Picks and Shovels for the Energy Patch
You know the story. It wasn't the gold miners that made the big money; it was the people that sold them picks and shovels, and that's the role of this company in the dynamic global energy exploration and production sector.
TETRA Technologies (NYSE:TTI) is a global provider of products and services to the oil and gas market.
Its Fluids Division, which produced 40.7% of first-half revenues, makes and sells clear brine fluids (CBFs), additives, and related products. CBFs assist in well drilling by reducing the chance of damage to the well bore. The segment also provides related services, including onsite fluid filtration, recycling, and fluid engineering consultation and management.
TTI's Production Enhancement Division consists of two operating segments. Production Testing (21.3% of revenues) offers after-frac flow back, production well testing, rig cooling, and related services.
Compressco (11.5% of revenues) provides conventional and unconventional wellhead compression services, well monitoring, sand separation services, and other compression-based production enhancement solutions. These services are available in major oil and gas basins, and onshore producing regions in the US, Mexico, Canada, South America, Africa, Europe, the Middle East, and Australia.
The company's Offshore Division (26.5% of revenues) consists of its Offshore Services segment, which provides downhole and subsea oil and gas services, such as well plugging and abandonment; decommissioning and construction services that use heavy lift barges and cutting technologies; and conventional and saturated air-diving services.
The division also houses Maritech, a business that produces oil and gas from acquired producing properties. Over the past two years, TTI has aggressively exited this business, selling substantially all of these properties. Remaining liabilities associated with Maritech are expected to be extinguished in 2013.
Due to the company's significant presence in the Gulf of Mexico region, the US is its largest market, responsible for 79.5% of 2011 revenues. This is followed by Europe (8.9%), Canada and Mexico (5.8%), South America (3.4%) and Africa (1.6%). Asia and other markets generated the rest.
Customers consist of private and public oil and gas producers, including Anadarko (NYSE:APC), Devon (NYSE:DVN), Halliburton (NYSE:HAL), Marathon Oil (NYSE:MRO), Petrobras (NYSE:PBR), Shell Oil (NYSE:RDS.A), BHP Billiton (NYSE:BHP), Chesapeake (NYSE:CHK), ConocoPhillips (NYSE:COP), PEMEX , Saudi ARAMCO, EXCO Resources (NYSE:XCO), Apache (NYSE:APA), and Chevron (NYSE:CVX).
While second-quarter results met expectations, TTI lowered its full-year adjusted earnings per share guidance to $.60 to $.70, from a prior range of $.70 to $.90. The company blamed weaker-than-expected demand in its Offshore Services segment, which is expected to linger for the remainder of the year. No doubt this is partly responsible for the 23% decline in the stock since.
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