these statements are not guarantees of future performance. With me today as usual is Joe Abell, our CFO. As is the custom in TETRA quarterly conference calls, there will be a prepared statement which will then be followed by your questions. I will now turn to Joe and ask him to review for you the financial results for the second quarter and six months of 2003.

The second quarter was the best quarter ever for our well abandonment and decommissioning division and one of our best overall. Consolidated earnings increased 72.6 percent year-over-year and 232 percent sequentially, excluding the FAS-143 cumulative effect of adjustment for first quarter of this year. Our stock price hit an all-time high closing price of $30.96 on July 21st, up 45 percent year to date. TETRA's revenues for the second quarter of 2003 were up 40.3 percent to $88 million, compared to the second quarter of '02. Sequentially, revenues were up 34.8 percent. Net income for the second quarter was $6.3 million, or 41 cents a share, fully diluted. This compares to 24 cents per share for the second quarter of '02 and 13 cents a share in the prior quarter; once again, excluding the FAS 143 cumulative effect adjustment for that prior quarter.

For the first six months of 2003, net income was $8.15 million before the $1.46 million cumulative effect adjustment, or 54 cents per share fully diluted. First-half earnings were up 11.5 percent compared to the first half of 2002 while revenues were up 27.1 percent. The second quarter of '03, profit before tax in fluids division was up slightly versus last year's comparable quarter and up 20.6 percent versus the prior quarter. On the other hand, the well abandonment and decommissioning division reported a 489 percent increase in profit before tax, versus the second quarter of last year and a 380 percent increase in the profit in the second quarter versus the first.

In the testing and services division, we reported a decrease in profit before tax of 56.1 percent versus the comparable quarter last year, but a 49.8 percent increase in profit versus the prior quarter. As we have stated previously, we believe that cash flow generation is an important way to measure testing (indiscernible) performance. DD&A increased 47.1 percent from the second quarter of '02 to the quarter just completed. Since regulation G restricts our usage of non-GAAP defined terms, we want to use an easily definable measure of cash flow here by simply adding the DD&A to net income equals $14.1 million for the second quarter just completed, up 57.4 percent versus the comparable quarter last year. Over the first six months, we've reduced debt by $15.1 million and have reduced debt an additional $7 million in July to $15.3 million currently. Our total debt to total capital is now 7.4 percent versus 16.9 percent at the beginning of the year.

With that, I will turn the discussion back to Jeff.

Thank you, Joe. The oil and gas service industry is by its very nature, a cyclical business. However, within this cyclicality lies certain niche markets that have strong growth components associated with them. Our well abandonment and decommissioning market is one of these growth areas. Our second quarter earnings began to reflect the impact this division can have on TETRA. But to fully understand where we are, we probably need to go back to mid-2002. At that time, TETRA was well on its way to carrying out its strategy toward well abandonment and decommissioning. We had developed an overall strategy and had initially entered the onshore Gulf Coast market, followed by entrance into the inland water and offshore Gulf of Mexico markets. We had hired competent managers and peopled our crews with experienced hands. We had acquired or contracted for equipment and we were well on our way to educating our prospective customers on the merits of our integrated approach. This all culminated by mid-2002 into what appeared to be a very rapidly growing market. Plans for an orderly expansion of this business, however, went out the window as new personnel and other infrastructure costs were needed to accommodate this rapidly growing group of prospects.

As most of you know, we chose to increase our infrastructure dramatically throughout the third and fourth quarters of 2002 and the first quarter of 2003. This increase cost us earnings. However, we chose to build for the future at the detriment of the present. That future began to be reflected in the second quarter numbers. Hopefully, that is but a preview of things to come.

In looking forward for well abandonment and decommissioning, you will need to keep a number of concepts in mind. First, increased utilization of men and equipment creates cost synergies that can be exploited for the benefit of TETRA and for our customers. Until we reach revenues of about $200 million in this division, we should not have to significantly add to our infrastructure costs on an annual basis, so the increased costs that you saw for a 3 quarter period starting midyear last year are now being spread as you very convincingly saw in the second quarter. We don't have to increase those materially and the synergies of having multiple jobs going at once are quite obvious.

Secondly, we are continuing to sign new contracts. However, many transactions are historically done in the fourth quarter and early first quarters of the year. Therefore, estimates for our market for 2004 are premature at this time. It looks very good to us, but to give you a hard number is just premature.

Thirdly, please recognize that well abandonment can go on year round. However, decommissioning is primarily a May-to-September occurrence. Therefore, all other things being equal, expect seasonality in this division.

The fourth item is really a compilation of questions for most of you, and that is -- what are the biggest short-term risks to profitability in this division. In the long-term, these factors should even out. However, any one quarter can be negatively affected by any one of the following. First, weather, weather and whether. We budget for weather downtime in all of our bids but prolonged periods of storms in the Gulf of Mexico would be material to earnings. To date this year, we have not had prolonged periods. Secondly, uninsured equipment losses. For some equipment, premiums make insurance uneconomic. Historically, you set up reserves to accommodate that. Accrued results for this event now are not allowed. Therefore, an uninsured equipment loss could affect the quarter. Again, I know of no significant losses in 2003. Successful efforts accounting. We have chosen this most conservative accounting method for our Ameritech (ph) subsidiary. Generally when we buy packages of properties, our eventual aggregate reserve value fairly represents the bid values, some with more reserves, some with less reserves, many about equal to our estimates. Under successful efforts, we write off the shortfalls by property. However, we do not write up the better than anticipated properties. This will lead to writeoffs periodically. But rest assured, both our budget for the year and our earnings guidance to you anticipate such writeoffs.

Now lets talk about our second division, our fluids business. During the first half of 2003, fluids profits have approximated budgeted levels. However, our second half profits will have to increase to meet our divisional estimates. The domestic market, primarily in the Gulf of Mexico, has been slow to improve as the rate count was flat to down second quarter to first and was down first quarter to the fourth quarter of last year. With a significant percentage of shelf acreage offered for sale, we see only a slow increase in rates until many of these properties change hands and are then ready for drilling. However, I am encouraged by the announcement on Friday by Apache that they're going to significantly increase their drilling by the end of the year. If they are typical of the companies that are acquiring these packages, then we may seem more of a pop even this year than we have anticipated. This in general means that we could see a slow improvement through the early part of 2004 or at least through the end of 2003, and then a more significant improvement assuming gas prices remain above, say, 4.75 (ph), which we anticipate. However, any improvement in the rig count in the Gulf of Mexico should have a positive effect on our fluids business. Therefore, we continue to estimate an improving domestic fluids market during the second half of 2003.

Our international fluids business has shown some improvement, especially in areas that were weak in 2002 and early this year for nontraditional reasons. Examples are Nigeria and Venezuela. We continue to expect improving international' fluids profitability as we approach 2004.

Our third division, testing and services, first operationally. Our production testing profits have lagged the buildup in natural gas billed drilling activity, which is typical. The primary reason is that after rigs go to work, they must complete drilling before production testing starts. With the significant improvement in rig activity in the second quarter, we should see improved utilization for TETRA in the third quarter. Also, two of our major customers had customer-specific reasons they kept their activity level low in the second quarter. We believe both of these companies will increase their production testing activities in the third quarter. Consequently, production testing profits are expected to be greater in the second half of 2003 as compared to the first half.

Our TETRA process services, TTS, subsidiary is also also in this division. As we have outlined for a number of quarters, we have been burdened by a losing PPS contract in Norway for some time. As anticipated, most of the processing under this contract had been accomplished by the end of the second quarter. Residual processing and cleanup will occur in the third quarter. The termination of our responsibilities under this losing contract will be a plus to this division. Look for some of this improvement to occur in the third quarter and the remainder in the fourth quarter.

Expansion of this testing market. Internally, we continue to build new equipment as the market indicates and hire people as the market indicates. Selectively, we have begun to enter the Eastern Hemisphere market in attacking certain contracts in certain countries. Externally in the Western Hemisphere, we continue to look for synergistic acquisitions. In the Eastern Hemisphere, we will continue to evaluate any acquisitions that could escalate our presence into these markets.

Now as a short discussion of our financial position. As Joe indicated, TETRA continues to consistently generate cash. Our cash flow far exceeds our maintenance CapX requirements, which leaves us the options to pay down debt, make acquisitions or even distribute money to our shareholders. Through the current time, we have chosen to pay down debt, which as Joe mentioned, now stands at 15.3 million, down from the 37.4 million at year end. However, we believe attractive opportunities exist within our focus areas that will allow us to make investments we go forward.

In summary, we believe TETRA is well positioned for the future. We are a market leader in each of our three primary areas. We have implemented a continuing strategy to grow and optimize profits in each business. Our combination of growth in cyclical markets is relatively unique within our industry as this quarter's 215 percent improvement in sequential per-share earnings attests. We expect to improve upon our second-quarter results with a third quarter that should set a per-share earnings record for operational performance.

Finally, we've done all of this while continuingly generating excess cash flow. This has allowed us to all but eliminate our long-term debt. This financial structure gives us many option. As stated in the press release, we are optimistic and enthusiastic about our future. And with that, I will open up the conference call for questions.

Jim Rollison, Raymond James.

Good morning, guys. Jeff, you talked about well abandonment obviously picking up in the quarter, and you mentioned the seasonality of May-September. If you look at the second quarter, how much -- when did you get your real uptick? Was it in May or not until early May, late May? If you look at when the seasonal pickup happened, what percentage of the quarter would you guess that that occurred?

Our decommissioning business picked up toward the midpart of May through the end of June. However, our well abandonment businesses going for the full quarter. If you wanted weighted average, that's a little difficult to give you. But if you're trying to look to where the growth in the third quarter would come from, we would have to have a full third quarter of decommissioning business, except for any weather conditions.

That is exactly what I was looking at.

Which obviously, should give you some improvement in the quarter versus the second quarter.

On the margins side, you have been for a year in change without your heavylift equipment and presumably putting off a lot of that work until you got your equipment back up and running. Now that it's in there, is that it what is driving the big margin upside in the quarter versus recent performance, and what are you looking at this quarter, barring weather issues?

First of all, these jobs vary dramatically, so it's a little difficult to be specific in terms of a weighted average. What I can tell you is very much a function of this business, and that is, if we are doing one job at a time, the efficiency of the personnel and equipment is really very poor and our margins are poor. To the degree that we can have multiple jobs working simultaneously, we can utilize our personnel and our equipment very efficiently. That gives us better margins and allows us to bid prices lower and give our customers an advantage as well. So as long as you see us having multiple jobs going on, we ought to have better margins than when we have one or two jobs going on during the quarter. So a lot of what you see in the improvement is efficiencies of multiple units working simultaneously.

And I would guess that since you guys have put a lot of backlog on the books here in the last nine months, and you obviously know that the seasonality is what it is, that you have probably put together a number of jobs for the third quarter, is that fair?

It is very to say that we are out working currently aggressively on a number of jobs, yes.

I know you mentioned it was too early to really make any guesses on 2004. But, you obviously had some insight with the property deals you have closed thus far that you have a base level of business already for next year, I would guess. What are you seeing -- if you look at your insight to next year right now versus where you were a year ago looking at this year, are you up, down, sideways, how do you feel about that?

Well first of all, let's talk about what we know and what we don't know. We know we have some backlog for next year, and actually some backlog into 2005. What we don't know is the order of magnitude of jobs that are going to come up in the typical time period of the fourth and first quarter. If I were a year ago, as you just suggested, looking at 2003, I would not have assumed we would be at the level of activity that we are today, because we had a lot of business come in in that time period. Right now, our real question is -- are we going to be at a level next year that is somewhat better than this year, or are we going to get a whole bunch of new business in the fourth quarter and first quarter and require us to turn over again an order of magnitude in terms of increase in certain of these business areas. And that is the issue that we're working with. It is not one of a big decline that we're worried about, it is how much of an increase do we think we're going to get. And we just don't have a good insight yet. We don't know if the fourth quarter and first quarter this last year was an anomaly in terms of the percentage, or whether it is going to be difficult.

Sure. A couple of housekeeping items. SG&A shot quite a bit in this quarter. What is going on there and I guess what do you expect going forward?

SG&A has gone up -- as we accrue bonuses, that is an accrual based on earnings and we have basically caught up with our budget, if not slightly exceeded it year-to-date year. So therefore, you see the bonus accrual match the overall performance, and that is the most significant change quarter over quarter that you saw.

So presumably, if guys are on track to set a new corporate earnings record per quarter in the third quarter, that is going to be up slightly again?

It could be. It depends on how that accrual really works in terms of each of the divisions. It will not be up the same amount as it was first to second, by any stretch. I would guess it will be somewhat similar to the second quarter, a little more a little less.

Your depreciation or DD&A, if I remember when you made the original guidance for the year, which you're standing by, you were kind of on a 35 million type of run rate forecast. And so far, you are running 3-4 million behind that. What are you expecting for the second half on DD&A?

Well, one thing that we did in our budget was assume acquisition of properties throughout the year, and it depends on then those properties come on for the depletion portion of that DD&A. All of the rest of the DD&A is just very close to what we budgeted for. So assuming we acquire some properties, then you will see that increase as well.

Okay, thanks guys.

Neil McAtee (ph), Morgan Keegan.

Good morning, guys. An exciting quarter, and I guess most of my questions were along Tim's lines. The one question I had is -- when you do have these property writeoffs, where are you going to put them on the income statement?

They come right through the divisional profits.

Okay. Then what kind of the outlook on the the fluids divisions -- I guess when we talked after the first quarter conference call, the talk was you're beginning to see some preliminary signs of work picking up. And I was curious as to what you're seeing now on that division as well?

I think TETRA's position within our markets is probably a little bit better on a relative basis than it was six months ago, meaning maybe we have a little larger share of the market, which is why you are seeing some improvement, even though the rig count has not gone up. Obviously, you cannot do that for an extended time period and continue to improve when you have three other very competent players in the market. So the improvement you're going to see for the remainder of the year is going to be a function of increased activity internationally and/or in the Gulf of Mexico. As we pointed out, we think both of those areas are going to do slightly better second half than first, and then maybe the Gulf will pick up a little more aggressively towards the end of the year.

What about the Mexican portion of the Gulf of Mexico? (indiscernible) put a lot rigs to work. Are they getting to the point where they need completion fluids yet?

They're beginning to put contracts out for completion fluids on the Mexican side, yes.

Alright, great, guys. Thanks.

Tracy (indiscernible), First Analysis.

Congratulations to everybody there at TETRA. It looks like you're having a good time this quarter. A couple of items. One, in Norway, should we think about that as you have also been able to add some business onto that, so you're going to be up to keep yourself busy going forward, so it is really from a negative to a positive, and you have a solid book of business possibly, or how should we think about it?

The Norwegian market is a very complicated market. I think the way you can look at it is that we've been in a negative position. We would hope to be at worst about neutral. And given the amount of business we are able to put on the books, will give us some indication of how profitable that is going to be. I know that is a nebulous answer to your question, but I think there are ways that we can enhance our position there and we're working on, but we're not willing to discuss it yet at this point and time.

There's been some new capacity around the Dead Sea (ph) for the brine fluids. Has that or does that impact you at all on a go-forward basis, or is that peripheral to your core?

Anybody that adds broaming (ph) capacity, which is what that has been to date, is going to affect the markets. Good or bad for us depends on whether we are buying at a cheaper price or not. But in general, you don't want that increased capacity in the market. What it has done, it has kept prices from moving up. You have seen rig rates and other things move up. You have not seen an appreciable increase in fluids, in completion fluids pricing. Therefore, what it has really done has been a cap on our pricing. And one would assume that that is going to remain for some period of time until all of the players in the market begin to raise what is inadequate margin.

That a little bit leads into my second question on that topic, and that was really what you are seeing on dayrate type numbers. It sounds like you're seeing some strengthening on that side.

Help me with your with your question on dayrates. On the fluid side, we're not seeing price increases. If you're asking dayrates on our testing side, there has been some improvement there, yes.

So you have seen some. Finally more of a housekeeping question, just to judge the size here. You talked about on the equipment loss that historically, you had been able to reserve. What type of number did that run, and did you really use it up?

Well, we're not allowed to have those type of reserves anymore under the new accounting standard, so no, there are not any out there. Historically, you would've been able to do that. However, we have not been able to accrue anything, given the new accounting standards. So if you have a loss of $1 million, then you write it off in the period you had the loss in.

The question was -- historically, how big a number was that for you?

Historically, we did not have that much equipment, so it was not a large number for us.

Thank you very much and good luck.

Will Foley (ph), Sidoti & Company.

Good morning, guys. Most of my questions have been answered. I guess the only thing I would ask is -- with your balance sheets in such good shape, where do you see perhaps on the acquisition opportunities or where are you looking to put that good balance sheet to work?

That is kind of a broad question. We have tod you that we would be willing to expand any of our three primary business areas, and that we continue to look for other niche markets that have some of the characteristics of the three that we are in. I guess I would say that we are doing both of those. We are looking outside of our three primary energy services businesses, but our focus is in looking at how to expand within our business lines. That may mean equipment, it may mean companies, it may mean just an asset purchase. There are certain areas of growth opportunities, especially in our abandonment and in our testing arena. There are less opportunities in our fluids business. It's somewhat difficult for us to consider buying Halliburton (ph) or Schlumberger (ph).

Okay, great. Thanks a lot.

Marshall Adkins, Raymond James.

Hello, guys. A couple of quick questions here. Along those same lines, obviously, you're well abandonment and decommissioning has been your biggest grower here. You still see a lot of property deals in the market? Is that market still robust, and can we continue to grow in the third quarter?

Our third quarter business hopefully is a function of what we have already put on the books back six and nine months ago. Our acquisition of properties in the third quarter will not reflect I hope on our third quarter results. But your question is a good one as it relates to what is out there. You have seen an awful lot of properties being packaged up by significant players in the Gulf of Mexico, and you're going to see a lot more in our opinion over the next 3-6 months. Consequently, some of the smaller packages have been enveloped into these, 4, 5, $6 million packages. We continue to see a very good amount of smaller packages, but I am going to bet that as soon as you see these larger packages being acquired, that you're going to see the small kind of ugly portion of those which is the part that we are looking at be spun off pretty aggressively, and that is where we're having a little confusion as to what happens here towards the end of the year. It may be that we get overwhelmed with some of these pieces that are being put in the large packages that will be spun off later. So to answer your question, we're continuing to see activity. However, we think there is going to be a very large amount of activity toward the end of the year and early next year that relates to some of these large packages.

That makes sense. Joe, along those lines, could you give me the quarter ending numbers on the balance sheet for your decommissioning liabilities, as well as your oil and gas producing assets? That would probably be helpful to see those trends.

Decommissioning liabilities, oil & gas assets, at the end of the second quarter, oil & gas properties were $38.2 million. At year end, they were 30.3 -- year-end 2002, 30.3 (ph) and increased almost 8 million -- And that is without depletion in it. That is a gross number. That is gross; depletion is not broken out. It is included together with all of our other depreciation. Decommissioning liabilities increased from 20 million even at year-end '02 to 24.1 million at the end of June. However on that balance sheet, what you don't see, there is about 6 million of those that are in a current portion of liabilities. So if you add that to the 24 that you will see, there is about 30 million gross.

What was your CapX for the quarter?

We are getting it right here.

While you're looking at that, let me go ahead and ask another one associated with it.

We've got it, Marshall -- 2.5 million.

Okay, wow. Extremely low, which obviously fits into why you have been able to pay down a lot of debt here in the last couple of quarters. Going forward, obviously, it will depend on the opportunities on a lot of this CapX, but can you give us any guidance on what we ought to be modeling there?

We have CapX for the year budgeted at something in the order of $22-24 million and that is CapX, excluding some oil & gas properties. I think we have run, to date, about --

8 or 9 million?

Yes, without oil and gas properties. So we have maintenance CapX of about $8 million within this company that you have to do to keep everything rolling the way it is. Anything above that should be growth CapX.

Okay, so a lot of potential back-end loaded on that. Otherwise, you keep paying down debt -- is that's fair?

That's fair.

A couple of other quick ones. Tax rate -- we have been modeling a little higher than where you've been coming in. You've been coming in a couple hundred basis points lower than what we thought. Going forward, 37.50 or should we bounce it down to 35.5?

Probably somewhere in between. It is going to depend on the total profitability for the year. When you are a lower profit level, you trigger about a percent lower. It also depended on the mix that we were getting and the mix allowed us to generate at a little lesser (ph) level. I would expect you're going to have a slightly higher tax rate in the second half than the first half.

Last question. DJ mentioned their fluids business was doing pretty good and they're actually looking for some reasonable growth there. How is your market share position looking on the fluids side?

As I mentioned a minute ago, we think we have increased modestly our market share in the last 6-9 months, especially in the Gulf of Mexico. BJ (ph) is a very good competitor and continued to go after market well. I am not sure that any of us can give you a real good indication of whether MI (ph), Beroid (ph), BJ or TETRA has ended up with a specific percentage, but I'm comfortable saying TETRA has probably increased its percentage over the last 6 months, and I would not distrust BJ if they think they have increased theirs.

Great job, guys, thanks.

Thank you.

(Caller Instructions). Tracy Marshbank (ph).

Quick follow-up. Besides decommissioning activity, which you've talked about the seasonality, anything different unfolding this year that is a little bit different than the historic TETRA seasonality going third, fourth quarter and into the first? Or is it pretty much along to the historic pattern, as far as you can see?

That's real good question, Tracy. Historically, TETRA if you go back over the last decade, mostly would have a real good quarter in the fourth quarter. And that related to the fact that a lot of oil companies tried to get their budgets in and did a lot of activity in the fourth quarter. Also, a mix of our business. So historically, our fourth quarter was probably our best quarter. I don't think that will be the case on a go-forward basis. You are looking at abandonment that might be 40-45-50 percent of our company as you go forward. Since that business does have seasonality, meaning the second and third quarters are disproportionate because of the decommissioning component of it, I would guess that you would obviate this fourth quarter being the largest quarter and probably make the second and third quarters your best quarters of the year. That clearly will be the case this year. However, long term, it is going to depend on how the other 55 percent of this company operates. And if we get back to historic times where companies are spending a lot of their budgets aggressively in the fourth quarter and our testing and our fluids business is doing very well, it might be a way to flatten out the second, third and fourth quarters. But right now, it looks like the seasonality patterns, well abandonment will dictate the profitability trends, at least in the near-term and your second and third quarters should be your best quarters.

Okay. On your operating efficiency, if you will, ell in the well abandonment decommissioning, how do you look at that, and if you will, how did the second quarter unfold and where might you be able to get in the third quarter? Do you have particular measures in dollars per person or how do you run the business and how do you track it?

This is an extraordinarily complicated matrix of putting together your partners and properties, if you own the properties. If not, the people that you're working for, the MMS, has control in the federal government waters. You also have issues of weather, you have issues of equipment. There is not a singular way to measure this. What you attempt to do is you attempt to get your people to do things in batches and your equipment to be doing things in batches so that you don't have to bring the pieces at equipment in and then back out. The mold and demold (ph) is very expensive and timely. So if you're going to work in one selected area, it is very important to do so. With the amount of properties we currently have, it gives us a lot of latitude to do a number of things at the same time, reducing things like mobilization costs and demobilization costs. We typically split those with our customers so that they get a benefit as well. So, again, trying to look at the second versus the third versus let's say next year will be very, very difficult. If weather comes in and you have to run in and back out a number of times, your costs are going to go up significantly. If you can keep weather delays out -- in the second quarter, we had three days of weather from the storm -- Bill, I believe it was -- at the end of June, and we had I believe 1.5 or 2 other days through the midpart of the quarter. That was not a large amount of time vis-a-vis what we budget. We had budgeted about that amount in our bids. So net-net, the efficiencies were very good. But I would guess that weather will be your most significant factor in your margins on a go-forward basis as long as you're doing multiple jobs. If you're doing one job at a time, your margins may decline.

Did you have any impact in the beginning of July, or was that pretty clear?

I think we have had about six weather days to date between the Bill storm that was about 1.5-2 days into July, and then I cannot remember the C or D storm, the one that we had about two weeks ago.

Thank you.

At this time, there are no further questions. Are there any closing remarks?

No. I would expect that we will talk again in the third quarter and hopefully we will be able to set a record that will will be able to be very comfortable with in the third quarter. Thank you.

This concludes today's TETRA Technologies second quarter earnings conference call. You may now disconnect.

(CONFERENCE CALL CONCLUDED)