Mr. Tony Pagnucco reports

BRI-CHEM ANNOUNCES 2023 SECOND QUARTER FINANCIAL RESULTS

Bri-Chem Corp. has released its 2023 second quarter financial results.

Key Q2 2023 highlights include:

• Consolidated sales for the three months ended June 30, 2023 were consistent quarter over quarter as the Company maintained its market share in all relevant markets. Year to date sales is higher due to an increase in production chemical toll blending revenue and increased cementing work being conducted in the California region.
• Consolidated gross margin for the three months ended June 30, 2023 decreased by $162 thousand compared to the same period last year. The gross margin dollars decrease is primarily related to an unfavorable change in sales mix when compared to the prior year.
• Adjusted EBITDA for the second quarter 2023 increased by $190 thousand when compared to the same period in the prior year, achieving 8% as a percentage of revenue in Q2 2023. Operating earnings was $1.2 million for the three months ended June 30, 2023 compared to operating earnings of $1.7 million the prior year comparable quarter, representing a 28% decrease. The decrease predominantly relates to higher interest incurred on borrowed funds and increasing employee remuneration and headcount.
• Adjusted net earnings per diluted share for the three months ended June 30, 2023 was $0.03 per share compared to $0.04 per diluted share for same period last year.
• Working capital, as at June 30, 2023, was $15.9 million compared to $13.2 million at June 30, 2022, an increase of 21%. The increase relates to notable increases in inventory balances in response to market demand in tandem with a decrease to accounts payable balances. These items were offset modestly by decreases to accounts receivable balances due to improved collection procedures in tandem with a higher realized bank indebtedness balance due to inventory purchases.

Summary for the three months ended June 30, 2023:

Consolidated sales for the three months ended June 30, 2023 were $25.2 million compared to $25.5 million for the same period in 2022, representing a $240 thousand decrease over the comparable period. The minor decrease was due to changes in select customer commodity purchases, offset by increased sales in the blending and packaging division.

Bri-Chem's Canadian drilling fluids distribution division generated sales of $2.9 million for the three months ended June 30, 2023 compared to $3 million in the comparable prior period. The Canadian wildfires reduced activity within specific geographic locations, which was offset by other regional increases to activity. The number of active operating land rigs in Q2 2023 averaged 114, compared to 113 in the same period last year (Source: Baker Hughes). Bri-Chem's United States drilling fluids distribution division generated sales of $15.6 million for the three months ended June 30, 2023 compared to sales of $17.1 million for the comparable period in 2022, representing a quarterly decrease of 9%. This decrease relates to a decrease in purchases made by a single customer. The number of active operating land rigs in Q2 2023 averaged 700, compared to a 2022 Q2 average of 699. (Source: Baker Hughes).

Bri-Chem's Canadian blending and packaging division generated sales of $3.8 million for the three months ended June 30, 2023 compared to Q2 2022 sales of $2.8 million, representing a quarterly increase of $940 thousand. The increase in sales relates to higher cementing and stimulation activities in addition to increased production chemical sales in the market. US blending and packaging sales for the three months ended June 30, 2023 were $3.0 million compared to $2.5 million in the prior year. The $0.5M surge relates to increased cementing activities in specific operating regions in California.

Operating earnings for the three months ended June 30, 2023 was $1.2 million compared to $1.7 million during the same period last year. Adjusted EBITDA was $2 million for Q2 2023 compared to $1.8 million for Q2 2022. Adjusted EBITDA as a percentage of sales was 8% for the quarter, which is an increase over the 7% in Q2 2022.

OUTLOOK

The second quarter of 2023 continued to show signs of stabilization in the oil and gas sector which is the expected trend for the remainder of the year. Bri-Chem has focused on maintaining its North America market share as the price of WTI continues to stabilize in harmony with rig counts which should provide future regional growth in our Texas and Oklahoma regions. Over the short-term, however, depressed natural gas commodity prices have contributed uncertainty to the near-term activity outlook. The Company will also strive to realize margin improvement from ongoing pricing adjustments while working diligently to purchase lower costed products from current and new suppliers. Our organic growth initiatives are moving forward with a new warehouse now recently opened in Lloydminster, Canada, and with additional growth opportunities forthcoming at our new Midland, Texas facility which is likely to be realized and capitalized upon within the next six to twelve months. Management is still fully committed to maintaining a low cost overhead infrastructure which will further allow the Company to be prepared should activity levels quickly rise or fall.

About Bri-Chem

Bri-Chem has established itself, through a combination of strategic acquisitions and organic growth, as the North American industry leader for wholesale 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 from 25 strategically located warehouses throughout Canada and the United States.

We seek Safe Harbor.