Fair Value Measurements

9 Months Ended

Sep. 30, 2022

Derivative Instruments and Hedging Activities Disclosure [Abstract]

FAIR VALUE MEASUREMENTS

Financial Instruments

Investments

We retained an interest in CSI Compressco (NASDAQ: CCLP) representing approximately 3.7% of CSI Compressco’s outstanding common units as of September 30, 2022.

In December 2021, we invested in a $5.0 million convertible note issued by CarbonFree. Our investment in CarbonFree is recorded in investments on our consolidated balance sheets based on an internal valuation with assistance from a third-party valuation specialist (a Level 3 fair value measurement). The valuation is impacted by key assumptions, including the assumed probability and timing of potential debt or equity offerings. The convertible note includes an option to convert the note into equity interests issued by CarbonFree. The change in the fair value of the embedded option is included in other (income) expense, net in our consolidated statements of operations. The change in the fair value of the convertible note, excluding the embedded option, is included in other comprehensive income in our consolidated statements of comprehensive income.

We are party to agreements in which Standard Lithium has the right to explore, produce and extract lithium in our Arkansas leases as well as additional potential resources in the Mojave region of California. The Company receives cash and stock of Standard Lithium (NYSE: SLI) under the terms of the arrangements. The cash and stock component of consideration received is initially recorded as unearned income based on the quoted market price at the time the stock is received, then recognized in income over the contract term.

Our investments in CSI Compressco and Standard Lithium are recorded based on the quoted market stock price in active markets (a Level 1 fair value measurement). Changes in the value of stock are recorded in other income (expense) in our consolidated statements of operations.

Recurring and nonrecurring fair value measurements by valuation hierarchy as of September 30, 2022 and December 31, 2021, are as follows:


			Fair Value Measurements Using
	Total as of		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	September 30, 2022		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Investment in CSI Compressco	$	6,128	$	6,128	$	—	$	—
Investment in CarbonFree	5,453		—		—		5,453
Investment in Standard Lithium	1,732		1,732		—		—

Investments	$	13,313


			Fair Value Measurements Using
	Total as of		Quoted Prices in Active Markets for Identical Assets or Liabilities		Significant Other Observable Inputs		Significant Unobservable Inputs
Description	December 31, 2021		(Level 1)		(Level 2)		(Level 3)
	(in thousands)
Investment in CSI Compressco	$	6,233	$	6,233	$	—	$	—
Investment in CarbonFree	5,000		—		—		5,000

Investments	$	11,233

Impairments

During the second quarter of 2022, our Completion Fluids & Products and Water & Flowback Services Divisions each recorded certain inventory and long-lived tangible asset impairments. Our Water & Flowback Services Division recorded impairments, including $1.3 million of equipment, $0.2 million of inventory, and $0.5 million for land and buildings. The Completion Fluids & Products Division also recorded a $0.2 million impairment related to obsolete inventory. The inventory and equipment were written down to zero or scrap value. The fair value of land and buildings of $0.4 million was estimated based on recent sales price per square acre or square foot of comparable properties (a Level 3 fair value measurement) in accordance with the fair value hierarchy.

The fair values of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities, short-term borrowings and long-term debt pursuant to TETRA’s ABL Credit Agreement, Swedish Credit Agreement and Term Credit Agreement approximate their carrying amounts. See Note 6 - “Long-Term Debt and Other Borrowings” for further discussion.