Tetra Technologies Inc (TTI) 2008 Q3 法說會逐字稿

Greetings and welcome to the TETRA Technologies, Inc. third quarter 2008 results. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Mr. Geoff Hertel, CEO for TETRA Technologies. Thank you, sir, you may begin.

Thank you. Welcome to the TETRA Technologies third quarter 2008 earnings conference call. Joe Abell, our Chief Financial Officer; and Stu Brightman our Chief Operating Officer are in attendance this morning and will be available to help address any of your questions. Joe is going give a short review of our third quarter financial results, and I'll then follow with a short presentation, which in turn will be followed by your questions.

I must first remind you that this conference call may contain at the same statements that are, or may be deemed the be forward-looking statements. These statements are based on certain assumptions and analyses made by TETRA, and are based on a number of factors. The statements are subject to a number of risks and uncertainties, many of which are beyond the control of the Company. You're cautioned that any such statements are not guarantees of future performance, and that the actual results may differ materially from those projected in the forward-looking statements. Additional information on some of these risk factors my be found in our annual report on Form 10-K. Joe, would you begin with the financial review?

Revenue in the hurricane-impacted third quarter was $249.1 million, 4.3% above the third quarter of 2007, but 18.2% below our record quarter in the previous quarter, the second quarter of '08. Gross profit was $43.7 million, 22.3% above the prior year's third quarter, but down 43.6% sequentially. Gross profit as a percentage of revenue was 17.6% for the quarter, just ended, compared to 14.9% for the prior-year's period, and 25.4% in the previous quarter.

General and administrative expenses were down 1.9% compared to last year's comparable quarter, to $25.6 million as a percentage of revenue G&A expenses decreased to 10.3% from 10.9% year over year. G&A was down 8.5% sequentially. Net income before discontinued operations for the quarter was $12.1 million million or $0.16 a share, fully diluted compared to $3 million or $0.04 a share fully diluted in the same period last year, an increase of almost 300%. Net income for discontinued operations was down 59.8% sequentially. Adding back approximately $10 million or $0.09 a share of non-routine charges mainly related to hurricane impairments, but partially offset by a gain we recorded for oil and gas hedges. To the $0.16 a share we reported results and $0.25 a share compared to a consensus of $0.23. Year to date, revenues were $778.6 million and net income before discontinued operations was $49.6 million or $0.65 a share fully diluted.

Looking at quarterly performance by division, revenues in the fluids division were up 7.8% compared to last year's third quarter. Profit before tax was $1.9 million, up over last year's third quarter, but down 88% sequentially due largely to hurricanes Gustav and Ike shutting down fluid sales in the Gulf of Mexico for several weeks. Revenue in the well abandonment and decommissioning services segment was down 3.2% quarter over quarter. Profit before tax was $9.8 million, up over last year's third quarter but down 15.4% sequentially due to the hurricanes. We have had strong demand for guiding services following the hurricanes.

Revenue in our E&P units, Maritech was down year over year, and down sequentially. Profit before tax was $1.8 million, up compared to the third quarter of last year, but down 89.7% sequentially due to the hurricanes. We currently have about 60% of our production shut in, which will take time to restore. The production enhancement segment revenue was -- was down -- was up quarter over quarter, but down sequentially, and profit before tax was $16.2 million, an increase of 19.4% versus the prior year's comparable quarter, but down 5.1% sequentially for the first time in seven quarters. We had 17 -- or $73 million of cash capital expenditures in the quarter. Our debt decreased by $9.7 million for the quarter to $380.6 million. Debt to total capital was 42.3% at the end of the quarter. With that I'll turn the discussion back to Geoff.

Thank you. In looking at our businesses, there are two factors that did not exist three months ago. These being the effects from the hurricanes and the substantially reduced commodity prices. Is anybody else hearing feedback? Brian?

Yes. I'm going to check on that.

Okay. Are we still hooked up?

Yes.

All right. I'll continue then. As I indicated over the last three months there have been a number of changes, particularly from the hurricanes and the substantially reduced commodity prices. Both of these factors do impact TETRA, and I'm going to go through those effects here right now. First the hurricanes.

Since almost all of our well abandonment services and Maritech operations are in the Gulf of Mexico, we obviously experienced operational shut-downs for much of September. Additionally, our largest fluids market is also the Gulf. So its operations were similarly affect, particularly in September. However, the longer-term impact from the storms is appreciably different for each of these three business segments.

For well abandonment decommissioning services, the storms should bring increased business first for assessment services, then for platform, pipeline and well repairs, and finally for well abandonment and decommissioning activities. In particular, our heavy lift, cutting and diving activities have each seen an uptick in utilization since the storms. We would expect to continue to see an improved market for these services well into 2009 and possibly beyond.

Now most of Maritech's shut-in or damage production facilities should be back on stream by late March and in fact, most of them should be back on stream by late January. However, production from our 50% owned East Cameron 328 facilities is not now scheduled to begin until 2010 after the replacement of a platform A, that went down in the storm and the redrilling of the associated wells.

While our Gulf of Mexico fluids operations were curtailed during the storms in their cleanup, we don't feel that the storms have significantly impacted demand for our completion fluids for 2009. They certainly impacted the third quarter and will, to some extent in the fourth. Much of our growth in these products was and is predicated on growing international, deepwater and ultra deepwater applications. The timing of which we do not believe was materially impacted by any of the storms in 2009.

Commodity price moves for oil and gas affect TETRA in two ways. First, any unhedged Maritech production is subject to the fluctuating prices. The impacts here are both to earnings and cash flow, although we mitigate a portion of this with our hedge program. Also some of our services businesses are impacted if the fluctuating prices increase or decrease drilling activity. While some of our business segments are not driven by drilling activity, most particularly well abandonment and decommissioning services, our domestic testing and on-shore fluids business are impacted by changes in this statistic. Should oil and gas prices remain at or below current levels, we would expect to see a drop in domestic drilling.

Clearly many production companies are signaling that they are trimming their 2009 CapEx budgets. And although we've really seen very limit slowdown in our domestic testing operations to date, it would seem prudent to expect business in this area to begin to soften if commodity prices stay at current levels and domestic drilling activity declines. Fortunately, for us, much of our anticipated 2009 growth in testing relates to new or expand expanded international contracts. This growing international presence should help mitigate the financial impact of a declining U.S. market. We would also expect that our domestic on-shore fluids, and fluids services businesses would be negatively impacted by the declining rig count.

So when you view all of the services businesses, and here I differentiate it from the production business of Maritech. So if you look at all of the services businesses in the aggregate, we do not look materially different than we did prior to the storms and the declining commodity prices. The major positive impact in this time period has been on the well abandonment decommissioning services and the major negative impacts have been on domestic testing and on-shore fluids.

The hurricanes, declining commodity prices and the financial meltdown did significantly change our anticipated 2009 capital program. Originally, we expected to couple large outlays for longer-term ongoing projects, like the new Arkansas plant, with a very aggressive Maritech exploitation budget. However, with the deferred East Cameron 328 production and the lower commodity prices, Maritech's projected cash flow should be less than we anticipated 90 days ago. While we have adequate capacity under our bank lines to allow for the original CapEx program, we do not feel that that would be a prudent use of debt in this environment. Therefore, we have dramatically reduced Maritech's anticipated 2009 exploitation budget basically to conserve cash. Fortuitously, we don't believe we will lose many, if any, of our exploitation opportunities by deferring the expenditures to 2010 or later. Another reason to consider waiting is the dramatically higher commodity hedges that we have in place for 2010.

We would expect that the loss of East Cameron 328 production in 2009, coupled with the reduction in exploitation CapEx, will significantly reduce the production and the associated earnings for Maritech versus the levels obtained during the second quarter of 2008. I'm certainly not talking about versus the current quarter.

Before I turn the conference call over to your questions, I might mention a couple of other items. First, during the third quarter we were awarded new completion fluids contracts for deepwater and ultra deepwater projects in the Gulf of Mexico. Second, our new Arkansas plant is slightly ahead of schedule with startup now anticipated sometime in the third quarter of 2009. And finally, this past week Epic Diving set an all-time record for diver utilization. This broke the record that they set the previous week, which in turn broke the record set in mid-October. I'm now going to open this up for questions.

Thank you. (OPERATOR INSTRUCTIONS) Our first question comes from the line of James West with Barclays Capital.

Hey, good morning, guys.

Good morning, James.

Geoff, or Stu, I think, after the hurricanes in 2005, pretty quickly you had several of your larger customers come to you and say, Look we want TETRA to do the vast majority of our platform removal work, given the extent of the damage. Has this occurred yet this time, or are we still in more of a wait and see how much the extent of the damage is before we let our contracts?

It's somewhere in between, James. There's a lot of discussion going on with several customers that are evaluating and looking at alternatives. So we've sent a lot of time laying out some suggestions and alternatives. I would expect some of those decisions will come pretty quickly, and then a lot of them will come in the springtime. And again, as Geoff said earlier, already some of the initial stages for the inspection and the cutting, we've done very well with that book in our cutting business and in our barges going out and doing some debris removal. So I think that's a little bit of both scenario scenarios.

Yes. I might add a little bit to that. There's a big difference between the storms of '05 and '08 as it relates to the perception of what's going on. If you remember, in '05, that was such an unprecedented damage that really nobody knew what was happening. And I mean that both from the service provider and the oil companies, and while they all wanted to go get work done quickly, because that's how they had historically done it, they found that that was not something that could be done easily, and it as going to cost inordinantly more than they thought it was going to cost, and as you've seen a lot of this has been stretched out with business, in some cases, starting last summer. There are still projects that haven't been let from '05.

So I would characterize a big difference that in '05, everybody was naive as to what needed to be done. In the '08 storms, people have already understood, because of the '05 storms, what is entailed in the process, and I actually think we're further along today in looking at new projects than we were in '05. However, in '05, we didn't know we weren't far along, because it was such a new event. So I think it's going to happen quicker. I think we're seeing that with our customers that are talking to us. They know what the costs are going to be. They know what's entailed with it. And I think we'll probably move pretty fast on some of this.

Do you think at this time, that given that you have Epic now, you have the cutting tools. You have more services. Do you think you're better suited to provide a broader package of services, or do you think it will play out like last time, where a majority of companies wanted to control the project management within the oil companies and just kind of piecemeal it out in discreet services.

Again, in answer to the first part of the question, I think we're a letter better prepared as we go into this cycle than where we were three years ago. We've owned Epic two and a half years. They're fully integrated into the Company. We've owned the cutting business for over a year now. Same thing. They're fully integrated. So I think getting it of the gate with those key services with us, the package is broader. The overall management of those individual pieces is stronger. So I feel very good about that. How they're going to contract, the second part of your question, I think it will be a combination like we eventually saw last time, where the larger players will probably manage it on their own and dole out the pieces, and we'll be prepared to play in that just like we did last time, with more services this time. I think some of the smaller companies will be looking to companies like TETRA to do a larger project management role; and again, I think we'll be capable of doing there, and we'll be marketing both approaches.

I will add one thing. There is a caveat to what he just said. In '05 we held back various amounts of each service so that we could offer a full package. I think it's safe to say that in the current environment, while we will certainly do full packages, we are not going to sit on our hands with a demand for, say diving, and hold back 30% of our fleet so that we can package it, we are going to go out and fully utilize each one of our services individually and if we can put the package together for the customer, great. And if we have to add some third-party service 0017instead of our own, we'll do that as well.

Okay. That makes sense. Just one last question for Joe. Looking at the capital budget for 2009, I know you spoke qualitatively about that in your comments. I think you guys were spending about $300 million this year, given that Maritech is going to be down significantly. What's your initial thoughts on total CapEx for next year?

I think it's premature to throw out a number, James. I think Geoff, accurately portrayed the: qualitative picture of conserving capital. I think we will use it judiciously. There will be opportunities to deploy the capital in high-value ways that we will -- that we will seize as the opportunities present themselves.

Okay. I guess, then, what will be the maintenance CapEx across the business, and then what's already committed with things like the Arkansas plan?

Let me try your answer, and the reason we're equivocating, is we've gone back to each one of our divisions, just in the last month and a half, and said, okay, guys. You see what's going on in the the capital markets. We want to be in a position to take advantage of things if they come to us. So we want you the go rescrub all your capital. So we're kind of jumping at numbers. I would say we have a 40 million to $50 million minimum CapEx that you're going to have to do. We have got probably 50 million to $70 million that we won't do in Maritech, something on that order of magnitude that wasn't what we had as a preliminary budget. I don't know what will drop out of other areas. Clearly we're going to have large capital as we finish out our plant in Arkansas. That isn't going to change. In the aggregate it will be down appreciably, but I don't know that I'm comfortable giving you a hard number. That's the best I think we can give you at this point in time.

Okay. That's fine. Thanks, guys.

Our next question comes from the line of Stephen Gengaro from Jefferies.

Thank you. Good morning, gentlemen. Looking at the Maritech side of the business, can you give us any indications on what kind of volumes we should be looking at over the next couple of quarters?

You're around 30. It's been vacillating between 25 million and 31 million equivalence, as we bring it on. We have, as I indicated in the press release coming on at the end of January. We have production coming on in December. By the end of January, and then the one piece in March. We should be back to that level that I pointed out, 50 million to 55 million. How that comes on, unfortunately you've got [C-ROBIN] and a few other pipelines out there that are currently down in various places, and we're trying to put production into those lines. So we may be ready, but they may not. So that's why I'm being a little conservative with you. It's possible that we get to those 50 million, $55 million (sic) levels a little earlier than the end of January to mid-February, late February. But right now. What did I say?

Dollars.

Dollars, sorry, million cubic feet a day equivalence. Maybe earlier than that, but that's than that. But that's our conservative estimate at this point in time.

Thank you. And looking at the well abandonment and decommissioning services side, you mentioned in your remarks how strong, I guess, Epic has been for the last couple of quarters on the diving side. Can you give us a sense for either the quarterly or annual revenue run rate for the diving piece of well abandonment?

Well, first of all, I don't think we said that it has been strong for a couple of quarters. It's been fine for a couple of quarters, but it's been much stronger since the storms is what we said. I don't know that we've ever broken that out, but we bought that based on an original revenue base of -- I'm looking at Stu, 40 to--? Yes, 40 million to 50 million. We doubled the capacity of the operations. So one would assume that, you know, it's a run rate in good times well north of 100 million.

Okay. That's helpful. I meant to say the last two weeks, not last two quarters.

Okay.

You mentioned the strength there. And then just finally, when we look at the fluids side, are we -- where do we stand as far as your inventory levels and your sort of margin expansion off your lower costs, raw materials? Are we hitting the sweet spot of that yet? Are we still a couple quarters away?

No. Actually the one thing that was a negative on fluids that were upsetting was the fact that we think we've got more business in '09, especially late in the year than what we project because of these new contracts. The negative is that because our customers were interested in, a, evacuating their platforms and then B, bringing their production back on, there was very little completion work done in September or October, for that matter. The net effect is that we haven't been able to reduce our inventories the way we wanted. So we'll go into next year with higher inventories then we had, which means, A, we're using more cash, but that's not the big issue. The big issue is you want to get rid of that higher-cost inventory sooner. During the year, you may run through it the way you had intended, but you would probably go into the year with a higher amount of inventory than you wanted. Stu wants the make a comment.

I'd also add the that, as we had indicated in our last call, that we have started to see the benefit of that during this year. Certainly came through during the second quarter, and as Goff said, all this does is it just slows down that process because our volumes in the third and fourth quarter will be less than we anticipated.

Yes. Hope you didn't think I meant that it wasn't helping us. It is helping us. But I thought the gist of your question, was when would we get the full effect of it? I was just saying we're pushing that off a little bit.

As a quick follow-up, the second quarter margin that we saw there, is that an achievable margin as an average for '09?

Well, remember the second quarter is a very bad quarter the make analogous to any year, because, TCE, TETRA Europe, is predominantly a second quarter event, and throws off your margin calculation for the whole business for the whole year. So that's just not a good number to use to calculate anything in any year.

Okay. Thank you.

Our next question comes from the line of Mike Harrison with First Analysis.

Hi, good morning. A question first for Joe. Looking at the P&L. that large other income item, presumably that's the hedging gains?

Yes. We had a gain on our hedges, and then in addition, the sale of some assets, some E&P assets sold in the quarter.

All right. And is that also related to the reason that Maritech's gross profit was negative, but then pre-tax profit was this?

Yes, it is.

Okay. In terms of the Maritech exploitation projects that you're going to be shelving here, is it fair to assume that if you guys see improvement in oil and gas prices, that you would be able to proceed with the projects that are ready? You suggested in the release that about 25% of those projects were sort of ready to go. Is that pretty simple math for you guys to do?

Yes, and no. First of all, part of those are going to be done anyway. We're not shutting off all exploitation dollars to the Company, and they fully expect to go ahead and do exploitation. In fact, they're beginning, I think, a well next week. So part of those are going to get done any way. You're just not going do the preponderance of them.

Remember that TETRA is not an E&P Company, and we typically, with a few exceptions the not go out and drill these 100%. We try to bring in partners, get promoted interests, develop them that way, and that's why we've had such a good history of how we've been able to exploit these properties? You're going to have to have your partners come along with you. So that's something I can't address, because I don't know where they would be. But the in most cases of the deals that we had really ready to go early in the year, all of those partners have indicated they would go ahead and do them if we wished to go ahead and do them. It's TETRA that is becoming a little more conservative than everyone else is at this point in time.

So the answer is yes, they're ready to develop in terms of going ahead. Actually you'd probably be better off, because you're looking at a somewhat weaker rig market. So you'd be able to get the rigs more expeditiously. But I think, in our case, we just need to make sure we get our partners on board and go ahead and do it. It would mean probably a 90-day lag from the time we felt we had extra cash that we would probably go in and -- go and do some of more of these.

All right. And turning to the fluids side, as it relates to ultra deepwater activity that you were expecting for 2009, do you have any sense of how much of a setback the hurricanes were in terms of when you would expect seeing some ultra deepwater completion activity?

We're already starting to get some rewards, and our position is this is not going to have a significant effect on the timing or the volumes of those project for 2009.

And in terms of fluids pricing, broadly what are you seeing there?

No major change.

All right. And then last question on the testing business. Any international contracts that you're pursuing right now that you think could make a contribution in 2009 that we haven't already heard about?

I think the areas where we continue to feel comfortable that we're going to grow internationally, predominantly those locations we're already at and just building on the existing customer base. We're now entering, in addition to that, one new region that -- during the next few months within -- within the Middle East. So I think you will continue to see that expansion where we are and, slowly one location at a time. But we can see that being positive, and do not see an impact on those opportunities with everything else going on, and continuing to invest in those areas.

All right. Thanks very much.

Our next question comes from the line of Joe Gibney with Capital One Southcoast.

Thanks. Good morning, everybody.

Good morning, Joe.

Geoff, just I was curious if you could give us an update on the fluid side relative the PBR and if you've got any other international fluids initiatives on the board that you're looking at?

I'm a little lost. PBR?

Petrobras.

Oh, I'm sorry. You can go ahead Stu.

Yes. We're carrying on with expanding our plant, getting our inventory position and believe we'll begin doing those first wells very early in the first quarter. So that's going as planned. No major change since our last update. Still confident those are all going on as we discussed previously.

Okay. And relative the two new bookings that you indicated on the deepwater side on the Gulf of Mexico, Geoff, did you say those are still targeted to start late '09, or fourth quarter? Is that the general ballpark?

Yes, in fact, a lot of our deepwater work is the second half of next year just because of the timing of most of these companies. The two awards are fourth quarter awards. Could be third quarter, I guess, in one case, but we're projecting the fourth quarter. And then they would carry over hopefully for the next two or three years thereafter.

Okay. Stu, relative to the record of the diving utilization, kind of where you are on some of your heavy lift vessels here, Could you help calibrate that a little bit? Where were we from a 2Q utilization standpoint versus what that record number is now?

Yes. If you look at the diving, again, you get -- the second quarter, as you recall, you almost have to split in two pieces, because it really didn't start the get busy do to weather until mid-May. We're certainly running probably 10% plus utilization more than we were at the peak of the end of the second quarter. And we've got every -- all the assets, all the people pretty much going and have been over the last month and anticipate that carrying on for a period of time. On the heavy lift side, where we've got our two big barges, we had very -- gain, as you'll recall, same story. First half of the second quarter, the weather was bad. The second half of the second quarter, we had very god utilization, very good execution. So at the moment, as we get into October and November, those two barges, probably utilizationwise are running about, very high, similar to what we saw at the end of the second quarter, and that's about as good as you're going to get with those. They're running every day, and executing well.

I might make sure that for those of you who aren't aware of the seasonality of this business, the reason that this is relevant, is typically at this point in the year, you're shutting down to a great degree, some of your diving and some of your heavy lift as you go in into November, and then you carry that for four or five months. It's a slow period.

What Stu is telling you is that we are getting activity bookings for the time of year there you typically aren't working. That is a very strong positive for our operations. This is not the second and third quarter, which is typically strong. This is the fourth and to some extent first quarter. The only thing that will relate into the first quarter, one of our two barges has to go in for inspection purposes, and will be down for 90 to 120 days, but that's been scheduled for awhile, and we'll do that in the first quarter so that it won't impact a good strong part of the year. However it looks like right now, it's going to have business right up to the date we bring it in, which is really very positive, and much different than the typical seasonal pattern.

All right. Helpful. And so in that sense, you're getting indications now from customers that they're going be willing to take on weather risk as we get into December to go ahead and get some of these inspections, repairs cutting diving, et cetera done. That's still a fair assessment?

Right now we have been able to get those terms going into December, which is typically much later than normal, and we'll see -- we think some of that will continue past -- we're still not certain what the duration of the winter is going to be. My guess is it will be a shorter winter than we typically see for all the reasons we mentioned. But right now we're out until December, pretty solid with those assets.

There's helpful. And just shifting to the production and enhancement side, relative to your domestic testing exposure, what kind of percentage of total production enhancement does that encompass? Obviously you have got the Compressco side in there and you've got the international side of it. Just help us calibrate a little bit there your exposure on domestic testing as a portion of production enhancement?

Oh, I'd say domestic testing as a percentage of production enhancement you probably have about 40% of the activity is domestic testing out of that entire segment.

Okay. All right. There's helpful. I appreciate it. One last one, if I may. Relative to your oil and gas kind of mix here, as we're looking at that 50 to 55 kind of run rate next year, Geoff, what is the split there oil and gas, that I should be thinking about that given the shut-ins and bringing stuff back online?

I'll give you an answer, and that is that we are very confident that we will cover our hedges, and our hedges are currently 2,500 barrels a day, and 25 million cubic feet day of gas. That would be 40 million. So we're going to cover both of those. So you add some percentage to both to get up to that 50 plus.

Okay. All right. Thanks, guys. I'll turn it back. I appreciate it.

Our next question comes from the line of Jim Rollyson with Raymond James.

Good morning, guys.

Good morning. I thought you were on vacation.

No. Going back to the well abandonment decommissioning. You've talked about it a lot. If you look at the combination of increased utilization, what area you might be seeing in terms of enhanced pricing given the opportunities there? And just service mix, how do you look at your margin opportunity on -- maybe on an annual basis going into next year? I realize seasonality, but do you think margins start becoming enhances and now that you, maybe versus last time, around, understand how to deploy the assets in to individual groups rather than, as you mentioned holding them off for packages. How you look at that margin opportunity?

I'll answer it, and then I'll let either of the other guys answer it. First of all, margins in that business are driven, number one, by utilization, number two by utilization, number three by utilization, and number four by price. So price is relevant, you want to get prices up. They certainly help you, but there is such a high cost to break even, and then a very good drop down to the bottom line after you hit that one rate that gets you your money back, that we learned last year and the year before that if we can enhance the utilization, even if it were at lower prices, you re going to be better off. So right now we are looking at prices that are better and utilization that is better. So the answer is we ought to have better gross margins but we ought to better -- ought to have better operating margins if we can just keep this utilization at relatively high rates. Stu, do you want to?

Yes. I agree. The one thing I would reiterate again, Jim, is as Geoff said earlier, we have got a lot more diving assets that we put in post-acquisition with Everett. So the asset base is larger also as we go through this cycle.

Right. I guess maybe to bring this into maybe numbers, '06, you were in the low 20s, gross margins. Last year, mid teens, this year, with the ups and downs and the hurricane stuff, mid teens. Do you think you're back, possibly in the low 20s, low to mid 20s again next year with what you see? Will you have?

That would be a good target.

Okay. That's very helpful. Geoff, I don't know if you said this, but just make sure I have the right number. What did you actually average for production levels in third quarter?

I don't know that I've even got there in front of me. Do one of you guys over here have our production for the third quarter? It was not much for September. We were probably running around $70 million in August -- in July. You had a couple of storms that were not hurricanes in August, where we pulled people off that reduced that rate somewhat, and then it went down the --I don't think we had more than 1 million or 2 million cubic feet a day equivalents there for a period of a week or 10 days, and then it began to build back. But I can get that number if you want it.

Yes.

I don't think we have it right here.

Whenever. That's fine. Last question for me, since you guys have talked a lot. Insurance. You talked -- you obviously had problems in the last hurricane cycle of getting recoveries on some of the damaged stuff. You noted on your press release having paid the premiums or some of the deductibles, but maybe taking a conservative case on the outlook for recovering damages again this time, do you expect to get recoveries here? And I guess, if not, why do you keep paying the premiums?

A little background for those of you who may not be totally aware, we had some $130 million give or take of damage in Katrina and Rita. We were paid 90 million. The insurance providers at the time kept dragging their heels on the remaining amounts wanting to argue with us. We finally ended up suing them at the end of the year last year, which precipitate the necessity of writing those off. Under GAAP accounting that would mean that that is not a probable outcome if you have to sue somebody according to GAAP. Therefore, we wrote those off. We believe we will be paid for those. We are going to court in February on that, and help to recover from Katrina and Rita. As it relates to these, we have a different insurance provider. We rewrote the policies, where there was any ambiguity, and we feel very confident that all of this will be recovered. However, if you'll look back to a year and a half ago, we had to continue to write off in quarters various insurance receivables as they were argued by the underwriter. We don't believe that's something we're comfortable with; and given the fact that we haven't been paid for certain types of these claims before, we thought it judiciaries and conservative and proper for us to write these off and we did so. We fully expect to get paid for all of this.

Excellent answer.

Obviously, by the way, in either the Katrina, Rita or, in this case, for those that are written off, if they are paid, it comes back to our income statement we would obviously make you aware of that. Not just drop 20 million or $30 million a quarter on there without letting you know why.

Thanks for the detail, Geoff.

Our next question comes from the line of Bill Dezellem with Tieton Capital Management.

Thank you. That's Tieton Capital Management. A couple of questions. First of all, the Gulf of Mexico deepwater fluids contracts that you have won, are either of those one that you had -- one of the three there you had referenced here some time ago that you were going after, and you won the Petrobras one, and think there were still a couple that were outstanding?

Neither of those were the larger contracts. One of those other two is a very significant contract that has yet to be awarded, and probably will not be until the first quarter of next year for initial work sometime next year. These were two other contracts. I believe we have seven or eight contracts in this area already for awards. And we obviously would like to get both of those others, in particular, the one that is to be awarded in the first quarter of next year. We would hope to get a portion of that contract.

So these wins this quarter are incremental to prior discussions.

Yes.

And then I'd like the circle become to the CapEx, and I know you made the comments that you did in response to an earlier question. However, if we look at the divisions that are not Maritech, would you be able to qualitatively address them individually at whether you expect each of those businesses' own cash flow generation to cover their CapEx or whether you will require using your debt facility to fund some of those?

I'm thinking here for a minute. The only business unit where we might not cover would be fluids because of the plant in Arkansas. I can't believe that the others wouldn't cover their cash. Stu's nodding yes. All the rest, the way they're set up at this point in time, would cover, with cash flow their CapEx for the year. Now, again, the one thing we can't discuss is obviously Compressco.

Fair enough, and they for that qualitative perspective. One additional question, relative to the hurricanes, you have -- you've discussed the write-off that you took actually in some nice detail just a moment ago. But I don't think on this call I have heard -- heard it quantified what the overall operational impact on net income, what you felt that was from the -- the Ike, Gustav combination.

Well, what -- what we've said -- and I don't know that we really have a hard number for you. What we've said was that most of our businesses were doing as well as we were doing in the second quarter. You could lock at what the second quarter was. In the third quarter, in particular in July, and began to have some impact in August, but August was not a bad month; it just wasn't quite as good as it could have been because you had a couple of times during the quarter, or the month, that you had to go down, so what I would probably say to you, in aggregate, if you looked at our second quarter and looked at the operational profits, and then looked at our third quarter and what we reported and take into consideration the $10 million that we show as unique items, you'd probably come up with what that impact was. Pretty close. I know there's not a hard number. I apologize. But that's how you get to it.

No. That's exactly what we were looking for. And we appreciate you doing that. Thank you.

(OPERATOR INSTRUCTIONS) Seeing as there are no further questions I'd like to turn the call back to management for concluding remarks.

Thank you. We appreciate your being with us today, and we will talk to you in the fourth quarter. We will also have a conference call on our 2009 budget, and that will be some time at the end of December to early January, which would follow our Board meeting in December as we have done historically. So that should be the next conference call that we have. Thank you.

This concludes today's teleconference. Thank you all for your participation.