Bri-Chem Corp.
TSX : BRY

Bri-Chem Corp.

November 12, 2014 20:03 ET

Bri-Chem Announces 52% Increase in EBITDA For Q3 and Record Quarterly Sales For USA Division

EDMONTON, ALBERTA--(Marketwired - Nov. 12, 2014) -

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Bri-Chem Corp. ("Bri-Chem" or "Company") (TSX:BRY), a leading North American wholesale distributor and blender of oil and gas drilling fluids today announced its third quarter financial results for the three and nine months ended September 30, 2014. During the third quarter of 2014, Bri-Chem completed the sale of its Steel Pipe Manufacturing and Steel Pipe Distribution divisions to a USA based steel company effective July 15, 2014. As a result of the sale, the Company will not retain any steel pipe assets or conduct any further steel pipe business operations going forward and has therefore reclassified the associated assets and liabilities of these businesses from assets and liabilities held for sale in Q3 to assets and liabilities related to discontinued operations for all periods presented. Bri-Chem's business operations, financial and corresponding operating results are now presented and concentrated entirely on its North American leading oil and gas drilling fluids distribution, blending & packaging businesses ("Continued Operations").

For Q3 2014, Bri-Chem's consolidated revenues from Continued Operations increased 23.0% to $53,283,129 compared to $43,323,525 from the prior period in 2013. This quarter-over-quarter revenue increase is primarily as a result of significant market share growth from Bri-Chem's USA drilling fluids distribution division which experienced record quarterly sales of $21,155,073. Consolidated revenues for the nine months ended September 30, 2014 were $134,416,336 compared to $105,140,508 for the comparable period of 2013, an increase of 27.8%. Earnings before interest, taxes, amortization and depreciation, and share-based payments expense ("EBITDA") was $6,460,579 or $ 0.27 per share and $11,346,886 or $0.47 per share respectively for the three and nine month periods ended September 30, 2014, compared to $4,241,153 and $9,078,710 respectively for the same periods in 2013. Net earnings for the three month period was $3,355,881 or $0.14 diluted earnings per share and $4,480,567 or $0.19 diluted earnings per share for the nine months ended September 30, 2014 as compared to net earnings of $1,940,291 and $3,469,900 respectively for the same periods in 2013.

Bri-Chem's Canadian drilling fluids distribution division generated sales of $23,122,393 and $61,336,517 for the three and nine months ended September 30, 2014, compared to sales of $24,126,287 and $60,531,611 over the comparable periods in 2013. Drilling activity in Canada has remained relatively level year over year with the exception that a significant backlog of drilling activity experienced in Q3 2013 was caused by the extremely wet weather in Q2 2013, which delayed the start of the summer drilling programs until July 2013. In addition, this year the Canadian drilling fluids distribution division's operations were also adversely impacted by very wet weather in Saskatchewan. The number of wells drilled in Q3 2014 in Western Canada was 3,022, compared to the 3,054 wells drilled in Q3 2013, representing a decrease of 1.0% quarter over quarter. Drilling rig utilization rates averaged 47.7% in Q3 2014 compared to 41.3% in Q3 2013, an increase of 6.4%. Year to date rig utilization has increased 5.3% compared to the nine months ended September 30, 2013.

Bri-Chem's United States drilling fluids distribution division generated sales of $21,155,073 and $51,841,195 for the three and nine month periods ended September 30, 2014, compared to revenues of $12,680,328 and $30,746,736 in the comparable periods of 2013, representing an increase of $8,474,745 or 66.8% quarter over quarter, while increasing 68.6% year over year. The USA fluids distribution division has continued to realize sales growth throughout Q3 2014 as a result of increased industry activity, and product and geographic expansion throughout the major resource plays in the USA. In the USA, the average number of active rigs running during the third quarter was 1,903, an increase of 7.6% quarter over quarter. The division has built a solid infrastructure with personnel and inventory to service the expanding needs of our customers. The states of Colorado, Pennsylvania, Oklahoma, Wyoming and Texas generated the majority of sales in the USA for the three months ended September 30, 2014. As at September 30, 2014 Bri-Chem had 18 operating warehouses, compared to 15 warehouses at September 30, 2013. The Company remains focused on expanding its product offerings as well as expanding into new geographic regions in the USA to meet the increasing demand for drilling fluids from an independent wholesaler.

The Canadian fluids blending and packaging division also continues to grow as the Company generated sales of $6,460,543 and $14,754,038 for the three and nine months ended September 30, 2014 compared to the comparable prior year period sales of $6,068,098 and $13,413,349 representing 6.5% increase quarter over quarter. The division continues to increase market share by utilizing new expanded capacity to meet the increasing demand of our customers. The acquisition of Sun Coast Materials LLC in the third quarter of 2013, which operates as our USA fluids blending and packaging division, generated sales of $2,545,120 and $6,484,586 for the third quarter of 2014 and nine months ended September 30, 2014 compared to $448,812 for Q3 2013.

During the nine months ended September 30, 2014 the Company recorded an impairment expense of $15,434,501 to reflect the estimated fair value, less costs to sell of the net assets of the Steel Pipe divisions at their estimated fair value, less costs to sell. The loss from Discontinued Operations was $368,909 and $12,637,254 for the three and nine month periods ended September 30, 2014 respectively.

Outlook Summary

With the current volatile crude oil and natural gas prices that are being experienced, there is a level of uncertainty of the impact that these volatile prices will have on Canadian drilling activity in the short term. Canadian drilling activity in the fourth quarter of 2014 is expected to decrease as compared to the same period of the prior year. The Petroleum Services Association of Canada (PSAC) has forecasted 2,627 wells to be drilled in Western Canada for the fourth quarter of 2014, a forecasted decrease of 5.9% over 2013. PSAC has also forecasted that 9,660 wells will be drilled in Canada for 2015, which is 6.2% less than the number of wells estimated to be drilled in 2014. In the USA, the average number of active rigs operating during the third quarter of 2014 was 1,903, an increase of 7.6% over the third quarter of 2013. The average number of active rigs for the fourth quarter of 2014 is expected to be consistent with Q3 2014. We believe the increased activity in the USA will drive increased year over year sales and profitability in our fluids division throughout the rest of 2014. Bri-Chem will continue to invest in 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. Bri-Chem is also currently evaluating several acquisition opportunities in the stimulation and production chemical segments in both Canada and the USA marketplace.

About Bri-Chem

Bri-Chem has established itself, through a combination of strategic acquisitions and organic growth, as the North American industry leader for the distribution and blending of oilfield drilling, completion, stimulation and production chemical fluids. We sell, blend, package and distribute a full range of drilling fluid products, cementing, acidizing and stimulation additives from 34 strategically located warehouses throughout Canada and the United States. Bri-Chem has been operating in Canada since 1985 and as a result of the increasing market demand for oilfield chemicals, we expanded into the United States in 2011 and have successfully obtained significant market penetration. Additional information about Bri-Chem is available at www.sedar.com or at our website at www.brichem.com.

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