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 second quarter ended
June 30, 2013.
During the second quarter of 2013, Bri-Chem continued to make significant
progress in growing year over year sales in its USA fluids distribution
division, realizing a 72% increase, and its steel pipe manufacturing division,
realizing a 74% increase. In addition, overall consolidated gross profit
increased 16.7% due to management's ongoing geographic and product
diversification strategy, targeting increased profitability.
Bri-Chem generated consolidated revenues of $28,243,483 for the quarter compared
to $30,931,414 from the prior quarter despite excessive wet weather and flooding
in Western Canada resulting in delays to Q2 summer drilling programs.
Consolidated revenues for the six months ended June 30, 2013 were $77,939,019
compared to $83,637,551 for the first half of 2012, a decrease of 6.8%. Adjusted
earnings before interest, taxes, amortization and share-based payments expense
("Adjusted EBITDAC") were $482,916 or $0.03 per share and $4,872,880 or $0.28
per share respectively for the three and six month periods ended June 30, 2013,
compared to $181,640 and $5,482,085 respectively for the same periods in 2012.
The Company incurred a net loss of $1,043,813 or $0.05 loss per share for the
quarter and net earnings of $790,891 or $0.06 earnings per share for the six
months ended June 30, 2013 as compared to a net loss of $769,807 and net
earnings of $2,123,796 respectively for the same periods in 2012. The year to
date decrease in earnings and Adjusted EBITDAC is mainly due to two significant
non-cash related items being foreign exchange, as the US dollar rose in
comparison to the Canadian dollar, resulting in a $365,484 foreign exchange
difference from the prior six month period, as well as a $484,271 increase in
stock-based compensation.
The Company's combined North American oil and gas drilling fluids divisions
recorded sales of $18,199,593 and $55,383,537 respectively for the three and six
month periods ended June 30, 2013, an increase of 9.1% for the second quarter of
2013 compared to the same period in 2012. On April 30, 2013, the Company
announced a letter of intent to acquire the assets and ongoing operations of a
California, USA based specialty cement chemical blending and packaging company
("Cementco"). Under the terms of the letter of intent, Bri-Chem has agreed to
purchase certain assets of Cementco. The closing of the transaction is expected
to be completed in the third quarter of 2013, subject to certain closing
conditions and outstanding due diligence matters being resolved.
In Canada, drilling rig utilization averaged 18.4% for the second quarter, a
decrease of 3.6% from the same quarter in 2012 when utilization rates average
22.0%. The Canadian fluids distribution division generated sales of $7,875,784
and $37,317,128 for the three and six months ended June 30, 2013, compared to
sales of $10,675,213 and $48,672,049 for the comparable periods in 2012. The 26%
decrease in Q2 Canadian fluid sales is mainly due to lower overall rig
utilization during Q2 and the excessive amount of wet weather and flooding in
Western Canada during the spring which has delayed the start of the summer
drilling programs. Sales for the fluids blending and packaging division were
$2,091,831 and $6,433,446 compared to prior year sales of $1,290,580 and
$3,921,551 representing a 62% and 64% increase respectively for the three and
six months ended June 30, 2013. The division has realized increased sales as a
result of providing cementing products into new geographic regions throughout
North America.
The USA fluids distribution division continues its market outreach with
customers in various geographic regions in the USA, resulting in revenues of
$10,323,809 and $18,066,409 for the three and six month periods ended June 30,
2013, an increase of 72% and 105% respectively over the same periods in 2012.
This increase is the result of the strategic warehouse and infrastructure
investment that occurred throughout 2012. With fourteen warehouses operating in
all the major resource plays in the USA, the division will focus on continuing
to grow its market share.
The steel pipe distribution division recorded sales of $3,461,319 and $7,279,611
respectively for the three and six month periods ended June 30, 2013, compared
to revenues of $10,110,382 and $17,226,183 for the same periods in 2012. Since
the fourth quarter of 2012, the Canadian market has 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 reducing
inventory and increasing 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 continued to increase its production
output during the first half of 2013 and recorded sales of $4,490,740 and
$8,824,425 respectively for the three and six month periods ended June 30, 2013,
an increase of 74% and 91% over the prior comparable periods. Despite the
decreased demand for large diameter seamless pipe during the first half of the
year, the division is cautiously optimistic that the second half of 2013 will
see increased demand which will drive increased sales and earnings growth.
Outlook Summary
The Petroleum Services Association of Canada (PSAC) has forecasted 6,578 wells
to be drilled in Western Canada for the second half of 2013, a forecasted
increase of 15.3% over 2012. During the first half of 2013, the Western Canadian
Sedimentary Basin ("WCSB") experienced a decline of 5.2% in wells drilled
compared to the same period in 2012, however, it is anticipated to improve in
the second half of 2013. Spring break up was longer than anticipated due to the
unusually wet spring which delayed many summer drilling programs in late Q2
2013. As a result, the Company anticipates drilling activity will be strong in
the third quarter as summer drilling programs ramp up, which will drive the
demand for 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, more product and acquisition
opportunities become available. 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. In addition, we are reducing inventory levels in seamless steel pipe to
match current sales demand in an effort to increase inventory turns.
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 30
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.
To receive Bri-Chem news updates send your email to ir@brichem.com.
Neither the TSX nor its Regulation Services Provider (as that term is defined in
the policies of the TSX) accepts responsibility for the adequacy or accuracy of
this release.
FOR FURTHER INFORMATION PLEASE CONTACT:
Bri-Chem Corp.
Jason Theiss
CFO
(780) 577-0595
jtheiss@brichem.com
www.brichem.com
CHF Investor Relations
Juliet Heading
Account Manager
(416) 868-1079 x239
juliet@chfir.com
CHF Investor Relations
Cathy Hume
CEO
(416) 868-1079 x231
cathy@chfir.com
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