Bri-Chem, a North American wholesale distributor and manufacturer of oil and gas drilling fluids and steel pipe, reported its Q3 financial results on Wednesday. The company said that although the Canadian drilling industry had strong demand for rigs in Q1 2012, activity in Q2 and Q3 was significantly hampered by wet weather and uncertain economic conditions. As a result, Canada experienced a 25 percent decline in drilling activity in Q3 2012 with the average number of operating rigs decreasing to 339 rigs compared to an average of 454 rigs for the comparable period in 2011.
Bri-Chem had net earnings of $1.44 million for Q3 and $3.6 million for the nine months ended September 30, 2012 as compared to net earnings of $3.9 million and $7.0 million, respectively, during the same period in 2011.
The steel pipe manufacturing division achieved record sales of $4.1 million and $8.6 million respectively, for the three and nine months ended September 30, 2012 and gross margins were 26.2 percent for the three months ended September 30, 2012.
The steel pipe distribution division recorded sales of $4.6 million and $21.7 million, respectively, for the three and nine month periods ended September 30, 2012, decreases of 34.7 percent and 0.4 percent respectively compared to the same periods in 2011. The decline in sales in the quarter was mainly due to lower overall oil and gas drilling activity. Despite the lower demand for seamless steel pipe in the quarter, the division yielded margins of 24.2 percent for the quarter.
Bri-Chem said that Canadian drilling activity has recently become more volatile with the uncertainty of future crude oil and natural gas pricing, coupled with an unclear economic environment. This uncertainty is expected to result in lower Canadian drilling activity in Q4 2012 as compared to the same period of the prior year.