Bri-Chem Corp.
TSX : BRY

Bri-Chem Corp.

November 13, 2013 19:18 ET

Bri-Chem Announces 2013 Third Quarter Results

EDMONTON, ALBERTA--(Marketwired - Nov. 13, 2013) - Bri-Chem Corp. ("Bri-Chem" or "Company") (TSX:BRY), a leading North American wholesale distributor and manufacturer of oil and gas drilling fluids and steel pipe is pleased to announce its financial results for the third quarter ended September 30, 2013.

During the third quarter of 2013, Bri-Chem's consolidated quarterly revenues increased 40.1% to $51,730,842 compared to $36,915,533 from the comparable prior period in 2012. This year-over-year increase is primarily a result of organic sales growth from Bri-Chem's North American drilling fluids distribution and blending divisions which recorded combined sales of $43,286,604 for the three months ended September 30, 2013 compared to sales of $27,914,492 in the comparable quarter in 2012, representing an increase of 55% quarter over quarter. In addition, Bri-Chem continued to make strong progress in growing quarter over quarter sales in its steel pipe manufacturing division having realized a 22% increase. Overall consolidated gross margin increased to 16.9% due to management's ongoing geographic and product diversification strategy, targeting increased profitability.

Consolidated revenues for the nine months ended September 30, 2013 were $129,669,861 compared to $120,553,084 for the comparable period of 2012, an increase of 7.6%. Adjusted earnings before interest, taxes, amortization and share-based payments expense ("Adjusted EBITDAC") was $3,672,060 or $0.21 per share and $8,544,940 or $0.49 per share respectively for the three and nine month periods ended September 30, 2013, compared to $2,963,886 and $8,445,973 respectively for the same periods in 2012. Net earnings for the three month period were $1,077,982 or $0.07 diluted earnings per share and $1,868,872 or $0.13 diluted earnings per share for the nine months ended September 30, 2013 as compared to net earnings of $1,438,579 and $3,562,379 respectively for the same periods in 2012. Net earnings decreased for the three and nine month periods ended September 30, 2013 mainly due to three significant non-cash related items being amortization increasing by $391,994 as more assets were put into use over the last year, a $579,826 increase in stock-based compensation and foreign exchange as the US dollar rose in comparison to the Canadian dollar, resulting in a $873,051 foreign exchange difference. In addition, the Company incurred $624,664 of additional interest expense related to a new subordinated debt facility acquired in late 2012. As of September 30, 2013, the Company's net book value per share was $2.36.

Bri-Chem's North American oil and gas drilling fluids distribution and blending divisions recorded sales of $43,286,604 and $105,103,587 respectively for the three and nine month periods ended September 30, 2013, an increase of 55.1% and 17.7% over the same comparable periods in 2012. On September 6, 2013, the Company acquired assets and business operations of Sun Coast Materials, a California, USA based specialty cement chemical blending and packaging company, that is expected to further expand Bri-Chem's product offerings into the USA market and provides a solid growth platform to offer cementing products and blending services throughout the USA market.

In Canada, drilling rig utilization averaged 41.3% for the third quarter, which was consistent compared to the same quarter in 2012 when utilization rates averaged 41.0%, and the number of active operating rigs were also comparable, quarter over quarter, at 338 rigs. Despite the nominal year over year change in Q3 drilling activity, the Canadian drilling fluids distribution division generated sales of $24,126,287 and $61,443,414 for the three and nine months ended September 30, 2013, compared to sales of $18,918,970 and $67,591,020 for the comparable periods in 2012. The 27.5% increase in Q3 Canadian fluid sales is due to the return of increased demand in Northern British Columbia, which resulted in Bri-Chem experiencing a 50.2% increase in liquid invert sales during the third quarter compared to the third quarter of 2012, along with Bri-Chem's customers increasing work in certain regions such as Lloydminster and Rosetown, Saskatchewan. The extensive weather and flooding in Western Canada that occurred during the spring, delayed the start to the summer drilling programs, which resulted in increased demand and sales into the third quarter.

The USA drilling fluids distribution division is growing at an extraordinary pace as a result of our extensive market outreach to new customers in numerous geographic regions throughout the USA. For the three and nine month periods ended September 30, 2013, the division experienced sales of $12,643,406 and $30,709,816, an increase of 122% and 112% respectively over the same periods in 2012. With sixteen warehouses operating in all the major resource plays in the USA, the division will focus on continuing to grow its overall market share.

The Canadian fluids blending and packaging division continues to significantly expand as the Company generated sales of $6,068,099 and $12,501,545 compared to prior year sales of $3,287,218 and $7,208,769 representing an 85% and 73% increase respectively for the three and nine months ended September 30, 2013. The division has realized increased sales as a result of penetrating new customers by providing cementing products into new geographic regions throughout North America and adding additional blending and storage capacity at its Acheson facility. In addition, the recent acquisition of Sun Coast Materials, the USA fluids blending and packaging division, generated new sales of $448,812 for the three weeks of operations during the third quarter.

The steel pipe distribution division recorded sales of $3,457,866 and $10,755,477 respectively for the three and nine month periods ended September 30, 2013, compared to revenues of $4,645,226 and $21,871,408 for the same periods in 2012. Since the fourth quarter of 2012, the Canadian market has experienced excess steel pipe inventory as many distributors were anticipating a stronger demand for steel pipe product during the 2013 winter drilling season. In addition, sales in the second quarter of 2012 included a substantial one-time mill direct order of approximately $5.1 million. The steel pipe distribution division will concentrate on replacing certain inventory with higher demand sizes that will increase inventory turns while maintaining superior customer service, with the appropriate quantities and sizes of steel pipe to meet the demand of its customers.

The steel pipe manufacturing division recorded sales of $4,949,451 and $13,773,876 respectively for the three and nine month periods ended September 30, 2013, an increase of 22% and 59% over the prior comparable periods. With the many major pipeline projects being delayed, the division has not experienced the robust demand for its large diameter seamless pipe. Despite the weaker demand, the division has been actively quoting for various jobs and is diligently working with a number of major energy companies that would place Bri-Chem on approved manufacturer's lists. As the market works through inventories and capital projects commence, the division is cautiously optimistic that 2014 will see increased demand which will drive increased sales and earnings growth.

Outlook Summary

The Petroleum Services Association of Canada (PSAC) has forecasted 2,908 wells to be drilled in Western Canada for the fourth quarter of 2013, a forecasted increase of 6.2% over 2012. Spring break up was longer than anticipated due to the unusually wet spring which delayed many summer drilling programs to Q3 2013. The Company anticipates drilling activity will remain strong for the remainder of the year and into the winter drilling programs in 2014. A return to drilling in Northern British Columbia will also assist in the demand for drilling fluid products and will drive Canadian fluid sales. Bri-Chem will continue to invest into its USA drilling fluid market expansion plan with the goal of obtaining significant market share. As we continue to gain market share in the USA drilling fluids market, more product and acquisition opportunities become available and the Company will continue to pursue its market presence in the USA. With the recent acquisition of Sun Coast, Bri-Chem has now established a platform for fluids blending and packaging in the USA market place and will look to grow its market presence by distributing its blending products and services into other regions in the USA where we currently operate. We will also continue to closely monitor North American steel pipe demand and seek to increase production capacity at the Thermal Pipe Expansion manufacturing facility when demand returns to more normal levels.

About Bri-Chem

Since our formation in 1985, Bri-Chem has established two primary segments of business through a combination of internal growth and acquisitions: Bri-Chem's Drilling Fluid Division is North America's largest independent wholesale supplier of drilling fluids for the oil and gas industry. We provide over 100 drilling fluid products, cementing, acidizing and stimulation additives from 31 strategically located warehouses throughout Canada and the United States; Bri-Chem's Steel Pipe Division is the first company to introduce and construct a Thermal Pipe Expansion (TPE) facility in North America for manufacturing, testing and supply of large diameter seamless steel pipe for the energy industry. Additional information about Bri-Chem is available at www.sedar.com or at Bri-Chem's website at www.brichem.com.

Forward-Looking Statements

Certain information set forth in this news release contains forward-looking statements or information ("forward-looking statements"), including statements which may contain words such as "could", "should", "expect", "anticipate", "believe", "will", and similar expressions and statements relating to matters that are not historical facts are forward looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond the Company's control, including the impact of general economic conditions, industry conditions, volatility of commodity prices, currency fluctuations, environmental risks, demand for oilfield services for drilling and completion of oil and natural gas wells; volatility in market prices for steel, oil, natural gas, and natural gas liquids and the effect of this volatility on the demand for oilfield services generally, competition from other industry participants, the lack of availability of qualified personnel or management, stock market volatility and the ability to access sufficient capital from internal and external sources. Although the Company believes that the expectations in our forward-looking statements are reasonable, our forward-looking statements have been based on factors and assumptions concerning future events which may prove to be inaccurate. Those factors and assumptions are based upon currently available information. Such statements are subject to known and unknown risks, uncertainties and other factors that could influence actual results or events and cause actual results or events to differ materially from those stated, anticipated or implied in the forward looking information. As such, readers are cautioned not to place undue reliance on the forward looking information, as no assurance can be provided as to future results, levels of activity or achievements. The risks, uncertainties, material assumptions and other factors that could affect actual results are discussed in our Annual Information Form and other documents available at www.sedar.com. Furthermore, the forward-looking statements contained in this document are made as of the date of this document and, except as required by applicable law, the Company does not undertake any obligation to publicly update or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The forward-looking statements contained in this document are expressly qualified by this cautionary statement.

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