OKOTOKS, AB, April 27 /CNW/ - (TSX:MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") is pleased to report its financial and operating results for the period ended March 31, 2011 with comparisons to the same period last year. These are the Corporation's first consolidated financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"). Effective January 1, 2011, the Corporation commenced reporting its financial and operating results in accordance with IFRS which requires the restatement of its prior year results for comparative purposes.
For the three month period ended March 31, 2011, Mullen Group generated consolidated revenue of $342.7 million, operating income of $74.4 million and net cash from operations of $50.1 million. Cash was used to, among other things, acquire net property, plant and equipment for $15.2 million, pay cash dividends totaling $9.8 million, and repay long-term debt of $5.9 million.
Mullen Group's consolidated revenue of $342.7 million was an increase of $82.9 million or 31.9 percent from the $259.8 million generated in 2010. This increase in consolidated revenue was attributable to greater revenues generated by both the Oilfield Services segment and the Trucking/Logistics segment.
The increase in revenue experienced by the Oilfield Services segment was primarily due to significantly higher crude oil prices which continue to attract investment capital for oil sands development, infrastructure projects and resource oil drilling. The year over year increase in drilling activity in western Canada, as well as changing well profiles, created strong demand for the fluid hauling and production services business units but did not assist the performance of the rig relocation businesses. Year over year growth in revenue was also achieved by virtue of increased oil sands related activity and through acquisitions. Demand for core drilling services also increased considerably as oil price stability encouraged further oil sands exploration. At the beginning of the drilling season, TREO Drilling Services L.P. had secured work for 15 rigs, unfortunately however, due to an inability to hire qualified personnel, TREO was only able to operate nine rigs this past drilling season. The Trucking/Logistics segment experienced increased revenue by virtue of the incremental revenue generated from acquisitions, increased demand for transportation services in western Canada, as well as higher fuel surcharge revenue.
Mullen Group generated operating income for the period ended March 31, 2011 of $74.4 million, an increase of $18.5 million or 33.1 percent over the $55.9 million generated in 2010. Operating income was negatively impacted by the recent rapid rise in diesel fuel costs. According to the Energy Information Administration, diesel fuel costs increased by approximately 20.0 percent during the quarter. Mullen Group was not able to fully recover this cost escalation resulting in a negative impact on operating income.
"The operating environment in the first quarter of 2011 continued to show positive signs that the Alberta economy, in particular, is gaining momentum with substantial revenue increases as compared to 2010. Higher commodity prices, particularly for crude oil, have strengthened the demand for the majority of the services provided by Mullen Group. Higher oil prices have also increased the price of diesel fuel substantially. Fuel is one of Mullen Group's largest operating expenses and this rapid rise negatively impacted operating income as fuel surcharge revenue always lags cost escalation. The positive signs from the first quarter have resulted in us reassessing our capital budget for 2011. A number of our business units, specifically those involved in the areas of production services and oil sands operations, continue to see attractive opportunities to deploy capital. As a result, our Board has approved an increase of $25.0 million to our capital expenditure budget moving it to $75.0 million for the year," stated Mr. Stephen Lockwood, President and Co-Chief Executive Officer.
"It is worth noting that our year over year growth in revenue and operating income was very much assisted by our recent acquisitions. Both Smook and Panda, as standalone business units, performed very much as expected and the tuck-ins of Radium into Cascade Energy Services L.P. and Ger-Ed and GVT into Payne Transportation L.P. clearly bolstered the financial performance of these business units," added Mr. Lockwood.
In the first quarter of 2011, Mullen Group generated net income of $48.3 million or $0.61 per share, an increase of $24.5 million or 102.9 percent compared to $23.8 million or $0.30 per share in 2010. The $24.5 million increase in net income was mainly attributable to Mullen Group's strong operating performance which contributed $18.5 million in operating income. Net income also increased by virtue of a $9.8 million change in the fair value of investments. These items were somewhat offset by a $2.2 million year over year decrease in unrealized foreign exchange gain and a $3.5 million increase in income tax expense. Adjusting Mullen Group's net income and earnings per share to eliminate the impact of unrealized foreign exchange gains and changes in fair value of investments results in adjusted net income of $34.0 million and adjusted earnings per share of $0.43 for 2011 compared to $18.5 million, or $0.23 per share, in 2010. These adjustments more clearly reflect earnings from an operating perspective.
A summary of Mullen Group's results for the quarter ended March 31, 2011, along with revenues and operating results by segment are as follows:
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SUMMARY Three Months Ended
March 31
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2011 2010 Change
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(Unaudited)
($ millions, except per share amounts) $ $ %
Revenue 342.7 259.8 31.9
Operating income(1) 74.4 55.9 33.1
Net income 48.3 23.8 102.9
Net income - adjusted(2) 34.0 18.5 83.8
Earnings per share(3) $0.61 $0.30 103.3
Earnings per share - adjusted(2) $0.43 $0.23 87.0
Cash dividends declared per common share $0.25 $0.125 100.0
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Notes:
(1) Operating income is defined as net income before depreciation on
property, plant and equipment, amortization on intangible assets,
finance costs, unrealized foreign exchange gains and losses, other
(income) expense and income taxes.
(2) Net income-adjusted and earnings per share-adjusted is calculated by
adjusting net income and basic earnings per share by the amount of
any unrealized foreign exchange gains and losses and the change in
fair value of investments.
(3) Earnings per share is calculated based on the weighted average number
of common shares outstanding for the period.
Operating income, net income - adjusted and earnings per share - adjusted
are not a recognized measures under International Financial Reporting
Standards ("IFRS") and do not have standardized meanings prescribed by
IFRS. Management believes these measures are useful supplemental
measures. Investors should be cautioned that these indicators should not
replace net income as an indicator of performance.
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SEGMENTED RESULTS Three Months Ended
March 31
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2011 2010 Change
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(Unaudited)
($ millions) $ $ %
Revenue
Oilfield Services 240.1 177.2 35.5
Trucking/Logistics 104.0 83.2 25.0
Corporate - 0.1 -
Intersegment eliminations
Oilfield Services (0.1) (0.3) -
Trucking/Logistics (1.3) (0.4) -
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Totals 342.7 259.8 31.9
Operating income
Oilfield Services 59.8 46.0 30.0
Trucking/Logistics 15.8 13.1 20.6
Corporate (1.2) (3.2) -
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Totals 74.4 55.9 33.1
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This news release may contain forward-looking statements that are subject to risk factors associated with the oil and natural gas business and the overall economy. Mullen Group believes that the expectations reflected in this news release are reasonable, but results may be affected by a variety of variables. Mullen Group relies on litigation protection for "forward-looking" statements.
Mullen Group is a company that owns a network of independently operated businesses. Today the Mullen Group is recognized as the largest provider of specialized transportation and related services to the oil and natural gas industry in western Canada and as one of the leading suppliers of trucking and logistics services in Canada - two sectors of the economy in which Mullen Group has strong business relationships and industry leadership. Mullen Group provides management and financial expertise, technology and systems support to its independent businesses.
Mullen Group is a publicly traded corporation listed on the Toronto Stock Exchange under the symbol "MTL". Additional information is available on our website at www.mullen-group.com.