Bri-Chem Corporation (BRY-TSXV)
October 31, 2008 Issue
The Most Powerful Name In Corporate News and Information.
Drilling Fluid Supplier To The Oil And Gas Industry, Bri-Chem Through Its Acquisition Of Weifang Steel Canada Has Entered The Import And Export Of Steel Products For The Resource Industry
Bri-Chem operates out of its head office located in Acheson, Alberta and its principal activity is the wholesale/distribution of drilling fluid supplies and steel tubing and casing for the oil and gas, mining and construction industries. Bri-Chem’s chemical division provides over 150 domestic and foreign products to customers throughout Alberta, British Columbia and Saskatchewan. The Company’s tubing and casing division provides various diameters of pipe and service Western Canada, Eastern and Central United States. Bri-Chem has built their business on long standing tradition of customer service. Supplying the right product at the right time to customers, makes Bri-Chem a first choice for many companies.
Acheson, AB T7X 5A7
Fax : 780-451-4420
Chief Executive Officer
Al Campbell has over 51 years of experience in the oilfield industry, with 47 of those years in the mud business. Al worked as a service rep for 7 years, then spent 5 years as a manager of operations. Al has worked in various management roles for the past 25 years. Al is also an active participant in industry seminars and meetings, maintaining a strong and up to date connection with the industry and its memberships. Al joined Bri-Chem Supply Ltd. in 1992 and his current role is a member of the Board of Directors and CEO for Bri-Chem Corp.
Interview conducted by:
Lynn Fosse, Senior Editor,
Mr. Campbell: “Bri-Chem up to this point has been a wholesale distributor of drilling chemicals. Just recently, we bought a steel company which imports and exports steel products for the oil industry and other industries. Therefore, we are a wholesale distributor of drilling fluids chemicals and metals, iron, and steel.”
CEOCFO: Why the diversification?
Mr. Campbell: “Because the oil industry in Canada is quite seasonal. We are trying to diversify to eliminate our ups and downs where we have a level playing field where we are busy all the time instead of just in spurts.”
CEOCFO: Who is buying your products?
Mr. Campbell: “The drilling fluids products and chemicals are bought by the drilling fluids companies. They are the ones who take the product to the locations, to use in the drilling wells. We are a wholesaler and we supply to the drilling fluid companies.”
CEOCFO: Is there much competition for you?
Mr. Campbell: “We have two major competitors. One is a large international drilling fluids company, and the other is a Canadian company similar to ours. At this particular time we are probably the biggest wholesale distributor of drilling fluids in Canada.”
CEOCFO: Why are your customers buying from you?
Mr. Campbell: “The service we give them, the locations, and we have history with a lot of the larger companies we have been dealing with from the day they started. We helped them start from the ground up and worked with them through the years and to this point we have never lost a customer.”
CEOCFO: Do people purchase as needed or do they purchase for a whole season?
Mr. Campbell: “They purchase as required. In the drilling fluids business they will order material and take it out to location, drill the well. What is unused they bring back and we give them credit for it.”
What is new in drilling fluids?
CEOCFO: Other people are looking at oil sands; do you have anything to do with that?
Mr. Campbell: “Yes and no. They use similar products and they also use different products. The oil sands is more of a mining project. They take the dirt out put it through a plant. They take the oil out and put the dirt back in the ground again. There are some Sag-D wells, that are drilled horizontally and produce it that way, and we do sell a lot of product up there through our clients.”
CEOCFO: Will you tell us about your entry into the US market?
Mr. Campbell: “At present, we are taking small steps. We are currently in Williston, North Dakota, where we have a warehouse there to service the Bakken Play. We do sell some chemicals to some companies down in the states; we sell them up here and they take the product down. Other than Williston with the drilling fluids, those are the only places where we are now. We sell our steel in several locations down there, which is one of our bigger markets. We have just purchased a steel company so Jason and I are not really very well versed on exactly where they sell and how they go about it. Therefore, we are fairly green in that regard.”
CEOCFO: Do you see additional diversification?
Mr. Theiss: “We do plan on further diversification. We have changed our focus and are really concentrated on the wholesale distribution market. We understand wholesale distribution very well. We acquired Weifang, is a wholesale distribution company that is in a lot of regards very similar to how Bri-Chem was operating in the past. The major difference being it is another product line, almost another service that we can offer to our customers. The customer base is also different. That being said, the core fundamentals of how we run our businesses were very similar and that is one of the main contributing reasons as to why we looked at acquiring this company.”
CEOCFO: What is it that Bri-Chem understands about wholesale distribution that maybe other companies haven’t realized yet?
Mr. Theiss: “I would say the ability to source product gives us an edge on the competition. The vendor and the customer relationships that we have sets us apart from a lot of competitors. We are able to source products from many regions whether they be Canada, US or international. We are able to bring the product in at the right time, store them in the right warehouses, and get the product available to the customer when they need it. Bri-Chem has prided itself in the past and continues to pride itself on having a 24-hour turnaround period to try and obtain and provide chemicals by our customers when and where they need them.”
CEOCFO: What inventory do you need to maintain?
Mr. Campbell: “Currently on the fluids side of our business, we are located in nineteen warehouses across western Canada and now one into the United States. With that range, we cover most of western Canada and the southeastern part of Saskatchewan. We have teamed up with third-party warehouses to put ourselves in very good strategic locations where a lot of the drilling activity has taken place. These are locations where fluids are used on a daily basis, so we carry a fair amount of inventory because we never want to run out. As product gets sold we will turnaround and replace that product in the warehouse so that the next company that comes along needing fluids will have accessibility to that product. On the steel side we have a pipe yard in Louisiana that services some of the US markets and we also have one other warehouse in Alberta Canada that services the Canadian and US markets as well. The future plans there would be to find a few more distribution points out of the US as our US operation continues to grow on the steel and tubing and casing side.”
CEOCFO: What is the financial picture for Bri-Chem?
Mr. Theiss: “Right now we have a very strong financial position. Our earnings per share continue to grow on a quarterly basis. The acquisition of Weifang as Al mentioned is going to help with some of the seasonality of the quarters. Balance sheet wise we have some debt on our books but our working capital remains very strong. Our customers continue to grow and we have seen an increased growth of 30% over last year so it is a very optimistic position to be in for the remainder of this year. We would anticipate more of the same in the coming periods.”
CEOCFO: What accounts for the increase?
Mr. Theiss: “Customer service accounts for some of that. We had an acquisition in July of 2007 where we bought one of our competitors and did some consolidation in the marketplace. That allowed us access to more sales people as well as some geographic diversification getting into southeastern Saskatchewan, and we were able to service some of our existing customers better by having a location set up in the Saskatchewan marketplace. We have seen the traditional Bri-Chem customers grow as a result of the new geographical locations. Those are the two fundamental things that have contributed to our growth.”
CEOCFO: Do you see more geographic expansion in Canada?
Mr. Theiss: “On the drilling fluids side, probably not. The majority of drilling activity in Canada is in the western Canadian sedimentary basin. We are well situated geographically in that region. On the steel side, I would probably say no as well. We do a fairly good job of distributing steel out of Canada, and a lot of the sales in Canada are for the oil, gas and resource industry, the majority of that is in western Canada. The expansion that we see is probably into the US market, getting into areas where the drilling activity is and see what states productivity is the heaviest and take a look at expansion into those regions.”
CEOCFO: Do your customers know what they need and it is just an issue of getting it from you or do you have the opportunity to increase sales?
Mr. Campbell: “It is difficult to answer that question because the drilling fluids companies go to the oil companies to acquire the work, and we don’t know about what is required until they order the material. How do we increase our sales to each customer? By increasing our market share through new and established companies.”
CEOCFO: Why should investors look at Bri-Chem, and what sets you apart from other companies?
Mr. Campbell: “Without sounding pompous, we treat our customers better than our competitors do. One of our competitors is a big international drilling fluids company, which is also a competitor to some of our customers so they are a little reluctant to buy out them. Our biggest Canadian competitor has been in the business for 35-40 years and is getting a little complacent so customers come to us; they like working with us. Sometimes we ask ourselves why, but they seem to, they want to, and whatever we are doing, we are doing right.”
Final thoughts, what should people reading about Bri-Chem remember most?
“Bri-Chem up to this point has been a wholesale
distributor of drilling chemicals. Just recently, we bought a steel company
which imports and exports steel products for the oil industry and other
industries. Therefore, we are a wholesale distributor of drilling fluids
chemicals and metals, iron, and steel.” - Alan Campbell
ceocfointerviews.com does not purchase or
recommendation on stocks based on the interviews published.