Mr. Tony Pagnucco reports

BRI-CHEM ANNOUNCES 2023 THIRD QUARTER FINANCIAL RESULTS

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

Key Q3 2023 highlights include:

• Consolidated sales for the three months ended Sept. 30, 2023, were slightly lower quarter over quarter as the company was impacted by the decrease in United States operating rigs. Year-to-date sales are higher due to an increase in blending and packaging activities in the company's Canada and California regions.
• Consolidated gross margin for the three months ended Sept. 30, 2023, decreased by $442,000 compared with the same period last year. The gross margin dollar decrease is primarily related to an unfavourable change in sales mix when compared with the prior year resulting in higher consumption levels of lower margin products.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the third quarter 2023 decreased by $665,000 when compared with the same period in the prior year and operating earnings was $1.2-million for the three months ended Sept. 30, 2023, compared with operating earnings of $2-million the prior-year comparable quarter, representing a 42-per-cent decrease. The decrease predominantly relates to margin compression due to a shift in sales mix and increased employee remuneration and headcount.
• Adjusted net earnings per diluted share for the three months ended Sept. 30, 2023, was negative one cent per share compared with three cents per diluted share for same period last year.
• Working capital, as at Sept. 30, 2023, was $16-million compared with $15.4-million at Sept. 30, 2022, an increase of 4 per cent. The increase relates to significant decreases in bank indebtedness and accounts payable which were offset by decreased inventory and accounts receivable.

Summary for the three months ended Sept. 30, 2023:

Consolidated sales for the three months ended Sept. 30, 2023, were $26.8-million compared with $29-million for the same period in 2022, representing a $2.1-million decrease over the comparable period. The decrease is directly related to the decrease in United States operating rigs year over year.

Bri-Chem's Canadian drilling fluids distribution division generated sales of $3.9-million for the three months ended Sept. 30, 2023, compared with $3.8-million in the comparable prior period. The number of active operating land rigs in Q3 2023 averaged 187, compared with 198 in the same period last year (source: Baker Hughes). Bri-Chem's United States drilling fluids distribution division generated sales of $15.5-million for the three months ended Sept. 30, 2023, compared with sales of $18.4-million for the comparable period in 2022, representing a quarterly decrease of 16 per cent. This decrease mainly relates to a decrease in the U.S. rig count as the number of active operating land rigs in Q3 2023 averaged 627, compared with a 2022 Q3 average of 741 (source: Baker Hughes).

Bri-Chem's Canadian blending and packaging division generated sales of $3.9-million for the three months ended Sept. 30, 2023, compared with Q3 2022 sales of $3.6-million, representing a quarterly increase of $322,000. The increase in sales relates to higher cementing and stimulation activities in Western Canada. U.S. blending and packaging sales for the three months ended Sept. 30, 2023, were $3.5-million compared with $3.2-million in the prior year. The $359,000 increase relates to higher cementing activities in specific operating regions in California.

Operating earnings for the three months ended Sept. 30, 2023, was $1.2-million compared with $2.0-million during the same period last year. Adjusted EBITDA was $1.1-million for Q3 2023 compared with $1.7-million for Q3 2022. Adjusted EBITDA as a percentage of sales was 4 per cent for the quarter, which is a decrease over the 6 per cent in Q3 2022. The decrease is primarily attributable to increased financing costs and employee overheads.

Outlook

U.S. land rig counts have steadily declined throughout 2023 which has proven to be challenging for 2023 wholesale chemical product sales and margins. Sustained oil prices in the $80 to $90 range would likely provide a modest recovery in rig counts through the first half of the 2024 fiscal year. Management remains committed to our strategic priorities of maintaining low headcounts and overheads to ensure alignment with oilfield activity and company profitability. The company is optimistic that the anticipated completion of the Trans Mountain pipeline project and LNG (liquified natural gas) projects would create an opportunity for increased production levels in 2024.

About Bri-Chem Corp.

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. The company sells, blends, packages and distributes a full range of drilling fluid products from 25 strategically located warehouses throughout Canada and the United States.

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