Bri-Chem Corp.

TSX : BRY


Bri-Chem Corp.

March 31, 2014 23:05 ET

Bri-Chem Announces 2014 Q4 and Year End Results

EDMONTON, ALBERTA--(Marketwired - March 31, 2014) -

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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 fourth quarter and year end results for the year end December 31, 2013. During the fourth quarter of 2013, Bri-Chem's consolidated revenues increased 30% to $51,151,004 compared to $39,247,509 from the comparable period in 2012. Q4 sales growth continued to be driven by Bri-Chem's North American drilling fluids distribution and blending divisions which recorded combined sales of $38,106,449 for the three months ended December 31, 2013 compared to sales of $25,905,601 in 2012, representing an increase of 47% quarter over quarter.

For the year ended December 31 2013, Bri-Chem's consolidated annual revenues increased by 13.1% to $179,947,009 compared to $159,144,727 from the comparable period in 2012. The 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 $150,039,754 for the year ended December 31, 2013 compared to sales of $119,459,171 in the comparable prior year, representing an increase of 26% year over year. Adjusted earnings before interest, taxes, amortization and share-based payments expense were $11,345,646 or $0.64 per share for the twelve month period ended December 31, 2013, compared to $11,937,169 or $0.69 per share for the same period in 2012. As of December 31, 2013, the Company's net book value per share was $2.11.

In November 2013, the Company announced that it was initiating a strategic review of its steel pipe division in view of the potential growth opportunities that exist in its drilling fluids division. The strategic review was to determine a viable plan going forward and to explore new strategic corporate alternatives. The Company recorded a non-cash impairment charge of $3,527,309 related to inventory, bad debts and other items. As a result of the year end adjustment, the Company incurred net earnings, not including non-controlling interests, of $109,481 with diluted earnings per share of $0.01 compared to net earnings of $5,365,835 or $0.31 diluted earnings per share for 2012.

The Company's North American oil and gas drilling fluids distribution and blending divisions recorded sales of $44,899,245 and $150,039,754 for the three and twelve months ended December 31, 2013, an increase of 53% and 26% respectively compared to the same periods in 2012. In Canada, drilling rig utilization averaged 45.7% for the fourth quarter, and 41.6% for the year ended December 31, 2013; an increase of 2.0% quarter over quarter and a decrease of 2.0% year over year. The Canadian drilling fluids distribution division generated sales of $24,267,169 and $85,710,585 for the three and twelve months ended December 31, 2013, compared to sales of $21,402,221 and $88,250,881 for the comparable periods in 2012. The increase in Q4 2013 fluids sales is due to overall higher drilling activity in the Western Canada and the return of increased demand in northern British Columbia.

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 twelve month periods ended December 31, 2013, the division experienced sales of $13,839,280 and $44,549,096, an increase of 207% and 126% 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 $4,970,079 and $17,471,624 compared to prior year sales of $3,554,229 and $11,505,357 representing a 40% and 52% increase respectively for the three and twelve months ended December 31, 2013. The division has realized increased sales as a result of gaining 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 LLC, our USA fluids blending and packaging division, generated sales of $2,308,449 from September 6, 2013 to December 31, 2013.

The steel pipe distribution division recorded sales of $2,490,572 and $12,372,191 respectively for the three and twelve months ended December 31, 2013, compared to revenues of $3,692,082 and $24,907,625 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. During Q4 2013, the Company has been diligent about managing its inventory by replacing slow moving stock with additional approved manufacturer's seamless pipe which has provided a better selection to a boarder range of customers.

The steel pipe manufacturing division recorded sales of $3,761,187 and $17,535,064 respectively for the three and twelve month periods ended December 31, 2013, a decrease of 38.3% and increase of 18.7% over the prior comparable periods. With many major pipeline projects being delayed, the division has not experienced a surge in demand for its large diameter seamless pipe. Despite the weaker demand, the division has been actively quoting and is diligently working with a number of major energy companies that would enlist Bri-Chem on their approved manufacturer's lists for large project quotes. The division is reviewing its production costs and its capacity model to establish a viable operating plan given the current large diameter steel pipe market demand.

During the fourth Quarter of 2013, Bri-Chem announced the closing of a $10 million equity financing to assist the Company's ongoing organic growth and potential acquisitions opportunities.

Outlook Summary

The Petroleum Services Association of Canada (PSAC) has forecasted 10,930 wells to be drilled in Western Canada for 2014, a forecasted decrease of 1.3% over 2013. PSAC also has forecasted 3,389 wells to be drilled in Canada for the first quarter of 2014, a decline of 9.9% compared to Q1 2013. Q1/14 in the USA has been negatively impacted by some adverse weather and field conditions, however, the average rig count year over year is expected to increase approximately 4%. Bri-Chem will continue to invest into its USA drilling fluid market expansion plan with the goal of obtaining new market share. As we continue to gain market share in the USA drilling fluids market, more product and acquisition opportunities become available. 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 regions in the USA where we currently operate. Throughout 2014, we will examine a number of opportunities that will provide product expansion, while exploring alternatives to enable us to become basic in certain commodity chemicals. We are continuing our strategic review of the steel pipe divisions to determine a viable plan going forward, while closely monitoring North American steel pipe demand and examining cost control measures to decrease the costs of production at the steel manufacturing facility.

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 distribute a full range of 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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