oil and gas drilling fluids distribution & blending … agm.pdf · oil and gas drilling fluids...

TSX: BRY

June 2014

Company

Overview

2014 Year End

Highlights

Jason Theiss, Chief

Financial Officer

Don Caron, Chief

Executive Officer

North America’s Largest Pure Play

“For over 30 years we have proven our ability to combine strategic supplier relationships and expert logistics making us the premier

supplier of drilling fluid chemicals and drilling fluid additives to the North American oil and gas industry.”

Oil and Gas Drilling Fluids

Distribution & Blending

Company

TSX:BRY June 2015

TSX: BRY

June 2014

Certain statements set forth in this presentation are forward looking statements. Although Bri-Chem Corp. management believe

their expectations are based on reasonable assumptions, they give no assurance that expected results will be achieved. There

are numerous risks and uncertainties that can effect the outcome and timing of such events, including many factors beyond the

control of Bri-Chem Corp.’s management.

These factors include, but are not limited to, economic and political conditions, government regulation, commodity prices for oil

and gas, fluctuations in the level of oil and gas, the need to effectively integrate acquired businesses, uncertainties as to Bri-

Chem’s ability to implement its business strategy effectively in Canada and the United States, Bri-Chem’s ability to attract and

retain key personnel, currency fluctuations and other factors that affect demand for the Company’s product. Should one or more

of these risks or uncertainties occur, or should underlying assumptions prove incorrect, the actual results and plans for fiscal

2015 and beyond could differ materially from those expressed in the forward looking statements. Additional information on

these and other factors and uncertainties are described under the heading “Risk Factors” in the Company’s most recent Annual

Information Form (“AIF”) and other continuous disclosure materials filed by the Company with Canadian securities regulators,

which are available to the public at www.sedar.com.

Readers are cautioned not to place undue reliance on this forward-looking information, which is given as of the date it is

expressed. The Company does not undertake to update or revise any forward-looking information, whether as a result of new

information, future events or otherwise, except as required by law.

Furthermore, certain measures we use are not recognized measures under International Financial Reporting Standards

(“IFRS”). Specific measures used are earnings before interest, taxes, depreciation, amortization and non-cash stock based

compensation (“EBITDA”). We strongly recommend the participants review the discussion of these statements in the

“Management’s Discussion and Analysis – Non-IFRS Measures and Reconciliations” section of our 2014 Annual Report.

Forward-Looking Statement

2

TSX: BRY

June 2014

1. COMPANY & INDUSTRY OVERVIEW

2. FINANCIAL REVIEW

3. 2015 OUTLOOK

4. QUESTIONS

Presentation Agenda

3

TSX: BRY

June 2014

4

Largest Independent Drilling

Fluids Wholesale Distributor

in North America

2014 Record Sales of $185M

2014 Record EBITDA of $17M

31 Strategic

Warehouses in North

America

7 Blending & Packaging

Facilities

Vital Link in the

Supply Chain

Drilling, Completion

Stimulation &

Production Chemicals

Warehouse Logistics

Operate 24/7

365 days per year

Enable Energy Service

Companies To Grow

Nationally

North American

Customer Base

Drilling Fluids

Blending Additives

Oilfield Cement

Our Business

Company & Industry Overview

TSX: BRY

June 2014 Market Data

As of May 25, 2015

Exchange Toronto Stock Exchange

Shares Outstanding 23.7M/FD25.3M

Share Price $0.48

52 Week High/Low $1.98/$0.37

Market Capitalization $11.4M

Float 18.0M

Net working capital $29.4M

EBITDA (1) $17.0M

EBITDA per FD share (1) $0.70

EV/EBITDA (1) (3) 4.2X

Debt/EBITDA (1) (2) 3.6X

Book Value per FD share (1) $1.83

(1) For the year ending December 31, 2014 from continued operations

(2) Debt is calculated as operating line, plus long-term debt

(3) Enterprise Value = Market capitalization, plus debt, less non-controlling interest

Management, Directors and

Insiders 24%

Institutional 41%

Retail 35%

Shareholder Breakdown


5

TSX: BRY

June 2014

6

Corporate Highlights


Canadian Fluids Distribution & Blending Divisions

USA Fluids Distribution & Blending Divisions

North America

2014 Sales flat YOY • Distribution sales down 4% • Blending sales up 13%

2014 Sales up 75% • Distribution sales up 66% • Blending sales up 260%

Consolidated 2014 Sales up 23% • Distribution sales up 20% • Blending sales up 41%

50 Employees generating $103M in Revenue Expanded Blending Facility Capacity Strategic Transportation Relationship with Mullen Group

73 Employees generating $82M in Revenue Expanded from 3 to 18 Warehouses and $6M to $74M in sales in 4 years No other national independent drilling fluids wholesaler in USA at present

123 Employees generating $185M in Revenue ($1.5M/employee) Limited Capex needs for additional expansion Best Inventory & Warehouse Industry Coverage

TSX: BRY

June 2014

7

Solution Blend - Production Chemicals

Well maintenance Enhance production

Sodium/ Solution Blend - Stimulation Chemicals

Eliminate unwanted materials Injection of fluids for fracturing process

Sodium/Sun Coast - Cementing Chemicals

Displaces the drilling fluids Cements wellbore casing

Bri-Chem Supply - Drilling Fluids

Lubricates and cools the drill

bit.

Remove cutting debris from

the bottom of the drill hole. Controls subsurface pressure

Prevents the well from

flowing or blowing out.

Oil & Gas Fluids – Fully Integrated

Drilling Fluids Are Essential


* See Appendix for Product List

TSX: BRY

June 2014

North American Oilfield Chemical Market

Stimulation Chemicals, 50%

Drill ings Fluids, 30%

Production Chemicals, 10%

Cementing Chemicals, 8%

Other Types, 2%

North American Drilling Fluids Market

(1) Company Estimate

(2) Source: Freedonia Group – US Oilfield Chemical Demand Company & Industry Overview

8

TSX: BRY

June 2014

9

Canadian Distribution and Blending Facilities


► 15 Distribution and Blending Facilities ► 12 Third party owned and operated warehouses minimize

capital and operating costs. ► Customers pay for all transportation costs to and from

rig sites

Distribution Facility Distribution & Blending Facilities

TSX: BRY

June 2014 USA Distribution and Blending Facilities

► 16 Distribution & Blending Facilities ► 8 third party owned and operated warehouses ► Coverage in all major USA resource plays

Distribution Facility

Distribution & Blending Facilities

10


TSX: BRY

June 2014

For The Years Ended Dec 31

Consolidated (Continued Operations)

2014 2013 % Change

Revenue $184,708 $150,040 23.1%

Gross Margin ($) $31,750 $26,644 19.2%

Gross Margin (%) 17.2% 17.8% (0.6%)

EBITDA $16,832 $13,031 29.2%

EBITDA/Share $0.70 $0.74 ($0.04)

Wgt Avg Shares Outstanding (000s)

24,014

17,613

37.6%

Financial Review

2014 Performance

11

TSX: BRY

June 2014 Annual Divisional Sales Breakdown

Financial Overview

12

40%

44%

11%

5%

2014 Consolidated Revenue $184.7M

USA Fluids

CDN Fluids

CDN Blend/Pack

USA Blend/Pack

30%

56%

12%

2%

2013 Consolidated Revenue $150.0M

TSX: BRY

June 2014 USA Fluids Division Explosive Growth

13 Financial Review

-

5,000

10,000

15,000

20,000

25,000

2011 2012 2013 2014

Q1 3,134 7,825 12,501

Q2 461 6,273 10,242 18,185

Q3 1,682 5,999 12,643 21,155

Q4 2,928 4,503 13,839 22,004

(00

0's

of

CD

N $

)

Year

USA Fluids Distribution Division Quarterly Revenue Growth

TSX: BRY

June 2014 Gross Margins

(1) Divisional Gross Margin based on percentage of divisional revenue

14

Financial Review

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

2010 2011 2012 2013 2014

Blend/Pack USA $- $915 $3,324

Blend/Pack CA $1,302 $1,494 $1,435 $3,581 $3,704

Fluids Dist USA $- $1,487 $4,113 $9,809 $13,998

Fluids Dist CA $16,672 $20,553 $14,574 $12,339 $10,724

$ T

ho

usa

nd

s

14.7%

21.8%

40.0%

17.8%

15.8%

19.5%

19.0% 22.0% 14.1%

39.6%

14.4% 16.3% 14.6% 13.1% 15.3%

20.9%

TSX: BRY

June 2014 Balance Sheet

As of Dec 31, 2014

ABL Operating Line $51.9M

Available Credit ($90M ABL) $21.5M

Inventory $57.3M

Total Assets $131.8M

Net working capital $29.4M

Long-term Debt $7.5M

Shareholders Equity $47.2M

Inventory Turnover 2.7X

Capital Expenditures $5.6M

Financial Review 15

$0

$10

$20

$30

$40

$50

$60

$70

$80

$90

$100

$ M

illio

ns

Credit Facility

Facility Used

Unmargined Availability

Margined Availability

$38M Available Liquidity

$22M Available

$52M Used

TSX: BRY

June 2014

Six Successfully Integrated Acquisitions

•Profitable

•Experienced Management

•Complementary Fit

•Opportunity for New Growth

•Geographic Expansion

16

Acquisitions

2007 2011 2012 2013 2014

Growth & Expansion

Opportunities

TSX: BRY

June 2014

17

2015 Industry Outlook

2015 Depressed Oil & Gas Prices

•PSAC forecasts 5,320 wells to be drilled in Western Canada (42% decrease -2014)

•CAODC forecasts 203 average active rigs (40% decrease - 2014)

•USA actual 885 average active rigs (53% decrease - 2014)

•Rig count (as of May 27, 2015)

• CA 75 rigs

• USA 885 rigs

A Forward Look

Growth & Expansion

Opportunities

TSX: BRY

June 2014

18

2015 Strategy

Project “Debt Reduction” Plan

Annualized interest savings of $1.1M (est.)

•Inventory reduction from $54M to $33M

•Repay Sub Debt principal down from $8.4M

to $5M

•Reduce CapX spending from $5.7M to

$750K

•Reduce ABL Debt from $43M to $30M

•Reduce ABL facilty from $90M to $50M

Project “Right Size” Plan

Annualized cost savings of $3.2M (est.)

•Wage Rollbacks (5% non-managerial, 10%

Management)

•Layoff 25% of employee base

•Suspension of employee benefits

•Cut back discretionary spending

•Corporate office move back to Acheson, AB

•Closure of less active warehouses

A Forward Look

Growth & Expansion

Opportunities

TSX: BRY

June 2014

19

Don Caron

Chief Executive Officer

2125 64 Avenue Edmonton, Alberta T6P 1Z4

Email: [email protected]

Ph: 780.420.6885

Contacts

Appendix

Jason Theiss

Chief Financial Officer

2125 64 Avenue Edmonton, AlbertaT6P 1Z4

Email: [email protected]

Ph: 780.577.0595

TSX: BRY

June 2014

20

Don Caron Chief Executive

Officer & Director

President and CEO since 2008

Partner of Alberta based Private Equity Firm.

Founder of International Technologies Inc. which merged to create Tervita (formerly CCS) (1992)

Albert Sharp Director

Former Chief Executive Officer of Altus Geomatics, partnership residing under Altus Group Income Fund. (TSX: AIF.UN)

Retired Trustee of Altus Group Income Fund.

Member of The Canadian Institute of Geomatics; The International Right of Way Association; and, The Alberta

Association of Surface Land Agents.

Eric Sauze Director & Chair

of Audit Committee

Chartered Accountant and Chartered Financial Analyst.

Chief Financial Officer of Western Canadian based oil and gas valve company.

Brian Campbell

Director

Over 25 Years of field and management experience in the drilling fluids industry.

Founded Bri-Chem in 1985.

Former President of Bri-Chem Fluids division.

Trent Abraham President of Fluids

Division

Over 20 years experience in the drilling fluids industry, oversees the day to day operations

Former owner of Millennium Technologies which was purchased by Bri-Chem (2007).

Jason Theiss Chief Financial

Officer

Chartered Accountant.

Prior, controller of private income trust, and senior auditor with public accounting firm.

Joined Bri-Chem in 2007.

Bios

Appendix

TSX: BRY

June 2014

21

Fluid Products

Stimulation &

Fracturing

Sodium Chloride

Silica Fume

Processed Lime

Hydrated Lime

Copper Chloride

Gilsonite

Kelzan

Barite

Bentonite

Oil Based Muds

Emulsifiers

Defoaming Agents

Calcium Nitrate

Soda Ash

Polymers

Surfactants

Acids

Guar Gums

Petro Distillate

Borate Salts

Citric Acid

Corrosion Inhibitors

Scale Inhibitors

Methanol

Sand Dispersants

Foaming Agents

De-waxing Solvents

Hydrogen Sulfide

Appendix

Cementing &

Other

Production

Chemicals

Drilling

Fluids

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