Brady Murphy: Yeah. So, our base in Brazil is where we have our services operations. And so that’s where we’ve added additional capacity to grow with what we’re seeing the growing market coming in Brazil. So that’s fully part of our anticipated growth that we see in the deepwater markets. In Guyana, we do not currently have our own operations in place but we do have opportunities to sell Completion Fluids to the major service providers. They are our customers, some of our biggest customers. And so, we will be participating in those markets through sales to the likes of the Halliburton, Schlumberger and Bakers, who have bases and operations in place, which is normal for us around the world where we don’t have our own service operations.
Bobby Brooks: Got it. Makes sense. And then, I was just wanting to confirm so going over to the beneficial reuse project. It seems like the — it seems like that’s now a 2020 that getting up and running the first commercial one. It seems like that’s not a summer 2024 event more something happening in 2025. Did I hear that right or was I missing something?
Brady Murphy: Yes. I think we had always articulated that we would first get the contract in place and there will be a period of time where there’s going to be some civil construction work. This is a fixed plan, five-year fixed plan. So this is not like a service operation we can deploy in a few weeks’ time. So there would be a lead time of six to eight months to actually get this facility up and running. That’s always been in our plans. So the impact on 2024, in terms of our financials, was never really part of our plan. With the latest developments, as we’ve mentioned, tying these projects together with the commercial pilot in the Permian, we see now that most likely this project will be up and running in the first quarter of 2025. So we will see the benefit financially in 2025, but we’ve never planned on that for 2024.
Elijio Serrano: And also to repeat what we mentioned earlier, the South Texas project is about a 24,000 barrel a day project, significant in scale. The project that we’ve talked about in the Permian Basin, on a commercial pilot scale, will begin generating revenue on that one this year but obviously on a much smaller scale.
Bobby Brooks: Okay. Got it. And then just sticking with the beneficial reuse. I might be reading too much into this, but I couldn’t help to kind of see a verbiage change on the discussion for that second beneficial reuse on the fourth quarter call. I know you guys stated how it was the same operator and I know that you’re kind of reiterating that. But on the press release, you mentioned that you’re in discussion with operators — plural.
Brady Murphy: Right.
Bobby Brooks: So, I was just wondering is — okay. So yes, is that — could you maybe just dive into that a little bit more and kind of help me understand the tie-in to the South Texas and First Permian project and then, how there’s — it seems to be — now you guys are opening the door to more operators setting this up and using this technology in a more near-term way?
Brady Murphy: Yeah. So the South Texas and Permian projects are with the operator that we’ve been — we ran our pilot with now two years ago, our successful pilot that we published the results in South Texas. And so we have a — pretty deep working relationship with this operator. And so as we’ve mentioned, we’re expanding that relationship beyond South Texas to now include the Permian. But there are many operators. I would say almost every operator that operates in the Permian Basin that is interested in finding a beneficial reuse solution. There are other pilots that are being discussed that will be, I’m sure, tested over the coming years. We feel we’ve got a leading-edge position because we did our pilot successfully over two years ago, and now we’re into the kind of commercial discussions. But we have a lot of customers that are — we are in discussions with about future projects for this technology.
Bobby Brooks: Okay. That’s great. Thank you guys for the color, and I’ll jump back in the queue.
Brady Murphy: Thank you.
Operator: [Operator Instructions] Next question comes from the line of Tim Moore from EF Hutton.
Tim Moore: Thanks. Just following up on the bromine development project, the board vote timing. If it’s approved, which it seems like it should be, do you think you can probably break ground on that by January or February? Because I think I heard in your prepared remarks, Brady that you mentioned the plant could be operational in the first half of 2026?
Brady Murphy: All right. Yeah, so obviously, before we approve the full project, we will have our Definitive Feasibility Study, plus or minus 10% completed and have an FID discussion approval with our Board. But we have greenlight from our Board to continue to look at long lead items, preparing the plant site location. Many of those things we are already doing. So we’re anticipating the first half of 2026, and we are maintaining our eye on those long lead items and civil works that we want to get a jump start on even ahead of FID, and we have full board approval support to do that.
Tim Moore: That’s great color. And nice to hear the board support for those long lead items getting ahead of that. Next question is for Elijio. It was really nice to hear that the working capital should improve and the first quarter was a one-off. You explained that the calcium chloride inventory seasonality build should unwind. So Elijio, I’m just wondering, can you maybe give us a rough range of what you think capital expenditures for this year would be including the project development spending? Could it be $35 million to $40 million this year?
Elijio Serrano: So the base business CapEx, we believe, could be in the range of $40 million to $50 million. And then anything that we spend in Arkansas, we intend to cover with that free cash flow from the base business.
Tim Moore: Great. Great. And so when we think about — you were very clear about free cash flow commentary, it sounded like above $40 million for the base business to add some — that’s stripping out or excluding the Arkansas spending rate?
Elijio Serrano: That’s correct. And then from there, we’ll fund any of the Arkansas investments, including long lead items. You saw that in the first quarter, we spent around $4 million for engineering design and work that we’re working on both lithium and bromine.
Tim Moore: Good. That’s helpful. And just lastly, since most of my questions are already addressed. For my second favorite topic, the desalination or produced water. It sounds like you probably by now have optimized the pretreatment on your side to reduce the total organic compound before they move to the filtration stage to really get — protect those membranes life and units longer. So I guess what I’m wondering, and Brady mentioned earlier, how capacity constrained are you to take on additional commercial pilots the size the one you mentioned, you could pass around the KMX equipment, but can you get duplicates of the KMX equipment and high rig stuff and do more than one or two pilots at once, as you look out to next year?
Brady Murphy: Yeah. I mean, that’s a subject we are having discussions on every day, Tim, and we are getting pulled on a lot of demands for pilots. Even some of the contracts that we’re discussing where we have pilots, we are also including doing — taking samples from our other customers that want to process that water through our pilot unit and giving them those results. So we’re trying to maximize the utilization of the units that we have. We will look at expanding our pilot fleet, those are discussions that we’re having. But obviously, our main priority right now is to get our commercial contracts moving because certainly for the South Texas type engineering work that we’ve already done, we feel we’re full of the commercial.
Tim Moore: Great. That’s really good elaboration. Well, thanks Brady and Elijio. I’m sure you’ll be busy for the rest of the year and thanks.
Brady Murphy: Thank you.
Operator: Your next question comes from the line of Stephen Gengaro from Stifel. Please go ahead.
Stephen Gengaro: Thanks. Good morning everybody. So you covered a lot. I guess two things for me. I’m not sure you want to comment directly on this, but I’ll ask. The second quarter consensus has a pretty big range and the average is about $35 million. Can you just talk about any thoughts that you have around that?
Elijio Serrano: Yeah. So we’ve made a habit of not giving guidance either in the year or specific quarters unless there’s something materially different out there. We’ve indicated that there’s three items that are working in our favor, both the costs coming down in the onshore business, the ramp-up of the calcium-chloride Northern Europe business and the Neptune project in the North Sea. Those — and I mentioned earlier that we think that propels us to be north of $30 million in the second quarter.
Stephen Gengaro: Okay. Thanks. And then the other one and this might be a little longer term as it pertains to the bromine side. Is there — when you look at your fluids expectations both for your core business and for what Eos likely takes as they ramp. How are your bromine needs served until you get to that point of the new facility being operational in 2026? Are there — any impact on margin? Can — are the volumes available? How should we think about that?
Brady Murphy: Yeah, Stephen. So we have a long-term supply agreement as you know with LANXESS that progresses till the end of this decade. We have favorable pricing terms on that. But we also have to supplement that supply with spot market pricing. Fortunately, bromine prices have stabilized. They were rising quite rapidly a few years ago with the Chinese economy slowing a bit, spot market pricing has been more reasonable. So we’re able to get additional bromine from the spot market to meet at least our current needs. Now as Eos starts to ramp up and the deepwater market continues to progress, we will need our Arkansas bromine and that will also boost our margins considerably as we hope to release our DFS report will show. So that’s an additional volume and an additional margin benefit obviously when we get to that point.
Stephen Gengaro: Okay. Great. Thanks for the color.
Brady Murphy: Thanks, Stephen.
Operator: There are no further questions at this time. This concludes our question-and-answer session. I would like to hand the call back to Mr. Murphy for closing remarks.
Brady Murphy: Thank you very much for your participation. As we’ve reiterated several times, we feel very good about where we’re at with our business and as we progress through 2024 and we will be continuing to quantify and keep you updated with our strategic initiatives as we go through 2024. Thank you very much.
Operator: Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect.
