Edgar Filing: TETRA TECHNOLOGIES INC

tti10q-20120809.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2012

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-13455

TETRA Technologies, Inc.

(Exact name of registrant as specified in its charter)

Delaware	74-2148293
(State of incorporation)	(I.R.S. Employer Identification No.)

24955 Interstate 45 North
The Woodlands, Texas	77380
(Address of principal executive offices)	(zip code)

(281) 367-1983

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ X ] No [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check One):

Large accelerated filer [ X ]	Accelerated filer [ ]
Non-accelerated filer [ ] (Do not check if a smaller reporting company)	Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ]

As of August 7, 2012, there were 78,035,270 shares outstanding of the Company’s Common Stock, $0.01 par value per share.

PART I

FINANCIAL INFORMATION

Item 1. Financial Statements.

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011
Revenues:
Product sales	$	75,782		$	105,290		$	143,011		$	211,813
Services and rentals		159,127			129,824			272,694			245,846
Total revenues		234,909			235,114			415,705			457,659

Cost of revenues:
Cost of product sales		62,516			82,686			113,006			159,704
Cost of services and rentals		100,064			79,678			180,642			161,449
Depreciation, depletion, amortization, and accretion		19,221			36,937			36,554			74,329
Total cost of revenues		181,801			199,301			330,202			395,482
Gross profit		53,108			35,813			85,503			62,177

General and administrative expense		31,466			29,006			62,357			56,768
Interest expense, net		4,084			4,085			8,235			8,276
(Gain) loss on sale of assets		703			(59,577	)		(3,264	)		(60,309	)
Other (income) expense, net		(1,585	)		14,745			(2,017	)		13,929
Income before taxes and discontinued operations		18,440			47,554			20,192			43,513
Provision for income taxes		6,262			17,031			6,866			15,502
Income before discontinued operations		12,178			30,523			13,326			28,011
Income (loss) from discontinued operations, net of taxes		3			(54	)		2			(57	)
Net income		12,181			30,469			13,328			27,954
Net (income) loss attributable to noncontrolling interest		(607	)		(95	)		(1,073	)		(95	)
Net income attributable to TETRA stockholders	$	11,574		$	30,374		$	12,255		$	27,859

Basic net income per common share:
Income before discontinued operations attributable to
TETRA stockholders	$	0.15		$	0.40		$	0.16		$	0.36
Loss from discontinued operations attributable to
TETRA stockholders		0.00			(0.00	)		0.00			(0.00	)
Net income attributable to TETRA stockholders	$	0.15		$	0.40		$	0.16		$	0.36
Average shares outstanding		77,278			76,579			77,174			76,415

Diluted net income per common share:
Income before discontinued operations attributable to
TETRA stockholders	$	0.15		$	0.39		$	0.16		$	0.36
Loss from discontinued operations attributable to
TETRA stockholders		0.00			(0.00	)		0.00			(0.00	)
Net income attributable to TETRA stockholders	$	0.15		$	0.39		$	0.16		$	0.36
Average diluted shares outstanding		78,998			78,315			78,640			77,985

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income

(In Thousands)

(Unaudited)

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2012			2011			2012			2011

Net income	$	12,181		$	30,469		$	13,328		$	27,954
Foreign currency translation adjustment, net of
taxes of $1,185 and $851, respectively, in 2012
and $(582) and $(770), respectively, in 2011		(6,942	)		2,229			(3,020	)		5,713
Net change in derivative fair value, net of taxes of
$4,165 and $1,578, respectively, in 2011		-			7,030			-			2,663
Comprehensive income		5,239			39,728			10,308			36,330
Less: comprehensive income attributable to
noncontrolling interest		(607	)		(95	)		(1,073	)		(95	)
Comprehensive income attributable to
TETRA stockholders	$	4,632		$	39,633		$	9,235		$	36,235

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands)

	June 30, 2012			December 31, 2011
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	49,212		$	204,412
Restricted cash		5,562			8,780
Trade accounts receivable, net of allowances for doubtful
accounts of $1,776 in 2012 and $1,849 in 2011		183,841			141,537
Inventories		98,236			99,985
Deferred tax asset		28,968			39,330
Oil and gas properties held for sale		34			3,743
Prepaid expenses and other current assets		24,832			30,714
Total current assets		390,685			528,501

Property, plant, and equipment
Land and building		79,253			76,937
Machinery and equipment		573,486			530,408
Automobiles and trucks		52,021			46,950
Chemical plants		158,234			158,065
Construction in progress		43,956			25,316
Total property, plant, and equipment		906,950			837,676
Less accumulated depreciation		(327,729	)		(308,375	)
Net property, plant, and equipment		579,221			529,301

Other assets:
Goodwill		150,966			99,132
Patents, trademarks and other intangible assets, net of accumulated
amortization of $24,568 in 2012 and $22,572 in 2011		37,205			11,872
Deferred tax assets		74			258
Other assets		40,619			34,246
Total other assets		228,864			145,508
Total assets	$	1,198,770		$	1,203,310

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Balance Sheets

(In Thousands, Except Share Amounts)

	June 30, 2012			December 31, 2011
	(Unaudited)
LIABILITIES AND EQUITY
Current liabilities:
Trade accounts payable	$	56,748		$	46,382
Accrued liabilities		83,091			80,940
Current portion of long-term debt		35,035			35
Decommissioning and other asset retirement obligations, net		75,537			105,008
Total current liabilities		250,411			232,365

Long-term debt, net		270,000			305,000
Deferred income taxes		42,516			48,537
Decommissioning and other asset retirement obligations, net		37,601			34,827
Other liabilities		16,119			13,493
Total long-term liabilities		366,236			401,857
Commitments and contingencies

Equity:
TETRA Stockholders' equity:
Common stock, par value $0.01 per share; 100,000,000 shares
authorized; 80,324,075, shares issued at June 30, 2012,
and 79,673,374 shares issued at December 31, 2011		803			797
Additional paid-in capital		224,664			220,144
Treasury stock, at cost; 2,290,282 shares held at June 30, 2012,
and 2,249,959 shares held at December 31, 2011		(14,954	)		(14,841	)
Accumulated other comprehensive income (loss)		(5,897	)		(2,877	)
Retained earnings		336,178			323,923
Total TETRA stockholders' equity		540,794			527,146
Noncontrolling interests		41,329			41,942
Total equity		582,123			569,088
Total liabilities and equity	$	1,198,770		$	1,203,310

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Six Months Ended June 30,
	2012			2011
Operating activities:
Net income	$	13,328		$	27,954
Reconciliation of net income to cash provided by (used in) operating activities:
Depreciation, depletion, amortization, and accretion		36,554			61,795
Impairments of long-lived assets		-			12,534
Provision (benefit) for deferred income taxes		(547	)		9,754
Equity-based compensation expense		4,253			3,140
Provision for doubtful accounts		(304	)		974
Gain on sale of property, plant, and equipment		(3,263	)		(60,309	)
Other non-cash charges and credits		6,904			19,997
Changes in operating assets and liabilities, net of assets acquired:
Accounts receivable		(38,703	)		597
Inventories		320			11,812
Prepaid expenses and other current assets		5,402			28,952
Trade accounts payable and accrued expenses		8,989			(17,608	)
Decommissioning liabilities		(42,582	)		(43,572	)
Other		1,623			3,894
Net cash provided by (used in) operating activities		(8,026	)		59,914

Investing activities:
Purchases of property, plant, and equipment		(55,884	)		(36,284	)
Acquisition of businesses, net		(107,469	)		(1,500	)
Proceeds on sale of property, plant, and equipment		12,440			187,384
Other investing activities		3,538			(4,929	)
Net cash provided by (used in) investing activities		(147,375	)		144,671

Financing activities:
Proceeds from long-term debt		1,947			-
Payments of long-term debt		(1,947	)		-
Compressco Partners' distributions		(2,300	)		-
Proceeds from exercise of stock options		612			2,245
Proceeds from issuance of Compressco Partners' common units,
net of underwriters' discount		-			50,234
Compressco Partners' offering costs		-			(2,038	)
Excess tax benefit from exercise of stock options		197			1,394
Net cash provided by (used in) financing activities		(1,491	)		51,835

Effect of exchange rate changes on cash		1,692			1,994

Increase (decrease) in cash and cash equivalents		(155,200	)		258,414
Cash and cash equivalents at beginning of period		204,412			65,360
Cash and cash equivalents at end of period	$	49,212		$	323,774

Supplemental cash flow information:
Interest paid	$	9,073		$	9,073
Income taxes paid (refunded)		4,190			(16,138	)

Supplemental disclosure of non-cash investing and financing activities:
Adjustment of fair value of decommissioning liabilities
capitalized to oil and gas properties	$	-		$	1,810

See Notes to Consolidated Financial Statements

TETRA Technologies, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

(Unaudited)

NOTE A – BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

We are a geographically diversified oil and gas services company, focused on completion fluids and associated products and services, after-frac flow back, production well testing and associated services, wellhead compression, and selected offshore services including well plugging and abandonment, decommissioning, and diving. We also have a limited domestic exploration and production business. We were incorporated in Delaware in 1981 and are composed of five reporting segments organized into three divisions – Fluids, Production Enhancement, and Offshore. Unless the context requires otherwise, when we refer to “we,” “us,” and “our,” we are describing TETRA Technologies, Inc. and its consolidated subsidiaries on a consolidated basis.

The consolidated financial statements include the accounts of our wholly owned subsidiaries. Investments in unconsolidated joint ventures in which we participate are accounted for using the equity method. Our interests in oil and gas properties are proportionately consolidated. All significant intercompany accounts and transactions have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements have been prepared in accordance with Rule 10-01 of Regulation S-X for interim financial statements required to be filed with the Securities and Exchange Commission (SEC) and do not include all information and footnotes required by generally accepted accounting principles for complete financial statements. However, the information furnished reflects all normal recurring adjustments, which are, in the opinion of management, necessary to provide a fair statement of the results for the interim periods. The accompanying unaudited consolidated financial statements should be read in conjunction with the audited financial statements for the year ended December 31, 2011.

Certain previously reported financial information has been reclassified to conform to the current year period’s presentation. The impact of such reclassifications was not significant to the prior year period’s overall presentation.

Cash Equivalents

We consider all highly liquid cash investments, with a maturity of three months or less when purchased, to be cash equivalents.

Restricted Cash

Restricted cash is classified as a current asset when it is expected to be repaid or settled in the next twelve month period. Restricted cash reported on our balance sheet as of June 30, 2012, consists primarily of escrowed cash associated with our July 2011 purchase of a heavy lift derrick barge. The escrowed cash will be released to the sellers in accordance with the terms of the escrow agreement.

Inventories

Inventories are stated at the lower of cost or market value and consist primarily of finished goods. Cost is determined using the weighted average method. Significant components of inventories as of June 30, 2012, and December 31, 2011, are as follows:

	June 30, 2012		December 31, 2011
	(In Thousands)

Finished goods	$	69,592	$	71,247
Raw materials		4,247		5,653
Parts and supplies		23,320		22,216
Work in progress		1,077		869
Total inventories	$	98,236	$	99,985

Finished goods inventories include, in addition to newly manufactured clear brine fluids, recycled brines that are repurchased from certain of our customers. Recycled brines are recorded at cost, using the weighted average method.

Net Income per Share

The following is a reconciliation of the weighted average number of common shares outstanding with the number of shares used in the computations of net income per common and common equivalent share:

	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2012		2011		2012		2011
	(In Thousands)

Number of weighted average common
shares outstanding		77,278		76,579		77,174		76,415
Assumed exercise of stock awards		1,720		1,736		1,466		1,570
Average diluted shares outstanding		78,998		78,315		78,640		77,985

In applying the treasury stock method to determine the dilutive effect of the stock options outstanding during the first six months of 2012, we used the average market price of our common stock of $8.57. For the three months ended June 30, 2012 and 2011, the average diluted shares outstanding excludes the impact of 3,219,457 and 1,733,435 outstanding stock options, respectively, that have exercise prices in excess of the average market price, as the inclusion of these shares would have been antidilutive. For the six months ended June 30, 2012 and 2011, the average diluted shares outstanding excludes the impact of 2,794,545 and 1,783,096 outstanding stock options, respectively, that have exercise prices in excess of the average market price, as the inclusion of these shares would have been antidilutive.

Environmental Liabilities

Environmental expenditures that result in additions to property and equipment are capitalized, while other environmental expenditures are expensed. Environmental remediation liabilities are recorded on an undiscounted basis when environmental assessments or cleanups are probable and the costs can be reasonably estimated. Estimates of future environmental remediation expenditures often consist of a range of possible expenditure amounts, a portion of which may be in excess of amounts of liabilities recorded. In such an instance, we disclose the full range of amounts reasonably possible of being incurred. Any changes or developments in environmental remediation efforts are accounted for and disclosed each quarter as they occur. Any recoveries of environmental remediation costs from other parties are recorded as assets when their receipt is deemed probable.

Complexities involving environmental remediation efforts can cause estimates of the associated liability to be imprecise. Factors that cause uncertainties regarding the estimation of future expenditures include, but are not limited to, the effectiveness of the anticipated work plans in achieving targeted results and changes in the desired remediation methods and outcomes as prescribed by regulatory agencies. Uncertainties associated with environmental remediation contingencies are pervasive and often result in wide ranges of reasonably possible outcomes. Estimates developed in the early stages of remediation can vary significantly. Normally, a finite estimate of cost does not become fixed and determinable at a specific point in time. Rather, the costs associated with environmental remediation become estimable as the work is performed and the range of ultimate cost becomes more defined. It is possible that cash flows and results of operations could be materially affected by the impact of the ultimate resolution of these contingencies.

Fair Value Measurements

Fair value is defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date” within an entity’s principal market, if any. The principal market is the market in which the reporting entity would sell the asset or transfer the liability with the greatest volume and level of activity, regardless of whether it is the market in

which the entity will ultimately transact for a particular asset or liability or if a different market is potentially more advantageous. Accordingly, this exit price concept may result in a fair value that may differ from the transaction price or market price of the asset or liability.

Under generally accepted accounting principles, the fair value hierarchy prioritizes inputs to valuation techniques used to measure fair value. Fair value measurements should maximize the use of observable inputs and minimize the use of unobservable inputs, where possible. Observable inputs are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs may be needed to measure fair value in situations where there is little or no market activity for the asset or liability at the measurement date and are developed based on the best information available in the circumstances, which could include the reporting entity’s own judgments about the assumptions market participants would utilize in pricing the asset or liability.

We utilize fair value measurements to account for certain items and account balances within our consolidated financial statements. Fair value measurements are utilized in the allocation of purchase consideration for acquisition transactions to the assets and liabilities acquired, including intangible assets and goodwill. In addition, we utilize fair value measurements in the initial recording of our decommissioning and other asset retirement obligations. Fair value measurements may also be utilized on a nonrecurring basis, such as for the impairment of long-lived assets, including goodwill. The fair value of our financial instruments, which may include cash, temporary investments, accounts receivable, short-term borrowings, and long-term debt pursuant to our bank credit agreement, approximate their carrying amounts. The fair values of our long-term Senior Notes at June 30, 2012 and December 31, 2011, were approximately $329.9 million and $332.4 million, respectively, compared to a carrying amount of $305.0 million, as current rates on those dates were more favorable than the stated interest rates on the Senior Notes. We calculate the fair value of our Senior Notes internally, using current market conditions and average cost of debt (a level 2 fair value measurement).

New Accounting Pronouncements

In June 2011, the FASB published ASU 2011-05, “Comprehensive Income (Topic 220), Presentation of Comprehensive Income” (ASU 2011-05), with the stated objective of improving the comparability, consistency, and transparency of financial reporting and increasing the prominence of items reported in other comprehensive income. As part of ASU 2011-05, the FASB eliminated the option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity. The ASU amendments require that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. The ASU amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011, and the amendments are applied retrospectively. In December 2011, with the issuance of ASU 2011-12, “Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05,” the FASB announced that it has deferred certain aspects of ASU 2011-05. The portion of this ASU that has been adopted has not had a significant impact on the accounting or disclosures in our financial statements.

In May 2011, the FASB published ASU 2011-04, “Fair Value Measurement (Topic 820) – Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs,” whereby the FASB and the International Accounting Standards Board (IASB) aligned their definitions of fair value such that their fair value measurement and disclosure requirements are the same (except for minor differences in wording and style). The Boards concluded that the amendments in this ASU will improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP and IFRS. The amendments in this ASU are effective during interim and annual periods beginning after December 15, 2011, and are applied prospectively. The adoption of the accounting and disclosure requirements of this ASU has not had a significant impact on our financial statements.

NOTE B – ACQUISITIONS AND DISPOSITIONS

Acquisition of Optima

In March 2012, we acquired 100% of the outstanding common stock of Optima Solutions Holdings Limited (Optima), a provider of rig cooling services and associated products that suppress heat generated by high rate flaring of hydrocarbons during well test operations. The acquisition of Optima, which is based in Aberdeen, Scotland, enables our Production Testing segment to provide its customers with a broader range of production testing and associated services, and expands the segment’s presence in many significant global markets. Including the impact of additional working capital received and other adjustments to the purchase price, we paid 41.2 million pounds sterling (approximately $65.0 million equivalent) in cash as the purchase price for the Optima stock at closing, and may pay up to an additional 4 million pounds sterling in contingent purchase price consideration, depending on a defined measure of earnings for Optima over each of the two years subsequent to the closing.

We allocated the purchase price to the fair value of the assets and liabilities acquired, which consisted of approximately: $3.0 million of net working capital; $16.8 million of property, plant, and equipment; $20.4 million of certain intangible assets; $6.1 million of deferred tax liabilities and $3.5 million of other liabilities associated with the contingent purchase price consideration obligation; and $34.5 million of nondeductible goodwill. This allocation of the purchase price to Optima’s net assets and liabilities is preliminary and subject to the potential identification of additional assets and contingencies or revisions to the fair value calculations. These fair value calculations and allocations are expected to be finalized later during 2012 and could result in adjustments to the calculated depreciation and amortization of the tangible and intangible assets, respectively that were acquired. The fair value of the obligation to pay the contingent purchase price consideration was calculated based on the anticipated earnings for Optima over each of the next two twelve month periods subsequent to the closing and could increase (up to 4 million pounds sterling) or decrease (to zero) depending on Optima’s actual and expected earnings going forward. Increases or decreases in the value of the anticipated contingent purchase price consideration obligation due to changes in the amounts paid or expected to be paid will be charged or credited to earnings in the period in which such changes occur. The $34.5 million of goodwill preliminarily recorded to our Production Testing segment as a result of the Optima acquisition is supported by the expected strategic benefits discussed above to be generated from the acquisition. For the six month period ended June 30, 2012, our revenues, depreciation and amortization, and pretax earnings included $8.6 million, $1.7 million, and $2.2 million, respectively, associated with the acquired operations of Optima after the closing in March 2012. In addition to the above impact on our results of operations, transaction costs associated with the acquisition of Optima of approximately $1.3 million were also charged to general and administrative expense during the period.

Acquisition of ERS

In April 2012, we acquired the assets and operations of Eastern Reservoir Services (ERS), a division of Patterson-UTI Energy, Inc. for a cash purchase price of $42.5 million. ERS is a provider of well testing and after-frac flow back services to oil and gas operators in the Appalachian and U.S. Rocky Mountain regions, and the acquisition represents a strategic expansion of our existing Production Testing segment operations, allowing it to serve customers in additional basins in the U.S.

We allocated the purchase price to the fair value of the assets acquired, which consisted of approximately $18.0 million of property, plant, and equipment, approximately $6.8 million of certain intangible assets, and approximately $17.7 million of nondeductible goodwill. This allocation of the purchase price to the ERS assets is preliminary and subject to the potential identification of additional assets and contingencies or revisions to the fair value calculations. These fair value calculations and allocations are expected to be finalized later during 2012 and could result in adjustments to the calculated depreciation and amortization of the tangible and intangible assets, respectively. The $17.7 million of goodwill preliminarily recorded to our Production Testing segment as a result of the ERS acquisition is supported by the expected strategic benefits discussed above to be generated from the acquisition. For the six month period ended June 30, 2012, our revenues, depreciation and amortization, and pretax earnings included $7.0 million, $0.7 million, and $2.5 million, respectively, associated with the acquired operations of ERS after the closing in April 2012. In addition to the above impact on our results of operations, transaction costs associated with the ERS acquisition of approximately $0.3 million were also charged to general and administrative expense during the period.

Acquisition of Greywolf

In July 2012, we acquired the assets and operations of Greywolf Production Systems Inc. and GPS Ltd. (together, Greywolf) for a cash purchase price of approximately $55.5 million. Greywolf is a provider of well testing and after-frac flow back services to oil and gas operators in western Canada and the U.S. Williston Basin (including the Bakken formation) and the Niobrara Shale formation of the U.S. Rocky Mountain region. This acquisition represents an additional strategic expansion of our existing Production Testing segment operations. As of August 9, 2012, a preliminary allocation of the Greywolf purchase price had yet to be calculated, but will be determined during the third quarter of 2012. Accordingly, disclosure of the allocation of the purchase price to the applicable Greywolf balance sheet line items, and the pro forma presentation reflecting the impact of the Greywolf acquisition will be presented in subsequent filings.

Pro Forma Financial Information

The pro forma information presented below has been prepared to give effect to the acquisitions of Optima and ERS as if they had occurred at the beginning of the periods presented. This pro forma information does not include the impact of the July 2012 acquisition of Greywolf, as the initial allocation of the purchase price for this acquisition has yet to be calculated. The aggregate pro forma impact of the sale of equipment and oil and gas producing properties described below is not material and is not included in the following pro forma information. The pro forma information is presented for illustrative purposes only and is based on estimates and assumptions we deemed appropriate. The following pro forma information is not necessarily indicative of the historical results that would have been achieved if the acquisition transactions had occurred in the past, and our operating results may have been different from those reflected in the pro forma information below. Therefore, the pro forma information should not be relied upon as an indication of the operating results that we would have achieved if the transactions had occurred at the beginning of the periods presented or the future results that we will achieve after the acquisitions.

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In Thousands, Except Per Share Amounts)

Revenues	$	237,299	$	246,553	$	425,471	$	477,927

Income before discontinued operations	$	12,965	$	32,257	$	16,232	$	30,037
Net income	$	12,968	$	32,203	$	16,234	$	29,980
Net income attributable to
TETRA stockholders	$	12,361	$	32,108	$	15,161	$	29,885

Per share information:
Income before discontinued operations
attributable to TETRA stockholders
Basic	$	0.16	$	0.42	$	0.20	$	0.39
Diluted	$	0.16	$	0.41	$	0.19	$	0.38

Net income attributable to
TETRA stockholders
Basic	$	0.16	$	0.42	$	0.20	$	0.39
Diluted	$	0.16	$	0.41	$	0.19	$	0.38

Sale of Equipment

In January 2012, our Offshore Services segment sold certain equipment for cash of approximately $7.8 million. As a result of the sale, we recognized a gain on disposal of approximately $4.1 million, which is included in gain on sale of assets.

Sale of Maritech Producing Properties

In March 2012, Maritech sold its interest in certain onshore oil and gas producing properties for cash of approximately $4.4 million received at closing. Following this transaction, Maritech’s remaining oil and gas reserves and production are negligible, and its operations consist primarily of the remaining well abandonment and decommissioning of its offshore oil and gas platforms and facilities.

NOTE C – LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following:

		June 30, 2012			December 31, 2011
		(In Thousands)
	Scheduled Maturity
Bank revolving line of credit facility	June 26, 2015	$	-		$	-
Compressco Partners' bank credit facility	June 24, 2015		-			-
5.90% Senior Notes, Series 2006-A	April 30, 2016		90,000			90,000
6.30% Senior Notes, Series 2008-A	April 30, 2013		35,000			35,000
6.56% Senior Notes, Series 2008-B	April 30, 2015		90,000			90,000
5.09% Senior Notes, Series 2010-A	December 15, 2017		65,000			65,000
5.67% Senior Notes, Series 2010-B	December 15, 2020		25,000			25,000
European bank credit facility			-			-
Other			35			35
Total debt			305,035			305,035
Less current portion			(35,035	)		(35	)
Total long-term debt		$	270,000		$	305,000

In July 2012, we borrowed $38.0 million and 10.0 million euros (approximately $12.1 million equivalent) pursuant to our revolving credit facility. Also in July 2012, Compressco Partners borrowed $5.8 million pursuant to its bank credit facility.

NOTE D – DECOMMISSIONING AND OTHER ASSET RETIREMENT OBLIGATIONS

The large majority of our asset retirement obligations consists of the future well abandonment and decommissioning costs for offshore oil and gas properties and platforms owned by our Maritech subsidiary, including the remaining abandonment, decommissioning, and debris removal costs associated with offshore platforms previously destroyed by hurricanes. The amount of decommissioning liabilities recorded by Maritech is reduced by amounts allocable to joint interest owners and any contractual amounts to be paid by the previous owners of the oil and gas properties when the liabilities are satisfied.

The changes in the asset retirement obligations during the three month and six month periods ended June 30, 2012 and 2011, are as follows:

	Three Months Ended June 30,
	2012			2011
	(In Thousands)

Beginning balance for the period, as reported	$	126,844		$	230,834
Activity in the period:
Accretion of liability		501			1,264
Retirement obligations incurred		-			-
Revisions in estimated cash flows		7,876			16,045
Settlement of retirement obligations		(22,083	)		(103,618	)
Ending balance as of June 30	$	113,138		$	144,525

	Six Months Ended June 30,
	2012			2011
	(In Thousands)

Beginning balance for the period, as reported	$	139,835		$	272,815
Activity in the period:
Accretion of liability		1,021			3,158
Retirement obligations incurred		-			-
Revisions in estimated cash flows		10,106			25,809
Settlement of retirement obligations		(37,824	)		(157,257	)
Ending balance as of June 30	$	113,138		$	144,525

Revisions in estimated cash flows during the second quarter of 2012 resulted primarily from additional work anticipated to be required on Maritech’s offshore oil and gas properties. Settlements of retirement obligations during the three and six months ended June 30, 2011, include approximately $72.7 and $118.7 million, respectively, of obligations associated with oil and gas properties sold by Maritech during these periods.

NOTE E – HEDGE CONTRACTS

We are exposed to financial and market risks that affect our businesses. We have currency exchange rate risk exposure related to transactions denominated in a foreign currency as well as to investments in certain of our international operations. As a result of our variable rate bank credit facilities, to the extent we have debt outstanding, we face market risk exposure related to changes in applicable interest rates. We have concentrations of credit risk as a result of trade receivables owed to us by companies in the energy industry. Our financial risk management activities may at times involve, among other measures, the use of derivative financial instruments, such as swap and collar agreements, to hedge the impact of market price risk exposures. Prior to the sale of substantially all of our remaining Maritech oil and gas properties in May 2011, we utilized cash flow commodity hedge transactions to reduce our exposure related to the volatility of oil and gas prices. These cash flow commodity hedge contracts were liquidated in the second quarter of 2011. For these and other hedge contracts, we formally document the relationships between hedging instruments and hedged items, as well as our risk management objectives, our strategies for undertaking various hedge transactions, and our methods for assessing and testing correlation and hedge ineffectiveness. All hedging instruments are linked to the hedged asset, liability, firm commitment, or forecasted transaction. We also assess, both at the inception of the hedge and on an ongoing basis, whether the derivatives that are used in these hedging transactions are highly effective in offsetting changes in cash flows of the hedged items.

Derivative Hedge Contracts

In April 2011, following the execution of the purchase and sale agreement pursuant to which Maritech agreed to sell approximately 79% of its proved reserves, we liquidated our remaining oil hedge contracts and paid $14.2 million to the counterparty. Therefore, from April 2011 forward, we have had no remaining cash flow hedging swap contracts outstanding associated with our Maritech subsidiary’s oil or gas production.

Prior to their liquidation during 2011, we believe that our swap agreements were “highly effective cash flow hedges,” in managing the volatility of future cash flows associated with Maritech’s oil production. The effective portion of the change in the derivative’s fair value (i.e., that portion of the change in the derivative’s fair value that offsets the corresponding change in the cash flows of the hedged transaction) was initially reported as a component of accumulated other comprehensive income, which was classified within equity. This component of accumulated other comprehensive income associated with cash flow hedge derivative contracts, including any derivative contracts which have been liquidated, was subsequently reclassified into product sales revenues, utilizing the specific identification method, when the hedged exposure affected earnings (i.e., when hedged oil and gas production volumes were reflected in revenues). Any “ineffective” portion of the change in the derivative’s fair value was recognized in earnings immediately.

Pretax gains and losses associated with oil and gas derivative swap contracts for the three and six month periods ended June 30, 2011, are summarized below:

	Three Months Ended June 30, 2011
Derivative Swap Contracts	Oil			Natural Gas		Total
	(In Thousands)
Amount of pretax gain reclassified from accumulated other comprehensive
income into product sales revenue (effective portion)	$	-		$	-	$	-
Amount of pretax gain (loss) from change in derivative fair value
recognized in other comprehensive income		-			-		-
Amount of pretax gain (loss) recognized in other income (expense)
(ineffective portion)		(14,224	)		-		(14,224	)

	Six Months Ended June 30, 2011
Derivative Swap Contracts	Oil			Natural Gas		Total
	(In Thousands)
Amount of pretax gain reclassified from accumulated other comprehensive
income into product sales revenue (effective portion)	$	1,177		$	-	$	1,177
Amount of pretax gain (loss) from change in derivative fair value
recognized in other comprehensive income		(7,854	)		-		(7,854	)
Amount of pretax gain (loss) recognized in other income (expense)
(ineffective portion)		(13,947	)		-		(13,947	)

Other Hedge Contracts

In July 2012, we borrowed 10.0 million euros (approximately $12.1 million equivalent) and designated the borrowing as a hedge of our net investment in our European operations.

NOTE F – EQUITY

Changes in equity for the three month and six month periods ended June 30, 2012 and 2011, are as follows:

	Three Months Ended June 30,
	2012									2011
				Noncontrolling									Noncontrolling
	TETRA			Interest			Total			TETRA			Interest		Total
	(In Thousands)

Beginning balance for the period	$	534,478		$	41,291		$	575,769		$	517,353		$	-	$	517,353
Net income		11,574			607			12,181			30,374			95		30,469
Changes in commodity derivatives, net of
taxes of $4,165		-			-			-			7,030			-		7,030
Foreign currency translation adjustment, net of
taxes of $1,185 and $(582), respectively		(6,942	)		-			(6,942	)		2,229			-		2,229
Exercise of common stock options		280			-			280			491			-		491
Issuance of Compressco Partners common
units, net of offering costs		-			-			-			-			42,885		42,885
Distributions to public unitholders		-			(1,066	)		(1,066	)		-			-		-
Equity-based compensation		1,521			377			1,898			1,303			-		1,303
Treasury stock and other		(136	)		120			(16	)		(684	)		-		(684	)
Tax benefit upon exercise of stock options		(19	)		-			(19	)		532			-		532
Ending balance as of June 30	$	540,794		$	41,329		$	582,123		$	558,628		$	42,980	$	601,608

	Six Months Ended June 30,
	2012									2011
				Noncontrolling									Noncontrolling
	TETRA			Interest			Total			TETRA			Interest		Total
	(In Thousands)

Beginning balance for the period	$	527,146		$	41,942		$	569,088		$	516,323		$	-	$	516,323
Net income		12,255			1,073			13,328			27,859			95		27,954
Changes in commodity derivatives, net of
taxes of $1,578		-			-			-			2,663			-		2,663
Foreign currency translation adjustment, net of
taxes of $851 and $(770), respectively		(3,020	)		-			(3,020	)		5,713			-		5,713
Exercise of common stock options		758			-			758			2,805			-		2,805
Issuance of Compressco Partners common
units, net of offering costs		-			-			-			-			42,885		42,885
Distributions to public unitholders		-			(2,275	)		(2,275	)		-			-		-
Equity-based compensation		3,604			649			4,253			(1,269	)		-		(1,269	)
Treasury stock and other		(146	)		(60	)		(206	)		3,140			-		3,140
Tax benefit upon exercise of stock options		197			-			197			1,394			-		1,394
Ending balance as of June 30	$	540,794		$	41,329		$	582,123		$	558,628		$	42,980	$	601,608

NOTE G – COMMITMENTS AND CONTINGENCIES

Litigation

We are named defendants in several lawsuits and respondents in certain governmental proceedings arising in the ordinary course of business. While the outcome of lawsuits or other proceedings against us cannot be predicted with certainty, management does not reasonably expect these matters to have a material adverse impact on our financial position, results of operations, or liquidity.

Environmental

One of our subsidiaries, TETRA Micronutrients, Inc. (TMI), previously owned and operated a production facility located in Fairbury, Nebraska. TMI is subject to an Administrative Order on Consent issued to American Microtrace, Inc. (n/k/a/ TETRA Micronutrients, Inc.) in the proceeding styled In the Matter of American Microtrace Corporation, EPA I.D. No. NED00610550, Respondent, Docket No. VII-98-H-0016, dated September 25, 1998 (the Consent Order), with regard to the Fairbury facility. TMI is liable for future remediation costs and ongoing environmental monitoring at the Fairbury facility under the Consent Order; however, the current owner of the Fairbury facility is responsible for costs associated with the closure of that facility.

NOTE H – INDUSTRY SEGMENTS

We manage our operations through five operating segments: Fluids, Production Testing, Compressco, Offshore Services, and Maritech.

Our Fluids Division manufactures and markets clear brine fluids, additives, and associated products and services to the oil and gas industry for use in well drilling, completion, and workover operations in the United States and in certain countries in Latin America, Europe, Asia, the Middle East, and Africa. The Division also markets liquid and dry calcium chloride products manufactured at its production facilities or purchased from third-party suppliers to a variety of markets outside the energy industry.

Our Production Enhancement Division consists of two operating segments: Production Testing and Compressco. The Production Testing segment provides after-frac flow back, production well testing, rig cooling, and other associated services in many of the major oil and gas basins in the United States, Mexico, Canada, as well as in certain basins in certain regions in South America, Africa, Europe, the Middle East, and Australia.

The Compressco segment provides compression-based production enhancement services, including both conventional wellhead compression services and unconventional compression services and in certain markets, well monitoring and sand separation services. Compressco provides these services throughout many of the onshore producing regions of the United States, as well as certain basins in Mexico, Canada, and certain countries in South America, Europe, Asia, and other international locations. Beginning June 20, 2011, following the initial public offering of Compressco Partners, L.P. (Compressco Partners), we allocate and charge certain corporate and divisional direct and indirect administrative costs to Compressco Partners.

Our Offshore Division consists of two operating segments: Offshore Services and Maritech. The Offshore Services segment provides (1) downhole and subsea oil and gas services such as well plugging and abandonment and wireline services, (2) decommissioning and certain construction services utilizing heavy lift barges and various cutting technologies with regard to offshore oil and gas production platforms and pipelines, and (3) conventional and saturated air diving services.

The Maritech segment is an oil and gas production operation. During 2011 and the first quarter of 2012, Maritech sold substantially all of its oil and gas producing property interests. Maritech’s operations consist primarily of the ongoing abandonment and decommissioning associated with its remaining offshore wells, facilities, and production platforms. Maritech intends to acquire a significant portion of these services from the Offshore Division’s Offshore Services segment.

We generally evaluate the performance of and allocate resources to our segments based on profit or loss from their operations before income taxes and nonrecurring charges, return on investment, and other criteria. Transfers between segments and geographic areas are priced at the estimated fair value of the products or services as negotiated between the operating units. “Corporate overhead” includes corporate general and administrative expenses, corporate depreciation and amortization, interest income and expense, and other income and expense.

Summarized financial information concerning the business segments from continuing operations is as follows:

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In Thousands)
Revenues from external customers
Product sales
Fluids Division	$	72,739		$	68,430		$	134,271		$	127,934
Production Enhancement Division
Production Testing		-			-			-			-
Compressco		1,057			2,513			2,219			5,003
Total Production Enhancement Division		1,057			2,513			2,219			5,003
Offshore Division
Offshore Services		882			1,192			2,877			2,127
Maritech		1,104			33,155			3,644			76,749
Total Offshore Division		1,986			34,347			6,521			78,876
Consolidated	$	75,782		$	105,290		$	143,011		$	211,813

Services and rentals
Fluids Division	$	17,006		$	20,365		$	34,782		$	38,191
Production Enhancement Division
Production Testing		50,329			31,738			88,612			64,948
Compressco		24,201			19,813			45,721			39,207
Intersegment eliminations		-			-			-			-
Total Production Enhancement Division		74,530			51,551			134,333			104,155
Offshore Division
Offshore Services		79,794			86,060			122,894			136,840
Maritech		75			227			150			655
Intersegment eliminations		(12,403	)		(28,421	)		(19,715	)		(34,037	)
Total Offshore Division		67,466			57,866			103,329			103,458
Corporate overhead		125			42			250			42
Consolidated	$	159,127		$	129,824		$	272,694		$	245,846

Intersegment revenues
Fluids Division	$	102		$	34		$	127		$	48
Production Enhancement Division
Production Testing		-			1			-			1
Compressco		-			-			-			-
Total Production Enhancement Division		-			1			-			1
Offshore Division
Offshore Services		-			3			-			3
Maritech		-			-			-			-
Intersegment eliminations		-			-			-			-
Total Offshore Division		-			3			-			3
Intersegment eliminations		(102	)		(38	)		(127	)		(52	)
Consolidated	$	-		$	-		$	-		$	-

Total revenues
Fluids Division	$	89,847		$	88,829		$	169,180		$	166,173
Production Enhancement Division
Production Testing		50,329			31,739			88,612			64,949
Compressco		25,258			22,326			47,940			44,210
Intersegment eliminations		-			-			-			-
Total Production Enhancement Division		75,587			54,065			136,552			109,159
Offshore Division
Offshore Services		80,676			87,255			125,771			138,970
Maritech		1,179			33,382			3,794			77,404
Intersegment eliminations		(12,403	)		(28,421	)		(19,715	)		(34,037	)
Total Offshore Division		69,452			92,216			109,850			182,337
Corporate overhead		125			42			250			42
Intersegment eliminations		(102	)		(38	)		(127	)		(52	)
Consolidated	$	234,909		$	235,114		$	415,705		$	457,659

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(In Thousands)
Income (loss) before taxes and
discontinued operations
Fluids Division	$	13,959		$	11,545		$	25,424		$	18,794
Production Enhancement Division
Production Testing		11,170			5,988			16,847			15,071
Compressco		4,645			3,809			8,155			7,814
Total Production Enhancement Division		15,815			9,797			25,002			22,885
Offshore Division
Offshore Services		11,764			13,577			10,731			9,201
Maritech		(8,626	)		38,523			(10,707	)		34,003
Intersegment eliminations		-			1,588			-			1,747
Total Offshore Division		3,138			53,688			24			44,951
Corporate overhead		(14,472	)(1)		(27,476	)(1)		(30,258	)(1)		(43,117	)(1)
Consolidated	$	18,440		$	47,554		$	20,192		$	43,513

	June 30,
	2012			2011
	(In Thousands)
Total assets
Fluids Division	$	354,680		$	384,744
Production Enhancement Division
Production Testing		266,991			97,675
Compressco		211,276			218,020
Total Production Enhancement Division		478,267			315,695
Offshore Division
Offshore Services		225,722			167,749
Maritech		48,939			30,775
Intersegment eliminations		-			(55	)
Total Offshore Division		274,661			198,469
Corporate overhead		91,162	(2)		352,044	(2)
Consolidated	$	1,198,770		$	1,250,952

(1)	Amounts reflected include the following general corporate expenses:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(In Thousands)

General and administrative expense	$	9,246	$	8,282	$	19,158	$	18,650
Depreciation and amortization		864		729		1,733		1,414
Interest expense		4,045		4,140		8,236		8,494
Other general corporate (income) expense, net		317		14,325		1,131		14,559
Total	$	14,472	$	27,476	$	30,258	$	43,117

(2)	Includes assets of discontinued operations.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Business Overview

Our revenues and operating profitability for the quarter ended June 30, 2012, reflect the growth of several of our businesses compared to the prior year period. In particular, the results of our Production Testing segment for the period include the impact of its acquisitions of Optima Solutions Holdings Limited (Optima) and Eastern Reservoir Services (ERS) which were both acquired during 2012. In addition, in July 2012, the Production Testing segment acquired the assets and operations of Greywolf Production Systems, Inc. and GPS Ltd. (together Greywolf) for cash of $55.5 million, which is expected to result in further growth to this segment. Greywolf is a provider of well testing and after-frac flow back services to oil and gas operators, primarily in Western Canada and the Williston Basin area of the northern United States. In addition, our Compressco segment, primarily through the Compressco Partners, L.P. subsidiary (Compressco Partners), reflected growth during the current year quarter compared to the prior year period, primarily as a result of increased Latin America demand. Our Fluids segment also reported increased revenues and profitability compared to the prior year period, primarily due to increased clear brine fluids (CBF) product sales activity. Partially offsetting the revenue growth in these segments, our Offshore Services segment reported decreased revenues and profitability during the current year quarter due to a number of factors, including weather disruptions, customer permitting delays, and increased competition and pricing pressures. Following the sales of its oil and gas producing properties, our Maritech segment now generates minimal revenues going forward. The most significant sale of Maritech producing properties occurred in the second quarter of 2011 and resulted in a $58.2 million gain during that period. Increased gross profit was partially offset by increased general and administrative expense, primarily due to the above mentioned acquisitions and due to the increased administrative costs of Compressco Partners. Corporate overhead decreased compared to the prior year period, primarily due to the $14.2 million charge during the prior year period for hedge ineffectiveness recorded from the liquidation of hedges associated with Maritech production cash flows.

With the acquisition of Greywolf, we have now completed three significant acquisitions during 2012, spending an aggregate of approximately $163 million of cash. The majority of the aggregate consideration for these acquisitions was funded from available cash, but in July 2012, we borrowed approximately $50.1 million under our revolving credit facility to fund a portion of the purchase price for Greywolf, and for general corporate purposes. Each of these acquisitions represents a strategic expansion of our Production Testing segment, and each has generated, or is expected to generate, revenues, earnings, and operating cash flows in 2012. We expect to fund our capital expenditure plans during the remainder of 2012 from our available cash and future operating cash flows. Our future operating cash flows, as well as revenues and profitability levels, are largely dependent on the level of oil and gas industry activity in the markets we serve and are significantly affected by oil and natural gas commodity prices. Given that these commodity prices have decreased from late 2011 levels, our capital expenditure and acquisition plans going forward will be reviewed carefully in light of the activity levels of our businesses. Following the July 2012 borrowings, we have approximately $219.4 million available under our revolving credit facility if needed to fund additional working capital requirements, capital expenditure plans, or additional acquisitions. We will continue to review additional suitable acquisition candidates as a part of our continuing growth strategy. Future acquisitions could be funded by existing cash balances, borrowing capacity under our bank revolving credit facility, the issuance of additional debt or equity, or other sources of capital.

Critical Accounting Policies

There have been no material changes or developments in the evaluation of the accounting estimates and the underlying assumptions or methodologies pertaining to our Critical Accounting Policies and Estimates disclosed in our Form 10-K for the year ended December 31, 2011. In preparing our consolidated financial statements, we make assumptions, estimates, and judgments that affect the amounts reported. We periodically evaluate these estimates and judgments, including those related to potential impairments of long-lived assets (including goodwill), the collectability of accounts receivable, and the cost of future abandonment and decommissioning obligations. Our estimates are based on historical experience and on future expectations that we believe are reasonable. The fair values of large portions of our total assets and liabilities are measured using significant unobservable inputs. The combination of these factors forms the basis for judgments made about the carrying values of assets and liabilities that are not readily apparent from other sources. These judgments and estimates may change as new events occur, as new

information is acquired, and as changes in our operating environments are encountered. Actual results are likely to differ from our current estimates, and those differences may be material.

Results of Operations

Three months ended June 30, 2012 compared with three months ended June 30, 2011.

Consolidated Comparisons

	Three Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	234,909		$	235,114		$	(205	)		-0.1	%
Gross profit		53,108			35,813			17,295			48.3	%
Gross profit as a percentage of revenue		22.6	%		15.2	%
General and administrative expense		31,466			29,006			2,460			8.5	%
General and administrative expense as a percentage of revenue		13.4	%		12.3	%
Interest expense, net		4,084			4,085			(1	)		0.0	%
(Gain) loss on sale of assets		703			(59,577	)		60,280
Other (income) expense, net		(1,585	)		14,745			(16,330	)
Income before taxes and discontinued operations		18,440			47,554			(29,114	)		-61.2	%
Income before taxes and discontinued operations as a percentage of revenue		7.8	%		20.2	%
Provision for income taxes		6,262			17,031			(10,769	)		-63.2	%
Income before discontinued operations		12,178			30,523			(18,345	)		-60.1	%
Income (loss) from discontinued operations, net of taxes		3			(54	)		57
Net income		12,181			30,469			(18,288	)		-60.0	%
Net income attributable to noncontrolling interest		(607	)		(95	)		(512	)
Net income attributable to TETRA stockholders	$	11,574		$	30,374		$	(18,800	)		-61.9	%

Consolidated revenues for the quarter ended June 30, 2012, decreased only slightly compared to the prior year period, as the significant decrease in Maritech revenues was largely offset by increases in other businesses, particularly the Production Testing and Compressco segments. The increase in our Production Testing segment was primarily due to the acquisitions of Optima and ERS during the first half of 2012, although a portion of the increase was also due to increased domestic activity levels. In July 2012, the Production Testing segment acquired the assets and operations of Greywolf, which is expected to contribute additional growth going forward. Our Compressco segment reported increased revenues compared to the prior year period due to increased activity in Latin America and in domestic shale reservoir markets. Our Fluids Division revenues also increased, as domestic CBF sales more than offset the decrease in domestic services and international calcium chloride sales. Our Offshore Services segment reported decreased revenues, despite the increased decommissioning revenues generated from the heavy lift derrick barge acquired in 2011, primarily due to decreased abandonment and diving services pricing and activity levels, and also due to weather disruptions. Overall gross profit increased primarily due to the increased profitability of our Production Testing segment as a result of the activity and growth discussed above, as well as the increased profitability of our Fluids and Compressco businesses. Our Maritech segment also reported a decreased loss due to significant impairments and excess decommissioning costs incurred during the prior year period.

Consolidated general and administrative expenses increased by $2.5 million during the second quarter of 2012 compared to the prior year period, primarily due to a $2.7 million increase by our Production Testing segment, as a result of its growth and acquisition transaction costs during the period. In addition, Compressco segment general and administrative expense increased $1.2 million as a result of increased administrative and public company costs associated with Compressco Partners being a separate publicly traded limited partnership. These increases were partially offset primarily by decreased Maritech administrative costs, which more than offset the decreased billings to joint owners. By type of cost, general and administrative expenses increased due to approximately $1.3 million of increased professional fee expenses, approximately $0.4 million of decreased billings to joint owners for Maritech administrative

overhead, approximately $0.4 million of increased office costs, and approximately $0.3 million of increased insurance and taxes expense.

Consolidated other income increased during the second quarter of 2012 compared to the corresponding 2011 period, primarily due to $14.2 million of hedge ineffectiveness losses recorded during the prior year period. In addition, during the second quarter of 2011, we recorded a gain of approximately $58.2 million from the sales of Maritech’s oil and gas producing properties.

Our provision for income taxes during the second quarter of 2012 decreased due to decreased earnings during the current year period.

Divisional Comparisons

Fluids Division

	Three Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	89,847		$	88,829		$	1,018			1.1	%
Gross profit		21,327			18,778			2,549			13.6	%
Gross profit as a percentage of revenue		23.7	%		21.1	%
General and administrative expense		7,872			7,363			509			6.9	%
General and administrative expense as a percentage of revenue		8.8	%		8.3	%
Interest (income) expense, net		34			26			8
Other (income) expense, net		(538	)		(156	)		(382	)
Income before taxes and discontinued operations	$	13,959		$	11,545		$	2,414			20.9	%
Income before taxes and discontinued operations as a percentage of revenue		15.5	%		13.0	%

The increase in Fluids Division revenues during the second quarter of 2012 compared to the prior year period was primarily due to a $4.3 million net increase in product sales revenues. This increase was due to $9.2 million of increased CBFs product sales revenues. The majority of these increased revenues were from the segment’s U.S. operations, although international revenues from CBF sales also increased. Partially offsetting this increase in CBF revenues was approximately $4.9 million of decreased revenue from manufactured products, primarily from decreased industrial demand due to weather, particularly in Europe. Onshore domestic activity levels were increased as compared to the prior year period, primarily in shale reservoir markets. The increase in product sales revenues was partially offset by $3.4 million in decreased service revenues, due to decreased domestic frac water service activity.

Fluids Division gross profit increased compared to the prior year period, primarily as a result of the increased domestic CBF revenues discussed above. This increase was partially offset by decreased gross profit from the Division’s European manufactured products operation, which was impacted by the decreased demand discussed above. In addition, the Division’s European calcium chloride plant is expected to experience reduced production levels associated with unplanned equipment repairs, which are expected to be completed during the third quarter of 2012.

Fluids Division income before taxes increased compared to the prior year period due to the increase in gross profit discussed above and increased other income, and despite increased administrative costs. Other income increased primarily due to increased income from an unconsolidated joint venture. Fluids Division administrative costs increased primarily due to increased personnel-related costs.

Production Enhancement Division

Production Testing Segment

	Three Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	50,329		$	31,739		$	18,590			58.6	%
Gross profit		15,420			9,065			6,355			70.1	%
Gross profit as a percentage of revenue		30.6	%		28.6	%
General and administrative expense		5,622			2,935			2,687			91.6	%
General and administrative expense as a percentage of revenue		11.2	%		9.2	%
Interest (income) expense, net		25			-			25
Other (income) expense, net		(1,397	)		142			(1,539	)
Income before taxes and discontinued operations	$	11,170		$	5,988		$	5,182			86.5	%
Income before taxes and discontinued operations as a percentage of revenue		22.2	%		18.9	%

Production Testing revenues increased during the second quarter of 2012 due to an increase of approximately $10.3 million in domestic revenues. This increase was primarily a result of acquisitions and the increased domestic onshore oil and gas drilling activity compared to the prior year period. In particular, the Production Testing segment capitalized on the increased domestic onshore activity associated with drilling in many of the shale reservoir markets it serves. Domestic revenues also increased due to approximately $7.0 million of revenues associated with the April 2012 acquisition of ERS. In addition, international revenues increased by approximately $8.3 million, primarily due to the March 2012 acquisition of Optima, which generated approximately $7.0 million of increased revenues. International revenues also grew due to increased revenue from a South American technical management contract compared to the 2011 period. During July 2012, the Production Testing segment acquired the assets and operations of Greywolf. Revenues of this segment are expected to further increase going forward as a result of these acquisitions.

Production Testing segment gross profit increased during the second quarter of 2012, primarily due to increased international profitability compared to the prior year period, particularly from the March 2012 acquisition of Optima and due to the South American technical management contract discussed above. Revenue and gross profit from this ongoing contract is recognized upon achieving contract milestones. In addition, segment gross profit from domestic activity also increased due to the impact from the ERS acquisition as well as from the increased domestic activity discussed above.

Production Testing income before taxes increased due to the increased gross profit discussed above as well as due to increased other income that resulted from increased earnings from an unconsolidated joint venture and increased foreign currency gains. These increases were partially offset by increased administrative expenses due primarily to increased personnel-related costs associated with the Optima and ERS acquisitions, and approximately $0.3 million of transaction costs expensed in connection with these acquisitions.

Compressco Segment

	Three Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	25,258		$	22,326		$	2,932			13.1	%
Gross profit		9,241			6,925			2,316			33.4	%
Gross profit as a percentage of revenue		36.6	%		31.0	%
General and administrative expense		4,152			2,994			1,158			38.7	%
General and administrative expense as a percentage of revenue		16.4	%		13.4	%
Interest (income) expense, net		(10	)		(4	)		(6	)
Other (income) expense, net		454			126			328
Income before taxes and discontinued operations	$	4,645		$	3,809		$	836			21.9	%
Income before taxes and discontinued operations as a percentage of revenue		18.4	%		17.1	%

The increase in Compressco revenues compared to the prior year period was due to an increase of $4.4 million of service revenues resulting from increased activity, particularly in Latin America and in domestic shale reservoir markets. Partially offsetting this increase was a $1.5 million decrease from sales of compressor units and parts during the second quarter compared to the prior year. Compressco has increased its compressor fleet in Latin America to serve the increasing demand.

Compressco gross profit increased during the second quarter of 2012 compared to the prior year period, primarily due to the increased Latin America activity discussed above. In addition, Compressco has reduced its domestic operating expenses, including maintenance, fuel, and labor costs, and plans to further improve its domestic operating profitability going forward.

Income before taxes for Compressco increased during the second quarter of 2012 compared to the prior year period due to the increased gross profit discussed above, despite increased administrative expenses. Compressco’s administrative expenses reflect increased administrative staff expenses as a result of Compressco Partners becoming a separate publicly traded limited partnership in the second quarter of 2011. In addition, general and administrative expense during the second quarter of 2012 also includes the allocation of a portion of our corporate administrative expenses to Compressco Partners pursuant to our Omnibus Agreement with Compressco Partners executed in connection with its initial public offering.

Offshore Division

Offshore Services Segment

	Three Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	80,676		$	87,255		$	(6,579	)		-7.5	%
Gross profit		15,124			16,433			(1,309	)		-8.0	%
Gross profit as a percentage of revenue		18.7	%		18.8	%
General and administrative expense		3,659			4,093			(434	)		-10.6	%
General and administrative expense as a percentage of revenue		4.5	%		4.7	%
Interest (income) expense, net		27			-			27
Other (income) expense, net		(326	)		(1,237	)		911
Income before taxes and discontinued operations	$	11,764		$	13,577		$	(1,813	)		-13.4	%
Income before taxes and discontinued operations as a percentage of revenue		14.6	%		15.6	%

Revenues from our Offshore Services segment decreased during the second quarter of 2012 compared to the prior year quarter. Increased decommissioning services revenues, including those from the heavy lift barge purchased during 2011, were more than offset by decreased abandonment, diving, and

cutting services revenue during the current year period. In addition to the continuing challenges of increased competition, pricing pressures, and permitting delays experienced by several of the Offshore Services segment’s customers, the segment also experienced weather disruptions during the current year quarter, particularly from Tropical Storm Debby. In addition, revenues decreased due to the 2011 sale of the segment’s onshore abandonment operations, which generated approximately $1.9 million in revenues during the prior year period. Approximately $12.4 million of Offshore Services revenues were from work performed for Maritech during the second quarter of 2012, compared to $28.4 million of such work in the prior year period, as Maritech continues to decommission and abandon its remaining oil and gas platform structures. These intercompany revenues are eliminated in consolidation.

Gross profit for the Offshore Services segment during the second quarter of 2012 decreased as compared to the prior year period, primarily due to decreased profitability of our abandonment, diving, and cutting services revenues, mostly as a result of the decreased pricing during the current year quarter. This decrease was partially offset by improved profitability of our decommissioning operations.

Offshore Services segment income before taxes decreased primarily due to the reduced gross profit discussed above and decreased other income, which was caused by the gain on the sale of onshore abandonment operations during the prior year period.

Maritech Segment

	Three Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	1,179		$	33,382		$	(32,203	)		-96.5	%
Gross profit (loss)		(7,263	)		(14,737	)		7,474			50.7	%
Gross profit (loss) as a percentage of revenue		-616.0	%		-44.1	%
General and administrative expense		915			3,338			(2,423	)		-72.6	%
General and administrative expense as a percentage of revenue		77.6	%		10.0	%
Interest (income) expense, net		-			(1	)		1
Other (income) expense, net		448			(56,597	)		57,045
Income (loss) before taxes and discontinued operations	$	(8,626	)	$	38,523		$	(47,149	)		-122.4	%
Income (loss) before taxes and discontinued operations as a percentage of revenue		-731.6	%		115.4	%

Maritech revenues decreased significantly during the second quarter of 2012 compared to the prior year period due to the sale of substantially all of its oil and gas reserves during 2011 and 2012. In particular, the May 31, 2011, sale of oil and gas properties resulted in the sale of approximately 79% of Maritech’s proven reserves. Following the sales of almost all of its producing properties, Maritech revenues are expected to continue to be negligible.

Maritech gross loss decreased during the second quarter of 2012 compared to the prior year period, despite the decreased revenues discussed above, primarily due to reduced operating and depletion expenses associated with the sold properties. In addition, Maritech recorded $9.2 million of impairments and $7.0 million of higher excess decommissioning costs during the prior year period.

Maritech recorded a pretax loss during the second quarter of 2012 compared to pretax income during the prior year period, which was primarily due to a gain of $56.6 million ($58.2 million consolidated) on the sale of oil and gas producing properties during the prior year period. This decrease in other income was partially offset by the decreased gross loss compared to the prior year period and the decreased net administrative expenses during the current year period. This decrease in administrative expense is primarily due to the reduction in its headcount following the sale of properties, and this decrease more than offset the decrease in administrative costs billed to joint owners.

Corporate Overhead

	Three Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Gross profit (loss) (primarily depreciation expense)	$	(741	)	$	(686	)	$	(55	)		-8.0	%
General and administrative expense		9,246			8,283			963			11.6	%
Interest (income) expense, net		4,008			4,065			(57	)
Other (income) expense, net		477			14,442			(13,965	)
(Loss) before taxes and discontinued operations	$	(14,472	)	$	(27,476	)	$	13,004			47.3	%

Corporate Overhead includes corporate general and administrative expense, interest income and expense, and other income and expense. Such expenses and income are not allocated to our operating divisions, as they relate to our general corporate activities. However, in connection with the public offering of common units in our Compressco Partners subsidiary, on June 20, 2011, we began allocating and charging Compressco Partners for its share of our corporate administrative costs directly related to Compressco Partners’ activities. Corporate Overhead decreased during the second quarter of 2012 compared to the prior year period, primarily due to decreased other expenses, which included $14.2 million of hedge ineffectiveness losses in the prior year period due to the April 2011 liquidation of the remaining commodity derivative swap agreements that previously were designated as hedges of Maritech’s production cash flows. In addition, corporate administrative costs also increased, largely due to approximately $0.8 million of increased professional fee expenses.

Six months ended June 30, 2012 compared with six months ended June 30, 2011.

Consolidated Comparisons

	Six Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	415,705		$	457,659		$	(41,954	)		-9.2	%
Gross profit		85,503			62,177			23,326			37.5	%
Gross profit as a percentage of revenue		20.6	%		13.6	%
General and administrative expense		62,357			56,768			5,589			9.8	%
General and administrative expense as a percentage of revenue		15.0	%		12.4	%
Interest expense, net		8,235			8,276			(41	)		-0.5	%
(Gain) loss on sale of assets		(3,264	)		(60,309	)		57,045
Other (income) expense, net		(2,017	)		13,929			(15,946	)
Income before taxes and discontinued operations		20,192			43,513			(23,321	)		-53.6	%
Income before taxes and discontinued operations as a percentage of revenue		4.9	%		9.5	%
Provision for income taxes		6,866			15,502			(8,636	)		-55.7	%
Income before discontinued operations		13,326			28,011			(14,685	)		-52.4	%
Income (loss) from discontinued operations, net of taxes		2			(57	)		59
Net income		13,328			27,954			(14,626	)		-52.3	%
Net income attributable to noncontrolling interest		(1,073	)		(95	)		(1,073	)
Net income attributable to TETRA stockholders	$	12,255		$	27,859		$	(15,699	)		-56.4	%

Consolidated revenues for the six months ended June 30, 2012, decreased compared to the prior year period, primarily due to the sales of Maritech oil and gas producing properties, which resulted in a $73.6 million decrease in Maritech revenues. Maritech revenues are expected to be negligible going forward. Increased activity compared to the first six months of 2011 and the acquisitions of Optima and ERS led to a $23.7 million growth in revenues for our Production Testing segment. The increased activity for our Production Testing segment was primarily in the U.S., and reflected increased industry drilling activity. Our Fluids segment’s revenue growth was also due to increased industry activity, which resulted in increased CBF product sales, and more than offset the decreased product sales by the segment’s manufactured

products businesses. Compressco also reported increased revenues, primarily due to increased activity and demand in Latin America. Offshore Services revenues decreased, primarily due to a decrease in the work performed for Maritech compared to the prior year period. Overall gross profit increased, primarily due to significant impairments recorded by Maritech during the prior year period, as well as due to the increased profitability of our Fluids, Production Testing, and Compressco segments, which resulted primarily from the increased industry activity levels compared to the prior year period.

Consolidated general and administrative expenses increased by $5.6 million during the first six months of 2012 compared to the prior year period, primarily due to a $3.6 million increase by our Production Testing segment and a $3.2 million increase by our Compressco segment. Production Testing segment administrative expenses increased as a result of acquisitions completed during the first six months of 2012, including approximately $1.6 million of associated transaction costs. Compressco administrative expenses increased as a result of administrative and public company costs associated with Compressco Partners being a separate, publicly traded limited partnership. These increases were partially offset by decreased Maritech administrative costs, which more than offset the decreased billings to joint owners. By type of cost, general and administrative expenses increased due to approximately $1.1 million of increased employee related costs, approximately $2.6 million of increased professional fee expenses, approximately $0.9 million of decreased billings to joint owners for Maritech administrative overhead, approximately $0.5 million of increased insurance and taxes expense, and approximately $0.8 million of increased office expenses. These increases in consolidated general and administrative expenses were partially offset by approximately $0.2 million of other general expenses. The increased professional fee expenses consisted primarily of the $1.6 million of acquisition transaction costs and $0.5 million of increased Compressco public company costs.

Consolidated other income increased during the first six months of 2012 compared to the prior year period, primarily due to $14.2 million of hedge ineffectiveness losses recorded during the prior year period. In addition, during the 2011 period, Maritech recorded gains on sales of its oil and gas properties, including approximately $58.2 million from a sale of approximately 79% of its oil and gas producing properties during the second quarter of 2011.

Our provision for income taxes decreased during the first six months of 2012 compared to the prior year period, due to reduced net earnings for the current period.

Divisional Comparisons

Fluids Division

	Six Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	169,180		$	166,173		$	3,007			1.8	%
Gross profit		39,247			32,385			6,862			21.2	%
Gross profit as a percentage of revenue		23.2	%		19.5	%
General and administrative expense		14,871			13,766			1,105			8.0	%
General and administrative expense as a percentage of revenue		8.8	%		8.3	%
Interest (income) expense, net		61			30			31
Other (income) expense, net		(1,109	)		(205	)		(904	)
Income before taxes and discontinued operations	$	25,424		$	18,794		$	6,630			35.3	%
Income before taxes and discontinued operations as a percentage of revenue		15.0	%		11.3	%

The increase in Fluids Division revenues during the first six months of 2012 compared to the prior year period was primarily due to a $6.3 million net increase in product sales revenues. This increase was primarily due to approximately $15.1 million of increased clear brine fluids (CBFs) product sales revenues. The majority of these increased revenues were from the segment’s U.S. operations, although international revenues also increased. Partially offsetting this increase in CBF sales was approximately $8.8 million of decreased revenue from manufactured products, primarily from decreased industrial demand due to weather, particularly in Europe. Manufactured product sales revenues also decreased due to the reduced sales of dry calcium chloride following the shutdown of our Lake Charles pellet plant during mid-2011. Onshore domestic industry activity levels were increased as compared to the prior year period, primarily in

shale reservoir markets. The increase in product sales revenues was partially offset by $3.4 million decrease in service revenues, due to decreased domestic frac water service activity compared to the prior year period.

Fluids Division gross profit increased compared to the prior year period, primarily as a result of the increased domestic CBF revenues discussed above and increased efficiency at our El Dorado, Arkansas, calcium chloride plant. These increases were partially offset by decreased gross profit from the Division’s European manufactured products operation, which was impacted by the decreased demand discussed above. In addition, the Division’s European calcium chloride plant is expected to experience reduced production levels associated with unplanned equipment repairs which are expected to be completed during the third quarter of 2012.

Fluids Division income before taxes increased compared to the prior year period due to the increase in gross profit discussed above and increased other income, and despite increased administrative costs. Other income increased primarily due to increased income from an unconsolidated joint venture and foreign currency exchange gains. Fluids Division administrative costs increased, primarily due to increased personnel-related costs.

Production Enhancement Division

Production Testing Segment

	Six Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	88,612		$	64,949		$	23,663			36.4	%
Gross profit		25,355			21,057			4,298			20.4	%
Gross profit as a percentage of revenue		28.6	%		32.4	%
General and administrative expense		10,605			6,989			3,616			51.7	%
General and administrative expense as a percentage of revenue		12.0	%		10.8	%
Interest (income) expense, net		31			(36	)		67
Other (income) expense, net		(2,128	)		(967	)		(1,161	)
Income before taxes and discontinued operations	$	16,847		$	15,071		$	1,776			11.8	%
Income before taxes and discontinued operations as a percentage of revenue		19.0	%		23.2	%

Production Testing revenues increased during the first six months of 2012 as compared to the prior period primarily due to an increase of approximately $15.8 million in domestic revenues. This increase was a result of increased domestic onshore oil and gas drilling activity compared to the prior year period, as reflected by rig count data. In particular, the Production Testing segment capitalized on the increased domestic onshore activity associated with drilling in many of the shale reservoir markets it serves. The increased domestic revenues also include approximately $7.0 million of revenues associated with the April 2012 acquisition of ERS. In addition, international revenues increased approximately $8.6 million compared to the prior year period due to the March 2012 acquisition of Optima. During July 2012, the Production Testing segment acquired the assets and operations of Greywolf. Revenues of this segment are expected to further increase going forward as a result of these acquisitions.

Production Testing segment domestic gross profit increased during the first six months of 2012 compared to the prior year period, primarily due to the increased domestic activity and the ERS acquisition discussed above. Gross profit from international operations also increased compared to the prior year period, as the impact of the Optima acquisition more than offset the decreased profitability from the South American technical management contract.

Production Testing income before taxes increased due to the increased gross profit discussed above, as well as due to increased other income, which was primarily due to increased earnings from an unconsolidated joint venture and from increased foreign currency gains. These increases were partially offset by increased administrative expenses resulting from increased personnel-related costs associated

with the acquisitions, as well as approximately $1.6 million of acquisition transaction costs expensed during the period.

Compressco Segment

	Six Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	47,940		$	44,210		$	3,730			8.4	%
Gross profit		17,122			13,544			3,578			26.4	%
Gross profit as a percentage of revenue		35.7	%		30.6	%
General and administrative expense		8,726			5,517			3,209			58.2	%
General and administrative expense as a percentage of revenue		18.2	%		12.5	%
Interest (income) expense, net		(22	)		(3	)		(19	)
Other (income) expense, net		263			216			47
Income before taxes and discontinued operations	$	8,155		$	7,814		$	341			4.4	%
Income before taxes and discontinued operations as a percentage of revenue		17.0	%		17.7	%

The increase in Compressco revenues compared to the prior year period was due to an increase of $6.5 million of service revenues resulting from increased activity, particularly in Latin America. Partially offsetting this increase was a $2.8 million decrease from sales of compressor units and parts during the first six months of 2012 compared to the prior year period. Compressco has expanded its fleet in Latin America in response to the increased demand.

Compressco gross profit increased during the first six months of 2012 compared to the prior year period, primarily due to the increased Latin America activity discussed above, and decreased domestic operating expenses. Compressco has taken steps to reduce domestic operating expenses, including maintenance, fuel, and labor costs, and seeks to further improve its operating profitability going forward.

Income before taxes for Compressco increased during the first six months of 2012 compared to the prior year period due to the increased gross profit discussed above, although this increase was largely offset by increased administrative expenses. Compressco’s administrative expenses reflect increased administrative staff and professional fee expenses associated with being a separate publicly traded limited partnership. In addition, general and administrative expense during 2012 also includes the allocation of a portion of our corporate administrative expenses to Compressco Partners pursuant to our Omnibus Agreement with Compressco Partners.

Offshore Division

Offshore Services Segment

	Six Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	125,771		$	138,970		$	(13,199	)		-9.5	%
Gross profit		14,019			15,770			(1,751	)		-11.1	%
Gross profit (loss) as a percentage of revenue		11.1	%		11.3	%
General and administrative expense		7,630			7,819			(189	)		-2.4	%
General and administrative expense as a percentage of revenue		6.1	%		5.6	%
Interest (income) expense, net		54			-			54
Other (income) expense, net		(4,396	)		(1,250	)		(3,146	)
Income before taxes and discontinued operations	$	10,731		$	9,201		$	1,530			16.6	%
Income before taxes and discontinued operations as a percentage of revenue		8.5	%		6.6	%

Revenues from our Offshore Services segment decreased during the first six months of 2012 compared to the prior year period. Increased decommissioning services revenues, including those from the heavy lift barge purchased during 2011, were more than offset by decreased diving, abandonment, and cutting services revenues during the current year period. In addition to the continuing challenges of increased competition, pricing pressures, and permitting delays experienced by several of the Offshore Services segment’s customers, the segment also experienced weather disruptions during the current year period, particularly from Tropical Storm Debby. Diving services revenues were also negatively affected by certain vessel repairs scheduled during the first quarter of the current year period. In addition, revenues decreased due to the 2011 sale of the segment’s onshore abandonment operations, which generated approximately $5.2 million in revenues during the prior year period. Approximately $19.7 million of Offshore Services revenues were from work performed for Maritech during the first six months of 2012, compared to $34.0 million of such work in the prior year period. Maritech plans to continue to aggressively decommission and abandon its remaining oil and gas platform structures. These intercompany revenues are eliminated in consolidation.

Gross profit for the Offshore Services segment during the first six months of 2012 decreased as compared to the prior year period. This decrease was primarily due to decreased profitability of our cutting services operations and mostly due to decreased pricing during the current year period. This decrease was partially offset by improved profitability of our abandonment operations.

Offshore Services segment income before taxes increased despite the reduced gross profit, primarily due to the gain on the sale of certain abandonment assets that generated approximately $4.1 million of other income during the first quarter of 2012.

Maritech Segment

	Six Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Revenues	$	3,794		$	77,404		$	(73,610	)		-95.1	%
Gross profit (loss)		(8,757	)		(19,314	)		10,557			54.7	%
Gross profit (loss) as a percentage of revenue		-230.8	%		-25.0	%
General and administrative expense		1,367			4,027			(2,660	)		-66.1	%
General and administrative expense as a percentage of revenue		36.0	%		5.2	%
Interest (income) expense, net		1			20			(19	)
Other (income) expense, net		582			(57,364	)		57,946
Income (loss) before taxes and discontinued operations	$	(10,707	)	$	34,003		$	(44,710	)		-131.5	%
Income (loss) before taxes and discontinued operations as a percentage of revenue		-282.2	%		43.9	%

Maritech revenues decreased significantly during the first six months of 2012 compared to the prior year period due to the sale of substantially all of its oil and gas reserves during 2011 and 2012. In particular, the May 31, 2011, sale of oil and gas properties resulted in the sale of approximately 79% of Maritech’s proven reserves. Following the sales of almost all of its producing properties, Maritech revenues are expected to continue to be negligible.

Maritech gross loss decreased during the first six months of 2012 compared to the prior year period despite the decreased revenues discussed above, primarily due to reduced operating and depletion expenses associated with the sold properties. In addition, Maritech recorded $12.5 million of impairments and approximately $14.0 million of higher excess decommissioning costs during the prior year period.

Maritech reported a pretax loss during the first six months of 2012 compared to pretax income during the prior year period, primarily due to approximately $57.4 million ($59.3 million consolidated) of gains from sales of producing properties reported in the prior year period. This decrease in other income was partially offset by the decreased gross loss discussed above. In addition, Maritech reported decreased net administrative expenses during the current year period, primarily due to the reduction in its headcount

following the sale of properties, and this decrease more than offset the decrease in administrative costs billed to joint owners.

Corporate Overhead

	Six Months Ended
	June 30,						Period to Period Change
	2012			2011			2012 vs 2011			% Change
	(In Thousands, Except Percentages)
Gross profit (loss) (primarily depreciation expense)	$	(1,483	)	$	(1,373	)	$	(110	)		-8.0	%
General and administrative expense		19,158			18,649			509			2.7	%
Interest (income) expense, net		8,110			8,265			(155	)
Other (income) expense, net		1,507			14,830			(13,323	)
(Loss) before taxes and discontinued operations	$	(30,258	)	$	(43,117	)	$	12,859			29.8	%

Corporate Overhead includes corporate general and administrative expense, interest income and expense, and other income and expense. Such expenses and income are not allocated to our operating divisions, as they relate to our general corporate activities. However, in connection with the public offering of common units in our Compressco Partners subsidiary, on June 20, 2011, we began allocating and charging Compressco Partners for its share of our corporate administrative costs directly related to Compressco Partners’ activities. Corporate Overhead decreased during the first six months of 2012 compared to the prior year period, primarily due to decreased other expense, primarily resulting from a $13.9 million hedge ineffectiveness loss during the 2011 period. This hedge ineffectiveness loss was primarily due to the April 2011 liquidation of hedge derivative contracts, following the planned sale of a significant portion of Maritech oil and gas producing properties, which resulted in a $14.2 million charge to corporate other expense for hedge ineffectiveness during the second quarter of 2011. This increase also includes an increase in corporate administrative costs, which was largely due to approximately $0.9 million of increased professional fee expenses offset by approximately $0.4 decrease in insurance and taxes.

Liquidity and Capital Resources

Our growth strategy includes the pursuit of suitable acquisitions and other opportunities to expand operations. In March 2012, we spent approximately $65.0 million of our available cash to acquire the common stock of Optima Solutions Holdings Limited (Optima), a provider of rig cooling services and associated products that suppress heat generated by high rate flaring of hydrocarbons during well test operations. In April 2012, we spent an additional $42.5 million of our available cash to acquire the assets and operations of ERS, a domestic production testing and after-frac flow back operation. In July 2012, we spent an additional $55.5 million of available cash and borrowings to acquire the assets and operations of Greywolf, a North American production testing and after-frac flow back operation. Each of these transactions has significantly and strategically expanded our Production Testing segment’s operations. In addition to these acquisitions, during the six months ended June 30, 2012, we spent $55.9 million on additional capital expenditures for our existing businesses. We expect to fund our capital expenditure plans during the remainder of 2012 from our available cash and future operating cash flows. Our future operating cash flows, as well as revenues and profitability levels, are largely dependent on the level of oil and gas industry activity in the markets we serve and are significantly affected by oil and natural gas commodity prices. Given that these commodity prices have decreased from late 2011 levels, our capital expenditure and acquisition plans going forward will be reviewed carefully in light of the activity levels of our businesses. Although the use of approximately $163 million of cash on these acquisitions significantly changes our liquidity position compared to December 31, 2011, we continue to have significant capital resources, including $219.4 in availability under our revolving credit facility, to pursue additional suitable acquisitions as part of our growth strategy.

Operating Activities

Cash flows used by operating activities totaled $8.0 million during the first six months of 2012 compared to $59.9 million of cash generated by operating activities during the prior year period, a decrease of $67.9 million. This decrease in operating cash flows during 2012 compared to the prior year period primarily reflects decreased earnings, the increased use of operating cash flows for working capital during

the current year period, and the sale by Maritech of substantially all of its oil and gas properties during the first six months of 2011. Increased cash used for working capital during 2012 compared to the prior year period was mainly as a result of increased accounts receivable balances and the collection of federal tax refunds during the 2011 period.

During the past three years, Maritech has performed an extensive amount of well abandonment and decommissioning work associated with its offshore oil and gas production wells, platforms, and facilities. As of June 30, 2012, and following the sale of substantially all of its oil and gas producing properties, the estimated third-party discounted fair value, including an estimated profit, of Maritech’s decommissioning liabilities totaled $106.0 million. Our future operating cash flow will continue to be affected by the actual timing and amount of Maritech’s decommissioning expenditures. Approximately $75.5 million of the cash outflow necessary to extinguish Maritech’s remaining decommissioning liability is expected to occur over the twelve month period ending June 30, 2013. Included in Maritech’s decommissioning liabilities is the remaining abandonment, decommissioning, and debris removal associated with two offshore platforms that were previously destroyed by hurricanes. Due to the unique nature of the remaining work to be performed associated with these downed platforms, actual costs could greatly exceed these estimates and, depending on the nature of any excess costs incurred, could result in significant charges to earnings in future periods.

In some cases, the previous owners of properties that were acquired by Maritech are contractually obligated to pay Maritech a fixed amount for the well abandonment and decommissioning work on these properties as the work is performed, which will partially offset Maritech’s future expenditures. Maritech’s estimated decommissioning liabilities are net of amounts allocable to joint interest owners and any contractual amounts to be paid by the previous owners of the properties. As of June 30, 2012, Maritech’s total decommissioning obligation is approximately $108.2 million, which includes Maritech’s total liability of $106.0 million plus approximately $2.2 million of such contractual reimbursement arrangements with the previous owners. An additional $18.4 million of such contractual reimbursement arrangements as of June 30, 2012, is classified as receivable assets related to amounts waiting to be invoiced and collected.

Demand for a large portion of our products and services is driven by oil and gas industry activity, which is affected by oil and natural gas commodity pricing. Given that North American natural gas prices have decreased during the past year, drilling activity related to natural gas wells in North America has decreased. While only a portion of our revenues are related to gas drilling activity, we are exposed to the impact that this decreased demand could have on our businesses. In particular, our Production Testing, Compressco, and Fluids segments are vulnerable to the impact of a sustained low natural gas price environment. In addition, decreases in worldwide crude oil prices during 2012 could also affect future overall industry drilling activity in certain of the regions in which we operate. If oil or gas industry activity levels decrease further in the future, our levels of operating cash flows may be negatively affected.

We are subject to operating hazards normally associated with onshore and offshore oilfield service operations, including fires, explosions, blowouts, cratering, mechanical problems, abnormally pressured formations, and accidents that cause harm to the environment. We maintain various types of insurance that are designed to be applicable in the event of an explosion or other catastrophic event involving our offshore operations. This insurance includes third-party liability, workers’ compensation and employers’ liability, general liability, vessel pollution liability, and operational risk coverage for our Maritech oil and gas properties, including removal of debris, operator’s extra expense, control of well, and pollution and clean-up coverage. Our insurance coverage is subject to deductibles that must be satisfied prior to recovery. Additionally, our insurance is subject to certain exclusions and limitations. We believe our policy of insuring against such risks, as well as the levels of insurance we maintain, is typical in the industry. In addition, we provide services and products in the offshore Gulf of Mexico generally pursuant to agreements that create insurance and indemnity obligations for both parties. Our Maritech subsidiary maintains a formalized oil spill response plan that is submitted to the BSEE. Maritech has designated third-party contractors in place to ensure that resources are available as required in the event of an environmental accident. While it is impossible to anticipate every potential accident or incident involving our offshore operations, we believe we have taken appropriate steps to mitigate the potential impact of such an event on the environment in the regions in which we operate.

Investing Activities

During the first six months of 2012, the total amount of our net cash utilized on investing activities was $147.4 million and included $107.5 million for the acquisitions of Optima and ERS in March 2012 and April 2012, respectively. In addition, in July 2012, we spent $55.5 million for the acquisition of the operations and assets of Greywolf. In addition to cash spent on acquisitions, total cash capital expenditures during the first six months of 2012 were $55.9 million. Approximately $13.6 million of our capital expenditures during the first six months of 2012 was spent by our Fluids Division, the majority of which related to the purchase of new equipment to support its onshore completion services business. Our Production Enhancement Division spent approximately $32.0 million of capital expenditures, consisting of approximately $18.8 million by the Production Testing segment to add or replace a portion of its production testing equipment fleet and approximately $13.2 million by the Compressco segment for the upgrade and expansion of its wellhead compressor and equipment fleet. Our Offshore Services segment spent approximately $9.3 million for costs on its various heavy lift and dive support vessels. Corporate capital expenditures were approximately $0.6 million.

Generally, a significant majority of our planned capital expenditures is related to identified opportunities to grow and expand our existing businesses (other than Maritech). However, certain of these planned expenditures may be postponed or cancelled in an effort to conserve capital. Although our planned level of capital expenditures during the remainder of 2012 is subject to the impact of acquisitions and future market conditions, we currently plan to expend up to $140 million on total capital expenditures (excluding acquisitions) during the current year. The deferral of capital projects could affect our ability to compete in the future. As reflected by our recent acquisitions of Optima, ERS, and Greywolf, our long-term growth strategy also continues to include the pursuit of suitable acquisitions or opportunities to expand operations in oil and gas service markets. To the extent we consummate an additional significant acquisition transaction or other capital project, our liquidity position and capital plans will be affected.

Financing Activities

To fund our capital and working capital requirements, we may supplement our existing cash balances and cash flow from operating activities as needed from long-term borrowings, short-term borrowings, equity issuances, and other sources of capital.

Our Bank Credit Facilities

We have a revolving credit facility with a syndicate of banks pursuant to a credit facility agreement that was most recently amended in October 2010 (the Credit Agreement). As of August 9, 2012, and following the July 2012 borrowings, we had an outstanding balance on the revolving credit facility of approximately $50.1 million, and had $8.5 million in letters of credit and guarantees against the $278 million revolving credit facility, leaving a net availability of $219.4 million. In addition, the amended credit facility agreement allows us to increase the facility by $150 million, up to a $428 million limit, with the agreement of the lenders and the satisfaction of certain conditions. Included in the approximately $50.1 million outstanding borrowings under the credit facility agreement is approximately $12.1 million equivalent denominated in euros, which has been designated as a hedge of the net investment in our European operations.

Under the Credit Agreement, which matures on October 29, 2015, the revolving credit facility is unsecured and guaranteed by certain of our material U.S. subsidiaries (excluding Compressco). Borrowings generally bear interest at the British Bankers Association LIBOR rate plus 1.5% to 2.5%, depending on one of our financial ratios. We pay a commitment fee ranging from 0.225% to 0.500% on unused portions of the facility. The Credit Agreement contains customary covenants and other restrictions, including certain financial ratio covenants based on our levels of debt and interest cost compared to a defined measure of our operating cash flows over a twelve month period. In addition, the Credit Agreement includes limitations on aggregate asset sales, individual acquisitions, and aggregate annual acquisitions and capital expenditures. Access to our revolving credit line is dependent upon our compliance with the financial ratio covenants set forth in the Credit Agreement. Significant deterioration of the financial ratios could result in a default by us under the Credit Agreement and, if not remedied, could result in termination of the agreement and acceleration of any outstanding balances. Compressco is an unrestricted subsidiary and is not a borrower or a guarantor under our bank credit facility.

The Credit Agreement includes cross-default provisions relating to any other indebtedness greater than a defined amount. If any such indebtedness is not paid or is accelerated and such event is not remedied in a timely manner, a default will occur under the Credit Agreement. Our Credit Agreement also contains a covenant that restricts us from paying dividends in the event of a default or if such payment would result in an event of default. We are in compliance with all covenants and conditions of our Credit Agreement as of June 30, 2012. Our continuing ability to comply with these financial covenants depends largely upon our ability to generate adequate cash flow. Historically, our financial performance has been more than adequate to meet these covenants, and we expect this trend to continue.

Our European Credit Agreement

We also have a bank line of credit agreement covering the day to day working capital needs of certain of our European operations (the European Credit Agreement). The European Credit Agreement provides borrowing capacity of up to 5 million euros (approximately $6.3 million equivalent as of June 30, 2012), with interest computed on any outstanding borrowings at a rate equal to the lender’s Basis Rate plus 0.75%. The European Credit Agreement is cancellable by either party with 14 business days notice and contains standard provisions in the event of default. As of June 30, 2012, we had no borrowings outstanding pursuant to the European Credit Agreement.

Compressco Partners’ Bank Credit Facility

On June 24, 2011, Compressco Partners entered into a credit agreement (the Partnership Credit Agreement) with JPMorgan Chase Bank, N.A. Under the Partnership Credit Agreement, Compressco Partners, along with certain of its subsidiaries, are borrowers, and all of its existing and future, direct and indirect, domestic subsidiaries are guarantors. We are not a borrower or a guarantor under the Partnership Credit Agreement. The Partnership Credit Agreement includes borrowing capacity of $20.0 million (less $3.0 million that is required to be set aside as a reserve that cannot be borrowed) that is available for letters of credit (with a sublimit of $5.0 million) and an uncommitted $20.0 million expansion feature. The Partnership Credit Agreement may be used to fund Compressco Partners’ working capital needs, letters of credit, and for general partnership purposes, including capital expenditures and acquisitions. The Partnership Credit Agreement could also be used to fund Compressco Partners’ quarterly distributions. Borrowings under the Partnership Credit Agreement are subject to the satisfaction of customary conditions, including the absence of a default. As of June 30, 2012, there was no balance outstanding under the Partnership Credit Agreement. However, in July 2012, Compressco Partners borrowed $5.8 million under the Partnership Credit Agreement to fund ongoing capital expenditures to expand and upgrade its compressor and equipment fleets. The maturity date of the Partnership Credit Agreement is June 24, 2015.

All obligations under the Partnership Credit Agreement and the guarantees of those obligations are secured, subject to certain exceptions, by a first lien security interest in substantially all of the assets (excluding real property) of Compressco Partners and its existing and future, direct and indirect domestic subsidiaries, and all of the capital stock of its existing and future, direct and indirect subsidiaries (limited, in the case of foreign subsidiaries, to 65% of the capital stock of first tier foreign subsidiaries).

Borrowings under the Partnership Credit Agreement bear interest at a rate per annum equal to, at Compressco Partners’ option, either (a) LIBOR (adjusted to reflect any required bank reserves) for an interest period equal to one, two, three, or six months (as we select) plus a margin of 2.25% per annum or (b) a base rate determined by reference to the highest of (1) the prime rate of interest announced from time to time by JPMorgan Chase Bank, N.A. or (2) LIBOR (adjusted to reflect any required bank reserves) for a one-month interest period on such day plus 2.50% per annum. In addition to paying interest on any outstanding principal under the Partnership Credit Agreement, Compressco Partners is required to pay customary collateral monitoring fees and letter of credit fees, including without limitation, a letter of credit fee equal to the applicable margin on revolving credit LIBOR loans and fronting fees.

The Partnership Credit Agreement requires Compressco Partners to maintain a minimum interest coverage ratio (ratio of earnings before interest and taxes to interest) of 2.5 to 1.0 as of the last day of any fiscal quarter, calculated on a trailing four quarter basis, whenever availability is less than $5 million. In addition, the Partnership Credit Agreement includes customary negative covenants, which, among other things, limit Compressco Partners’ ability to incur additional debt, incur, or permit certain liens to exist, or

make certain loans, investments, acquisitions, or other restricted payments. The Partnership Credit Agreement provides that Compressco Partners can make distributions to holders of its common and subordinated units, but only if there is no default or event of default under the facility. If an event of default occurs, the lenders are entitled to take various actions, including the acceleration of amounts due under the Partnership Credit Agreement and all actions permitted to be taken by secured creditors.

Senior Notes

In April 2006, we issued $90.0 million in aggregate principal amount of Series 2006-A Senior Notes pursuant to our existing Master Note Purchase Agreement dated September 2004, as supplemented as of April 18, 2006. The Series 2006-A Senior Notes bear interest at the fixed rate of 5.90% and mature on April 30, 2016. Interest on the 2006-A Senior Notes is due semiannually on April 30 and October 30 of each year.

In April 2008, we issued, $35.0 million in aggregate principal amount of Series 2008-A Senior Notes and $90.0 million in aggregate principal amount of Series 2008-B Senior Notes (collectively the Series 2008 Senior Notes) pursuant to a Note Purchase Agreement dated April 30, 2008. The Series 2008-A Senior Notes bear interest at the fixed rate of 6.30% and mature on April 30, 2013. The Series 2008-B Senior Notes bear interest at the fixed rate of 6.56% and mature on April 30, 2015. Interest on the Series 2008 Senior Notes is due semiannually on April 30 and October 31 of each year. We anticipate funding the repayment of the Series 2008-A Senior Notes in April 2013 with available cash balances, borrowings under our revolving credit facility, or through the issuance of additional debt instruments.

In December 2010, we issued, $65.0 million in aggregate principal amount of Series 2010-A Senior Notes and $25.0 million in aggregate principal amount of Series 2010-B Senior Notes (collectively, the 2010 Senior Notes) pursuant to a Note Purchase Agreement dated September 30, 2010. The Series 2010-A Senior Notes bear interest at the fixed rate of 5.09% and mature on December 15, 2017. The Series 2010-B Senior Notes bear interest at the fixed rate of 5.67% and mature on December 15, 2020. Interest on the Series 2010 Senior Notes is due semiannually on June 15 and December 15 of each year.

Each of the Senior Notes was sold in the United States to accredited investors pursuant to an exemption from the Securities Act of 1933. We may prepay the Senior Notes, in whole or in part, at any time at a price equal to 100% of the principal amount outstanding, plus accrued and unpaid interest and a “make-whole” prepayment premium. The Senior Notes are unsecured and are guaranteed by substantially all of our wholly owned U.S. subsidiaries. The Note Purchase Agreement and the Master Note Purchase Agreement, as supplemented, contain customary covenants and restrictions and require us to maintain certain financial ratios, including a minimum level of net worth and a ratio between our long-term debt balance and a defined measure of operating cash flow over a twelve month period. The Note Purchase Agreement and the Master Note Purchase Agreement also contain customary default provisions as well as a cross-default provision relating to any other of our indebtedness of $20 million or more. We are in compliance with all covenants and conditions of the Note Purchase Agreement and the Master Note Purchase Agreement as of June 30, 2012. Upon the occurrence and during the continuation of an event of default under the Note Purchase Agreement and the Master Note Purchase Agreement, as supplemented, the Senior Notes may become immediately due and payable, either automatically or by declaration of holders of more than 50% in principal amount of the Senior Notes outstanding at the time.

Other Sources and Uses

In addition to the aforementioned revolving credit facilities, we fund our short-term liquidity requirements from cash generated by operations and from short-term vendor financing. Should additional capital be required, we believe that we have the ability to raise such capital through the issuance of additional debt or equity. However, instability or volatility in the capital markets at the times we need to access capital may affect the cost of capital and the ability to raise capital for an indeterminable length of time. As discussed above, our Credit Agreement matures in 2015, and our Senior Notes mature at various dates between April 2013 and December 2020. The replacement of these capital sources at similar or more favorable terms is not certain. If it is necessary to issue equity to fund our capital needs, dilution to our common stockholders will occur.

In November 2009, we filed a universal shelf registration statement on Form S-3 that permits us to issue an indeterminate amount of securities including common stock, preferred stock, senior and

subordinated debt securities, warrants, and units. Such securities may be used for working capital needs, capital expenditures, and expenditures related to general corporate purposes, including possible future acquisitions.

Compressco Partners’ Partnership Agreement requires that within 45 days after the end of each quarter, it distribute all of its available cash, as defined in the Partnership Agreement, to its unitholders of record on the applicable record date. For the six months ended June 30, 2012, net of distributions paid to us, Compressco Partners distributed approximately $2.3 million to its public unitholders.

Off Balance Sheet Arrangements

As of June 30, 2012, we had no “off balance sheet arrangements” that may have a current or future material effect on our consolidated financial condition or results of operations.

Commitments and Contingencies

Litigation

Environmental

Cautionary Statement for Purposes of Forward-Looking Statements

Certain statements contained herein and elsewhere may be deemed to be forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to the “safe harbor” provisions of that act, including, without limitation, statements concerning future or expected sales, earnings, costs, expenses, acquisitions or corporate combinations, including the recent sales of oil and gas properties and the anticipated benefits to be realized from these sales, asset recoveries, expected costs associated with damage from hurricanes and the ability to recover such costs under our insurance policies, the ability to obtain alternate sources of raw materials for certain of our calcium chloride facilities, working capital, capital expenditures, financial condition, other results of operations, the expected impact of current economic and capital market conditions on the oil and gas industry and our operations, our recent acquisitions and our ability to realize the anticipated benefits from such acquisitions, other statements regarding our beliefs, plans, goals, future events and performance, and other statements that are not purely historical. Such statements involve risks and uncertainties, many of which are beyond our control. Actual results could differ materially from the expectations expressed in such forward-looking statements. Some of the risk factors that could affect our actual results and cause actual results to differ materially from any such results that might be projected, forecast, estimated, or budgeted by us in such forward-looking statements are described in our Annual Report on Form 10-K for the year ended December 31, 2011, and this Quarterly Report on Form 10-Q, and are set forth from time to time in our filings with the Securities and Exchange Commission.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

We will be exposed to the commodity price risk associated with Maritech’s oil and natural gas production that we will continue to own until it is sold. Due to the minimal amount of expected production following the sale, such commodity price risk exposure is not expected to be significant.

As discussed above, in July 2012, we borrowed $38.0 million and 10.0 million euros (approximately $12.1 million equivalent) pursuant to our revolving credit facility, which included funding for a portion of the consideration for the acquisition of Greywolf. Also in July 2012, Compressco Partners borrowed $5.8 million to fund the expansion and upgrade of its compressor and equipment fleet. Each of these borrowings was made under existing revolving credit facilities, and is subject to market risk exposure related to changes in applicable interest rates. Pursuant to these revolving credit facilities, borrowings will bear interest at an agreed-upon percentage rate spread above LIBOR.

We are exposed to fluctuations between the U.S. dollar and the euro with regard to our euro-denominated operating activities. As of June 30, 2012, we had no currency hedge for our euro-denominated operations. However, in July 2012, we designated the 10.0 million euro borrowing described above as a hedge for our euro-denominated operations.

Item 4. Controls and Procedures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of June 30, 2012, the end of the period covered by this quarterly report.

There were no changes in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2012, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings.

Environmental Proceedings

Item 1A. Risk Factors.

There have been no material changes in the information pertaining to our Risk Factors as disclosed in our Form 10-K for the year ended December 31, 2011.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

(a) None.

(b) None.

								Maximum Number (or
				Average		Total Number of Shares		Approximate Dollar Value) of
	Total Number			Price		Purchased as Part of		Shares that May Yet be
	of Shares			Paid per		Publicly Announced		Purchased Under the Publicly
Period	Purchased			Share		Plans or Programs(1)		Announced Plans or Programs(1)

Apr 1 - Apr 30, 2012		140	(2)	$	9.06		-	$	14,327,000
May 1 - May 31, 2012		14,279	(2)		6.81		-		14,327,000
Jun 1 - Jun 30, 2012		751	(2)		7.13		-		14,327,000
Total		15,170					-	$	14,327,000

(1)	In January 2004, our Board of Directors authorized the repurchase of up to $20 million of our common stock. Purchases will be made from time to time in open market transactions at prevailing market prices. The repurchase program may continue until the authorized limit is reached, at which time the Board of Directors may review the option of increasing the authorized limit.
(2)	Shares we received in connection with the exercise of certain employee stock options or the vesting of certain employee restricted stock. These shares were not acquired pursuant to the stock repurchase program.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibits:

31.1*	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+	XBRL Instance Document.
101.SCH+	XBRL Taxonomy Extension Schema Document.
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document.

*	Filed with this report.
**	Furnished with this report.
+	Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011; (ii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2012 and 2011; (iii) Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011; (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011; and (v) Notes to Consolidated Financial Statements for the six months ended June 30, 2012.

A statement of computation of per share earnings is included in Note A of the Notes to Consolidated Financial Statements included in this report and is incorporated by reference into Part II of this report.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TETRA Technologies, Inc.

Date: August 9, 2012	By:	/s/Stuart M. Brightman
		Stuart M. Brightman
		President
		Chief Executive Officer


Date: August 9, 2012	By:	/s/Elijio V. Serrano
		Elijio V. Serrano
		Senior Vice President
		Chief Financial Officer


Date: August 9, 2012	By:	/s/Ben C. Chambers
		Ben C. Chambers
		Vice President – Accounting
		Principal Accounting Officer

EXHIBIT INDEX

31.1*	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification Pursuant to Rule 13a-14(a) or 15d-14(a) of the Exchange Act, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification Furnished Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS+	XBRL Instance Document.
101.SCH+	XBRL Taxonomy Extension Schema Document.
101.CAL+	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB+	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE+	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF+	XBRL Taxonomy Extension Definition Linkbase Document.

*	Filed with this report.
**	Furnished with this report.
+	Attached as Exhibit 101 to this report are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011; (ii) Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2012 and 2011; (iii) Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011; (iv) Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011; and (v) Notes to Consolidated Financial Statements for the six months ended June 30, 2012.