Mr. Tony Pagnucco reports

BRI-CHEM ANNOUNCES 2023 ANNUAL AND FOURTH QUARTER FINANCIAL RESULTS

Bri-Chem Corp. has released its 2023 annual and fourth quarter financial results.

Key Q4 2023 highlights include:

• Consolidated sales for the three months ended Dec. 31, 2023, were slightly higher in the quarter over quarter due to increased drilling fluid sales and blending and packaging activities in the Canadian operations, which was offset by decreased U.S. sales caused by a lower average rig count and cementing activities.
• Consolidated gross margin for the three months ended Dec. 31, 2023, decreased by $410,000 compared with the same period last year. The gross margin dollar decrease is primarily related to increased shipping costs and pricing concessions made on specific products to maintain market position.
• Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) for the fourth quarter 2023 increased by $506,000 when compared with the same period in the prior year and operating earnings held at $1-million for the three months ended Dec. 31, 2023, compared with the prior-year comparable quarter.
• Adjusted net earnings per diluted share for the three months ended Dec. 31, 2023, were two cents per diluted share, compared with one cent per diluted share for the same period last year.
• Working capital, as at Dec. 31, 2023, was $15.9-million, compared with $15.4-million at Dec. 31, 2022, an increase of 3 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 Dec. 31, 2023

Consolidated sales for the three months ended Dec. 31, 2023, were $26.8-million, compared with $26.5-million for the same period in 2022, representing a $253,000 increase over the comparable period. The increase is directly related to increased drilling fluid sales and blending and packaging activities in Canada, offset by lower U.S. sales driven by a lower U.S. rig count and decreased cementing activities in Q4 2023.

Bri-Chem's Canadian drilling fluids distribution division generated sales of $3.9-million for the three months ended Dec. 31, 2023, compared with $3.5-million in the comparable prior period. The increase relates to sales of a specialty product to a single customer. The number of active operating land rigs in Q4 2023 averaged 181, compared with 189 in the same period last year (source: Baker Hughes). Bri-Chem's United States drilling fluids distribution division generated sales of $16.1-million for the three months ended Dec. 31, 2023, compared with sales of $16.5-million for the comparable period in 2022, representing a quarterly decrease of 2 per cent. This decrease mainly relates to a decrease in the U.S. rig count as the number of active operating land rigs in Q4 2023 averaged 599, compared with a 2022 Q4 average of 761. (source: Baker Hughes)

Bri-Chem's Canadian blending and packaging division generated sales of $4.4-million for the three months ended Dec. 31, 2023, compared with Q4 2022 sales of $3.5-million, representing a quarterly increase of $842,000. 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 Dec. 31, 2023, were $2.4-million, compared with $3-million in the prior year. The $595,000 decrease relates to decreased cementing activities in specific operating regions in California.

Operating earnings for the three months ended Dec. 31, 2023, were $1.0-million, which is consistent with the same period last year. Adjusted EBITDA was $1.9-million for Q4 2023, compared with $1.4-million for Q4 2022, the increase is primarily driven by a lower bad debt expense quarter over quarter. Adjusted EBITDA as a percentage of sales was 7 per cent for the quarter, which is an increase over the 5 per cent in Q4 2022. The adjusted EBITDA increase is primarily attributable to foreign exchange gain in the quarter.

Outlook

Canadian market fundamentals remain positive with the completion of the Trans Mountain pipeline expansion expected in mid-2024, which will help increase capacity and access to global markets for Canadian oil and gas companies. Bri-Chem expects 2024 oil field activity in the United States to remain relatively sluggish after experiencing a larger-than-expected U.S. rig count decline throughout fiscal 2023. There has been increasing pressure on global freight costs given the shipping concerns in the Middle East, which is having an impact on the company's margins in the short term. Management believes there is opportunity to realize modest growth in the company's Canadian blending division through selective product expansion from new and existing customers. Bri-Chem continues to control overheads and employee count to ensure sustainability and balance sheet strength while it manages through rig count and commodity market volatility.

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 oil field 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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