Tetra Technologies Inc

NYSE:TTI

Q4-2025 Earnings Call

[Operator]

Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the TETRA Technologies, Inc 4Q '25 and Full Year 2025 Earnings Conference Call.

[Operator Instructions] I would now like to turn the call over to Kurt Hallead, Treasurer and Investor Relations. Kurt, please go ahead.

[Kurt Hallead, executive]

Thank you so much. Good morning, and thank you for joining TETRA's Fourth Quarter and Full Year 2025 Earnings Call. The speakers for today will be Brady Murphy, Chief Executive Officer; Elijio Serrano, Chief Financial Officer; and Matt Sanderson, Chief Commercial Officer.

Before we begin, I would like to call your attention to the safe harbor statement in our Form 10-K. Some of the remarks we make today may be forward-looking and are subject to risks and uncertainties as outlined in our SEC filings. Actual results may differ materially from those expressed or implied.

In addition, we may refer to adjusted EBITDA, free cash flow and other non-GAAP financial measures. Please refer to our press release for reconciliations of non-GAAP to the most comparable GAAP financial measures. These reconciliations are not a substitute for GAAP financials, and we encourage you to refer to our 10-K that was filed yesterday. After Brady, Elijio and Matt provide their comments, we will open the line for Q&A.

I'll now turn the call over to Brady.

[Brady Murphy, executive]

Thanks, Kurt, and good morning, everyone. Welcome to TETRA's Fourth Quarter and Total Year 2025 Earnings Call. Before we get into the quarterly results and outlook, I would like to begin the call by acknowledging and highlighting the exceptional efforts and the 2025 performance of our leadership team and all of the TETRA employees.

2025 was a challenging year for the U.S. oil and gas industry, marked by reduced levels of U.S. onshore activity and a volatile global economic environment. But despite these headwinds, there's a long list of TETRA's record financial achievements as well as overwhelming support for the company's strategic developments.

I'll highlight some of the outstanding financial achievements and progress against our 2030 objectives, which we communicated as part of our One TETRA 2030 strategy at our investor conference at the New York Stock Exchange last September. I'll then turn it over to Matt Sanderson and Elijio Serrano to summarize our fourth quarter results and provide an update on our balance sheet.

Headlining our exceptional 2025 performance is our Gulf of America Completion Fluids team. For the fifth consecutive year, TETRA was ranked the top supplier in the Gulf of America for product quality and overall performance for offshore completion fluid suppliers in the well-respected Kimberlite International Oilfield Research report. As the market and technology advanced to 20,000 ultra-high pressure and ultra-high-temperature wells, our innovation leadership is resulting in market share gains.

TETRA's Gulf of America revenue increased well over 50% in 2025 compared to 2024, driven by participation in deepwater projects, including 3 CS Neptune wells that we completed in the first half of the year for a super major. Our unique zinc-free, high-density completion fluid allowed them to complete their high-pressure wells on schedule without exposing their production facilities to zinc in the production flowback.

The performance of our Gulf of America team drove our Completion Fluids & Products' EBITDA margins to improve 420 basis points from 28.9% in 2024 to 33% in 2025. The combination of our vertically-integrated business model as the only service provider that manufactures our own fluids, and our unique technology portfolio gives us a very strong market position. Supporting our global Completion Fluids business is our West Memphis manufacturing team, which is the heart of our bromine-based completion fluids and our PureFlow electrolyte production.

Using elemental bromine sourced through a combination of open market purchases and our long-term supply agreement, we produce offshore completion fluids, including CS Neptune and the PureFlow-based electrolyte. 2025 was a record production year for West Memphis, producing 40% more bromine end products than our long-term bromine supply agreement allows. The West Memphis team also expanded their production and distribution capacity to ship PureFlow electrolyte to Eos in tanker trucks rather than totes to keep up with their expanded production.

Another 2025 record performance is our global calcium chloride business, which set both revenue and adjusted EBITDA records and again outperformed GDP in 2025. We hold a market-leading position in Europe and a strong second place in the U.S. market. In addition to our food-grade products, we are encouraged by the outlook for our Tech Grade product lines, supporting the reintroduction of chip and other high-tech manufacturing operations in the U.S.

Although still a small percentage of our U.S. calcium chloride revenue, our Tech Grade for chip manufacturing grew by 144% in 2025 over 2024. The combination of these 3 record-setting operations; Gulf of America, West Memphis plant production and calcium chloride business, not surprisingly, resulted in record level revenue and adjusted EBITDA for the Completion Fluids segment as a whole in 2025.

This performance occurred despite an estimated 55% fewer floating deepwater rigs operating globally than the 2014 peak, and we believe are still in the early days of anticipated Eos production ramp-up. This is one of the reasons we feel very well positioned to benefit from the multiyear deepwater activity recovery and the electrolyte growth highlighted in our One TETRA 2030 strategy.

Moving on to the strategic milestones for 2025 and the fourth quarter. During the year, we made significant progress on our new bromine plant and reached a major milestone in December by erecting a 120-foot tall titanium bromine tower and support structure at our Evergreen plant site in Southwest Arkansas. We completed Phase 1 of the planned 3 phases on time and materially below budget.

We've advanced the detailed engineering design for Phases 2 and 3, placed orders for long lead items, refined the plant's total cost and are finalizing the detailed schedule. By designing the plant around the bromine tower's capacity of 75 million pounds of bromine annually, we will have 56% more low-cost bromine available to us than the 48 million pounds we published in our definitive feasibility study in August of 2024.

Since that study was completed, we have increased our demand outlook for deepwater completion fluids and now expect total bromine product demand to reach the 75 million plant capacity by 2029. Once we have the final upstream well field schedule from Standard Lithium and Equinor's Reynolds unit from which we intend to receive the post-lithium extracted brine, with Board approval, we intend to FID the project. For the reasons highlighted, we expect the Arkansas bromine project's economics to be improved from what we previously published.

Continuing on with our Arkansas brine resources, we're pleased with the progress towards finalizing JV terms with Magrathea for the production of magnesium metal using the rich concentration of magnesium, also in the same Smackover brine on our 40,000 acres. Magnesium is classified as a critical mineral by the U.S. government and is used to produce a highly valued metal for the Department of War and other U.S. industries. Through our planned partnership, we would combine Magrathea's advanced process technology with TETRA's deep operational expertise and a world-class magnesium resource base from our Southwest Arkansas brine acreage.

Magrathea has already secured Defense Production Act Title III funding from the Department of War to support its commercial Phase 1 planned to be on site at TETRA's Evergreen plant. We're optimistic that further government support is possible for our future commercial plans.

Finally, as it relates to our Arkansas brine resources and as we highlighted in our 2030 strategy, lithium has been viewed as a future opportunity beyond our 2030 targets. However, with lithium prices increasing back to over $20,000 per metric ton, we are reengaging direct lithium extraction technology companies and evaluating technological and cost efficiency advantages to understand the current economic environment. As a reminder, TETRA is the designated operator of the Evergreen brine unit and owns 65% of the brine minerals, including lithium, while ExxonMobil owns the remaining 35%.

Our final strategy update concerns desalination for beneficial re-use. We're very pleased with the results of our EOG commercial plant desalination operation in the Permian Basin. This Phase II grassland study has been running with over 95% uptime for the past 4 months following completion of the greenhouse Phase 1 study. This grassland study is evaluating oil and gas produced water desalinated through TETRA's oasis technology.

Of great significance is that TETRA was issued a patent for our TETRA oasis TDS end-to-end desalination solution. We're pleased that our unique pretreatment combined with exclusive membrane and post-treatment technologies has been recognized as a unique and patentable solution for desalinating oil and gas produced water for beneficial re-use.

However, the biggest desalination update since our Investor Day in September is the growing attractiveness of West Texas for data centers, which has shifted our customers' priorities and our focus. With data center straining electric utility grids and driving price increases, behind-the-meter cost-effective power has become a major driver for data centers. With West Texas low-cost abundant natural gas, ample and affordable land and a friendly regulatory environment, it is easy to understand why.

The one challenge West Texas does have is a lack of fresh water for power and data center cooling. However, with over 20 million barrels of produced water per day, there is far more water available by desalinating produced water. This is an extremely attractive option since operators need to reduce the amount of water they reinject for disposal and converting it into a viable resource for power and data center cooling is a double win given they now have a revenue source instead of incurring disposal costs.

Our customer plan for 25,000 barrels per day plants have been shifted to greater than 100,000 barrel per day desalination plants as one data center could require as much as 200,000 barrels of desalinated water. This is a very dynamic environment that has not changed the fact that operators need a solution for disposal well pore space filling up. However, has provided an exciting acceleration opportunity that has significant potential for TETRA. All these efforts are contributing towards the goals we laid out for 2030, including our future segments focused on specialty chemicals and water desalination and treatment.

Looking forward to 2026, we see continued momentum towards our 2030 objectives. We expect incremental revenue growth driven largely by a material increase in electrolyte business and major contract awards in Argentina. Argentina has been a real success story for us as our team has secured contracts to meaningfully expand our production testing business, anchored by our proprietary and highly efficient SandStorm technology.

In addition, our team secured 3 early production facility contracts. The combination of winning more early production facility contracts and gaining market share with Sandstorm is expected to double our revenue in '26 compared to '25. Argentina's margins are accretive to our overall water management and flowback margins and are more stable given the long-term nature of our contracts.

On the Completion Fluids side, Gulf of America activity in 2025 was heavily weighted towards completion and less towards drilling. 2026 activity is forecasted to be higher in drilling, including more exploration with less completion activity. As a result, we do not expect the Gulf of America to reach the same record levels as in 2025. However, this is projected to cycle into stronger 2027 completions activity and our 2030 targets for this business are on track.

Our U.S. water onshore -- our onshore Water & Flowback Services business continues to benefit from longer laterals, increased sand and water usage and more production-related activities, including water treatment and recycling. We expect the net impact of all these to result in overall modest growth in 2026.

We've secured third-party bromine supply for '26 and '27 to bridge our growing bromine demand and until our bromine processing plant is brought online. These third-party supplies will allow us to keep pace with the expected material increase in electrolyte and robust deepwater market, but they do come at an incrementally higher cost relative to our current long-term bromine supply agreement, which is consistent with our expectations.

Although it is possible for one or more CS Neptune jobs to materialize in '26, without CS Neptune projects and somewhat higher short-term cost of bromine, we expect our Completion Fluids & Products' adjusted EBITDA margins to be in the 25% to 30% range, which is consistent with the average margin range for this segment over the past 7 years.

The increased cost for additional bromine supply has been anticipated as a bridge until we have our bromine processing plant operational, but it further supports the strong business case and significant EBITDA increase we expect for this segment starting in 2028 when the plant is operational. For Water & Flowback Services, the continued focus on differentiated technology and our profitable international growth contribute to improved adjusted EBITDA margins from 12% in '25 to the mid-teens in 2026.

With that, I'll ask Matt Sanderson, who has currently and for the past 2 years, done a great job as our Chief Commercial Officer, to update us on the fourth quarter highlights and then Elijio Serrano to close out with our balance sheet and update. Before turning the call over to Matt and Elijio, I'd like to again express my and the Board's deep appreciation for Elijio's contributions and efforts over the past 13 years.

Last October, we announced that Elijio had notified TETRA of his intention to retire at the end of March. Over the past 6 months, Elijio has worked with Matt to ensure a seamless and orderly transition of the CFO responsibilities. Matt has been with TETRA for over 9 years and as stated, most significantly as Chief Commercial Officer. The Board and I spend a lot of time on succession planning to ensure we have the talent necessary for the organization to execute on the base business and deliver our longer-term goals. This transition will allow us to do so.

Elijio has agreed to remain available to Matt, me and the Board as an adviser so we can leverage his skills, knowledge and relationships with our investors, the financial community, our lenders and the financial team. While this might be Elijio's last quarterly earnings call, we fully expect that in the background, he will continue to support the organization as we methodically march towards our 2030 goals.

With that, Matt will provide some additional color on the fourth quarter results before handing over to Elijio.

[Matthew Sanderson, executive]

Thank you, Brady. As mentioned, 2025 was a record-setting year for TETRA on several fronts. This included our strong fourth quarter performance. Completion Fluids & Products revenue of $83.7 million was up 22% compared to a year ago and included a material increase in shipments of electrolyte and our adjusted EBITDA margins remained strong at 28.2%.

Water & Flowback services revenue of $63 million was flat compared to the third quarter despite the traditional year-end slowdown in the U.S. market. Conversely, we saw stronger activity in Argentina as we started another early production facility during the quarter. We expect to start another one this week, setting us up for a strong year in 2026 in the Vaca Muerta region, as Brady mentioned earlier. Production testing activity remains strong on the back of our SandStorm technology.

Adjusted EBITDA margins improved 100 basis points on aggressive cost reductions and a continued focus on new technology and automation aimed at reducing personnel at the well site. Despite competitive pricing pressures in U.S. land, our adjusted EBITDA margins remained relatively flat during the year. Our focus remains on leveraging technology on higher-margin opportunities and generating free cash flow in this segment.

Corporate and other expenses were $11.3 million and included materially higher variable compensation expense resulting from our team's record 2025 performance. This variable compensation includes both short-term and long-term incentives, including returns on net capital employed targets and a total shareholder return, or TSR, over a 3-year period, which is structured to align management's interests with those of our shareholders.

For the 3-year period that we are being compared to our peers, we were in the top quartile of our peer group. As a result of that increase in shareholder value, our long-term variable cash compensation increased $2 million over the third quarter. In the fourth quarter, we also changed our corporate office location, which will reduce our corporate G&A expenses by approximately $2 million per year.

We will be participating in several upcoming investor-related events in the first part of this year, which have been listed on our website. I look forward to working closely with our current and future shareholders, along with the broader investor community. On a personal note, I'd like to congratulate Elijio on his upcoming retirement. I sincerely appreciate all of Elijio's support during these past 9 years, and I wish he and Mary all the best on the next chapter in their life together.

With that, I will turn it over to Elijio to cover cash flow and the balance sheet.

[Elijio V. Serrano, executive]

Thank you, Matt. I'll highlight 3 areas, then we'll open the call up to questions. The first one is free cash flow. Cash flow from the base business in the fourth quarter was very solid at $21.8 million. For the year, free cash flow from the base business was $83 million. As you recall, all during 2025, we have been communicating our objective of generating over $50 million of base business free cash flow, and we did $83 million.

Included in 2025's free cash flow was $19 million in cash proceeds from the sale of our shares in Kodiak Gas Services following our divestiture of CSI Compressco. Just like we did with our previous sale of shares of Standard Lithium, we time our sale of Kodiak shares near their 52-week high.

The organization is very focused on managing cash flow and managing working capital, so we can maximize cash flow from our base business to invest into our bromine project in Arkansas. Despite a $12 million increase in fourth quarter revenue compared to a year ago, our cash management efforts allowed us to reduce working capital by almost 20% or by $21 million from -- to $88 million at the end of 2025.

To demonstrate the quality of our customers and our internal focus on timely invoicing and collections, days sales outstanding improved 13% from 71 at the end of 2024 to 62 days outstanding at the end of 2025.

Base business capital expenditures were $30.5 million and investments in Arkansas were $45 million. We also capitalized $4.5 million of interest expense consistent with GAAP requirements on large capital projects. Consolidated TETRA free cash flow, including all our Arkansas investments was $33 million in 2025, demonstrating the strength of our base business to allow us to invest into the projects and still be free cash flow positive. This will allow us to keep making progress towards our 2030 goals without over-levering TETRA.

The second topic of emphasis is our balance sheet. Even after we invested $45 million into Arkansas, we ended the year with cash on hand of $73 million, double where we started the year at. Net debt is $109 million, down from $143 million at the end of '24. Our net leverage ratio improved from 1.8x at the end of 2024 to 1.1x at the end of 2025. We have nothing outstanding on our revolvers. As of this week, we had borrowing capacity of approximately $7 million on our revolvers.

Brady mentioned the growth in our business in Argentina. Argentina is cash self-sufficient for us. We are not having to support Argentina by moving cash there to double the business in 2026. We expect to begin repatriating cash to the U.S. in 2027, given the strong performance that we expect from them with long-term stable early production contracts.

The third topic is our tax loss carryforwards. As of the end of 2025, we have a tax loss carryforward of approximately $84 million that can offset almost $300 million of taxable income in the United States. In 2025, we're able to use approximately $7 million of this deferred tax asset to reduce our U.S. cash taxes in the United States. This tax loss carryforward is of significant value to TETRA and TETRA shareholders as we continue to grow our business and move towards the 2030 goals with expected higher U.S. income from our bromine plant and from water desalination facilities.

And lastly, given this is my final earnings call, I would like to express my appreciation to the TETRA organization, our Board of Directors, the research community and our shareholders for the opportunity to work with all of you. TETRA is in a great position to deliver on our 2030 goals and create even more value to our shareholders as we grow our earnings.

Tiffany, with that, we'll open the call to question.

[Operator]

[Operator Instructions] the call to questions. Your first question comes from Stephen Gengaro with Stifel.

[Stephen Gengaro, analyst]

It will be odd without Elijio next quarter, but we'll keep talking to him. So, I think the first thing is, when we think about the comments on the fluids side and how the deepwater market looks in '26 versus '25 for fluids and how that evolves into 2027. Can you just talk a little bit about kind of what you're seeing -- just any incremental color on how we should be thinking about the offshore -- basically the nonindustrial piece of fluids?

[Brady Murphy, executive]

Yes. Yes, sure, Stephen. As mentioned, we had a record-setting year for our Completion Fluids business in 2025. And really, when you think about it, we're still way below where the market peaked in deepwater in 2014. As I mentioned, we're 55% below where we were in the peak, and we're setting records financially. But we had a couple of tailwinds with us in '25 because the Gulf of Mexico, as I mentioned, was largely in completion phase. And there are -- these cycles happen, right, in deepwater.

If your drilling campaign is ongoing and you're doing less completions, that has an impact on us. If you're doing more exploration and less development, that has an impact on us. So, '25 was a great year. '26 is still going to be a very strong year for us. But we are seeing a cycle into more drilling phase and less completion phase. But again, that cycle will reverse itself in 2027. And I will say the overall deepwater market is -- overall is continuing to look very positive over the next 3 to 4 years.

So, hopefully, that helps with your question.

[Stephen Gengaro, analyst]

Yes, it does. And the other question I had on that was, when we think about margin progression on the fluids side, and obviously, we can sort of back out the first half of '25, which you had the CS Neptune work. The guidance parameters you gave, is there -- is it -- what's driving that? Is it just kind of normalized margins ex Neptune? And is there -- and what's sort of the pricing situation look like for the deepwater fluids?

[Brady Murphy, executive]

Yes. Our pricing power is pretty strong in the Completion Fluids. We are the innovation leaders, and we get -- we think we get a premium for that. We're also vertically-integrated from the standpoint of being able to produce our own fluids. So, we feel we have an advantageous position in that regards.

I mean, as I've mentioned, we are securing third-party bromine at higher pricing levels, spot market pricing levels than our long-term supply contract because we're growing in both the deepwater and the Eos demand. So that does put a little bit of pressure on our margin side. But as we communicated, we think we're going to be in that range, 25% to 30% for the year in the segment, which is really consistent with our past 7 years.

But I think what it does highlight is, again, the strong business case that we have for our bromine plant because when we bring that plant online, we will have 75 million pounds of bromine available to us at significantly lower cost than what we are paying today. And that's, again, part of our 2030 objectives that we've outlined.

[Stephen Gengaro, analyst]

And then just one really quick one on the margin side. I don't think you've ever said this. I don't know if you will tell us, but how -- any guidance on how much of your bromine needs are serviced by the long-term LANXESS agreement?

[Brady Murphy, executive]

I don't know that we have communicated that, Stephen. Do you know Elijio, if that's public knowledge?

[Elijio V. Serrano, executive]

We've indicated that approximately 75% of our historical needs have been met under our long-term agreement, and we've been doing open market purchases for the rest of it. But as Brady mentioned, with the volumes increasing, we're doing more and more open market purchases.

[Brady Murphy, executive]

Yes. The percentage of open markets is definitely increasing, Stephen, as we grow and we support the electrolyte ramp-up. So, we're going to continue to see that in '26 and '27 until we bring the plant online, which will have a dramatic change.

[Operator]

Your next question comes from the line of Martin Malloy with Johnson Rice.

[Martin Malloy, analyst]

Elijio, enjoyed working with you for a number of years and wish you the best in retirement.

[Elijio V. Serrano, executive]

Thank you Marty.

[Brady Murphy, executive]

We're going to keep him busy, Marty. Don't worry.

[Martin Malloy, analyst]

Okay, good. I wanted to ask about the desalinization plants. And it seems like, obviously, the size of the potential projects has increased substantially. I'd imagine that there's a number of different parties involved from E&P companies to midstream to the data/powered providers. Can you maybe help us with how we should think about the timing of these commercial contracts potentially getting finalized and then the time to revenue?

[Brady Murphy, executive]

Yes. So appropriate question, Marty, because we were -- even since our Investor Day in September, we were going down a path with several customers who had a really sincere interest to stand up our 25,000 design plant in 2026. That has changed dramatically since our September discussion. And multiple customers, multiple data centers are now part of the discussion and have kind of taken over, I would say, the opportunity set that we initially were thinking about.

But it also includes the fact that we have to do additional engineering work. We had almost -- well, we completed our 25,000 engineering study. But clearly, when you go to 100,000 and above, we have to kind of restart that engineering cycle. And as you stated, there are multiple parties involved with this, the supplier of natural gas, a potential midstream supplier who's got water or an operator that has their own water, the power generation itself and the potential hyperscaler, whoever that in the case may be.

So, it is a multiparty process. It's an exciting process. West Texas is looking very favorable, I would say, in terms of the future of these data centers. And quite frankly, we've been open to the fact that we, to date, still, to our knowledge anyway, are the only ones that have communicated an end-to-end full commercial offering for desalinating produced water for beneficial reuse. And we're very encouraged by the patent that we received in the fourth quarter that provides more validation that we've got a technological advanced position.

So, in terms of timing, look, we're hopeful that one of these data center desalination projects will materialize in the first half of this year. Obviously, we weren't planning on much revenue, if any, revenue in 2026, but it does hopefully set us up for a first revenue of a large facility sometime in 2027.

[Martin Malloy, analyst]

That's great. And then for my follow-up question, I just wanted to ask about bromine and you're having to go out in the spot market and make purchases to meet the demand. And it sounds like from Eos' call earlier this morning, demand is not the issue. They've had some temporary execution issues ramping up, but the demand is certainly out there, and they'll be increasing the manufacturing going forward.

Does it make sense to try to accelerate the timing of bringing that bromine project online? It seems like you all are trying to pace it so you kept it within free cash flow. But given the ramp-up in demand and potentially completions in the deepwater coming back in '27, does it make sense to try to bring that in some, the completion date for the bromine facility?

[Brady Murphy, executive]

Yes. The bromine facility is really being a schedule-driven -- it's a construction-driven project right now. The timing of being able to get the contractors on site, get all of the major equipment, tagged equipment on location. So, we're not slowing the pace of this project by any means to try to pace it with cash flow funding. So, we are moving as quickly as we can. We're still on schedule for the fourth quarter of 2027, Marty. But there may be a little bit of opportunity to pull it in a little bit, but we want to be conservative with our estimates on that.

[Operator]

Your next question comes from the line of Bobby Brooks with Northland Capital Markets.

[Robert Brooks, analyst]

First I want to say, Elijio, congratulations on the terrific career. And I'm glad I've got to known you pretty well over the past couple of trips we've had the last few years, including you taking me to -- on my first trip to Midland.

[Elijio V. Serrano, executive]

Thank you, Bobby. And hopefully, that was a very good experience for you.

[Robert Brooks, analyst]

Absolutely. So, I wanted to double-click on the desal stuff. I thought it was really exciting to hear the customer conversations have pivoted from the 25,000 barrel a day to 100,000 or more plants. But what I wanted some more clarity on was, I thought that when you did the engineering on the 25,000 barrel a day plant that it was sort of modular and scalable in nature, so you could kind of just stack for to get to that 100,000 number. Maybe I'm misunderstanding it, but could you just discuss why -- if that is the case, like why not just deploy 4 of them to hit that 100,000 goal?

[Brady Murphy, executive]

Yes. Good question, Bobby. And we did anticipate that if we started out with 25,000 plants that as volumes increased, we would be able to build them in a train type of environment, right, another 25,000. But when you know you're going to start instead of a 25,000 plant and you're going to start with 100,000 or more, obviously, there are efficiencies to be gained out of a large 100,000 barrel per day plant versus just going and building 4 separate 25,000 facilities. So, with that in mind, our customer is asking us to prepare for a much larger facility as opposed to, well, let's just build 4 25,000 and put them together. So -- because there are some economies of scale to be had.

[Robert Brooks, analyst]

Absolutely. That makes a lot of sense. And maybe to dive a little bit deeper there, I think it took a couple of quarters to do the -- to get the engineering finalized for the 25,000 barrel a day plant. Do you think that might be a little bit accelerated since I'm guessing there's probably some crossover where you're kind of starting at second phase rather than starting at first phase with this engineering plan?

[Brady Murphy, executive]

Yes. No, absolutely. I mean the fundamentals of the engineering are in place. So, we will get some efficiencies as we move into the 100,000-plus plant site. And if we were starting from scratch, this would clearly be a 6-month exercise, but we're not. And we feel fairly confident within the next 3 to 4 months, we will have a good range of where we need to be to move into a commercial discussion.

[Robert Brooks, analyst]

Great. And then just one last one for me. Just on the kind of base business, Water & Flowback Services U.S. If we think -- if you take the assumption that onshore U.S. activity stays flat, do you guys think you can continue to outperform that just through the value add that you provide the E&Ps? Or is it probably more likely kind of -- if it's in a flat environment, you stay flat as well?

[Brady Murphy, executive]

Yes. So, I mean, the SandStorm technology uptake really continues with our customers, and we have more room to grow on that side of the business. As you probably heard, as you -- I'm sure you heard during our Investor Day, we are deemphasizing our water transfer business somewhat. We're still supporting that business and looking for the efficiencies that we'd like to get out of that business, but investing less in growth as that piece of our business becomes -- which is our lower-margin business, becomes less of our North America business, then we fully expect the flowback side of the business to continue to increase share. And that's what's helping us, along with Argentina, to continually drive our overall margins up in that segment in '26.

[Robert Brooks, analyst]

Got it. Great to hear. And maybe if I just could squeeze in one more. I thought it was really exciting here in the industrial calcium chloride for chip production had really outstanding growth in '26. Could you just maybe remind us, is that being supplied to domestic chip manufacturing, international chip manufacturing or is it a mix of both?

[Brady Murphy, executive]

It is domestic chip manufacturing. And really, we're on early days of that growth. And calcium chloride provides a really valuable part of the solution for these chip manufacturers because it neutralizes fluorine and fluorides, which we know are an environmental concern. So, we fully expect that business to grow as the chip manufacturing market grows here in the U.S.

[Operator]

Your next question comes from the line of Jon Tanwanteng with CJS Securities.

[Jonathan Tanwanteng, analyst]

Nice quarter. I was wondering if you could go a little bit more into the decision to bring on a third-party supplier for bromine. Does that indicate that you're having any issues with your current supplier or perhaps any delays or shortfalls expected when you ramp the new facility? Or is it purely just the demand for bromine is exceeding what you already had contracted? That's the first part of the question. The second part is, are you expecting to pass on some of that higher input cost through to your customers?

[Brady Murphy, executive]

Yes. So, the incremental bromine -- remember, bromine feeds 2 important parts of our business, our completion fluids, our deepwater completion fluids, which had a record year in 2025. And then it also supports our electrolyte production, which Eos electrolyte production, as they ramp. So, we are definitely supplying -- securing third-party supply well above now the long-term contract. There's no issue with the long-term contract. But as we've stated publicly that contract does wind down through the end of 2029, which dovetails very nicely with our bringing the plant online in 2028.

We have some success with pricing because of our innovation leadership. That does help offset some of the increased price of bromine. But again, that's consistent with the guidance range that we've given between 25 and 30 for the segment, which is consistent with our past 7 years, really even overcoming the increased cost of bromine that we see as a short-term issue in '26 and '27.

[Jonathan Tanwanteng, analyst]

Got it. And then you did mention you're expecting to hit that plant capacity in ' 29, just 2 years after you open it. I'm wondering if -- or what the plan is for excess bromine supply after that? Is it to stay with these third-party contractors? Or are there extension opportunities that you can do with the assets that you have?

[Brady Murphy, executive]

Yes. The 75 million will be the current tower that we have. We have plenty of resource in the ground and in our brine to continue building out additional capacity. But most likely, we will go to the market with incremental bromine supply above the 75 million, at least for a period of time until see whether or not we've reached a whole new plateau of future bromine growth above our 75 million. But for the short term, we would expect to go to the market for any needs above that.

[Jonathan Tanwanteng, analyst]

Okay, great. If I could squeeze one more in there. Do you have any expected shortfall in supply in bromine in the short term to your -- both your completion business -- or the battery business or is it -- are you expecting to satisfy all the demand with these new agreements?

[Brady Murphy, executive]

We have secured -- contractually secured well what we need for 2026. Obviously, as we get closer to 2027, we will do the same thing, but we're in good shape for the supply.

[Operator]

Your next question is a follow-up from Stephen Gengaro with Stifel.

[Stephen Gengaro, analyst]

Just a quick one, and I was -- I might have missed this earlier, so I apologize. The margin guidance you gave on the water side for 2026 is pretty healthy. What's behind that guidance?

[Elijio V. Serrano, executive]

That is simply reflecting stronger or pricing pressures in the Permian Basin that we're working toward offsetting some of that with aggressive cost actions that Roy McNiven and his team are taking. So, we believe we'll remain in the teens with that business, especially with Argentina coming on.

[Stephen Gengaro, analyst]

Okay. And then just a quick follow-up. When we think about the progression through 2026, given what you know as far as seasonal factors, et cetera, any sense for -- or any color you could give on kind of where the consensus sits for the first quarter EBITDA, which I think is like in the $23 million, $24 million range?

[Elijio V. Serrano, executive]

As you know, we don't -- we're not giving any guidance for the year, much less for the quarters. The only spike that we see will be the second quarter spike that we traditionally see in Northern Europe with our calcium chloride business. Otherwise, I think each of the quarters are going to reflect the offshore activity and the timing of projects.

[Operator]

Your next question is a follow-up from Jon Tanwanteng CJS Securities.

[Jonathan Tanwanteng, analyst]

I don't know if you've mentioned this specifically, but just given where you sit with the Oasis negotiations on the data center side, when is the earliest do you think you could have a large scale, the 100-plus million plant online and starting to produce?

[Brady Murphy, executive]

Probably the earliest, I would say, would be Q2, probably more like midyear of 2027 would be our expectation.

[Jonathan Tanwanteng, analyst]

Okay. Great. And does that also take into account factors like the relative difficulty of like getting gas turbines on site and things like that, just given where backlogs are for power generation?

[Brady Murphy, executive]

Yes. We can't comment on the other partners in these programs kind of where they are on securing everything they need for these projects, but we are having specific discussions with multiple customers as it relates to data centers and our role, and they're aware of our time line. Obviously, they're asking us if we can shorten that time line, but that's a realistic time line for us to stand up that size of a plant.

[Jonathan Tanwanteng, analyst]

Okay. Great. One more just high-level question. Is there any sort of long-term impact that you might expect in the offshore business based on just the changes in Venezuela and how that might be impacting the overall energy market?

[Brady Murphy, executive]

Yes. I mean our view of Venezuela, I mean, I think it's positive for both the country and the oilfield services long term. I don't think you're going to see a huge impact in the short term. We had a business TETRA did in Venezuela that we will look at returning or at least selling completion fluids into that market by way of participation. But as far as the overall energy market, my view is that it will not be significant in the short term.

[Operator]

That concludes our question-and-answer session. I will now turn the call back over to Brady Murphy for closing remarks.

[Brady Murphy, executive]

Well, thank you very much for joining us. 2025 is in the books as a record year for TETRA and really a year that our strategic initiatives came into focus for us with our One TETRA 2030 strategy. And we're very excited about the future. So, thank you all for joining us and participating with us today.

[Operator]

Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.