Tetra Technologies is cutting costs in response to a slowdown in North America onshore drilling and completions activity.
Among the company’s plans are to reduce its dependence on calcium chloride produced at its El Dorado facility.
In addition to reducing field staff and field operating costs to align with lower activity, The Woodland, TX-based company is restructuring its support functions to reduce selling, general and administrative expenses at the corporate level and at its North America onshore operations by an estimated $8 million to $10 million, on an annualized basis.
Tetra said it has entered into a long-term raw material supply agreement with favorable pricing for its North America chemicals operations. This is expected to cut its cost to produce calcium chloride at some of its chemical production plants.
As a result of the reduction in the cost of raw materials, as well as general market conditions in the oil and gas industry, Tetra will depend less on its decade-old calcium chloride facility in Union County.
The El Dorado plant uses mechanical evaporation in its production process, which is different from other facilities.
The company said it would record a non-cash impairment charge of between $80 million and $100 million in the fourth quarter of 2019 to write-down the value of its El Dorado assets.
A write-down means that the company is reducing the book value of the El Dorado facility. Write-downs occur when the fair market value of a facility drops below the book value.
Tetra said its new long-term supply agreement, in conjunction with the company’s network of North America chemical plants and distribution facilities, will help it maintain adjusted EBITDA margins of 20 percent or higher for the Completion Fluids and Products segment.
In 2008, Tetra Technologies opened what was then a state-of-the-art calcium chloride production facility next to Chemtura’s bromine plant near El Dorado. The plant produces liquid calcium chloride and flake calcium chloride from bromine.
Calcium chloride is used to make oil and gas well completion fluids, and for dust control on unpaved roads, ready-mix concrete acceleration, de-icing and other industrial applications.
Tetra Technologies had originally planned to build a bromine plant in Columbia County, using the bromine for production of completion fluids and other products. Instead, it decided to bypass the expense of a plant and its associated brine field by investing in Chemtura’s El Dorado facility.
Chemtura Corporation was sold to Cologne, Germany-based specialty chemical maker Lanxess AG in 2016.
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