TETRA TECHNOLOGIES INC - 10-K Annual Report

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
/x/ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the fiscal year ended December 31, 2001
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from________________to_______________

Commission File No. 0-18335

TETRA Technologies, Inc.
(Exact name of registrant as specified in its charter)

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

25025 I-45 North
The Woodlands, Texas 77380
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)

(Registrant's Telephone Number, Including Area Code): (281) 367-1983

Securities Registered Pursuant to Section 12(b) of the Act:

Common Stock, par value $0.01 per share New York Stock Exchange
(Title of class) (Name of Exchange on Which Registered)

Rights to purchase Series One New York Stock Exchange
Junior Participating Preferred Stock (Name of Exchange on Which Registered)
(Title of Class)

Securities Registered Pursuant to Section 12(g) of the Act: NONE

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 / / No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

The aggregate market value of the common stock of TETRA Technologies, Inc.
held by non-affiliates (based upon the March 18, 2002 closing sale price as
reported by the New York Stock Exchange) ($26.01 per share) was approximately
$353,994,201. For purposes of the preceding sentence only, all directors,
executive officers and beneficial owners of 10% or more of the common stock are
assumed to be "affiliates".

Number of shares outstanding of each of the issuer's classes of common
stock as of March 18, 2002 was 14,049,584 shares.

Part III information is incorporated by reference from the registrant's
proxy statement for its annual meeting of stockholders to be held May 23, 2002
to be filed with the Securities and Exchange Commission within 120 days of the
end of the registrant's fiscal year.

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TABLE OF CONTENTS

PART I

Item 1. Business................................................................ 1

Item 2. Properties.............................................................. 13

Item 3. Legal Proceedings....................................................... 14

Item 4. Submission of Matters to a Vote of Security Holders..................... 14

PART II

Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters........................................... 14

Item 6. Selected Financial Data................................................. 15

Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................. 16

Item 7A. Quantitative and Qualitative Disclosures About Market Risks............. 25

Item 8. Financial Statements and Supplementary Data............................. 25

Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.............................................. 25

PART III

Item 10. Directors and Executive Officers of the Registrant...................... 26

Item 11. Executive Compensation.................................................. 26

Item 12. Security Ownership of Certain Beneficial Owners and Management.......... 26

Item 13. Certain Relationships and Related Transactions.......................... 26

PART IV

Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......... 27

THIS ANNUAL REPORT ON FORM 10-K CONTAINS "FORWARD-LOOKING STATEMENTS"
WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING,
WITHOUT LIMITATION, STATEMENTS CONCERNING FUTURE SALES, EARNINGS, COSTS,
EXPENSES, ACQUISITIONS OR CORPORATE COMBINATIONS, ASSET RECOVERIES, WORKING
CAPITAL, CAPITAL EXPENDITURES, FINANCIAL CONDITION AND OTHER RESULTS OF
OPERATIONS. SUCH STATEMENTS REFLECT THE COMPANY'S CURRENT VIEWS WITH RESPECT TO
FUTURE EVENTS AND FINANCIAL PERFORMANCE AND ARE SUBJECT TO CERTAIN RISKS,
UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THOSE DISCUSSED IN "ITEM 1. DESCRIPTION
OF BUSINESS - CERTAIN BUSINESS RISKS." SHOULD ONE OR MORE OF THESE RISKS OR
UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT,
ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE ANTICIPATED, BELIEVED, ESTIMATED
OR PROJECTED.

PART I

ITEM 1. BUSINESS.

GENERAL

TETRA Technologies, Inc. ("TETRA" or "the Company") is an oil and gas
services company with an integrated calcium chloride and brominated products
manufacturing operation that supplies feedstocks to energy markets, as well as
other markets. The Company is comprised of three divisions - Fluids, Well
Abandonment & Decommissioning and Testing & Services.

The Company's Fluids Division manufactures and markets clear brine fluids
to the oil and gas industry for use in well drilling, completion and workover
operations in both domestic and international markets. The Division also markets
the fluids and dry calcium chloride manufactured at its production facilities to
a variety of markets outside the energy industry.

The Company's Testing & Services Division provides production testing
services to the Texas, Louisiana, Alabama, Mississippi, offshore Gulf of Mexico
and Latin American markets. It also provides technology and services required
for the separation and recycling of oily residuals generated from petroleum
refining and exploration and production operations.

The Well Abandonment & Decommissioning Division provides a complete package
of services required for the abandonment of depleted oil and gas wells and the
decommissioning of platforms, pipelines and other associated equipment. The
Division services the onshore, inland waters and offshore markets of the Gulf of
Mexico. The Division is also an oil and gas producer from wells acquired in
connection with its well abandonment and decommissioning business.

TETRA Technologies, Inc. was incorporated in Delaware in 1981. All
references to the Company or TETRA include TETRA Technologies, Inc. and its
subsidiaries. The Company's corporate headquarters are located at 25025
Interstate 45 North in The Woodlands, Texas. Its phone number is 281-367-1983
and its web site is accessed at www.tetratec.com.

-1-

PRODUCTS AND SERVICES

FLUIDS DIVISION

Liquid calcium chloride, sodium bromide, calcium bromide, zinc bromide and
zinc calcium bromide produced by the Fluids Division are referred to as clear
brine fluids (CBFs) in the oil and gas industry. CBFs are solids-free, clear
salt solutions that, like conventional drilling "muds", have high specific
gravities and are used as weighting fluids to control bottom-hole pressures
during oil and gas completion and workover activities. The use of CBFs increases
production by reducing the likelihood of damage to the wellbore and productive
pay zone. CBFs are particularly important in offshore completion and workover
operations due to the increased formation sensitivity, the significantly greater
investment necessary to drill offshore, and the consequent higher cost of error.
CBFs are distributed through the Company's Fluids Division and are also sold to
other companies who service customers in the oil and gas industry.

The Division provides basic and custom blended CBFs to domestic and
international oil and gas well operators, based on the specific need of the
customer and the proposed application of the product. The Division also provides
these customers with a broad range of associated services, including on-site
fluid filtration, handling and recycling, fluid engineering consultation, and
fluid management. The Division also repurchases used CBFs from operators and
recycles and reconditions these materials. The utilization of reconditioned CBFs
reduces the net cost of the CBFs to the Company's customers and minimizes the
need for disposal of contaminated fluids. The Company recycles and reconditions
the CBFs through filtration, blending and the use of proprietary chemical
processes, and then markets the reconditioned CBFs.

The Division's fluid engineering and management personnel use proprietary
technology to determine the proper blend for a particular application to
maximize the effectiveness and life span of the CBFs. The specific volume,
density, crystallization, temperature and chemical composition of the CBFs are
modified by the Company to satisfy a customer's specific requirements. The
Company's filtration services use a variety of techniques and equipment for the
on-site removal of particulates from CBFs so that those CBFs can be recirculated
back into the well. Filtration also enables recovery of a greater percentage of
used CBFs for recycling.

The PayZone-Registered Trademark- Drill-in Fluids systems use CBFs as the
basis for this line of specialized drilling fluid systems, some of which are
patented. These systems are used during drilling, completing, underreaming,
reentry and workover operations through the sensitive pay zone of the well, to
increase oil and gas recovery. The Division's patented Advanced Clean Up
Technology (ACT -TM-) systems are designed to quickly and uniformly clean up
drill-in fluids filtercake from the payzone to increase oil and gas production.

The manufacturing group of the Fluids Division presently operates eight
active production facilities that manufacture liquid and dry calcium chloride,
sodium bromide, calcium bromide, zinc bromide and zinc calcium bromide for
distribution primarily into energy markets. Liquid and dry calcium chloride are
also sold into the water treatment, industrial, cement, food processing, dust
control, ice melt and consumer products markets. Liquid sodium bromide is also
sold into the industrial water treatment markets, where it is used as a biocide
in recirculated cooling tower waters.

Four of these facilities convert co-product hydrochloric acid from
nearby sources into liquid and dry calcium chloride products. These
operations are located near Lyondell's Lake Charles, Louisiana TDI plant;
Resolution Performance Product's Norco, Louisiana epoxy resins plant;
Vulcan's Wichita, Kansas chlorinated solvents plant; and DuPont's
Parkersburg, West Virginia fluoromonomer plant. Some of these facilities
consume feedstock acid from other sources as well. Dry calcium chloride is
produced at the Company's Lake Charles plant. With production capacity of at
least 100,000 tons of dry product per year, the Lake Charles plant can
produce both 80% and 97% calcium chloride products. The Company also has two
solar evaporation plants located in San Bernardino County, California, which
produce liquid calcium chloride from underground brine reserves to supply
markets in the Western United States.

-2-

The manufacturing group manufactures and distributes calcium bromide and
zinc bromide from its West Memphis, Arkansas facility. The production process
uses a low-cost hydrobromic acid or bromine along with various zinc sources to
manufacture its products. This facility also uses proprietary technologies to
recondition and upgrade used CBFs repurchased from the Company's customers. The
group also has a facility at Dow's Ludington, Michigan chemical plant that
converts a crude bromine stream from Dow's calcium/magnesium chemicals operation
into purified bromine and liquid calcium bromide or liquid sodium bromide.

The Company also owns a plant in Magnolia, Arkansas that is designed to
produce calcium bromide. Approximately 33,000 gross acres of bromine-containing
brine reserves are under lease by the Company in the vicinity of the plant to
support its production. The plant is not currently in operation, and the Company
continues to evaluate its strategy related to these assets and their
development.

TESTING & SERVICES DIVISION

The production testing group of the Testing & Services Division provides
flow-back pressure and volume testing of oil and gas wells, predominantly in the
Texas, Louisiana, Alabama, Mississippi, offshore Gulf of Mexico, Mexico and
Venezuela markets. The Company believes this group to be the leading provider of
these services in the Western Hemisphere. These services facilitate the
sophisticated evaluation techniques needed for reservoir management and
optimization of well work-over programs. In 2000, the Company acquired certain
assets of Southern Well Testing, Inc. and Key Energy Services, Inc., which
significantly increased its equipment capacity in production testing, slickline,
liquid mud facilities and pipe testing assets. In September 2001, the Company
expanded its testing capabilities in the offshore Gulf of Mexico market as well
as improving its onshore presence through the acquisition of the assets of
Production Well Testers. The Division's Production Testing group maintains the
largest fleet of high pressure production testing equipment in the South Texas
area, with operations in Victoria, Alice, Edinburg and Laredo, Texas, as well as
Reynosa, Mexico. The division also has operations in Conroe and Palestine Texas,
Lafayette Louisiana and Maturin, Venezuela.

The process services group of the Testing & Services Division applies a
variety of technologies to separate oily residuals, mixtures of hydrocarbons,
water and solids, into their components. The group provides its oil recovery and
residuals separation and recycling services to the petroleum refining market
primarily in the United States. This group utilizes various liquid/solid
separation technologies, including a proprietary high temperature thermal
desorption and recovery technology and hydrocyclones, centrifuges and filter
presses. Oil is recycled for productive use, water is recycled or disposed of
and organic solids are recycled. Inorganic solids are treated to become inert,
non-hazardous materials. The Division typically builds, owns and operates fixed
systems that are located on its customer's sites, providing these services under
long-term contracts.

Through the Company's international fluids operations, this Division has
developed an exploration and production application for its technology.
Utilizing its existing technology, the Division is able to remove oily
contaminants from liquid and solid residuals generated in offshore drilling and
production. The Division acquired its first international contract in 2000 and
subsequently constructed a processing facility in Kristiansund, Norway.

-3-

WELL ABANDONMENT & DECOMMISSIONING DIVISION

The Well Abandonment & Decommissioning Division provides a complete package
of services required for the abandonment of depleted oil and gas wells and the
decommissioning of platforms and other associated equipment onshore and in
inland waters in Texas and Louisiana and offshore in the Gulf of Mexico. The
Company first entered this business in 1994 in an effort to expand the services
offered to its customers and to capitalize on existing personnel, equipment and
facilities along the Louisiana and Texas Gulf Coast. The business was expanded
significantly in 1996 with two acquisitions that provided penetration into the
Texas onshore markets and the inland waters markets off Texas and Louisiana. The
Division added wireline services to its mix in 1997 with an additional
acquisition.

The Division has service facilities which are located in Belle Chase, Houma
and Lafayette, Louisiana and Bryan, Midland and Victoria, Texas. In providing
its well abandonment and decommissioning services, the Company operates onshore
rigs, barge-mounted rigs, a platform rig, a heavy lift barge and offshore
rigless packages. The Division's integrated package of services includes the
full complement of operations required to plug wells, salvage tubulars and
decommission well head equipment, pipelines and platforms. Its wireline
operations provide pressure transient testing, reservoir evaluation, well
performance evaluation, cased hole and memory production logging, perforating,
bridge plug and packer service and pipe recovery to major oil companies
operating in the Gulf of Mexico.

In the fourth quarter of 2000, the Company increased its capacity to
service its markets through the acquisition of the assets of Cross Offshore
Corporation, Ocean Salvage Corporation and Cross Marine LLC. This purchase
approximately doubled the number of offshore rigless well abandonment packages
owned by the Company and increased the number of inland packages as well. The
Company also acquired the heavy lift barge, Southern Hercules, with a 500-ton
lift capacity (upgradable to 800 tons) which further expands the Company's
turnkey capabilities in decommissioning inland water and offshore pipelines and
platforms.

The Company formed Maritech Resources, Inc. in 1999 as a new component
of the Well Abandonment & Decommissioning Division to own, manage and exploit
producing oil and gas properties purchased in conjunction with its well
abandonment business. Federal regulations generally require leasees to plug
and abandon wells and decommission the platforms, pipelines and other
equipment located on the lease within one year after the lease terminates.
Frequently the costs of abandonment and decommissioning exceed the value of
the producing wells with regard to a particular lease. The Division's
strategy is to provide the oil and gas companies with alternative ways of
managing their well abandonment obligations, while effectively base-loading
well abandonment and decommissioning work for the Well Abandonment &
Decommission Division. The Division structures creative alternatives to
relieve E&P companies of the burden of managing these obligations and the
end-of-life properties that are associated with them. This may include
purchasing an interest in the remaining productive wells and operating those
properties in exchange for assuming the well abandonment obligations
associated with such properties. The Company believes that this Division's
strategy is being perceived by the operators of these properties as a cost
effective method of satisfying their abandonment and decommissioning
obligations, which in turn provides for increased demand for the Division's
services and equipment.

-4-

SOURCES OF RAW MATERIALS

The Fluids Division manufactures calcium chloride, sodium bromide, calcium
bromide, zinc bromide and zinc calcium bromide for distribution to its oil and
gas customers. The Division also purchases calcium bromide and sodium bromide
from two domestic and one foreign manufacturer, and it recycles calcium and zinc
bromide CBFs repurchased from its oil and gas customers.

Some of the Division's primary sources of raw materials are low-cost
chemical co-product streams obtained from chemical manufacturers. At the Norco,
Louisiana; Wichita, Kansas; Lake Charles, Louisiana; and Parkersburg, West
Virginia calcium chloride production plants, the principal raw material is
co-product hydrochloric acid produced by other chemical companies. The Company
has written agreements with those chemical companies regarding the supply of
hydrochloric acid but believes that there are numerous alternative sources of
supply as well. The Company produces calcium chloride at its two plants in San
Bernardino County, California from underground brine reserves. These brines are
deemed adequate to supply the Company's foreseeable need for calcium chloride in
that market area. Substantial quantities of limestone are also consumed when
converting hydrochloric acid into calcium chloride. The Company uses a
proprietary process that permits the use of less expensive limestone, while
maintaining end-use product quality. The Company purchases limestone from
several different sources. Hydrochloric acid and limestone are in abundant
supply. The Company also purchases calcium chloride from a domestic producer
under a long-term supply agreement.

To produce calcium bromide, zinc bromide and zinc calcium bromide at its
West Memphis, Arkansas facility, the Company uses hydrobromic acid, bromine and
various sources of zinc raw materials. The Company has one internal and several
external sources of bromine and several external sources of co-product
hydrobromic acid. The Company uses proprietary and patented processes that
permit the use of cost advantaged raw materials, while maintaining high product
quality. There are multiple sources of zinc that the Company can use in the
production of zinc bromide. The Company has an agreement with the Dow Chemical
Company to purchase crude bromine to feed its bromine derivatives plant in
Ludington, Michigan. This plant produces purified bromine for use at the West
Memphis facility as well as liquid calcium bromide and sodium bromide for
resale.

The Company also owns a calcium bromide manufacturing plant near Magnolia,
Arkansas, that was constructed in 1985 and has a production capacity of 100
million pounds of calcium bromide per year. This plant was acquired in 1988 and
is not in operation. The Company currently has approximately 33,000 gross acres
of bromine-containing brine reserves under lease in the vicinity of this plant.
While this plant is designed to produce calcium bromide, it could be modified to
produce elemental bromine or select bromine compounds. The Company believes it
has sufficient brine reserves under lease to operate a world-scale bromine
facility for 25 to 30 years. Development of the brine field, construction of
necessary pipelines and reconfiguration of the plant would take several years
and require a substantial additional capital investment.

The Company has a long-term supply agreement with a foreign producer of
calcium bromide as well. This agreement, coupled with production of bromine and
sodium and calcium bromide from the new Ludington, Michigan plant and calcium
bromide, zinc bromide and zinc calcium bromide from the West Memphis, Arkansas
facility, affords the Company additional flexibility, beyond the development of
the Magnolia, Arkansas plant, for the secure supply of its required bromine
derivatives.

-5-

MARKET OVERVIEW AND COMPETITION

FLUIDS DIVISION

The Fluids Division markets and sells CBFs, drilling and completion fluids
systems, and related products and services to major oil and gas exploration and
production areas worldwide. Current foreign areas of market presence include the
North Sea, Mexico, South America, the Far East and West Africa. The Division's
principal competitors in the sale of CBFs to the oil and gas industry are Baroid
Corporation, a subsidiary of Halliburton, Inc., M.I. LLC, a joint venture of
Smith International Inc. and Schlumberger Limited, and OSCA, Inc., which has
entered into an agreement to be acquired by B.J. Services. This market is highly
competitive and competition is based primarily on service, availability and
price. Although all competitors provide fluid handling, filtration and recycling
services, the Company believes that its historical focus on providing these and
other value-added services to its customers has enabled it to compete
successfully with all companies. Major customers of the Fluids Division include
Shell Oil, ChevronTexaco, Amerada Hess, BP, El Paso Energy, Kerr-McGee Corp.,
Apache, Anadarko, Newfield Exploration and Conoco USA.

Non-energy markets for the Company's liquid and dry calcium chloride
products include industrial, municipal, mining, janitorial and consumer markets
for snow and ice melt products, dust control, cement curing, and road
stabilization markets, and certain agricultural and food industry businesses.
Most of these markets are highly competitive. The Company's major competitors in
the dry calcium chloride market include Dow Chemical Company and General
Chemical Company. The Company sells sodium bromide into the industrial water
treatment markets as a biocide under the BioRid-TM- trade name.

TESTING & SERVICES DIVISION

The Division's production testing group provides its services primarily to
the natural gas segment of the oil and gas industry. Using typical completion
techniques, sand, water and other abrasive materials will normally accompany the
initial production of natural gas, usually under very high pressures. The
Company provides the equipment and qualified personnel to remove these
impediments to production and to pressure test wells and wellhead equipment.

The market is highly competitive and competition is based on availability
of equipment and qualified personnel, as well as price, quality of service and
safety record. The Company believes its equipment maintenance program and
operating procedures give it a competitive advantage in the marketplace. Market
competition is dominated by numerous small, individually owned operators such as
Fesco and Parchman, and to a lesser extent by Schlumberger, Halliburton and
other integrated service companies. The Company's customers include Conoco
U.S.A., Shell Oil, El Paso Energy, ChevronTexaco, Devon, Newfield, other large
independent gas producers, PEMEX (the national oil company of Mexico) and PDVSA
(the national oil company of Venezuela).

The Division's process services group currently provides oily residuals
processing to U.S. refineries concentrated in Texas and Louisiana. Although U.S.
refineries have alternative technologies and disposal systems available to them,
the Company feels its competitive edge lies in its ability to apply its various
liquid/solid separation technologies to provide the most efficient processing
alternative at competitive prices. The group currently has major processing
facilities at the following refineries: ExxonMobil - Baytown, Texas and Baton
Rouge, Louisiana; Premcor and Motiva - Port Arthur, Texas; Phillips - Borger,
Texas; Lyondell-Citgo - Houston, Texas; and Citgo - Lake Charles, Louisiana.
Major competitors in this market include Scaltech, Midwestern Centrifuge Systems
and Phillips Services. The Company believes that new refinery regulations
permitting the processing of oily residuals from other refineries will provide
the group with expanded market opportunities in the U.S. In 2001, the Company
signed a contract with Hovensa and constructed a processing facility in St.
Croix, U.S. Virgin Islands. The plant commenced processing in 2002.

-6-

The Process Services group entered the international energy market in 2000
by applying its technology to process oily residuals generated from offshore
exploration and production in the Norwegian sector of the North Sea. The
Division has a contract with Renovasson Nord A/S (RN) to process drilling fluids
and drill cuttings at the group's central processing facility in Kristiansund,
Norway. RN has contracts with major exploration and production operators working
offshore Norway to process their oily residuals. Using its technologies, the
group believes it is able to provide more cost-effective alternatives to the
customer's waste disposal needs. Major competitors in this market include
Soilcare, Slovagen Industries and Franzefoss Gjennvinning. Environmental
regulations are a major marketplace driver in this business. Markets such as the
North Sea, which have stringent zero discharge regulations, afford the greatest
growth opportunities for the Company.

WELL ABANDONMENT & DECOMMISSIONING DIVISION

Demand for the services of The Well Abandonment and Decommissioning
Division is predominately driven by government regulations that dictate when
a well must be plugged. Current regulations generally require wells to be
plugged, offshore platforms removed and remediation of the seabed at the well
site to its original state within twelve months after the lease expires. As a
result of past drilling activity, depletion of wells and various exceptions
generally offered to exploration and production companies in the past that
have delayed the plug and abandonment obligation, the number of wells
requiring plugging has grown steadily. The Company believes there to be a
substantial number of wells offshore in the Gulf of Mexico and in the inland
waters, and onshore Texas and Louisiana that require well abandonment and
decommissioning work. Critical factors required to participate in these
markets include: the proper equipment to meet diverse market conditions;
qualified, experienced personnel; technical expertise to address varying
downhole conditions; the financial strength to ensure all abandonment and
decommissioning obligations are satisfied and a comprehensive safety and
environmental program. The Company believes its integrated service package
satisfies these market requirements, allowing it to successfully compete.

The Division markets its services to major oil and gas companies,
independent operators, and state governmental agencies. Major customers include
ChevronTexaco, ExxonMobil, Shell Oil, BP, Total Fina Elf, Conoco U.S.A., Apache,
Anadarko, Newfield Exploration, El Paso, the Louisiana Conservation Commission
and the Railroad Commission of the State of Texas. These services are performed
onshore in Texas and Louisiana, Gulf Coast inland waterways and the Gulf of
Mexico. The Company's principal competitors in the offshore and inland waters
markets include Superior Energy Services, Inc., Cal Dive International, Inc.,
Horizon Offshore and Global Industries. This market is highly competitive and
competition is based primarily on service, equipment availability and price. The
Division believes its focus on core competency in well abandonment and
decommissioning operations has allowed it to better provide the complete
portfolio of equipment, experience and administration required to manage its
customer's needs.

OTHER BUSINESS MATTERS

MARKETING AND DISTRIBUTION

The Fluids Division markets its domestic products and services through its
distribution facilities located principally in the Gulf Coast region of the
United States. These facilities are in close proximity to both product supplies
and customer concentrations. Since transportation costs can represent a large
percentage of the total delivered cost of chemical products, particularly liquid
chemicals, the Division believes that its strategic locations make it one of the
lowest cost suppliers of liquid calcium chloride and other CBFs in the Southern
United States and California. International markets that are served include the
U.K. and Norwegian sectors of the North Sea, Mexico, Venezuela, Brazil, West
Africa and the Far East.

-7-

The non oilfield liquid and dry calcium chloride products are marketed
through the Division's sales offices and sales agents in California, Missouri,
Florida, Texas and Wyoming, as well as through a network of distributors located
throughout the Midwest, West, Northeast, Southeast and Southwest. To service
these markets, the Division has over two dozen distribution facilities
strategically located to provide efficient, low-cost product availability.

BACKLOG

The Company generally provides its products and services within seven days
of receipt of an order. Consequently, the level of backlog is not indicative of
the Company's sales activity. On December 31, 2001, the Company had an estimated
backlog of work of $73.9 million, of which approximately $14.8 million is
expected to be billed during 2002.

EMPLOYEES

As of December 31, 2001, the Company had 1,452 employees. None of the
Company's U.S. employees are presently covered by a collective bargaining
agreement, other than the employees of the Company's Lake Charles, Louisiana
calcium chloride production facility who are represented by the Paper, Allied
Industrial, Chemical and Energy Workers International union. The Company
believes that its relations with its employees are good.

PATENTS, PROPRIETARY TECHNOLOGY AND TRADEMARKS

As of December 31, 2001, the Company owned or licensed 21 issued U.S.
patents, had two patents pending in the U.S., one issued foreign patent and
eight foreign patents pending. The foreign patents and patent applications are
primarily foreign counterparts to U.S. patents or patent applications. The
issued patents expire at various times through 2018. The Company has elected to
maintain certain other internally developed technologies, know-how and
inventions as trade secrets. While the Company believes that the protection of
its patents and trade secrets is important to its competitive positions in its
businesses, the Company does not believe any one patent or trade secret is
essential to the success of the Company.

It is the practice of the Company to enter into confidentiality agreements
with key employees, consultants and third parties to whom the Company discloses
its confidential and proprietary information. There can be no assurance,
however, that these measures will prevent the unauthorized disclosure or use of
the Company's trade secrets and expertise or that others may not independently
develop similar trade secrets or expertise. Management of the Company believes,
however, that it would require a substantial period of time, and substantial
resources, to develop similar know-how or technology independently. As a policy,
the Company uses all possible legal means to protect its patents, trade secrets
and other proprietary information.

The Company sells various products and services under a variety of trade
marks and service marks, some of which are registered in the U.S. or certain
foreign countries.

-8-

SAFETY, HEALTH AND ENVIRONMENTAL AFFAIRS REGULATIONS

Various environmental protection laws and regulations have been enacted and
amended during the past three decades in response to public concerns over the
environment. The operations of the Company and its customers are subject to the
various evolving environmental laws and corresponding regulations, which are
enforced by the US Environmental Protection Agency, the MMS and various other
federal, state and local environmental authorities. Similar laws and regulations
designed to protect the health and safety of the Company's employees and
visitors to its facilities are enforced by the US Occupational Safety and Health
Administration and other state and local agencies and authorities. The Company
must comply with the requirements of environmental laws and regulations
applicable to its operations, including the Federal Water Pollution Control Act
of 1972, the Resource Conservation and Recovery Act of 1976 (RCRA), the Clean
Air Act of 1977, the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 (CERCLA), the Superfund Amendments and Reauthorization Act
of 1986 (SARA), the Federal Insecticide, Fungicide, and Rodenticide Act of 1947
(FIFRA), Hazardous Materials Transportation Act of 1975, and Pollution
Prevention Act of 1990. The Company is also subject to the applicable
environmental and health and safety rules and regulations of the local, state
and federal agencies in those foreign countries in which it operates. Many state
and local agencies have imposed environmental laws and regulations with stricter
standards than their federal counterparts. The Company believes that it is in
compliance with all material environmental regulations.

At the Company's Lake Charles, West Memphis, Parkersburg and San Bernardino
County production plants, the Company holds various permits regulating air
emissions, wastewater and storm water discharges, disposal of certain hazardous
and non-hazardous wastes, and wetlands preservation.

The Company believes that its manufacturing plants and other facilities are
in general compliance with all applicable environmental and health and safety
laws and regulations. Since its inception, the Company has not had a history of
any significant fines or claims in connection with environmental or health and
safety matters. However, risks of substantial costs and liabilities are inherent
in certain plant operations and certain products produced at the Company's
plants and there can be no assurance that significant costs and liabilities will
not be incurred in the future. Changes in the environmental and health and
safety regulations could subject the Company's handling, manufacture, use,
reuse, or disposal of materials at plants to stricter scrutiny. The Company
cannot predict the extent to which its operations may be affected by future
regulatory and enforcement policies. Tighter MMS regulations regarding well
abandonment and platform decommissioning could benefit the Company's Well
Abandonment & Decommissioning Division.

CERTAIN BUSINESS RISKS

The Company identifies the following important risk factors, which could
affect the Company's actual results and cause actual results to differ
materially from any such results that might be projected, forecasted, estimated
or budgeted by the Company in this report.

MARKETS

The Company's operations are materially dependent on the levels of oil and
gas well drilling, completion, workover and abandonment activity, both in the
United States and internationally. Such activity levels are affected both by
short-term and long-term trends in oil and gas prices and supply and demand
balance, among other factors. In recent years, oil and gas prices and,
therefore, the levels of well drilling, completion and workover activity, have
been volatile. Worldwide military, political and economic events, including
initiatives by the Organization of Petroleum Exporting Countries, have
contributed to, and are likely to continue to contribute to, price volatility.
Also, a prolonged slow down of the U.S. and/or world economy may contribute to
an eventual downward trend in the demand and correspondingly the price of oil
and natural gas. Any prolonged reduction in oil and gas prices may depress the
levels of well drilling, completion and workover activity and result in a
corresponding decline in the demand for the Company's products and services and,
therefore, have a material adverse effect on the Company's revenues and
profitability.

-9-

COMPETITION

The Company encounters and expects to continue to encounter intense
competition in the sale of its products and services. The Company competes with
numerous companies in its oil and gas and chemical operations. Many of the
Company's competitors have substantially greater financial and other related
resources than the Company. To the extent competitors offer comparable products
or services at lower prices, or higher quality and more cost-effective products
or services, the Company's business could be materially and adversely affected.

SUPPLY OF RAW MATERIALS

The Company sells a variety of CBFs, including brominated CBFs such as
calcium bromide, zinc bromide and sodium bromide, and other brominated products,
some of which are manufactured by the Company and some of which are purchased
from third parties. The Company also sells calcium chloride, as a CBF and in
other forms and for other applications. Sales of calcium chloride and brominated
products contribute significantly to the Company's revenues. In its manufacture
of calcium chloride, the Company uses hydrochloric acid and other raw materials
purchased from third parties. In its manufacture of brominated products, the
Company uses bromine, hydrobromic acid and other raw materials, including
various forms of zinc, that are purchased from third parties. The Company
acquires brominated products from a variety of third party suppliers. If the
Company was unable to acquire the brominated products, sulfuric, hydrobromic or
hydrochloric acid, zinc or any other raw material supplies for a prolonged
period, the Company's business could be materially and adversely affected.

CERTAIN CREDIT RISKS RELATED TO OIL AND GAS PROPERTIES

The Company's Maritech Resources, Inc. subsidiary purchases interests in
certain end-of-life producing oil and gas properties in the U.S. Gulf Coast
Region (including the Gulf of Mexico) in association with the operations of the
Company's Well Abandonment & Decommissioning Division. As the owner of these
interests, Maritech is liable for the proper abandonment and decommissioning of
the wells, platforms, pipelines and associated equipment located on these
properties. TETRA has guaranteed a portion of the abandonment and
decommissioning liabilities of Maritech, which can be material in amount. When
it purchases these properties, Maritech is compensated for assuming these
abandonment liabilities, in the form of cash, oil and gas reserves, by the
former owner agreeing to pay Maritech in the future, or by other means. When
this compensation is in the form of an agreement to pay in the future, Maritech
and TETRA are subject to the risk that the former owner(s) will be unable to
make these future payments. Maritech and TETRA attempt to minimize this risk by
analyzing the creditworthiness of the former owner(s) and others who may be
legally obligated to pay in the event the former owner(s) are unable to do so,
and obtaining guarantees, bonds, letters of credit or other forms of security
when they are deemed necessary. In addition, if Maritech acquires less than 100%
of the working interest in a property, its co-owners are responsible for the
payment of their portion of the associated abandonment liabilities, although if
the co-owners do not pay their portions, Maritech may be liable for the
defaulted amount as well. If any required payment is not made by a former owner
or a co-owner and any security is not sufficient to cover the required payment,
TETRA could suffer material losses.

-10-

POTENTIAL LIABILITY FOR ENVIRONMENTAL OPERATIONS: ENVIRONMENTAL
REGULATION

The Company's operations are subject to extensive and evolving Federal,
state and local laws and regulatory requirements, including permits, relating to
environmental affairs, health and safety, waste management and the manufacture,
storage, handling, transportation, use and sale of chemical products.
Governmental authorities have the power to enforce compliance with these
regulations and permits, and violators are subject to civil and criminal
penalties, including civil fines, injunctions or both. Third parties may also
have the right to pursue legal actions to enforce compliance. It is possible
that increasingly strict environmental laws, regulations and enforcement
policies could result in substantial costs and liabilities to the Company and
could subject the Company's handling, manufacture, use, reuse, or disposal of
substances or pollutants to scrutiny. The Company's business exposes it to risks
such as the potential for harmful substances escaping into the environment and
causing damages or injuries, which could be substantial. Although the Company
maintains general liability insurance, this insurance is subject to coverage
limits and generally excludes coverage for losses or liabilities relating to
environmental damage or pollution. The Company maintains environmental liability
insurance covering named locations and environmental risks associated with
contract services for oil and gas operations, refinery waste treatment
operations and for its oil and gas production properties. The extent of this
coverage is consistent with the Company's other insurance programs. The Company
could be materially and adversely affected by an enforcement proceeding or a
claim that was not covered or was only partially covered by insurance.

In addition to increasing the Company's risk of environmental liability,
the promulgation of stricter environmental laws, regulations and enforcement
policies has accelerated the growth of some of the markets served by the
Company. Decreased regulation and enforcement could materially and adversely
affect the demand for the types of systems offered by the Company's Process
Services and Well Abandonment & Decommissioning operations and, therefore,
materially and adversely affect the Company's business.

RISKS RELATED TO ACQUISITIONS AND INTERNAL GROWTH

The Company's aggressive growth strategy includes both internal growth and
growth by acquisitions. Acquisitions require significant financial and
management resources both at the time of the transaction and during the process
of integrating the newly acquired business into the Company's operations.
Internal growth requires both financial and management resources as well as
hiring additional personnel. The Company's operating results could be adversely
affected if it is unable to successfully integrate such new companies into its
operations or is unable to hire adequate personnel. Future acquisitions by the
Company could also result in issuances of equity securities or the rights
associated with the equity securities, which could potentially dilute earnings
per share. In addition, future acquisitions could result in the incurrence of
additional debt or contingent liabilities and amortization expenses related to
goodwill and other intangible assets. These factors could adversely affect the
Company's future operating results and financial position.

WEATHER RELATED FACTORS

Demand for the Company's products and services are subject to seasonal
fluctuation due in part to weather conditions, which cannot be predicted. The
Company's operating results may vary from quarter to quarter depending on
weather conditions in applicable areas in the United States and in international
regions.

RISKS RELATED TO GROSS MARGIN

The Company's operating results in general, and gross margin in particular,
are functions of the product mix sold in any period. Other factors, such as unit
volumes, heightened price competition, changes in sales and distribution
channels, shortages in raw materials due to timely supplies or ability to obtain
items at reasonable prices, and availability of skilled labor, may also continue
to affect the cost of sales and the fluctuation of gross margin in future
periods.

-11-

PATENT AND TRADE SECRET PROTECTION

The Company owns numerous patents, patent applications and unpatented trade
secret technologies in the U.S. and certain foreign countries. There can be no
assurance that the steps taken by the Company to protect its proprietary rights
will be adequate to deter misappropriation of its proprietary rights. In
addition, independent third parties may develop competitive or superior
technologies.

DEPENDENCE ON PERSONNEL

The Company's success depends upon the continued contributions of its
personnel, many of whom would be difficult to replace. The success of the
Company will depend on the ability of the Company to attract and retain skilled
employees. Changes in personnel, therefore, could adversely affect operating
results.

THE FOREGOING REVIEW OF FACTORS PURSUANT TO THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995 SHOULD NOT BE CONSTRUED AS EXHAUSTIVE. IN ADDITION
TO THE FOREGOING, THE COMPANY WISHES TO REFER READERS TO THE COMPANY'S FUTURE
PRESS RELEASES AND FILINGS AND REPORTS WITH THE SECURITIES AND EXCHANGE
COMMISSION FOR FURTHER INFORMATION ON THE COMPANY'S BUSINESS AND OPERATIONS AND
RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE CONTAINED IN FORWARD-LOOKING STATEMENTS, SUCH AS THIS REPORT. THE
COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY RELEASE THE RESULT OF ANY REVISIONS
TO ANY SUCH FORWARD-LOOKING STATEMENTS WHICH MAY BE MADE TO REFLECT THE EVENTS
OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.

-12-

ITEM 2. PROPERTIES.

The following table sets forth certain information concerning facilities
leased or owned by the Company as of December 31, 2001. The Company believes its
facilities are adequate for its present needs.

- ----------
(1) Includes real property and buildings unless otherwise noted.
(2) Includes solar evaporation ponds.

-13-

ITEM 3. LEGAL PROCEEDINGS.

The Company is a named defendant in numerous lawsuits and a respondent in
certain other governmental proceedings arising in the ordinary course of
business. While the outcome of such lawsuits and other proceedings cannot be
predicted with certainty, management does not expect these matters to have a
material adverse impact on the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders of the Company,
through solicitation of proxies or otherwise, during the fourth quarter of the
year ended December 31, 2001.

PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.

PRICE RANGE OF COMMON STOCK

The Common Stock is traded on the New York Stock Exchange under the symbol
"TTI". As of March 25, 2002 there were approximately 2,719 holders of record of
the Common Stock. The following table sets forth the high and low closing sale
prices of the Common Stock for each calendar quarter in the two years ended
December 31, 2001, as reported by the New York Stock Exchange. Over-the-counter
market quotations reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not necessarily represent actual transactions.

DIVIDEND POLICY

The Company has never paid cash dividends on its Common Stock. The Company
currently intends to retain earnings to finance the growth and development of
its business and does not anticipate paying cash dividends in the foreseeable
future. Any payment of cash dividends in the future will depend upon the
financial condition, capital requirements and earnings of the Company as well as
other factors the Board of Directors may deem relevant. The Company declared a
dividend of one Preferred Stock Purchase Right per share of Common Stock to
holders of record at the close of business on Novembers 6, 1998. See Note R to
the financial statements attached hereto for a description of such Rights.

-14-

ITEM 6. SELECTED FINANCIAL DATA.

(1) Includes special charge of $4,745 and restructuring charge of $2,320
(2) Includes unusual charges of $3,000
(3) Includes gain on the sale of administration building of $6,731 and gain on
sale of business of $29,629.
(4) EBITDA is earnings before interest, taxes, depreciation and amortization,
adjusted to eliminate the effects of special charges and restructuring of
$7,065 in 1999 and $3,000 in 1997.
(5) Excludes gain on the sale of administration building of $6,731 and gain on
sale of business of $29,629.

The above selected financial data has been restated to reflect the discontinued
operations of TETRA Micronutrients, Inc.

-15-

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS

The following table presents, for the periods indicated, the percentage
relationship which certain items in the Company's statement of operations bear
to revenues, and the percentage increase or decrease in the dollar amount of
such items. The following data should be read in conjunction with the
Consolidated Financial Statements and the associated Notes contained elsewhere
in this document.

BUSINESS ENVIRONMENT

Demand for the Company's products and services depends primarily on
activity in the oil and gas exploration and production industry in the Gulf of
Mexico, Texas, Louisiana, upper Gulf Coast, and in selected international
markets. This activity can be significantly affected by the level of industry
capital expenditures for the exploration and production of oil and gas reserves,
and the plugging and decommissioning of abandoned oil and gas properties. These
expenditures are influenced strongly by oil company expectations about the
supply and demand for crude oil and natural gas products and by the energy price
environment that results from supply and demand imbalances. Throughout the first
part of 2001, increased spending by large oil and gas companies contributed to
higher levels of worldwide drilling activity, especially gas drilling in the
United States. General business conditions in the United States began to decline
during the second quarter. The events of September 11 accelerated the economic
slowdown which in turn adversely impacted the energy industry, particularly in
the United States. Reduced demand for aviation fuel, weakened demand for
industrial and residential natural gas and increasing natural gas storage levels
together with one of the warmest winters on record resulted in significant
decreases in North American oil and natural gas drilling.

-16-

The Company anticipates oil and gas drilling activity in the U.S. will
continue to languish into the second quarter of 2002 due to the slow global
economy and an unseasonably warm winter contributing to reduced demand for
natural gas. The Company then expects activity to begin recovering in the second
half of the year. Over the longer-term, the Company believes that with the
current trends of:
- deeper gas drilling with more complex completions,
- faster reservoir depletion,
- stricter enforcement of environmental and abandonment regulations,
- advancing age of offshore platforms, and
- increasing future demand for natural gas,
there will continue to be growth opportunities for the Company's products and
services.

The Gulf of Mexico and international oil and gas rig counts are leading
indicators of the fluids business. Natural gas prices and gas drilling in North
and South America are key indicators for the production testing business. 2001
began with 161 rigs running in the Gulf of Mexico, increasing to a high of 176
in February, and closing the year at 119; while the international rig count
started the year at 705 rigs and increased to 752 by December 31, 2001. U.S.
drilling activity during the first half of 2001, particularly for gas, was very
strong, posting significant increases over the same period in 2000. U.S. gas
drilling increased 44% during this period, while gas prices improved 30%.
However, in the latter stages of 2001, activity declined as the impact of a
slowing economy took hold. Natural gas prices fell from a $10.00/MCF high at the
beginning of 2001 to approximately $2.00/MCF at year end. Likewise, the U.S.
natural gas rig count started the year at 862 rigs, peaked at 1,068 in mid-year,
and closed the year at 748 rigs.

The Fluids Division manufactures and distributes completion fluids and
provides filtration and associated engineering services to exploration and
production companies worldwide. The Division's products and services are
consumed in the completion of a successful well or the workover of a currently
producing well and can also be used under certain drilling conditions. The
Company is vertically integrated into the production of its calcium chloride and
brominated completion fluids, making it a relatively low-cost supplier of a
number of these products. The Division's major markets include inland water and
offshore Gulf of Mexico, the North Sea, Mexico, South America and offshore West
Africa. Strong natural gas and crude oil drilling activity during the first half
of 2001 contributed to increased demand for the products and services of the
Division, resulting in increased product volume, asset utilization and allowing
the Company to provide its products and services at improved prices over 2000.
As demand tailed off toward the end of 2001, volumes decreased, but pricing
remained relatively constant thereby bolstering the profit margin percentage.

The outlook for world oil and gas demand is highly uncertain due to the
slowdown in the global economy as well as the U.S. economy. The Company expects
that recent declines in U.S. rig counts combined with the economic uncertainties
in the U.S. will result in a short-term decline in revenues and operating
profits in this Division. The Company believes that its current market position
as a major supplier of fluids, combined with the price increases implemented
during 2001, should provide some offset to the anticipated reduced operating
activity. Expectations are that industry demand will return in the second half
of 2002, providing increasing demand for the Company's products and services.

The Testing & Services Division's principal operations include flow-back
pressure, volume testing and separation of impurities in gas wells. The markets
primarily served are Texas, Louisiana, Mississippi, Alabama, offshore Gulf of
Mexico, Mexico and Venezuela. While testing is performed periodically during a
well's life, the most extensive use of the Company's equipment and services is
immediately following completion of a well. In an effort to minimize the market
cyclicality, the Company has initiated a strategy to place a portion of its
asset fleet under favorable working arrangements with major domestic oil and gas
operators and to diversify into international markets. It has also expanded its
offshore Gulf of Mexico operations with the acquisition of Production Well
Testers, Inc. in September, 2001. The Company benefited from this strategy in
2001 in that revenues remained strong throughout the year, despite the drop in
rigs.

-17-

Natural gas prices have risen to the mid $3.00 per MMBTU level as of
late March, 2002. The stabilization of the price at this level, or higher
levels, will lead to increased drilling activity depending upon gas supply
and demand and storage considerations. The Company expects the current dip in
demand to unfavorably impact its business but believes the above mentioned
strategies should partially mitigate that impact. In addition, the business
climate created by the current market conditions, generally provides
increased acquisition opportunities for the Company, allowing the Company to
further consolidate its market position while increasing its revenue base.

The Well Abandonment & Decommissioning Division is in the business of
well plug and abandonment, platform decommissioning and removal, pipeline
abandonment and site clearance for oil and gas companies. Their services are
marketed primarily in the Gulf Coast region of the U.S. including onshore,
inland waters and offshore. The Division also includes Maritech Resources,
Inc. (Maritech), a company formed in 1999 to own, manage and exploit the
producing oil and gas properties acquired in conjunction with its well
abandonment business. The Division's strategy is to provide the oil and gas
companies with alternative ways of managing their well abandonment
obligations, while effectively base-loading well abandonment and
decommissioning work for the Division. The Division structures creative
alternatives to relieve the E&P companies of the burden of managing these
obligations and the end-of-life properties that are associated with them.
This may include purchasing an ownership interest of the mature production
wells in exchange for assuming various well abandonment obligations
associated with such properties. In some transactions, cash may be received
by the Company to balance the economics.

The Company's decommissioning liability is recorded at the fair value cost
to dismantle, relocate and dispose of the Company's offshore production
platforms, gathering systems, wells and related equipment. Costs are based on
prevailing market conditions. Oil and gas producing assets are recorded at the
future estimated decommissioning costs less any considerations received. These
costs are included in the full cost pool and are depleted on a unit of
production basis upon the depletion of the oil and gas producing assets.

Maritech seeks to purchase producing natural gas and oil properties that
are generally in the later stages of their economic life. Assumption of
future abandonment liability is a significant consideration with respect to
the offshore producing properties purchased to date. Although higher natural
gas prices tend to reduce the number of mature properties available to be
acquired by Maritech, these higher prices typically contribute to improved
operating results for Maritech, which was generally the case in the first
half of 2001. In contrast, lower natural gas prices typically contribute to
lower operating results for Maritech and a general increase in the number of
mature properties available for abandonment. The services provided consist of
platform decommissioning, removal and abandonment and well plugging and
abandonment. Platform decommissioning and well abandonment operations are
driven by regulations, which offers a partial hedge against fluctuations in
the commodity price of natural gas. In particular, MMS regulations require
removal of platforms and remediation of the seabed at the well site to its
original state within twelve months after lease expiration. Other factors
influencing this business include seasonal weather patterns, which typically
result in weaker first quarter operations, tighter environmental statutes and
stricter enforcement of abandonment regulations by regulatory agencies. The
Company contracts and manages, on a day-rate or turnkey basis, all aspects of
the decommissioning and abandonment of fields of all sizes.

As a result of the improving acquisition environment in the latter half
of 2001, Maritech purchased in December producing properties from Pogo
Producing Company in exchange for assuming related well abandonment and
decommissioning liabilities. In September 2001 Maritech purchased several
offshore properties from Seneca Resources Corporation and Range Energy
Ventures Corporation. Although the properties received had no future economic
value at the time of conveyance and therefore were not recorded on the
Company's balance sheet, Maritech assumed all the well abandonment and
decommissioning liabilities associated with the transferred properties. The
agreement stipulates that Maritech will be paid on a turnkey basis by the
sellers for the future well abandonment and decommissioning work performed,
as the work is performed. The Company estimates this contract will generate
approximately $24.3 million in revenues to the Company in future years, while
relieving the sellers of the burden of managing these end-of-life properties.

-18-

2001 COMPARED TO 2000

REVENUES - Revenues for the year ended December 31, 2001 were $303.4
million, up $78.9 million or 35.2% from the prior year of $224.5 million. All
divisions of the Company experienced significant growth during the year. The
Fluids Division reported revenues of $141.3 million, an increase of $22.5
million or 19% over the prior year. This Division benefited from improved
overall year-to-year oil and gas completion and workover activity in the Gulf
of Mexico, improved pricing, and a tightening fluids supply market. In
addition, the international fluids business increased by 48% with improved
activity coming from the U.K. markets. The Well Abandonment & Decommissioning
Division experienced significant growth in 2001 with reported revenues of
$98.5 million, up $38.1 million or 63%. With the addition of significant
amounts of capital equipment in the past two years combined with significant
improvements in equipment utilization, the Division reported record revenues
in 2001. Inland water and offshore activity increased 57% with improved
utilization and rates. Revenues from the decommissioning business have
increased substantially with the addition of heavy lift equipment to the
Division's product offerings. The land plug and abandonment and wireline
business also realized significant year-over-year growth through improved
utilization and rates. In addition, revenues of the Division's exploitation
company, Maritech Resources, Inc., have grown as a result of oil and gas
production purchased or developed in conjunction with our expanding well
abandonment and decommissioning business and higher natural gas prices in the
first half of the year. Revenues of the Testing & Services Division were
$65.7 million, an increase of $19.3 million or 42%. Revenue increases in this
Division are the result of improved market conditions driven by strong
natural gas drilling, additional equipment employed and improved pricing.
Domestic production testing revenues were up 120% with a full year's
utilization of the assets acquired in the 2000 swap with Key Energy and
improved pricing. In addition, international revenues, principally from
Mexico, also increased.

GROSS PROFIT - Gross profit for the year was $85.2 million compared to
$53.7 million in the prior year, an increase of $31.5 million or 59%. The
increase is due to the $78.9 million increase in revenues for the year combined
with a 420 basis point improvement in margin percentages to 28.1%. The Fluids
Division dollar margins improved 40% during the year, reflecting improved
pricing in domestic markets. The Division's gross profit percentage increased by
360 basis points to 25.2%. The Well Abandonment & Decommissioning Division
realized a 147% growth in dollar margins year-to-year while improving their
gross profit percentage by 820 basis points to 24.3%. These gains were the
result of improved equipment utilization in the onshore rigs, offshore rigless
packages, wireline units and inland water rigs. Higher day rates and improved
service mix to higher margin offshore work also significantly impacted margin
improvements. Gross profits from the Division's oil and gas exploitation
company, Maritech, comprise approximately 5% of the Company's total margin.
Maritech's dollar margins improved 165% while their gross profit percentage
increased by 1,700 basis points as a result of the spike in natural gas pricing
during the first half of the year. The Testing & Services Division dollar
margins increased by 38% with their margin percentage remaining approximately
flat at 39%. Improved gas drilling activity in the Gulf of Mexico stimulated
increased utilization and improved pricing. The Division also benefited from
having available for service those assets acquired in the 2000 asset swap with
Key Energy and, to a lesser extent, the assets acquired from Production Well
Testers in September, 2001.

GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative
expenses were $44.4 million in 2001 compared to $37.6 million in 2000, an
increase of $6.8 million or 18.1%. G&A expense as a percentage of revenues
decreased from 16.7% in 2000 to 14.6% in 2001. Expenses in the Well
Abandonment & Decommissioning Division increased due to the added
infrastructure necessary to support the Division's growth. Expenses in the
domestic production testing operation also increased as a result of expansion
and acquisitions. Finally, the Company's record earnings performance during
the year resulted in increased expenditures under the Company's incentive
compensation program.

INTEREST EXPENSE AND TAXES - Net interest expense for the year was $2.5
million compared to $4.2 million in the prior year. Reduced long-term debt
balances resulted in this decrease. The provision for income taxes was $14.4
million in 2001, an increase of $9.7 million as a result of improved earnings
during the year. The effective tax rate for the year was 37.6%, relatively
unchanged from 2000.

NET INCOME - Net income for the year was $23.9 million compared to a net
loss of $6.7 million (which includes a $14.5 million loss on the disposal of
discontinued operations) in the prior year. Net income per diluted share was
$1.61 in 2001 on 14,837,000 average diluted shares outstanding compared to a
loss of $0.49 per share on 13,616,000 average diluted shares outstanding in
2000.

-19-

2000 COMPARED TO 1999

REVENUES - Revenues for the year ended December 31, 2000 were $224.5
million compared to $178.1 million in 1999, an increase of $46.4 million or 26%.
Improved revenues reflected the overall improvement in the energy industry,
particularly the Gulf of Mexico markets. Fluid Division revenues improved 8% to
$118.9 million. Well Abandonment & Decommissioning revenues increased 67% to
$60.4 million due to significantly improved equipment utilization rates and
revenues generated from natural gas producing properties. Testing & Services
Division revenues increased 55% to $46.4 million due to increased production
testing activity in South Texas and Mexico and the addition of process services
operations in Norway.

GROSS PROFIT - Gross profits for the year were $53.7 million compared to
$39 million in 1999, an increase of $14.7 million or 38%. Gross profit
percentage increased from 22% to 24%. Gross profits in both the Well Abandonment
& Decommissioning and Testing & Services Divisions improved significantly as a
result of substantial improvements in equipment utilization. Gross profit from
natural gas producing properties also contributed to the year-over-year
improvement.

GENERAL AND ADMINISTRATIVE EXPENSES - General and administrative expenses
were $37.6 million in 2000 compared to $37.2 million in 1999. G&A expenses as a
percentage of revenues decreased from 20.9% in 1999 to 16.7% in 2000. In March
1999, the Company recorded a $4.7 million special charge relating to the
impairment of various plant assets predominantly in the Fluids Division.

During the fourth quarter of 1999, the Company initiated a strategic
restructuring program to refocus its efforts in the energy services business.
This program concentrated the Company's efforts on developing its oil and gas
services business and selling or consolidating non-core chemical operations. The
Company disposed of its micronutrients business, as well as several smaller
chemicals-related operations. Additionally, the Company has implemented plans to
exit certain product lines and businesses, which are not core to its new
strategic direction. The remaining chemicals business will consist of a
commodity products based operations, which significantly supports the energy
service markets. The Company also embarked on an aggressive program to
reorganize its overhead structure to reduce costs and improve operating
efficiencies in support of the energy services operations. As a result of this
change in strategy, the Company recorded a $2.3 million, pretax, restructuring
charge in the fourth quarter of 1999. The following table details the activity
in the restructuring during the twelve months ended December 31, 2000 (amounts
in thousands).

Involuntary termination costs consist of severance costs associated with
the termination of six management-level employees associated with the Company's
restructuring. Contractual costs include obligations triggered in two chemicals
product lines when the Company decided to exit these businesses. The remaining
exit costs are additional liabilities realized by exiting certain portions of
the specialty chemicals business. Of the total restructuring charge at December
31, 2000, approximately $0.9 million is associated with the Fluids Division, and
$0.3 million with corporate administrative activities. The majority of these
costs are expected to be paid within the next 12 months and will be funded using
cash flow from operations.

INTEREST EXPENSE - Interest expense decreased during the period, compared
to the prior year, due to decreased long-term debt over the past twelve months.
Proceeds from the sales of a portion of the micronutrient business in 2000 and
the Process Technologies business in 1999 were used to reduce long-term debt.

-20-

OTHER INCOME - In March 1999, the Company sold its corporate headquarters
building, realizing a gain of approximately $6.7 million. The Company
subsequently signed a ten-year lease agreement for space within the building.
During the second quarter of 1999, the Company sold its Process Technologies
business for a $29.6 million gain.

NET INCOME - Income before discontinued operations and the cumulative
effect of accounting change was $7.7 million in 2000 and $14.3 million in 1999.
Net income per diluted share before discontinued operations and the cumulative
effect of accounting change was $0.57 in 2000 based on 13,616,000 average
diluted shares outstanding and $1.06 in 1999 based on 13,576,000 average diluted
shares outstanding.

DISCONTINUED OPERATIONS - In conjunction with the Company's strategic
restructuring program, the Company developed a plan in October 2000 to exit its
micronutrients business, which produces zinc and manganese products for the
agricultural markets. The plan provided for the sale of the stock of TETRA's
wholly owned Mexican subsidiary, Industrias Sulfamex, S.A. de C.V., a producer
and distributor of manganese sulfate, and all the manganese inventory held by
the Company's U.S. operations. It also provided for the sale of all inventories
and the sale or shutdown of the plant and equipment associated with its zinc
sulfate business. In December 2000, the Company sold all of its U.S. and foreign
manganese sulfate assets for $15.4 million in cash and wrote down its investment
in the remaining zinc sulfate micronutrients assets to their estimated net
realizable value.

The Company has accounted for the micronutrients business as a discontinued
operation and has restated prior period financial statements accordingly. The
estimated loss on the disposal of the discontinued operations of $14.5 million
(net of income tax benefit of $5.4 million) represents the estimated loss on the
disposal of the assets of the micronutrients business and a provision of $0.2
million for anticipated losses during the disposition period from October 1,
2000 to September 30, 2001. Revenues from discontinued operations were $30.6
million in 2000 compared to $37.2 million in 1999. Net income from discontinued
operations was $0.01 million in 2000 and $1.7 million in 1999.

In April 1998, the American Institute of Certified Public Accountants
issued Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES
(SOP 98-5), which requires that costs related to start-up activities be expensed
as incurred. Prior to 1999, the Company capitalized those costs incurred in
connection with opening a new production facility. The Company adopted the
provisions of the SOP 98-5 in its financial statements for the year ended
December 31, 1999. The effect of adoption of SOP 98-5 was to record a charge for
the cumulative effect of an accounting change of $5.8 million ($0.43 per share),
net of taxes of $3.9 million, to expense costs that had been previously
capitalized prior to 1999.

Net loss for the year 2000 was $6.7 million (which includes a $14.5 million
loss on the disposal of discontinued operations) compared to income of $10.2
million in the prior year. Net loss per diluted share was $0.49 in 2000 on
13,616,000 average diluted shares outstanding and net income of $0.75 in 1999 on
13,576,000 average diluted shares outstanding.

LIQUIDITY AND CAPITAL RESOURCES

Over the past three years, the Company has funded its operating activities
from internally generated cash flow, even during periods of weak industry demand
as in 1999. During this three-year period, the Company generated approximately
$93 million of cash flow from operations which it used to fund the purchase of
approximately $57 million of capital equipment and $14 million in acquisitions.
Over the same period, total outstanding debt was reduced from $111.3 million at
December 31, 1998 to $41.9 million at December 31, 2001. This reduction of $69.4
million was funded through cash generated from operations and cash generated
from the restructuring of the Company and disposal of non-core assets. During
this period, working capital increased from $60.3 million in 1999 to $64.3
million in 2000 to $69.5 million in 2001.

-21-

OPERATING ACTIVITIES - Net cash provided by operating activities was $58.1
million in 2001 compared to $22.6 million in 2000, an increase of $35.5 million.
A significant portion of this increase is due to the increased earnings reported
in 2001 and an increase in year-end accruals associated with salaries and
benefits, taxes and Well Abandonment & Decommissioning activities. Also
contributing to the improvement was the increase in depreciation and depletion
and the increase in deferred tax expense, both the results of added capital
investments over the past several years. Accounts receivables increased during
the year, reflecting the Company's revenue growth, although the increase was
less than that of 2000 due to a substantial improvement in revenues late in 2000
compared to the same period of 1999. Inventories increased in 2001, consuming
approximately $3.6 million, reflecting the weakening market conditions toward
the end of 2001 in the fluids business. By comparison, inventories were reduced
in 2000 due to an inventory reduction program implemented by the Company and
improved market demand. Finally, the Company generated approximately $8.0
million through the liquidation of working capital associated with its
discontinued micronutrients business.

INVESTING ACTIVITIES - Capital expenditures for the year ended December 31,
2001 were $28.3 million. Approximately $4.5 million was invested in the Fluids
Division for the procurement of plant production equipment and filtration and
blending equipment. The Well Abandonment & Decommissioning Division invested
approximately $12.6 million of cash during the year to expand and upgrade its
fleet in support of its inland waters and offshore abandonment operations. The
Company also invested in additional equipment to enhance its decommissioning and
salvage business, which included significant refurbishment of its heavy lift
barge, the Southern Hercules. Approximately $10.6 million was invested in the
Testing & Services Division, a significant portion of which went to expand the
production testing equipment fleet. The Company also invested additional capital
in its process services operations to enhance its oily residual separation
business. The remaining funds were used to support general corporate activities.

Major investing activities of the Company in 2001 included business
acquisitions totaling $7.6 million and the purchase of additional end-of-life
oil and gas properties.

During the third quarter of 2001, the Company acquired the assets of
Production Well Testers, Inc. (PWT) for approximately $4.9 million in cash. PWT
provides production testing services to offshore Gulf of Mexico markets as well
as onshore Gulf Coast markets. The business has been integrated with TETRA's
Testing & Services Division as part of its production testing operations,
enhancing the Division's production testing presence in Louisiana and expanding
operations into the Mississippi and Alabama markets.

The Company acquired the assets of Lee Chemical during the fourth
quarter of 2001 for approximately $2.7 million in cash. Lee is a producer and
distributor of liquid calcium chloride in the U.S. West Coast markets. Also
in the fourth quarter, the Company's Well Abandonment & Decommissioning
Division purchased oil and gas producing properties in exchange for the
assumption of approximately $4.5 million of decommissioning liabilities
related to the properties and other considerations. As part of that
transaction, the Company received approximately $1.7 million of cash to
satisfy other working interest owners' future well abandonment obligations.
This cash is reported as restricted cash on the Company's balance sheet. The
oil and gas producing assets were recorded at the future estimated costs to
abandon and decommission the properties.

In the second quarter of 2000, the Company completed an asset exchange of
its trucking operations for certain assets of Key Energy Services. The assets
acquired included production testing equipment which complemented and expanded
the Company's existing testing fleet. The Company accounted for the exchange of
interest as a non-monetary transaction whereby the basis in the exchanged assets
became the new basis in the assets received. No gain or loss was recognized as a
result of the exchange.

During the fourth quarter of 2000, the Company expanded its Well
Abandonment & Decommissioning capacity through the acquisition of the assets of
Cross Offshore Corporation, Ocean Salvage Corporation and Cross Marine LLC. The
Company paid approximately $6.2 million in cash plus additional future
consideration contingent upon future net earnings. The assets purchased
complement the Company's current well abandonment, platform decommissioning and
heavy lift operations in the Gulf Coast inland waters and offshore markets. This
transaction approximately doubled the offshore rigless well abandonment packages
and increased the number of inland water well abandonment packages the Company
can provide. It also gave the Company heavy lift capabilities with the
acquisition of the Southern Hercules, a 500 ton capacity heavy lift barge.

-22-

Also in the fourth quarter of 2000, the Company purchased, in two separate
transactions, oil and gas producing properties in exchange for the assumption of
approximately $9.6 million in decommissioning liability. Oil and gas producing
assets were recorded at the future estimated decommissioning costs less cash
received of $1.3 million.

FINANCING ACTIVITIES - To fund its capital and working capital
requirements, the Company uses cash flow as well as its general purpose,
secured, prime rate/LIBOR-based revolving line of credit with a bank syndicate
led by Bank of America. In December 2001, the Company amended its line of credit
to an $80 million line, that may be expanded to $110 million during the first
year, at the Company's discretion. This agreement matures in December 2004,
carries no amortization, and is secured by accounts receivable and inventories.
The agreement permits the Company to execute up to $20 million of capital leases
and $50 million of unsecured senior notes, and there are no limitations or
restrictions on operating leases or unsecured non-recourse financing. TETRA's
credit facility is subject to common financial ratio covenants. These include,
among others, a funded debt-to-EBITDA ratio, a fixed charge coverage ratio, a
tangible net worth minimum, an asset coverage ratio, and dollar limits on the
total amount of capital expenditures and acquisitions the Company may undertake
in any given year. The Company pays a commitment fee on unused portions of the
line and a LIBOR-based interest rate which decreases or increases as the
Company's funded debt-to-EBITDA ratio (as defined in the Credit Agreement)
improves or deteriorates. The Company is not required to maintain compensating
balances. The covenants also included certain restrictions on the Company for
the sale of assets. As of December 31, 2001, the Company has $3.5 million in
letters of credit and $41.0 million in long-term debt outstanding against an $80
million line of credit, leaving a net availability of $35.5 million, expandable
to $65.5 million by December 2002. The Company believes this new credit facility
will meet its foreseeable capital and working capital requirements through
December 2004.

In September 1997, the Company entered into two interest rate swap
agreements, each with a nominal amount of $20 million, which were effective
January 2, 1998 and expire on January 2, 2003. The interest rate swap agreements
provide for the Company to pay interest at a fixed rate of approximately 6.4%
(annual rate) every three months, beginning April 2, 1998 and requires the
issuer to pay the Company on a floating rate based on LIBOR. The swap
transactions can be canceled by the Company through payment of a cancellation
fee, which is based upon prevailing market conditions and remaining life of the
agreement. The estimated fair value of the swap transactions at December 31,
2001 was $1.3 million, net of taxes, below the carrying value.

In November 2001, the Company announced that its Board of Directors had
authorized the repurchase of up to $10 million of its common stock. The Company
feels that its stock is significantly undervalued in relation to its peer group,
financial position and future growth prospects and, consequently, is a sound
investment of its capital dollars. During the year the Company repurchased
228,400 shares of its stock at a cost of $3.9 million. Finally, the Company
received $4.1 million during 2001 from the exercising of stock options by
employees.

In addition to the aforementioned revolving credit facility, the Company
funds its short term liquidity requirements from cash generated by operations,
as well as from other traditional financing arrangements, such as leasing with
institutional leasing companies and vendor financing. The Company's debt is not
currently rated and the Company's ability to access its revolving credit line is
largely unaffected by fluctuations in its stock price. However, the Company must
comply with certain financial ratio covenants in the credit agreement.
Significant deterioration of these ratios could result in default under the
credit agreement and, if not remedied, could result in termination of the
agreement and acceleration of the outstanding balance under the facility. The
Company's ability to comply with these financial covenants centers largely upon
its ability to generate adequate earnings before interest, taxes, depreciation
and amortization (EBITDA). Historically, the Company's financial performance and
EBITDA levels have been more than adequate to meet these covenants, and the
Company expects this trend to continue. Over the past three years, the Company's
EBITDA has increased from $16.4 million in 1999 to $31.9 million in 2000 and
$59.3 million in 2001, with the 1999 earnings reflecting a severe downturn in
the oil and gas industry. During that same period, the Company's debt decreased
from over $111 million to $41.9 million. The Company believes its principal
sources of liquidity, cash flow from operations, revolving credit facility and
traditional financing arrangements are adequate to meet its current and
anticipated capital and operating requirements through at least December 2004.

-23-

The table below recaps the Company's contractual cash obligations as of
December 31, 2001:

(1) Decommissioning liabilities must be satisfied within twelve months after an
oil and gas property's lease has expired. Lease expiration occurs six
months after the last producing well on the lease ceases production. The
Company has estimated the timing of these payments based upon anticipated
lease expiration dates, which are subject to many changing variables that
can influence the ultimate timing of these cash flows.

Other commercial commitments of the Company as of December 31, 2001 include
letters of credit of $3.5 million, of which $2.1 million will expire within one
year and $1.4 million within two years.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

In preparing the financial statements, the Company makes assumptions,
estimates and judgements that affect the amounts reported. The Company
periodically evaluates its estimates and judgements related to bad debts;
impairments of long-lived assets, including goodwill and decommissioning
liability. Note B to the Consolidated Financial Statements contains the
accounting policies governing each of these matters. The Company's estimates are
based on historical experience and on future expectations that are believed to
be reasonable; the combination of these factors forms the basis for making
judgements about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results are likely to differ from
the Company's current estimates and those differences may be material.

Reserves for bad debts are determined on a specific identification basis
when the Company believes that the required payment of specific amounts owed to
it is not probable. A significant portion of the Company's revenues come from
oil and gas E&P companies. This activity can be significantly affected by the
level of industry capital expenditures for the exploration and production of oil
and gas reserves and the plugging and decommissioning of abandoned oil and gas
properties. These expenditures are influenced strongly by oil company
expectations about the supply and demand for crude oil and natural gas products
and by the energy price environment that results from supply and demand
imbalances. If, due to these circumstances, the customers are unable to repay
these receivables, additional allowance may be required.

The determination of impairment on long-lived assets, including goodwill,
is conducted periodically when indicators of impairment are present. If such
indicators were present, the determination of the amount of impairment is based
on the Company's judgements as to the future operating cash flows to be
generated from these assets throughout their estimated useful lives. The oil and
gas industry is cyclical and the Company's estimates of the period over which
future cash flows will be generated, as well as the predictability of these cash
flows, can have significant impact on the carrying value of these assets and, in
periods of prolonged down cycles may result in impairment charges.

The Company's decommissioning liability is recorded at the fair value cost
to dismantle, relocate and dispose of the Company's offshore production
platforms, gathering systems, wells and related equipment. In estimating the
decommissioning liabilities, the Company performs detailed estimating
procedures, analysis and engineering studies. These costs are included in the
full cost pool of the oil and gas properties acquired less any cash
considerations received, and are amortized on a unit-of-production basis upon
the depletion of the oil and gas producing assets. The Company performs
impairment tests on these full cost pool assets when indicators of impairment
are present. Additionally, the Company reviews the adequacy of its
decommissioning liability whenever indicators suggest that the estimated cash
flows underlying the liability have changed materially. The timing and amounts
of these cash flows are subject to changes in the energy industry environment
and may result in additional liabilities recorded, which in turn would increase
the Company's full cost pool.

-24-

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is subject to market risk exposure related to changes in
interest rates on the floating rate portion of its credit facility. These
instruments carry interest at an agreed-upon percentage rate spread above LIBOR.
At December 31, 2001, the Company had $41.0 million outstanding under its credit
facility, of which $40 million was subject to an interest rate swap and $1.0
million was subject to a floating rate based on LIBOR plus 1.25%. The interest
rate swap agreements provide the Company with a 6.4% fixed interest rate which
mitigates a portion of the Company's risk against increases in interest rates.
Based on this balance, an immediate change of one percent in the interest rate
would cause a change in interest expense of approximately $10,000 on an annual
basis. The Company has no financial instruments subject to foreign currency
fluctuation or commodity price risks at December 31, 2001.

FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities," requires companies to record derivatives on the balance sheet as
assets and liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives are accounted for depending on the
use of the derivative and whether it qualifies for hedge accounting. The Company
has adopted this accounting standard, as required, on January 1, 2001.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial statements of the Company and its subsidiaries required to be
included in this Item 8 are set forth in Item 14 of this Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

There is no disclosure required by Item 304 of Regulation S-K in this
report.

-25-

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The information required by this Item as to the directors and executive
officers of the Company is hereby incorporated by reference from the information
appearing under the captions "Election of Directors", "Information about
Continuing Directors", "Executive Officers" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's definitive proxy statement
which involves the election of directors and is to be filed with the Securities
and Exchange Commission ("Commission") pursuant to the Securities Exchange Act
of 1934 as amended (the "Exchange Act") within 120 days of the end of the
Company's fiscal year on December 31, 2001.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by this Item as to the management of the Company
is hereby incorporated by reference from the information appearing under the
captions "Director Compensation" and "Executive Compensation" in the Company's
definitive proxy statement which involves the election of directors and is to be
filed with the Commission pursuant to the Exchange Act within 120 days of the
end of the Company's fiscal year on December 31, 2001. Notwithstanding the
foregoing, in accordance with the instructions to Item 402 of Regulation S-K,
the information contained in the Company's proxy statement under the sub-heading
"Management and Compensation Committee Report" and "Performance Graph" shall not
be deemed to be filed as part of or incorporated by reference into this Form
10-K.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The information required by this Item as to the ownership by management and
others of securities of the Company is hereby incorporated by reference from the
information appearing under the caption "Beneficial Stock Ownership of Certain
Stockholders and Management" in the Company's definitive proxy statement which
involves the election of directors and is to be filed with the Commission
pursuant to the Exchange Act within 120 days of the end of the Company's fiscal
year on December 31, 2001.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information required by this Item as to certain business relationships
and transactions with management and other related parties of the company is
hereby incorporated by reference to such information appearing under the caption
"Management and Compensation Committee Interlocks and Insider Participation" in
the Company's definitive proxy statement which involves the election of
directors and is to be filed with the Commission pursuant to the Exchange Act
within 120 days of the end of the Company's fiscal year on December 31, 2001.

-26-

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) List of documents filed as part of this Report

1. Financial Statements of the Company

2. Financial Statement Schedule

All other schedules are omitted as they are not required, or are
not applicable, or the required information is included in the
financial statements or notes thereto.

-27-

3. List of Exhibits

3.1 (i)Restated Certificate of Incorporation (filed as an exhibit
to the Company's Registration Statement on Form S-1
(33-33586) and incorporated herein by reference).
3.1 (ii)Certificate of Designation of Series One Junior
Participating Preferred Stock of the Company dated October
27, 1998 (filed as an exhibit to the Company's
Registration Statement on Form 8-A filed on October 27,
1998 (the "1998 Form 8-A") and incorporated herein by
reference).
3.2 Bylaws, as amended (filed as an exhibit to the Company's
Registration Statement on Form S-1 (33-33586) and
incorporated herein by reference).
4.1 Rights Agreement dated as of October 26, 1998 between the
Company and Computershare Investor Services LLC (as
successor in interest to Harris Trust & Savings Bank), as
Rights Agent (filed as an exhibit to the 1998 Form 8-A and
incorporated herein by reference).
10.1 Long-term Supply Agreement with Bromine Compounds Ltd.
(filed as an exhibit to the Company's Form 10-K for the
year ended December 31, 1996 and incorporated herein by
reference; certain portions of this exhibit have been
omitted pursuant to a confidential treatment request filed
with the Securities and Exchange Commission).
10.2 Agreement dated November 28, 1994 between Olin Corporation
and TETRA-Chlor, Inc. (filed as an exhibit to the
Company's Form 10-K for the year ended December 31, 1994
and incorporated herein by reference; certain portions of
this exhibit have been omitted pursuant to a confidential
treatment request filed with the Securities and Exchange
Commission).
10.3 Sales Agreement with Albemarle Corporation (filed as an
exhibit to the Company's Form 10-Q for the three months
ended June 30, 1997 and incorporated herein by reference;
certain portions of this exhibit have been omitted
pursuant to a confidential treatment request filed with
the Securities and Exchange Commission).
10.4 1990 Stock Option Plan, as amended through January 5, 2001
(filed as an exhibit to the Company's Form 10-K for the
year ended December 31, 2000 and incorporated herein by
reference).
10.5 Director Stock Option Plan (filed as an exhibit to the
Company's Form 10-K for the year ended December 31, 2000
and incorporated herein by reference).
10.6 1998 Director Stock Option Plan (filed as an exhibit to
the Company's Form 10-K for the year ended December 31,
2000 and incorporated herein by reference).
10.7* Amended and Restated Credit Agreement dated as of December
14, 2001 with Bank of America, N.A.
10.8* Letter of Agreement with Gary C. Hanna, dated March, 2002
21* Subsidiaries of the Company
23* Consent of Ernst & Young, LLP

- ----------
* Filed with this report

(b) Form 8-K: None.

-28-

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, TETRA Technologies, Inc. has duly caused this report to be
signed in its behalf by the undersigned, thereunto duly authorized.

TETRA TECHNOLOGIES, INC.

Date: March 26, 2002 BY: /s/ Geoffrey M. Hertel
------------------------------------------
Geoffrey M. Hertel, President & CEO

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:

SIGNATURE TITLE DATE
--------- ----- -----

/s/J. Taft Symonds Chairman of March 26, 2002
- ------------------------- the Board of Directors
J. Taft Symonds

/s/Geoffrey M. Hertel President and Director March 26, 2002
- ------------------------- (Chief Executive Officer)
Geoffrey M. Hertel

/s/Joseph M. Abell Senior Vice President March 26, 2002
- ------------------------- (Chief Financial Officer)
Joseph M. Abell

/s/Bruce A. Cobb Vice President, Finance March 26, 2002
- ------------------------- (Principal Accounting Officer)
Bruce A. Cobb

/s/Hoyt Ammidon, Jr. Director March 26, 2002
- -------------------------
Hoyt Ammidon, Jr.

/s/Paul D. Coombs Director March 26, 2002
- ------------------------- (Chief Operating Officer)
Paul D. Coombs

/s/Ralph S. Cunningham Director March 26, 2002
- -------------------------
Ralph S. Cunningham

/s/Tom H. Delimitros Director March 26, 2002
- -------------------------
Tom H. Delimitros

/s/Allen T. Mcinnes Director March 26, 2002
- -------------------------
Allen T. McInnes

/s/Kenneth P. Mitchell Director March 26, 2002
- -------------------------
Kenneth P. Mitchell

-29-

REPORT OF INDEPENDENT AUDITORS

Board of Directors and Stockholders
TETRA Technologies, Inc.

We have audited the accompanying consolidated balance sheets of TETRA
Technologies, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for each of the three years in the period ended December 31, 2001. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of TETRA
Technologies, Inc. and subsidiaries at December 31, 2001 and 2000, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 2001, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

ERNST & YOUNG LLP

Houston, Texas
February 20, 2002

F-1

TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

See Notes to Consolidated Financial Statements

F-2

TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

See Notes to Consolidated Financial Statements

F-3

TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

See Notes to Consolidated Financial Statements

F-4

TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

See Notes to Consolidated Financial Statements

F-5

TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

See Notes to Consolidated Financial Statements

F-6

TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2001

NOTE A -- ORGANIZATION AND OPERATIONS OF THE COMPANY

TETRA Technologies, Inc. ("TETRA" or "the Company") is an oil and gas
services company with an integrated calcium chloride and brominated products
manufacturing operation that supplies feedstocks to energy markets, as well as
other markets. The Company is comprised of three divisions - Fluids, Well
Abandonment & Decommissioning and Testing & Services.

The Company's Fluids Division manufactures and markets clear brine fluids
to the oil and gas industry for use in well drilling, completion and workover
operations in both domestic and international markets. The Division also markets
the fluids and dry calcium chloride manufactured at its production facilities to
a variety of markets outside the energy industry.

The Well Abandonment & Decommissioning Division provides a comprehensive
range of services required for the abandonment of depleted oil and gas wells,
and the decommissioning of platforms, pipelines and other associated equipment.
The Division services the onshore, inland waters and offshore markets of the
Gulf of Mexico. The Division is also an oil and gas producer from wells acquired
in connection with its well abandonment and decommissioning business.

The Company's Testing & Services Division provides production testing
services to the Texas, Louisiana, offshore Gulf of Mexico and Latin American
markets. It also provides the technology and services required for separation
and recycling of oily residuals generated from petroleum refining and
exploration and production operations.

TETRA Technologies, Inc. was incorporated in Delaware in 1981. All
references to the Company or TETRA include TETRA Technologies, Inc. and its
subsidiaries. The Company's corporate headquarters are located at 25025
Interstate 45 North in The Woodlands, Texas. Its phone number is (281) 367-1983,
and its website may be accessed at www.tetratec.com.

F-7

NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.

CASH EQUIVALENTS

The Company considers all highly liquid investments with a maturity of
three months or less when purchased to be cash equivalents.

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.

FINANCIAL INSTRUMENTS

The fair value of the Company's financial instruments, which include cash,
accounts receivables, short-term borrowings and long-term debt, approximates
their carrying amounts. Financial instruments that subject the Company to
concentrations of credit risk consist principally of trade receivables with
companies in the energy industry. The Company's policy is to evaluate, prior to
shipment, each customer's financial condition and determine the amount of open
credit to be extended. The Company generally requires appropriate, additional
collateral as security for credit amounts in excess of approved limits. The
Company's customers consist primarily of major, well-established oil and gas
producers and independents.

PROPERTY, PLANT AND EQUIPMENT

Property, plant, and equipment are stated at the cost of assets acquired.
Expenditures that increase the useful lives of assets are capitalized. The cost
of repairs and maintenance are charged to operations as incurred. For financial
reporting purposes, the Company provides for depreciation using the
straight-line method over the estimated useful lives of assets which are as
follows:

Buildings 25 years
Machinery and equipment 3 - 5 and 10 years
Automobiles and trucks 4 years
Chemical plants 15 years

Certain production equipment and properties are depreciated and depleted
based on operating hours or units of production, subject to a minimum amount,
because depreciation and depletion occur primarily through use rather than
through elapsed time. Depreciation and depletion expense for the years ended
December 31, 2001, 2000 and 1999 was $17.5 million, $13.5 million and $13.1
million, respectively.

For income tax purposes, the Company provides for depreciation using
accelerated methods. Interest capitalized for the years ended December 31, 2001,
2000 and 1999 was $0.5 million, $0.3 million and $0.07 million, respectively.

F-8

The Company's Maritech Resources, Inc. subsidiary has interests in oil and
gas properties that are located offshore in the Gulf of Mexico or in inland
waters adjacent thereto. The Company follows the full cost method of accounting
for its investment in natural gas and oil properties. Under the full cost
method, all the costs associated with acquiring, developing and producing the
Company's oil and gas properties are capitalized. Maritech's offshore property
purchases are recorded at the value exchanged at closing combined with an
estimate of its proportionate share of the decommissioning liability assumed in
the purchase, based upon its working interest ownership percentage. In
estimating the decommissioning liabilities associated with these offshore
property acquisitions, the Company performs detailed estimating procedures,
analysis and engineering studies. All capitalized costs are depleted on a
unit-of-production basis based on the estimated remaining equivalent proved oil
and gas reserves. Oil and gas producing assets were depleted at an average rate
of $1.27 per MCF and $1.60 per MCF for the years ended December 31, 2001 and
2000, respectively. Properties are periodically assessed for impairment in
value, with any impairment charged to expense.

DECOMMISSIONING LIABILITY

The decommissioning liability recorded is the fair value cost to dismantle,
relocate and dispose of the Company's offshore production platforms, gathering
systems, wells and related equipment. These costs are used to value the full
cost pool of the oil and gas properties and are depleted on a unit of production
basis upon the depletion of the oil and gas producing assets. The Company
utilizes the services of its Well Abandonment & Decommissioning group, when
possible, to perform the work to satisfy these liabilities. In connection with
2000 and 2001 offshore property additions, the Company assumed net abandonment
liabilities estimated at approximately $9.6 million and $4.5 million,
respectively.

ADVERTISING

The Company expenses costs of advertising as incurred. Advertising expense
for continuing operations for the years ended December 31, 2001, 2000 and 1999
was $1.3 million, $3.0 million and $3.1 million, respectively.

INTANGIBLE ASSETS

Patents and licenses are stated on the basis of cost and are amortized on a
straight-line basis over the estimated useful lives, generally ranging from 14
to 20 years.

Goodwill is amortized on a straight-line basis over its estimated life of
20 - 40 years. On an annual basis, the Company estimates the future estimated
discounted cash flows of the business to which goodwill relates in order to
determine that the carrying value of the goodwill had not been impaired.

LONG-LIVED ASSETS

Impairment losses are recognized when indicators of impairment are present
and the estimated undiscounted cash flows are not sufficient to recover the
asset's carrying cost. Assets held for disposal are recorded at the lower of
carrying value or estimated fair value less costs to sell.

INCOME TAXES

The Company computes income tax expense using the liability method. Under
this method, deferred tax liabilities or assets are determined based on
differences between financial reporting and tax bases of assets and liabilities
and are then measured using tax rates and laws that are in effect at year end.

ENVIRONMENTAL LIABILITIES

Environmental expenditures which 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. These costs are adjusted as further information develops
or circumstances change.

F-9

STOCK COMPENSATION

The Company accounts for stock-based compensation using the intrinsic value
method. Compensation cost for stock options is measured as the excess, if any,
of the quoted market price of the Company's stock at the date of the grant over
the amount an employee must pay to acquire the stock. Note L to the Consolidated
Financial Statements contains a summary of the pro forma effects to reported net
income and earnings per share as if the Company had elected to recognize the
compensation cost based on the fair value of the options granted at the grant
date.

INCOME PER COMMON SHARE

Basic earnings per share excludes any dilutive effects of options. Diluted
earnings per share includes the dilutive effect of stock options, which is
computed using the treasury stock method during the periods such options were
outstanding. A reconciliation of the common shares used in the computations of
income per common and common equivalent shares is presented in Note O to the
Consolidated Financial Statements.

FOREIGN CURRENCY TRANSLATION

The U.S. dollar is the designated functional currency for all of the
Company's foreign operations, except for those in the United Kingdom, Norway and
Brazil where the British Pound, the Norwegian Kroner and the Brazilian Real,
respectively, are the functional currency. The cumulative translation effects of
translating balance sheet accounts from the functional currencies into the U.S.
dollar at current exchange rates are included as a separate component of
shareholders' equity.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclose contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

RECLASSIFICATIONS

Certain previously reported financial information has been reclassified to
conform to the current year's presentation.

REVENUE RECOGNITION

Revenues are recognized when finished products are shipped to unaffiliated
customers or services have been rendered with appropriate provisions for
uncollectable accounts. The Company recognizes oil and gas revenue from its
interests in producing wells as oil and natural gas is produced and sold from
those wells. Oil and natural gas sold is not significantly different from the
Company's share of production.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company manages its exposure to variable interest rate financing
arrangements by entering into interest rate contracts, which provide for the
Company to pay a fixed rate of interest and receive a variable rate of interest
over the term of the contracts. The differential to be paid or received as a
result of the changes in the prevailing interest rates are accrued and
recognized as adjustments of interest expense related to the debt. The net
amount receivable or payable under the interest rate contracts are included in
other assets or liabilities.

F-10

START-UP COSTS

In April 1998, the American Institute of Certified Public Accounts issued
Statement of Position 98-5, REPORTING THE COSTS OF START-UP ACTIVITIES ("SOP
98-5"), which requires that costs related to start-up activities be expensed as
incurred. Prior to 1999, the Company capitalized those costs incurred in
connection with opening a new production facility. The Company adopted the
provisions of the SOP 98-5 in its financial statements for the year ended
December 31, 1999. The effect of adoption of SOP 98-5 was to record a charge in
1999 for the cumulative effect of an accounting change of $5.8 million ($0.43
per share), net of taxes of $3.9 million, to expense costs that had been
previously capitalized prior to 1999. Had SOP 98-5 been adopted as of January 1,
1998, the reported net income and earnings per share for 1998 would not have
materially changed.

NEW ACCOUNTING PRONOUNCEMENTS

In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, Business Combinations, which supersedes Accounting Principles Board
(APB) Opinion No. 16, Business Combinations. SFAS 141 eliminates the
pooling-of-interests method of accounting for business combinations and modifies
the application of the purchase accounting method. The elimination of the
pooling-of-interests method is effective for transactions initiated after June
30, 2001. The remaining provisions of SFAS 141 will be effective for
transactions, accounted for using the purchase method, that are completed after
June 30, 2001.

In July 2001, the FASB also issued Statement of Financial Accounting
Standards No. 142, Goodwill and Intangible Assets, which supersedes APB Opinion
No. 17, Intangible Assets. SFAS 142 eliminates the current requirement to
amortize goodwill and indefinite-lived intangible assets, addresses the
amortization of intangible assets with a defined life and addresses the
impairment testing and recognition for goodwill and intangible assets. SFAS 142
will apply to goodwill and intangible assets as of the Statement's effective
date. SFAS 142 is effective for the year ended December 31, 2002. The Company
believes adoption of this standard will not have a material effect on its
financial position and results of operations.

In July 2001, the FASB released SFAS No. 143, "Accounting for Asset
Retirement Obligations," which is required to be adopted by the Company no later
than January 1, 2003. SFAS No. 143 addresses the financial accounting and
reporting for obligations and retirement costs related to the retirement of
tangible long-lived assets. The Company currently records the retirement
obligations associated with the oil and gas properties it has acquired and is
currently reviewing the provisions of SFAS No. 143 to determine the Standard's
impact on other operations of the Company, if any, and on its financial
statements upon adoption.

In August 2001, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets," which is effective for the Company
beginning January 1, 2002. SFAS No. 144 supersedes SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
Of," and the accounting and reporting provisions relating to the disposal of a
segment of a business of Accounting Principles Board Opinion No. 30. The Company
does not anticipate that the adoption of SFAS No. 144 will have a material
impact on its financial position or results of operations.

F-11

NOTE C -- DISCONTINUED OPERATIONS

The Company developed a plan in October 2000 to exit its micronutrients
business, which produced zinc and manganese products for agricultural markets.
The plan provided for the sale of the stock of TETRA's wholly owned Mexican
subsidiary, Industrias Sulfamex, S.A. de C.V., a producer and distributor of
manganese sulfate, and all the manganese inventory held by the Company's U.S.
operations. It also provided for the sale of all inventories, plant and
equipment associated with its U.S. zinc sulfate business. In December 2000, the
Company sold all of its U.S. and foreign manganese sulfate assets for $15.4
million in cash. Effective September 30, 2001, the Company sold the remainder of
its micronutrients business, except for the Cheyenne, Wyoming facility, which
was closed and held for sale at December 31, 2001.

The Company has accounted for the micronutrients business as a discontinued
operation and has restated prior period financial statements accordingly. The
estimated loss on the disposal of the discontinued operations of $14.5 million
(net of income tax benefit of $5.4 million) represents the estimated loss on the
disposal of the assets of the micronutrients business which was recognized in
2000. The Company also made a provision of $0.2 million for expected losses
during the disposition period from October 1, 2000 to September 30, 2001.

Summary operating results of discontinued operations are as follows:

Assets and liabilities of the micronutrients business disposed of consist of the
following at December 31:

The net assets to be disposed of are carried at their expected net
realizable values and have been separately classified in the accompanying
balance sheet at December 31, 2001.

During the period from January 1, 2001 to September 30, 2001 and for the
years ended December 31, 2000 and 1999, the loss from discontinued operations,
net of taxes, included an allocation of interest expense of $0.4 million, $1.4
million and $2.0 million, respectively. For the period from the measurement date
through the expected divestiture date, the loss from discontinued operations
included an allocation of interest expense of $0.9 million. Interest expense
allocated to the discontinued operations was based upon borrowings directly
attributed to those operations.

F-12

NOTE D -- RESTRUCTURING AND SPECIAL CHARGES

During the fourth quarter of 1999, the Company initiated a strategic
restructuring program to refocus its efforts in the energy services business.
This program concentrated the Company's efforts on developing its oil and gas
services business and selling or consolidating non-core chemical operations. To
achieve this strategy, the Company sold its micronutrients business, as well as
several smaller chemicals-related operations. Additionally, the Company
implemented plans to exit certain product lines and businesses which were not
core to its new strategic direction. The remaining chemicals business is a
commodity products based operation, which significantly supports the energy
service markets. The Company also embarked on an aggressive program to
reorganize its overhead structure to reduce costs and improve operating
efficiencies in support of the energy services operations.

As a result of this change in strategy, the Company recorded a $2.3
million, pretax, restructuring charge in the fourth quarter of 1999. The
following table details the activity during the twelve months ended December 31,
2001.

Amortization of these assets is computed using the straight-line method
over the terms of the leases and is included in depreciation and amortization
expense.

Future minimum lease payments by year and in the aggregate, under capital
leases and noncancellable operating leases with terms of one year or more
consist of the following at December 31, 2001:

Rental expense for all operating leases was $8.1 million, $6.5 million and
$5.4 million in 2001, 2000 and 1999, respectively.

F-15

NOTE G -- INCOME TAXES

The income tax provision attributable to continuing operations for years
ended December 31, 2001, 2000 and 1999 consisted of the following:

A reconciliation of the provision for income taxes attributable to
continuing operations computed by applying the federal statutory rate for the
years ended December 31, 2001, 2000 and 1999 to income before income taxes and
the reported income taxes is as follows:

Income before taxes, discontinued operations and cumulative effect of
accounting change includes the following components:

F-16

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets and liabilities as of December 31, 2001 and
2000 are as follows:

During 2001, the Company disposed of certain assets that eliminated the
need for a valuation allowance recorded as of December 31, 2000.

NOTE H -- ACCRUED LIABILITIES

Accrued liabilities are detailed as follows:

F-17

NOTE I -- LONG-TERM DEBT AND OTHER BORROWINGS

Long-term debt consists of the following:

Scheduled maturities for the next three years and thereafter as of December
31, 2001 are as follows (in thousands):

2002................................................ $ -
2003................................................ -
2004................................................ 41,000
---------
$ 41,000
=========

In December 2001, the Company amended its revolving line of credit to an
$80 million line that may be expanded to $110 million during the first year, at
the Company's discretion. This agreement matures in December 2004 and is secured
by accounts receivable, inventories, and guarantees and pledges of stock of the
Company's subsidiaries. TETRA's credit facility is subject to common financial
ratio covenants. These include, among others, a debt-to-EBITDA ratio, a fixed
charge coverage ratio, a tangible net worth minimum and dollar limits on the
total amount of capital expenditures and acquisitions the Company may undertake
in any given year. The Company pays a commitment fee on unused portions of the
line and a LIBOR-based interest rate which decreases or increases as the
financial ratios improve or deteriorate. The Company is not required to maintain
compensating balances. The covenants also include certain restrictions on the
sale of assets. As of December 31, 2001, the Company has $3.5 million in letters
of credit and $41.0 million in long-term debt outstanding against an $80 million
line of credit, leaving a net availability of $35.5 million. The Company
believes this new credit facility will meet all its capital and working capital
requirements through December 2004.

In September 1997, the Company entered into two interest rate swap
agreements, each with a nominal amount of $20 million, which are effective
January 2, 1998 and expire on January 2, 2003. The interest rate swap agreements
provide for the Company to pay interest at a fixed rate of approximately 6.4%
(annual rate) every three months, beginning April 2, 1998 and requires the
issuer to pay the Company on a floating rate based on LIBOR. The swap
transactions can be canceled by the Company through payment of a cancellation
fee, which is based upon prevailing market conditions and remaining life of the
agreement. The estimated fair value of the swap transactions at December 31,
2001 was $1.3 million, net of taxes, below the carrying value.

NOTE J - COMMITMENTS AND CONTINGENCIES

The Company and its subsidiaries 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
the Company cannot be predicted with certainty, management does not expect these
matters to have a material adverse impact on the financial statements.

F-18

NOTE K -- CAPITAL STOCK

The Company's Restated Certificate of Incorporation authorizes the Company
to issue 40,000,000 shares of common stock, par value $.01 per share, and
5,000,000 shares of preferred stock, no par value. The voting, dividend and
liquidation rights of the holders of common stock are subject to the rights of
the holders of preferred stock. The holders of common stock are entitled to one
vote for each share held. There is no cumulative voting. Dividends may be
declared and paid on common stock as determined by the Board of Directors,
subject to any preferential dividend rights of any then outstanding preferred
stock.

The Board of Directors of the Company is empowered, without approval of the
stockholders, to cause shares of preferred stock to be issued in one or more
series and to establish the number of shares to be included in each such series
and the rights, powers, preferences and limitations of each series. Because the
Board of Directors has the power to establish the preferences and rights of each
series, it may afford the holders of any series of preferred stock preferences,
powers and rights, voting or otherwise, senior to the rights of holders of
common stock. The issuance of the preferred stock could have the effect of
delaying or preventing a change in control of the Company. The Board of
Directors has no present plans to issue any of the preferred stock.

Upon dissolution or liquidation of the Company, whether voluntary or
involuntary, holders of common stock will be entitled to receive all assets of
the Company available for distribution to its stockholders, subject to any
preferential rights of any then outstanding preferred stock.

NOTE L -- STOCK OPTION PLANS

The Company has various stock option plans which provide for the granting
of options for the purchase of the Company's common stock and other
performance-based awards to executive officers, key employees, non executive
officers, consultants and directors of the Company. Incentive stock options can
vest over a period of up to five years and are exercisable for periods up to ten
years. The TETRA Technologies, Inc. 1990 Stock Option Plan (the "1990 Plan") was
initially adopted in 1985 and subsequently amended to change the name and the
number and type of options that could be granted as well as the time period for
granting stock options.

The Company has granted performance stock options under the 1990 Plan to
certain executive officers. These granted options have an exercise price of
$25.00 per share and vest in full in no less than five years, subject to
earlier vesting as follows: fifty percent of each such option vests
immediately if the market value per share of the Company's common stock is
equal to or greater than $37.50 for a period of at least 20 consecutive
trading days; and the remaining fifty percent vests immediately if the market
value per share is equal to or greater than $50.00 for a period of at least
20 consecutive trading days. These options are immediately exercisable upon
vesting; provided, however, that no more than 100,000 shares of Common Stock
may be exercised by any individual after vesting in any 90 day period, except
in the event of death, incapacity or termination of employment of the holder
or the occurrence of a Corporation Change. Such options must be exercised
within three years of vesting or they expire. At December 31, 2001, 950,000
shares of common stock have been reserved for grants of such performance
options under the 1990 Plan, of which 175,000 were available for future
grants.

In 1993, the Company adopted the TETRA Technologies, Inc. Director Stock
Option Plan (the "Directors' Plan"). The purpose of the Directors' Plan is to
enable the Company to attract and retain qualified individuals who are not
employees of the Company to serve as directors. In 1996, the Directors' Plan was
amended to increase the number of shares issuable under automatic grants
thereunder. In 1998, the Company adopted the TETRA Technologies, Inc. 1998
Director Stock Option Plan (the "1998 Directors' Plan"). The purpose of the 1998
Directors' Plan is to enable the Company to attract and retain qualified
individuals to serve as directors of the Company and to align their interests
more closely with the Company's interests. The 1998 Directors' Plan is funded
with treasury stock of the Company.

F-19

The Company also has a plan designed to award incentive stock options to
non-executive employees and consultants who are key to the performance of the
Company. At December 31, 2001, 750,000 shares of common stock have been
registered and are reserved for grants, of which 300,000 are available for
future grants.

The following is a summary of stock option activity for the years ended
December 31, 1999, 2000 and 2001:

(In thousands, except per share amounts)

F-20

Assuming that TETRA had accounted for its stock-based compensation using
the alternative fair value method of accounting under FAS No. 123 and
amortized the fair value to expense over the options' vesting periods, net
income and earnings per share would have been as follows (in thousands except
per share amounts):

The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions; expected
stock price volatility 47%, expected life of options 5.0 to 6.0 years, risk-free
interest rate 5.0% to 6.0% and no expected dividend yield. The weighted average
fair value of options granted during 2001, 2000 and 1999 was $7.81, $3.91 and
$3.69 per share, respectively.

NOTE M -- 401(K) PLAN

The Company has a 401(k) profit sharing and savings plan (the "Plan") that
covers substantially all employees and entitles them to contribute up to 22% of
their annual compensation, subject to maximum limitations imposed by the
Internal Revenue Code. The Company matches 50% of each employee's contribution
up to 6% of annual compensation, subject to certain limitations as outlined in
the Plan. In addition, the Company can make discretionary contributions which
are allocable to participants in accordance with the Plan.

F-21

NOTE N -- DERIVATIVES

The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities
as amended by SFAS No. 137 and SFAS No. 138. These statements require the
Company to recognize all derivative instruments on the balance sheet at fair
value and establish criteria for designation and effectiveness of hedging
relationships. A fair value hedge requires that the effective portion of the
change in the fair value of a derivative instrument be offset against the change
in the fair value of the underlying assets, liability or firm commitment being
hedged through earnings. A cash flow hedge requires that the effective portion
of the change in the fair value of a derivative instrument be recognized in
Other Comprehensive Income (OCI), a component of the Shareholders' Equity, and
then be reclassified into earnings in the period or periods during which the
hedged transaction affects earnings. Any ineffective portion of a derivative
instrument's change in fair value is immediately recognized in earnings.

The Company uses interest rate swap agreements to decrease the volatility
of future cash flows associated with interest payments on its variable rate
debt. The Company's swap agreements, in effect, provide a fixed interest rate of
6.4% on its credit facility through 2002. The nominal principle values of these
agreements are substantially equal to the outstanding long-term debt balances.
Differences between amount paid and amounts received under the contracts are
recognized in interest expense. The Company will also hedge a portion of its gas
production to decrease the volatility associated with variable market pricing.

The Company believes that its swap agreements are "highly effective cash
flow hedges", as defined by the Standards, in managing the volatility of future
cash flows associated with interest payments on its variable rate debt. The
effective portion of the derivative's gain or loss (i.e., that portion of the
derivative's gain or loss that offsets the corresponding change in the cash
flows of the hedged transaction) is initially reported as a component of
"accumulated other comprehensive income (loss)" and will be subsequently
reclassified into earnings when the hedged exposure affects earnings (i.e., when
interest expense on the debt is accrued). The "ineffective" portion of the
derivative's gain or loss is recognized in earnings immediately.

In 2001, the Company recognized a decrease in the aggregate fair market
value of its swap agreements, resulting from the general decline in interest
rates that occurred during the period. The decrease in the aggregate fair market
value of the agreements of $1.3 million (net of an income tax benefit of $0.8
million) is reflected under the caption "accumulated other comprehensive loss"
in the balance sheet.

NOTE O -- INCOME PER SHARE

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

F-22

NOTE P -- INDUSTRY SEGMENTS AND GEOGRAPHIC INFORMATION

The Company manages its operations through three divisions: Fluids, Well
Abandonment & Decommissioning and Testing & Services.

The Company's Fluids Division manufactures and markets clear brine fluids
to the oil and gas industry for use in well drilling, completion and workover
operations in both domestic and international markets. The division also markets
the liquid and dry calcium chloride manufactured at its production facilities to
a variety of markets outside the energy industry.

The Well Abandonment & Decommissioning Division provides a complete package
of services required for the abandonment of depleted oil and gas wells and
decommissioning of platforms, pipelines and other associated equipment. The
division services the onshore, inland waters and offshore markets of the Gulf of
Mexico. The Division is also an oil and gas producer from wells acquired in its
well abandonment and decommissioning business.

The Company's Testing & Services Division provides production testing
services to the Texas, Louisiana and Latin American markets. It also provides
the technology and services required for separation and recycling of oily
residuals generated from petroleum refining and offshore exploration and
production.

The Company generally evaluates performance and allocates resources based
on profit or loss from operations before income taxes and non-recurring charges.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. Transfers between
segments, as well as geographic areas, are priced at the estimated fair value of
the products or services as negotiated between the operating units. Others
include corporate expenses, nonrecurring charges and elimination of intersegment
revenues.

F-23

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

- ----------
(1) Includes gain on the sale of administration building of $6,731, gain on the
sale of the TPT business of $29,629, special charges of $4,745 and a
restructuring charge of $2,320.
(2) Revenues from the TETRA Process Technologies business, which was sold in
1999.
(3) Includes net assets of discontinued operations.

F-24

Summarized financial information concerning the geographic areas in which
the Company operated at December 31, 2001, 2000 and 1999 are presented below:

- ----------

(1) Includes net assets of discontinued operations.

In 2001, 2000 and 1999, no customer accounted for more than 10% of
consolidated revenues.

F-25

NOTE Q -- QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

Summarized quarterly financial data from continuing operations for 2001 and
2000 are as follows:

F-26

NOTE R - SHAREHOLDERS RIGHTS PLAN

On October 27, 1998, the Board of Directors adopted a stockholder rights
plan (the "Rights Plan") designed to assure that all of the Company's
shareholders receive fair and equal treatment in the event of any proposed
takeover of the Company. The Rights Plan helps to guard against partial tender
offers, open market accumulations and other abusive tactics to gain control of
the Company without paying an adequate and fair price in any takeover attempt.
The Rights are not presently exercisable and are not represented by separate
certificates. The Company is currently not aware of any effort of any kind to
acquire control of the Company.

Terms of the Rights Plan provide for a dividend distribution of one
Preferred Stock Purchase Right for each outstanding share of Common Stock to
holders of record subsequent to the close of business on November 6, 1998. The
Rights Plan would be triggered if an acquiring party accumulates or initiates a
tender offer to purchase 20% or more of the Company's Common Stock and would
entitle holders of the Rights to purchase either the Company's stock or shares
in an acquiring entity at half of market value. Each Right entitles the holder
thereof to purchase 1/100 of a share of Series One Junior Participating
Preferred Stock for $50.00 per share, subject to adjustment. The Company would
generally be entitled to redeem the Rights at $.01 per Right at any time until
the tenth day following the time the Rights become exercisable. The Rights will
expire on November 6, 2008.

For a more detailed description of the Rights Plan, refer to the Company's
Form 8-K filed with the Securities and Exchange Commission on October 28, 1998.

F-27

TETRA TECHNOLOGIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

ADDITIONS

- ----------
(1) Uncollectible accounts written off, net of recoveries.
(2) Sale of business

S-1