Q4 2023 Tetra Technologies Inc Earnings Call
Participants
Rigo Gonzales; Corporate Finance & IR Manager; TETRA Technologies, Inc.
Brady Murphy; President & CEO; TETRA Technologies, Inc
Elijio Serrano; SVP & CEO; TETRA Technologies, Inc
Martin Malloy; Analyst; Johnson Rice & Company, LLC
Bobby Brooks; Analyst; Northland Capital Markets
Presentation
Operator
Good morning, and welcome to Tetra Technologies first fourth quarter 2023 results conference call. All participants will be in listen-only mode. (Operator Instructions) After today's presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded. I will now turn the conference over to Rigo Gonzalez.
Rigo Gonzales
So ahead they can Joel.
Good morning, and thank you for joining federal Fourth Quarter 2023 Results Call. Speakers for today's call are Brady Murphy, Chief Executive Officer, and Alicia Arnold, Chief Financial Officer. I would like to remind you that this conference call may contain statements that are or may be deemed to be forward looking including projections, financial guidance, profitability and estimated earnings statements are based on certain assumptions and analysis made by Tetra and are based on several factors. These statements are subject to several risks and uncertainties, many of which are beyond the control of the Company You're 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, adjusted EBITDA, adjusted EBITDA, gross margins, free cash flow, net debt, net leverage ratio, liquidity, returns on net capital employed or other non-GAAP financial measures, please refer to yesterday's press release or to our public website for reconciliations of non-GAAP financial measures to the nearest GAAP measures. And These reconciliations are not substitute for financial information prepared in accordance with GAAP and should be considered within the context of our complete financial results for the period.
In addition to our press release announcement, we encourage you to refer to our 10-K that we also filed yesterday. I will now turn it over to Brady.
Brady Murphy
Thank you, Rigo, and good morning, everyone, and welcome to Tetra Technologies fourth quarter earnings call. 2023 was a historical year for the company. And despite higher than usual year ending activity slowdowns in a few of our segments, we are seeing good activity recovery in the first half of 2024 and expect another year of growth for 2023 achieved numerous historical financial highs for us also achieve some strategic milestones that will benefit the Company for many years to come.
Our full year 2023 adjusted EBITDA, excluding mark-to-market of $106 billion, grew by 37% from 2022 and nearly three times higher than that of 2021, as both of our segments posted another year of strong returns.
Our full year 2023 adjusted free cash flow of $41.1 million was 61.6% higher than 2022 and was slightly above our guidance from the beginning of the year, representing approximately a 40% conversion rate of adjusted EBITDA to adjusted free cash flow. This was achieved despite significant investments made in Arkansas and investments made to finalize the engineering design for our first-ever commercial produced water for beneficial reuse project, a solution that we believe will be disruptive for the industry and transforming oil and gas well produced water from a waste into an important resource.
Our strong 2023 adjusted EBITDA growth was achieved despite little contributions from Tetra CS Neptune and Tetra Pure Flow, which we will believe will be catalysts for further growth in 2024. For the full year, our Completion Fluids & Products segment grew revenue by $40 million or 15%, while adjusted EBITDA grew $22 million or 32%, representing an EBITDA fall-through of nearly 55%, driven by strong performance in our Industrial Chemicals business and growth in our international offshore completion fluids operations, full year Completion Fluids & Products revenue of $313 million was the highest since 2015 when we completed two large central CS Neptune projects in the Gulf of Mexico. Our Industrial Chemicals business posted a historical year, achieving its highest revenue and adjusted EBITDA in our history with 2023 revenue growth over '22 of over 18%.
Our Industrial Chemicals business is now 22% of the company's total revenue. And as we ramp up deliveries of zinc bromide based electrolyte in the coming years, we expect this percentage to continue to increase our diversity and product offering, including grades for technology and food and superior product quality allows us to participate in a wide range of markets and applications, as evidenced by our recent entry into the lithium production process in South America and the chip manufacturing process in the United States. Our leading market positions in Northern Europe and US. gives us stable markets in which to operate with predictable revenue and earnings and strong free cash flow, allowing us to reinvest in our new high growth opportunities for Energy Services.
Total revenue attributed to offshore projects increased 11% year over year, and we anticipate another another double-digit top line growth in 2024 as our pipeline of offshore projects continues to build. We've already recovered the investments made in recent years where we strategically expanded capacity in key deepwater offshore markets and expect to continue to generate positive momentum in those markets, we have intentionally built our inventory levels to capture the upcoming growth in deepwater activity. Although floater utilization shows increasing rig availability through 2024 price that expects operators will continue to exercise outstanding options and or continue to recontract rigs currently under contract marketed utilization is expected to peak in 2028 at 91% due to steady growth in project development activity centers well positioned to benefit from this multiyear growth trajectory.
Our outlook for Tetra CS Neptune continues to improve, and we've secured a second quarter job in the North Sea. And we are in early discussions with two different supermajors for projects in the Gulf of Mexico that was scheduled for late 2024 or early 2025 earlier this month, the executive team and I visited uses state-of-the-art automated manufacturing line at the Actros, Wisconsin facility and came away with high confidence they will deliver to users' requirements earlier this year, you announced that it expanded its partnership with Tetra and designated the company as its preferred strategic supplier for the for electrolyte of its Z. three long duration energy storage cube.
The company was previously only providing architecture Pure Flow zinc bromide solution, which was only a portion of the full electrolyte, the evolution of increasing Tetris participation with videos from only that's a pure flow through the full electrolyte will be accomplished without the need for incremental bromine as a good fit within our chemistry expertise. Central is expected to supply a minimum of 75% of the total electrolyte product demand going forward. And we anticipate deliveries to be meaningfully higher than 2023, mostly in the second half of the year. This relationship and the timing of their expected growth also dovetails nicely with our Arkansas bromine production plants.
Turning to our Water & Flowback Services segment, despite declining rig activity and active three frac fleets for most of 2023, while full year revenue was up $33 million or 12% and adjusted EBITDA was up $10 million or 23%. The majority of the growth was driven by continued market share gains and high utilization within our fleet of Tetra Sandstorm and an increasing part of our business dealing with produced water, which despite declining US drilling and completion activity in '23 is only increasing along with oil and gas production, the market share gains and benefits of shifting our focus to production rather than drillbit can be seen by our 2023 revenue, exceeding that of our previously year high in 2018.
But with 50% less rig activity, these market share gains were achieved as we improved our adjusted EBITDA margins from 15.5% to 17% in 2023. International business, mainly Argentina also drove some of the revenue increase. And although we strategically sold one of our EPS in the fourth quarter, we anticipate earnings to be flat year over year in that region. As previously mentioned, these projects are longer-term contracts with established day rates, which also provide a steady stream of cash flows over the last several years, we have deployed significant growth capital in this segment to build out our fleet for Tetra Sandstorm's, introduce new technology to help drive efficiencies, increase our capacity for water treatment and recycling and investments in EPS to grow beyond North America.
These investments are paying off, as demonstrated by our improvement in return on net capital employed as we expect they will continue to drive higher returns as we move forward with this segment, we will continue to invest in technology and automation, but we'll maintain our focus on returns rather than additional growth as we plan to divert much of the growth capital to Arkansas and our produced water for beneficial reuse projects in November of 5.2 magnitude earthquake was recorded in the Permian Basin, marking the fourth strongest recorded in Texas vessels in the past few weeks, earthquakes over 4.0 magnitude were reported in New Mexico, South Texas and Oklahoma, as our tweets become more frequent and more intense in areas of produced water disposal regulators have increased sense of urgency to limit volumes of produced water disposal and find alternative solutions, multiple agencies across multiple states and are very active in defining regulatory specifications for using produced water for industrial farming and other applications sectors engaging with regulatory agencies as well as operators to ensure our solutions will meet these requirements.
We met our year-end targets, Dave to complete the engineering design for our first commercial produced water for beneficial reuse projects. We are currently in advanced negotiations with one of the largest U.S. oil producers for their beneficial reuse project and have entered commercial discussions for a second high salinity Permian Basin demonstration project. We are on track to deploy our first commercial project in the second half of this year. Lastly, in 2023, we significantly advanced our Arkansas lithium and bromine brine project. In June, we announced an MOU with ThoughtWorks LLC, a wholly owned subsidiary of ExxonMobil to pull both of our acreage to form the evergreen brand unit, which is a subset subsequently unanimously approved by the AOGC. in September.
In the fourth quarter, we launched and completed a technical resource historic study for the evergreen brand unit, which advanced our prior inferred resources to include the measured and indicated category, reflecting higher confidence in the resources evaluated by the study. The study highlighted the highest lithium concentrations to date, many lithium brine resource in the US for which and S-K 1300 dash one one or JORC compliant technical report summary has been published. I'm also pleased to announce that yesterday we closed on 120-acre plant site that is ideally located just south of stamps Arkansas that is within our 35,000 leased acres and one mile north of our evergreen brand unit.
We are currently performing soil sampling before planning to break ground later this year filing. We're currently focused on completing the lithium FEED study as well as finalizing the negotiations for operating joint venture and or joint development agreements relating to the development of the Evergreen Brian unit. Based on that report, plus the engineering studies that were previously completed, we were able to secure the remaining financing required to complete the bromine processing facility once we get to FID, which we expect to be later this year.
Now I'll turn it over to Lidio to provide some additional commentary on the successful financing and our financial results. Then we'll open it up to questions.
Elijio Serrano
Thank you, Brady, and good morning. Everybody. 2023 with a strong year for Tetra, adjusted EBITDA was up 37% and operating income was up 183%. Adjusted EBITDA margin of 17.1% increased 300 basis points year over year. And more importantly, we generated over $40 million of free cash flow in 2023. We also significantly improved our balance sheet, ending the year with a net leverage ratio of 1.1 times and a 27% reduction in net debt. As of February 26, liquidity was $212 million, inclusive of the $35 million delayed draw feature that is available to Tetra for the bromine project.
In addition, based on Friday's closing prices, our holdings of Standard Lithium and CSI Compressco combined for a total market cap of approximately $12 million. And this investments can be monetized if necessary. Subsequent to the end of the quarter, we refinanced extended and expanded our term loan at a more attractive interest rate than our prior term loan. Further strengthening our balance sheet and providing us the flexibility to execute on our growth initiatives. We were very pleased with the reception we got on the refinancing, which we reached out to a significant number of potential capital providers, including those in the oil and gas mining and chemicals sector and received interest from over 60 capital providers.
We received 11 term sheets and favorables wanted on the road to help us refinance the entire term loan without partners, providing us the capital to help us with the bromine initiatives and indicate a strong interest in supporting us with the required capital for the lithium initiatives and talking to those in the industry, getting five term sheets from capital providers willing to take on the entire opportunity on their own plus another six willing to be part of a consortium is where for a small or mid-cap oilfield services company in today's environment, we believe this demonstrates the value of a company like Tetra with over $100 million of adjusted EBITDA, a leverage ratio of 1.1 times free cash flow of over $40 million and working with a partner like ExxonMobil as an industrial chemicals revenue base of $130 million is not subject to the fluctuations of the oil and gas industry, plus our history of being free cash flow and EBITDA positive in the last two downturns makes us an attractive partner to raise capital.
Our terminals. We financed 50 basis points below our prior term loan and the maturity is now January of 2013. Our balance sheet aside nicely said to invest in lithium and bromine in Arkansas between our current liquidity, expected free cash flow in 2024 and 2025 plus the $75 million delayed draw feature available to us. We believe we have the capital necessary to complete the bromine project without having to issue equity. Our focus will now shift towards finding the capital for our 49% of the expected lithium joint venture with ExxonMobil, just like we did with the bromine projects. Our objective is to source of capital for lithium will rock without relying on the equity market. We will evaluate project financing at the JV level and government loans and grants for a portion of the lithium project. From an outlook perspective, we expect 2024 revenue, adjusted EBITDA and free cash flow to be above 2023. And as mentioned, earlier 2023 cash flow was $41 million.
Our base business free cash flow in 2024 is expected to be better than 2023 before investments in bromine and the lithium project in Arkansas. We don't expect our Arkansas investments in 2024 to be more than the free cash flow we generated from our base business and we don't expect to use our delayed-draw revolver until 2025. We believe we remain on plan to be generating revenue and EBITDA from the bromine and lithium projects in 2026. We also expect a ramp up in electrolyte sales into the stationary battery storage market in the second half of 2024. We also expect to be generating revenue and EBITDA from the first desalination project in the second half of 2023, 2024.
These will be the catalyst or 2024 being stronger than 2023 in the first fourth quarter, we expect Water Management to be stronger than the fourth quarter due to the ramp up in fracking activity that we saw early this quarter. We expect full flowback services to be weaker in the first quarter relative to the fourth quarter as the flowback lags water management and fracking by two to three months sum total of this is a Q1 water management and flowback services EBITDA to be comparable to Q4 slipped and stronger in the second quarter of flowback services, we bounce on a stronger first quarter fracking activity?
Also remember that in the second quarter, we see a seasonal peak in industrial chemicals business in Northern Europe that has historically added approximately $50 million in revenue Q2 over Q1 and has added between $4 million to $6 million in EBITDA Q2 over Q1. We expect our second quarter of 2024 to be at or above the second quarter of last year. From an investor relations perspective, we have several events coming up to help us further communicate our initiatives. We will be hosting one or once tomorrow at the Scotia conference in Miami, Northland Capital who initiated coverage on Keppra last month.
We will be hosting us for our virtual fireside chat on March 14 and co-led with benchmark who also recently initiated coverage on Tetra will be hosting us for a non-deal roadshow in New York City, Philadelphia and Boston in the first week of April. This will include a group lunch on April first in New York City with Brady, myself and our Chairman of the Board, Jay Glick. Please reach out to me if you'd like to person participate in any of these events, strong performance by our base business. Our long-duration battery storage opportunity in our lithium arrangements with ExxonMobil has created a strong industry interest in Tetra. We now have six research analysts covering Tetra up from just a couple of years ago. I'll turn this back to Brady for closing comments before we open up the call to questions.
Brady Murphy
Thanks, Elijio. We're ending 2024 with a strong and growing base business, a solid balance sheet over $210 million of liquidity with a constructive outlook for our products and services. We anticipate further growth in 24 and expect to continue to generate strong free cash flow from our base business to fund our strategic growth investments. Combination of these plus advances in our produced water beneficial reuse solution. Our Arkansas resource position and strategic partnerships provides us with the opportunity to continue to drive long-term shareholder value. While '23 was a historical year for the company. We anticipate '24 to be both historic and transformational.
With that, we'll now open up to questions.
Question and Answer Session
Operator
We will now begin the question-and-answer session. (Operator Instructions)
Martin Malloy, Johnson Rice.
Martin Malloy
Good morning and congratulations on a strong '23 in the free cash flow generation. I think my earlier question and my first question, just wanted to see if maybe you could go over. I think I heard FID of the bromine project later this year, but could you go over maybe the timing of the CapEx requirements for the bromine project and also the associated and I guess, the amount and the associated wells and pipe.
Brady Murphy
Sure, Marty, I'll take the first part of that and then maybe ask Leo to talk about the capital outlay. But as far as timing goes. As you know, we completed the bromine FEED study last year, and we have been layering over the that FEED study with the lithium FEED study because they will be on the same plant site. And obviously, there are some synergies that we can gain by having two plants on the same site, which we mentioned. We just closed on yesterday, 100, 20 acres, just south of stamps, Arkansas. And so we hope to have the the lithium or sorry, the bromine cost analysis completed within the next couple of months to where we can take that proposal to the Board with updated economics and get approval to move forward with with the bromine as a portion of that project, the lithium as you know, is with our JV partner or hopefully to be JV partner. And that one, we think will follow after the bromine FID, probably late Q3, potentially Q4. And then we're obviously working with them once we get our final agreements in place to decide how the funding of that will be handled.
And with that, I'll ask Elijio to give some more comments.
Elijio Serrano
Yes, Marty, with respect to the capital for the bromine side, we'll start placing orders for long lead items. We will begin and finish soon. The detailed engineering design and they will begin doing a lot of the civil work during this year. We don't expect a significant amount of the construction to begin until next year.
On the lithium side, once we and our partner agreed to approve the project and move forward. Any investments that we make remember are going to be shared between us and our partner.
The sum total of all bonuses that expenditures this year, we believe will be below the free cash flow that are at or below the free cash flow that we generate from base business, keeping us from borrowing any on the delayed draw or ABL facility this year.
Martin Malloy
Thank you. And my follow up question, wanted to ask about the desalinization of water reuse plant and the first one. Could you maybe talk about ownership and CapEx related to it and what the finished water after it comes out of this plant, what it is expect it to be used for?
Brady Murphy
Sure. So a couple of pieces of that question. In terms of this particular project, our first project of the way we are outlining responsibilities for the project, we will own the desal technology and equipment that is on location. Our partner will be providing the capital for the civils works and the site construction costs. So it will be a bit of a combined offering, but this is a multi-year targeted for over five years types of project targeting between 20,000 and 25,000 barrels per day of produced water for desalination now the specifications of that water, if you remember, Marty, we completed last year a pilot project using the same technology where we were able to desalination 92% of the brine of produced water inflow to freshwater specifications that ourselves and the regulators would meet the current regulatory environment and ourselves and our customer very happy with. So that's the the commercial design that we have now built and as I said, will be will be shared, we'll be owning the equipment and the technology and our partner will be owning the site and the civil works for that particular location.
Martin Malloy
Great. Thank you. I'll turn it back.
Operator
Bobby Brooks, Northland Capital Markets.
Bobby Brooks
Hey, good morning, guys. Thanks for taking my question. So I kind of want to stick with the beneficial produced water project. So it seems to continue to progress really nicely, and that's the most near term and the emerging revenue opportunities you're pursuing. And I know you kind of just touched on it, but maybe to give some more color, could you remind those of, you know, maybe some of those key milestones achieved so far. Obviously, you already touched on those our preliminary results last year. And then secondly, maybe could you talk about the next steps investors should be watching for on this project and there maybe just talk about the size of the opportunity and how you would anticipate to scale into it.
Brady Murphy
Sure. So let me let me recap and highlight kind of the path that we've taken to get us to where we are. As you remember last year or maybe a year and a half ago, we announced two strategic partnerships, some that are kind of integral to the old total desalination solution that we have. A high risk was identified as a reverse osmosis technology that that met our requirements, along with our pretreatment technologies, proprietary pretreatment technology. We felt that was the optimum solution for what I'll call lower TDS., lower total dissolved solids solutions, 60,000 or so parts per million and below appropriate for South Texas, Colorado. Many different environments here in the US, but not for the Permian. Permian is very high total dissolved solids, TDS. for that partnership. We had chosen KMXI., both of those relationships that we have and that uses a backroom vacuum distillation technology for both of those relationships we have exclusive applications for the oil and gas produced water, beneficial reuse and have tailored our pretreatment, which remember this is very different than desalination water. This has a lot of very complex minerals of organics in the fluid. And so that pretreatment is very critical to the ultimate solution. So those two partnerships we've progressed. We've done significant testing of produced water samples from customers across the U.S. at our research facility and entered into negotiations with, again, a large oil producer, one of the largest in North America to put together a commercial project design and proposal for an application in South Texas. That is the first commercial project that we're in commercial discussions discussions with today that we expect to deploy during the second half of the year. That same customer is also very aware of what we're doing on the higher TDS. levels in the Permian Basin with the KMX. technology and we are now in commercial discussions with them for a pilot unit using that technology and our pretreatment for the Permian Basin. That project, we expect to also have launched this year. So we are hoping to have a full commercial production unit in place as well as a demonstrated pilot commercial unit in place for the Permian and the customer interest as you can imagine given the current environment is just a is quite significant for us to have to keep pace with. But those are two near-term focuses.
Bobby Brooks
Thanks, Nan and non-op gain also Turning to the Industrial Chemicals segment, you know, so destocking was a headwind in the fourth quarter, but then you mentioned in the press release, you know that in the second quarter 24, you're expecting to see that traditional Northern European industrial chemical demand ramp up. I know you also already knows. I know you also mentioned you've already seen us start a sharp rebound to start 2024. But you know, aside from that, is there any more color on why you expect that rebound? And maybe just talk about the visibility you have on that trend in terms of the destocking headwinds of that phone?
Rigo Gonzales
Yes. So last year's we'd mentioned was was an historical high for our Industrial Chemicals business. I think we said it grew 18% year on year, our highest revenue and EBITDA numbers. We have seen in that in that business. But we did we did see some year-end destocking as customers kind of rebalanced their purchases that they had made with year-end targets to a higher level than probably we have seen in past years. But we're very pleased to see that the start of the year reverse that trend quite sharply. And the order flow has been has been very consistent in the upward direction. And as Leo said, we expect our Q2 be very much in line with the expectations, but we're also seeing, again, continued offshore completion fluids activity churn, and it's a little lumpier, obviously, than our industrial chemicals business. So we can see more fluctuations quarter by quarter, but we expect the first half of 2024 in our completion services business to be above the first half of 2023 at a double-digit pace. And combined with our Industrial Chemicals scale, it gives us a strong first half of the year outlook.
Okay.
And just so first First Half 24 for completion fluids above first half 23 at a double digit pace. Did I hear that correctly?
That's correct.
Okay.
And then last one for me, Alex. And sticking with the completion fluids business, you know it.
Yes, highest revenue, highest EBITDA since I think it's I think you've mentioned since 2015 when there was when you guys completed two large CS Neptune projects in the Gulf of Mexico. Could you maybe just remind us how many CS Neptune projects you did in <unk> 2023? And maybe just give some directional color on where that goes in 2024 that you mentioned already the RD oh one in the North Sea and then talking to two super majors in the Gulf of Mexico but maybe just frame that up.
Yes, sure. So so the the Neptune jobs, some we did have some jobs in the North Sea, but they are typically smaller volume jobs and sometimes it's difficult to actually you'll see see the impact of those jobs from the North Sea perspective relative to on a normal large calcium bromide job, for instance, in the Gulf of Mexico. So but we're very pleased with the trend that we're seeing in terms of our outside of the Gulf of Mexico, Neptune, it's just that they're typical typically smaller jobs than what we see in the Gulf of Mexico. The jobs in the next in the Gulf of Mexico are just are just really quite different just due to the volume of the fluid, the jobs that we referenced in 2015, I think they were on the order of $15 million to 20 million apiece type types of jobs. Those are the types of jobs that we have in the Gulf of Mexico. We've had we don't know what the jobs that we're currently in discussions with will be of that size or magnitude because we're still in early discussions with those customers, but it just gives you a sense of the types of size and scale of those jobs versus versus the North Sea. But we're just we're just very pleased to see the traction we're getting with the technology and we know that the activity will will follow over the years.
Todd and I appreciate and premium look hard on looking forward to hosting you guys not before.
Yes.
Thank you, Bobby, very much. Look forward to it as well. Often a journey with you.
Operator
Your next question comes from Kurt Hallead with Benchmark. Please go ahead.
Elijio Serrano
Very glorious.
Rigo Gonzales
Morning.
Elijio Serrano
I appreciate all that detail and info on. So just the legal view, you gave us some indications here that the first quarter may start off a little bit light, particularly in the Water & Flowback part of your business. But as you look out for the rest of the year and you kind of look at where I guess the consensus EBITDA numbers out there at $120 million plus side, you have you have good line of sight as to the progression that you feel confident that you can get to at least under $20 million in EBITDA for the year?
Yes. I won't comment on the actual full year number because six months down the road is a long way down the road. I did say earlier that the combination of electrolyte sales into the stationary stationary battery market plus the desalination and the deepwater activity, especially the projects that Brady made reference to and give us confidence that 2024 is going to be stronger than 2023 for U.S. Pipe.
Tom, so you are kind of curious in the context of your report that you had here on the lithium front that indicated that it has resource potential was three times your prior report? And just kind of what can you put that into context for us in the dynamic of how does that alter how much you think you might have to invest to ramp up production or get your facility going? And is it is it significantly larger in the context that's going to require more capital?
Rigo Gonzales
So Bob, I'll speak to the resource and then touch on the capital and the fleet wants to add any more. So if you recall initially, Kurt, we had applied to the Arkansas Oil & Gas. So we're preparing to apply for the Arkansas Oil and Gas for our own acreage that Tetra had held as of, I think, between 45 hundred and 5,000 acres that we had applied for a unit and right before that our partnership evolved with ExxonMobil and we decided to combine acreage or a larger unit right now, that unit is the Evergreen unit with 61 hundred and 38 acres. And so there was an expansion of the original lithium in place, but also more importantly, the lithium concentrations after we completed the Evergreen number one well was well above expectations in terms of the concentration and then the reservoir rock quality turned out to be exceptional as well. So all those all those factors combined when you look at the resource report for lithium today versus what it was initially when we did our inferred study a couple of years ago was nearly three times the volume and obviously volume of lithium translates into how much Brian has to be processed, which also translates into financials. So again, we're quite encouraged by by what we see in terms of the capital that's still under evaluation. We don't have a firm number to be able to provide yet. That's part of the feed analysis. That's that's ongoing. But again, we think the synergies of having a bromine plant and a lithium plant on-site managed by one partnership is going to show some very attractive financials on both side of the equation there.
Elijio Serrano
And Kurt, I'll add that the upstream work, the work they were doing with the source wells and disposal wells and the pipelines to move the brine from the wells to and from the processing facility, iShared So pulling brine is going to feed both the lithium and bromine projects and also creating significant synergies on the upstream side that catch up that mine on again, focusing on the emerging growth opportunities you have again on lithium desalinization flash producers, you're flying those electrolytes into the battery energy storage system, right? Looks like you have some revenue opportunities on the battery storage front coming got this year yet in detail revenue opportunity starting this year.
Rigo Gonzales
So what do you what do you think the I think first revenue could be for for lithium first first, revenue for lithium is more likely a early 2027, late 2026 or early 2027 at this point.
Operator
Okay, got you.
Elijio Serrano
Thank you.
Operator
Your next question comes from Patrick will lead people. Please go ahead.
Rigo Gonzales
Hey, good morning. It's Pat on for Steve and Jerry, thanks for taking the questions. 40, you want to go out and good morning. Given the US land outlook right now, do you think you can grow the water business faster than activity? And then on the margin side, during 2023, you have strong margin regression in the water business. Obviously Q4 dropped off a bit. Just curious how you could think about this as a high 10s margin business going forward or more around the level seen in the fourth quarter?
Yes. Well, I'll take that and ask Leo to add some color. So if you look at our business, as had mentioned, relative to rig count, we exceeded our revenue in 2023 over 2018, which was our previous high by 12% on 50% less rig count. So that shows on an ability to continue to grow in a period of declining completion activity. And a lot of that has to do with the technology that we've deployed that Sandstorm has gained significant market share continues to gain market share in North America. So that continues to be a growth catalyst for us, but also focus on produce drought and water weather rather than the basic water transfer type services, which is more of a completion related activity. Clearly, we won't get the benefit of the significant benefit of the desal project in 2024, but we do still do expect growth in our Water & Flowback segment in 24 over 2023. And then hopefully as things progress with our desal, we would see a step change in desalination revenue in 2025.
Elijio Serrano
And Pat, I'll add on the margin to your question on the margins. We have spent quite a bit of time on automation and reducing the number of personnel at the Web at the well site. We've also focused aggressively on introducing technology that we believe create some barriers to entry against some of our local and regional competitors such as with the Sandstorm technology.
And just to give you a sense of a couple of weeks ago, I was out in the Permian Basin and we had one of the largest produced water treatment jobs going on. And we're operating that with one person on-site and the amount of revenue that we're generating relative to the amount of personnel that we have today versus what we had several years ago is a step change. The combination of those is what we think will make this a EBITDA margin business. It will be high. Thanks.
Rigo Gonzales
All right. Thanks, both you. That's helpful. And this relates to an earlier question. So apologies if you had explicitly laid this out, I was just struggling to make out what you were saying as we think about the global deepwater market, you'd noted that revenue attributable offshore projects increased 11% year over year and expectations for continued expansion. Just curious, can the completions business deliver mid-teens growth in 2024 similar to that of 2023 as we go?
Elijio Serrano
Yes, we believe that it can Brady mentioned some Neptune opportunities. We only saw a handful of smaller opportunities in the North Sea. The opportunities that we're engaged with customers on are now in the Gulf of Mexico. And because of the depth and the volume fluid that those projects take that can be a significant contributor. Also, a lot of the new rigs that are being introduced that are coming online in the Gulf of Mexico are per customers that we've got the contracts in place with. So we think the combination of those we'll allow a double digit growth year over year on the completion fluids side.
Great.
Rigo Gonzales
Thanks for the color.
Operator
Again, if you have a question, please press star then one.
Your next question comes from Tim Moore with EF. Hutton. Please go ahead.
Thanks, and congratulations on the overall 2023 organic sales growth and EBITDA margin expansion. It's really nice to see the free cash flow to. And I'm glad I thought versus helping out with that.
Most of my questions have already been asked, but maybe let me just start off with their completion sales. It seems like double-digit growth is possible this year, depending on the Gulf of Mexico to Neptune project to the falls in the December quarter or not.
But just switching gears back to Water & Flowback sales growth this year I know Brady has just mentioned the expectation is that will grow. Do you think it could be mid-single digit growth? And is that dependent on kind of the earlier comments?
Brady, mentioned about you're reallocating some growth CapEx to Arkansas and desalination, so that even if it is mid single digit growth this year, so the opportunity of Invigorate, if you reinvested more than have those other projects?
Rigo Gonzales
Yes. So I think strategically, we will continue to invest in automation technology and selective Sandstorm customers where we're getting the pricing, the premium pricing that that we want. So we are focused more on returns.
As far as your question, can we achieve single mid digit growth? Yes, we feel that's achievable in 2024. But again, we're really more focused on returns and margin enhancement with that business. We could grow more, but that's a strategic decision that we're taking at this point to use the free cash flow that we have discussed for what we think will be longer term, a much higher return and growth businesses for us.
That makes sense. Pretty I love the ROI aspect in the self-help.
Yes, I enjoyed seeing all the sandstones when I was down in the Permian a year-and-a-half ago on-site. But I'm actually just switching gears to my favorite topic. They've been publishing on for maybe 15 months, the desalination at produced water opportunity. They've been putting an EBITDA estimate out there for it for over a year. But I'm I know that's more second half loaded and of what about the progress being made maybe with the railroad commission and the commission environmental quality, they have this established the purity levels of the TDS. I mean, I know you have the 92% desalination level of risk, but on top of it, zoned in and finalize the purity level TDS. hurdle?
Yes, so great question. I mean, I think with the more recent or earthquake activity and what they've been looking at this now for several years, but that I think I get working with these agencies, the sense of urgency has really ratcheted up. And I thought overall, TDS, we're well below the overall TDS level. Now we're into very discrete parts for millions of certain minerals on organics, those types of things. And we're working to understand the final regulatory requirements for each of those applications is going to have a different appetite, I think does different levels for industrial applications, different levels for farming. You've got very discrete now beneficial reuse applications that are being defined and the agencies are working with the operators and companies like ourselves who have the technology to help get those specifications. So it has become a very collaborative process more so than I've ever seen, certainly within the last six months, we've had several meetings with a New Mexico produced water consortium, for instance, the Railroad Commission and our customers to really nail down these these requirements on companies coming together quite rapidly at this point.
Great.
That's really helpful. I'm very excited about that, given I was on-site. And so what you can do with the pretreatment a year-and-a-half ago. But my last question is around the business. I think investors really aren't giving you any credit for and it's awfully stable if not growing quite nicely.
The industrial calcium chloride business, another banner year last year, I think you said it was up 18% yet. A little bit of that was lapping that that supply chain raw material impact in Finland from the UK and the year before but even when you strip that out and it's still double digits on, is there anything else you're doing now with the supply agreements and need to really keep that up? And it's something that almost like 30-year EBITDA. So I'm just love to hear a bit more about that business.
Yes, that business is running very, very well for us. A combination of good solid management teams that we have great infrastructure that we have in place, but also finding new markets. As I mentioned, we penetrated two new markets in 2023 that were not significant, but they have significant growth potential for the calcium chloride usage in the lithium processing in Latin America continues to have some traction, although lithium, obviously right now, pricing wise is down, but we still see a longer-term view, very positive, very constructive for lithium, and we see a role for calcium chloride with those operations.
And then the other one is chip manufacturing here in the United States. I'm not sure we fully appreciated until a lot of these chip manufacturers started coming online. They use a very high purity water in their process. They actually have to recount Safi or actually remember allies that water before it can be put back into various applications. And that's a great opportunity for us on our calcium chloride business as well. So a very well run business for us right now and some new market opportunities that we think has some high-growth potential prepayments that business over the time from investors, but I'm thankful and I hoping you catch up on sleeping have awfully busy here and Alberta and Exxon's.
I think we'll hopefully get read soon after the trip Thanks.
Thanks, Tim.
Operator
This concludes our question and answer session. I would now like to turn the conference back over to Mr. Murphy for any closing remarks.
Rigo Gonzales
We'll go and thank you very much, and we're very proud and pleased with what we accomplished in 2023 are we have a fantastic employee base management team and great strategic partnerships that we're very excited about with our our current business performing extremely well and a great outlook going forward. So thank you for listening, and thank you for your interest.
Operator
This concludes the conference call.
For today. You may now disconnect.
Okay.
Yes.
