OKOTOKS, ALBERTA--(Marketwired - April 22, 2015) - Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") (TSX:MTL), one of Canada's largest and most diversified oilfield services and transportation companies, today reported its financial and operating results for the period ended March 31, 2015, with comparisons to the same period last year.
Key financial highlights for the first quarter of 2015 and 2014 were as follows:
($ millions, except per share amounts)
|Three month periods ended
|Corporate and intersegment eliminations||(1.1||)||(0.8||)||37.5|
|Total Operating Income (1)||64.8||91.2||(28.9||)|
|Net income - adjusted (1)||24.9||47.2||(47.2||)|
|Earnings per share (1)||0.03||0.40||(92.5||)|
|Earnings per share - adjusted (1)||0.27||0.52||(48.1||)|
|(1) Refer to notes section of Summary|
For the three month period ended March 31, 2015, Mullen Group generated consolidated revenue of $337.2 million, operating income of $64.8 million and net cash from operations of $41.9 million. During the quarter Mullen Group implemented a series of cost saving initiatives due to the collapse in crude oil and natural gas prices; acquired the business of Gardewine Group Limited Partnership ("Gardewine") for total cash consideration of $171.8 million, which included a $56.4 million repayment of associated debt; paid dividends of $27.5 million; incurred net capital expenditures of $34.8 million consisting mainly of real property; and paid interest obligations of $4.1 million. Mullen Group ended the first quarter with approximately $137.9 million of cash and cash equivalents.
Consolidated revenue in the first quarter of 2015 decreased by $74.8 million or 18.2 percent as compared to $412.0 million generated in 2014. This decrease in revenue was directly attributable to the Oilfield Services segment, where revenue declined by $114.4 million, or 42.0 percent, to $158.2 million as compared to $272.6 million in the same period one year earlier. Low commodity prices have reduced capital investments and drilling activity within western Canada's sedimentary basin, which has negatively impacted almost all of our services lines within the Oilfield Services segment. Specifically, the decrease was due to a reduction in revenue generated by those Operating Entities involved in the transportation of fluids and servicing of wells, which resulted from a combination of lower activity levels and intense competition accompanied by lower rates. Revenue also decreased due to the cancellation of core drilling programs within the oil sands, project delays related to large diameter pipeline construction projects and from a reduction in revenue from those Operating Entities most directly tied to oil and natural gas drilling activity in western Canada. These decreases were somewhat offset by an increase in the demand for dewatering services and from the incremental revenue generated from acquiring the business of Recon Utility Search N.A. Inc. The Trucking/Logistics segment experienced an increase in revenue of $39.9 million or 28.5 percent to $180.1 million as compared to $140.2 million in 2014. This increase was due to the incremental revenue generated from the acquisition of Gardewine and Bernard Transport Ltd. ("Bernard"), which was somewhat offset by Mill Creek Motor Freight L.P.'s financial results no longer being consolidated by Mullen Group as of December 1, 2014.
Operating income for the first quarter was $64.8 million, a decrease of $26.4 million or 28.9 percent over the same period in 2014. The decrease was primarily attributable to the Oilfield Services segment that experienced a $37.4 million decrease in operating income. This $37.4 million decrease was mainly due to the cancellation of core drilling programs within the oil sands, project delays related to large diameter pipeline construction projects combined with intense competition and pricing pressures experienced by those Operating Entities involved in the transportation of fluids and servicing of wells. The declines in the Oilfield Services segment were somewhat offset by gains of $3.9 million in the Trucking/Logistics segment, which mainly resulted from the acquisition of Gardewine and Bernard. Corporate costs also fell by $7.1 million on a year over year basis, which was mainly attributable to a $7.1 million positive variance in foreign exchange. As a percentage of consolidated revenue, operating income decreased to 19.2 percent as compared to 22.2 percent in 2014.
In the first quarter of 2015, Mullen Group generated net income of $2.8 million or $0.03 per share, a decrease of $33.5 million, or 92.3 percent, compared to $36.3 million or $0.40 per share in 2014. The $33.5 million decrease in net income was mainly attributable to a $26.4 million decrease in operating income, a $7.9 million negative variance in net unrealized foreign exchange, a $2.3 million increase in finance costs and a $1.4 million negative variance in the fair value of investments. These decreases were partially offset by a $5.9 million decrease in income tax expense. Adjusting Mullen Group's net income and earnings per share to eliminate the impact of the net unrealized foreign exchange gains and losses and the change in fair value of investments during the first quarter of 2015 resulted in adjusted net income of $24.9 million and adjusted earnings per share of $0.27, as compared to $47.2 million and $0.52 per share in 2014, respectively. These adjustments more clearly reflect earnings from an operating perspective.
"It is during times like this that a diversified business model and strong balance sheet become a real advantage. Our previously announced acquisitions, the most significant being Gardewine - one of Canada's largest trucking and logistics carriers - cushioned an otherwise very challenging quarter. The real and negative impact of low crude oil and natural gas prices hit oilfield service providers, including Mullen Group, in the first quarter. Drilling programs were slashed, capital investment decisions were either delayed or cancelled and pricing pressures were intense, all factors which contributed to the significant declines in our Oilfield Services segment. But one of the real tragedies of this cyclical downturn is the impact on people, including here at Mullen Group where we have reduced our employee head count by over 1,000. We have been forced to adapt to the realities of the current state of the oil and gas industry. The only bright spot last quarter was the relatively strong performance of our Trucking/Logistics segment, in spite of the modest economic performance in Canada," commented Mr. Murray K. Mullen, Chairman and Chief Executive Officer.
At March 31, 2015, Mullen Group had $279.3 million of working capital which included $137.9 million of cash and cash equivalents and $463.1 million of net debt. Mullen Group also has access to additional funding of $75.0 million from its bank credit facility, which continues to remain undrawn. The long-term debt consists mainly of private placement debt of U.S. $314.0 million and Canadian $331.0 million. The weighted average interest rate on the U.S. debt and the Canadian debt is 4.43 percent and 4.80 percent, respectively. The majority of this debt matures on October 22, 2024 and October 22, 2026. In July 2014 Mullen Group entered into two cross-currency swap contracts to swap the principal portion of $229.0 million of U.S. dollar debt into a Canadian currency equivalent of $254.1 million.
"We fully expect that our future results will reflect the current trend. Oilfield services will remain under pressure until oil and natural gas prices recover and confidence in the future prospects for the oil and gas industry is restored. The timing of this recovery is uncertain, however, the recent increases in crude oil pricing is encouraging. Our Operating Entities leveraged to oilfield services have substantially completed the necessary cost saving initiatives and are positioned to wait out this cyclical downturn. Until we see clear evidence of an industry recovery we will under invest in the oilfield services sector. However, there are a few areas of interest that we will pursue as opportunities arise. We have already invested in two new companies - Envolve Energy Services Corp. and Cordova Oilfield Services Ltd. - investing alongside quality entrepreneurs in areas we believe offer growth potential. And I fully expect that Mullen Group will make additional investments to support the growth of these companies.
"Our Trucking/Logistics segment will be our most productive segment in 2015 given the overall outlook for the Canadian economy and of course the acquisition of Gardewine. The integration of Gardewine is substantively complete and we are now focused on improving the margins at this large and growing company. Trucking and logistics remains an area of interest to our organization given the consolidation opportunities as well as the long-term potential of the industry," added Mr. Mullen.
A summary of Mullen Group's results for the three month periods ended March 31, 2015 and 2014 are as follows:
($ millions, except per share amounts)
|Three month periods ended March 31|
|Net unrealized foreign exchange loss||17.7||9.8||80.6|
|Decrease in fair value of investments||4.3||2.9||48.3|
|Net income - adjusted(2)||24.9||47.2||(47.2||)|
|Earnings per share(3)||0.03||0.40||(92.5||)|
|Earnings per share - adjusted(2)||0.27||0.52||(48.1||)|
|Net cash from operating activities||41.9||35.1||19.4|
|Net cash from operating activities per share(3)||0.46||0.39||17.9|
|Cash dividends declared per Common Share||0.30||0.30||-|
(1) Operating income is defined as net income before depreciation of property, plant and equipment, amortization of intangible assets, finance costs, net unrealized foreign exchange gains and losses, other (income) expense and income taxes.
(2) Net income - adjusted and earnings per share - adjusted are calculated by adjusting net income and basic earnings per share by the amount of any net unrealized foreign exchange gains and losses and the change in fair value of investments.
(3) Earnings per share and net cash from operating activities per share are 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 recognized terms under 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 and earnings per share as an indicator of performance.
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. Additional information regarding the forward-looking statements is found on page 1 of Mullen Group's Management's Discussion and Analysis.
Mullen Group is a company that owns a network of independently operated businesses providing a wide range of specialized transportation and related services to the oil and natural gas industry in western Canada and is recognized 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. The corporate office provides management and financial expertise, technology and systems support, shared services and strategic planning 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 or on SEDAR at www.sedar.com.