Good day and welcome to the TETRA Technologies Incorporated Second Quarter 2020 results conference call. [Operator Instructions] please note this event is being recorded. I would now like to turn the conference over to Jacek Mucha, please go ahead.

Thank you, Ian. Good morning. And thank you for joining TETRA’s second quarter 2020 results. I would like to remind you that this conference call may contain statements, statements that are, or maybe deemed to be forward looking. These statements are based on certain assumptions and analysis made by Tetra and are under and are based on a number of factors. These statements are subject to a number of risks and uncertainties many of which are beyond the control of the company. You are cautioned that such statements are not guarantees of future performance, and that actual results may differ materially from those projected in the forward looking statements. In addition, in the course of the call, we may refer to EBITDA, gross margins, adjusted EBITDA, adjusted EBITDA gross margins, adjusted free cash flow, distributable cash flow, distribution coverage ratio, leverage ratio, or other non-GAAP financial measures. Please refer to this morning's press release or to our public website for reconciliation of non-GAAP financial measures to the nearest GAAP measures. These reconciliations are not a substitute for financial information prepared in accordance with GAAP and should be considered within the context of a complete financial results for the period. In addition to our press release announcement that went out earlier this morning, and it's posted on our website, our Form 10-Q is planned to be filed with the SEC on or before Wednesday, August 5th, 2020. With that, I will now turn it over to Brady.

Thank you, Jacek. Good morning everyone and thank you for joining TETRA’s second quarter 2020 earnings call. I'll give a recap of our second quarter performance and market environment, and then turn it over to Elijio to provide information on the balance sheet, cashflow, liquidity. First I want to recognize the exceptional dedication and performance from our employees and management team for a job very well done in one of the most challenging quarters our industry has ever seen due to COVID-19. We're thankful that the few employees that have been directly impacted by the virus have recovered or are recovering well and that we have not had any situations where we could not service or deliver our customer's requirements. The Board and I are very proud of what our employees and management team are accomplishing in this extraordinary environment. Turning to our results for the second quarter, we were able to deliver a strong financial results despite the historical decline in drilling and completion activity with US land rig activity down 64% to the lowest level on record, international rig activity down 26% and that active frac crews dropping at a record pace. Our second quarter revenue was only down 14% from the first quarter, when oil prices dropped in early March, we knew we were going to have to take to move quickly and decisively to reduce costs, accelerate some of our strategies and get ahead of our customers' activity declines. We took undesired but necessary actions through staff reductions, furloughs and adjustments to salaries and benefits while also reducing third party costs and securing concessions from our suppliers. And parallel to field staff and cost reductions we also made deep cuts in our corporate overhead cost structure. This has streamlined our decision making and much of these…

Thank you, Brady. Good morning, everybody. In the second quarter, we incurred $18.1 million of non recurring charges, of which 15.7 million were for CSI Compressco and $2.3 million for TETRA. These charges included non-cash charges of 9 million dollars to write off idled compression assets and related inventory. 28 million dollars of expenses from the recently completed bond exchange for CSI Compressco and $4.3 million mainly for severance and other costs associated with rightsizing the organization. I'm going to spend a couple of minutes on TETRA’s balance sheet and capital structure now. Brady mentioned that we generated $31 million of free cash flow on a TETRA only basis, this was achieved despite the incurrence of severance and restructuring related cost. Also in the period where many operators are struggling financially, we're able to collect a significant amount of receivables to materially improve working capital. Our water management and flow back segment incurred approximately $700,000 of bad debt expense in the second quarter that we did not normalize for. TETRA only adjusted EBITDA without any of the impact of CSI Compressco was $9 million in the second quarter. TETRA only capital expenditures in the second quarter were $2.2 million. TETRA only interest expense runs about $4 million per quarter and TETRA only cash taxes went up about a million dollars per quarter. So even in the worst quarter in recent history, TETRA on a standalone basis was able to generate enough EBITDA to cover capital expenditures, interest expense, cash taxes, and remain cashflow positive, in this period. We expect TETRA only capital expenditures to be between 10 million and $15 million for the full year, which is unchanged from our prior guidance. We will continue to monitor and adjust our capital spending based on current market conditions. We expect the…

Thanks. Good morning, everybody. I guess a couple of things, but could you start with, if we think about the, the completion fluids and products business in the quarter, and sort of how we should think about the path to the third and fourth quarters, as far as you know, what's going on with activity in the US offset by the European business, which I think you mentioned that had the best quarter since 2Q ’15 in the second quarter and how that is, what kind of decremental margins we should think about as well.

So, Stephen, good question. As you and everybody realized our second quarter is our peak seasonal activity in our European business. And those margins are not much different than the overall segment margins. So I think that the transition from Q2 to Q3 and potentially Q4 will continue to leave us with EBITDA margins for this segment in the twenties, we have a significant trend of consistent performance being in the mid twenties. Brady mentioned that we have picked up a significant asset, product sales to go into the Middle East in the second half of the year, I think that'll benefit us and offset some of the decline that we're seeing from the seasonal drop in TCV. So all the data points that we have tell us that our margins will continue to run in the mid to low twenties.

I'll just add a little bit to that as, as you're probably aware outside of the European seasonal peak we've seen in Q2 most of our oil and gas revenue comes from the offshore piece of the business and not so much on the US not affected by the US land decline. That business has actually held up very well for us, we've talked before about some of the major awards that we had at the end of last year, at the beginning of this year, we continue with that success with a major award in the Middle East. And so our outlook for our completion fluids business, really has not changed much in this environment.

Great, and is that Middle East product sale as third or fourth quarter event, or do we not know yet?

It’ll go across both quarters.

Okay, thank you and then just as a follow up across the oil services world, we're seeing a lot of working capital liquidation and you guys did a really good job in the second quarter and TETRA only free cash flow was very strong. Elijio how should we think about working capital in the second half of the year?

So let me emphasize one data point that I made in my script and make sure that the investment community really absorbs it, is TETRA even without monetizing all the working capital, the EBITDA that TETRA only generated covered interest expense, maintenance capital expenditures, growth capital expenditures, cash taxes. That's a significant accomplishment that others in the industry will not be able to pound their shifts that they accomplish the same. Now you're right. We monetize a lot of receivables, yes activity slowed down and didn't ramp up. I would hope that there's a bounce in activity and we start to build receivables. And then the opportunity to monetize incremental working capital is minimal. If we stay flat from the base run rate, I think we remain slightly cash flow positive. And if we see a big ramp up, like I mentioned, there's such a negative where we burned a little bit of working capital rebuilding the receivable. Things further deteriorate we will continue to monetize working capital. We think that we've seen a bottom in that bottoming out in the second quarter and given some of the wins that Brady mentioned that we got slightly positive momentum going into the second half of the year to where the amount of cash coming from working capital will be minimal.

[Operator Instructions] At this time we have no further question. I’ll turn the conference back over to Brady Murphy for any closing remarks.

Okay. Thank you, Ian. We appreciate your interest in TETRA Technologies and thank you for taking the time to join us this morning. This will conclude our call.

The conference is now concluded, thank you for attending today’s presentation, you may now disconnect.