Tetra Technologies Inc. Reports Operating Results (10-Q)
TETRA Technologies, Inc. is an energy services company with an integrated chemicals operation that supplies chemical products to energy markets, as well as other markets. TETRA is comprised of three divisions - Fluids, Well Abandonment/Decommissioning and Testing & Services. Tetra Technologies Inc. has a market cap of $725.5 million; its shares were traded at around $9.63 with a P/E ratio of 14.37 and P/S ratio of 0.72. Tetra Technologies Inc. had an annual average earning growth of 12% over the past 10 years. Highlight of Business Operations:During the past year s economic uncertainty, we have continued our focus on maximizing operating cash flows and conserving capital resources, while continuing with selected strategic growth initiatives.In particular, our new El Dorado, Arkansas calcium chloride plant facility, which is expected to be completed in the first quarter of 2010, is the most significant capital construction project in our history. The construction of this facility was funded primarily from operating cash flows, resulting in minimal increased borrowings under our long-term debt facility. This achievement was accomplished despite a difficult market environment for many of our businesses through a combination of reducing or deferring other capital expenditures, reducing operating and administrative expenses, enhancing operating efficiencies, and carefully managing working capital. The completion of the El Dorado, Arkansas facility, which is expected to begin its initial commercial production during the fourth quarter of 2009, is expected to further increase the Fluids Division s efficiency in manufacturing its chemicals and completion fluids products, which should strengthen operating cash flows in future years. In October 2009, we entered into a settlement agreement with the various parties to our insurance litigation regarding certain costs associated with Maritech offshore platforms which were damaged or destroyed by Hurricanes Katrina and Rita during 2005. As a result of this settlement, during the fourth quarter of 2009 we expect to receive approximately $40.0 million, which will further increase our operating cash flows for the year. In addition to applying our 2009 operating cash flows to capital expenditure projects, we also made significant progress in the abandonment and decommissioning of many of Maritech s offshore oil and gas property assets, expending approximately $71.8 million. As of September 30, 2009, Maritech reflects an asset retirement obligation for the remainder of its abandonment and decommissioning efforts of approximately $215.9 million, much of which consists of the remaining work to be done associated with the offshore platforms which were destroyed during the 2005 and 2008 hurricanes. As of September 30, 2009, the outstanding balance of our long-term debt had increased to $414.2 million, an increase of $7.3 million from the beginning of the year. Our bank credit facility is scheduled to mature in June 2011, and our Senior Notes are scheduled to mature at various dates from September 2011 through April 2016.
General and Administrative Expenses – General and administrative expenses were $24.2 million during the third quarter of 2009 compared to $25.6 million during the third quarter of 2008, a decrease of $1.4 million or 5.5%. This decrease was primarily due to approximately $0.9 million of decreased salary, benefits, contract labor costs, and other associated employee expenses, primarily as a result of personnel cost reductions and despite increased incentive compensation. In addition, general and administrative expenses decreased due to decreased office expenses of approximately $0.5 million, primarily from decreased office rent following the completion of our new corporate headquarters building, and approximately $0.1 million from decreased professional fees. These decreases were partially offset by approximately $0.1 million of increased general expenses. General and administrative expenses as a percentage of revenue decreased to 9.5% during the third quarter of 2009 compared to 10.3% during the prior year period.
Other Income and Expense – Other income and expense was $1.7 million of expense during the third quarter of 2009 compared to $5.3 million of income during the third quarter of 2008, primarily due to $4.3 million of increased gains from asset sales during the prior year period. In addition, the current year period includes approximately $0.7 million of hedge ineffectiveness losses compared to approximately $2.9 million of hedge
Net Income – Net income before discontinued operations was $22.8 million during the third quarter of 2009 compared to $12.1 million in the prior year third quarter, an increase of $10.7 million or 88.2%. Net income per diluted share before discontinued operations was $0.30 on 76,059,594 average diluted shares outstanding during the third quarter of 2009 compared to $0.16 on 76,315,957 average diluted shares outstanding in the prior year period.
Net income was $22.7 million during the third quarter of 2009 compared to $11.7 million in the prior year third quarter, an increase of $11.0 million or 94.4%. Net income per diluted share was $0.30 on 76,059,594 average diluted shares outstanding during the third quarter of 2009 compared to $0.15 on 76,315,957 average diluted shares outstanding in the prior year quarter.
Fluids Division – Our Fluids Division revenues decreased from $65.4 million during the third quarter of 2008 to $50.9 million during the third quarter of 2009, a $14.5 million decrease, or 22.2%. This decrease was primarily caused by $10.9 million of decreased product sales due to significantly reduced sales volumes for completion fluids and manufactured chemical products compared to the prior year quarter. The decreased completion fluids sales volumes reflect the decreased oil and gas drilling activity, particularly domestically, as reflected in rig count levels compared to the prior year period. In addition, many operators who are continuing drilling activities are deferring completion operations, which further decreases demand for the Division s completion fluids products. The decrease in manufactured chemicals sales volumes also reflects the general decline in economic conditions which is affecting the activity levels of the Division s customers. In addition to decreased sales volumes, the Division also received decreased prices for many of its products compared to the prior year period. The Division also reflected $3.4 million of decreased service revenues due to decreased domestic onshore oil and gas activity.
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