Mullen Group Ltd.
TSX : MTL

Mullen Group Ltd.

December 17, 2014 19:00 ET

Mullen Group Ltd. Announces 2015 Business Plan and Declaration of Monthly Dividend

OKOTOKS, ALBERTA--(Marketwired - Dec. 17, 2014) - (TSX:MTL) Mullen Group Ltd. ("Mullen Group" and/or the "Corporation") announced today the business plan for 2015 has been approved by the Board of Directors (the "Board") . The annual process encompassed an extensive review of a wide range of issues including: expectations for economic activity in North America, the negative impact associated with the declines in commodity prices on the oil and natural gas sector, including drilling activity in western Canada and capital investment plans, the balance sheet of Mullen Group, the impact of previously announced acquisitions and expected cash outflows. Taking all of these issues into consideration, the Board approved a capital budget for 2015 of $80.0 million, with $40.0 million allocated as replacement capital for the Corporation's Operating Entities, the majority focused towards acquiring trucks, trailers and specialized equipment to support operations. In addition, $35.0 million will be allocated to acquire real property in Saskatchewan, facilities currently leased by Jay's Transportation Group Ltd., and to complete the rail transload facility in Edmonton, Alberta; assets that are considered strategic to the long-term success of Mullen Group. Further, a total of $5.0 million will be allocated for contingencies.

"The recent declines in crude oil pricing will undoubtedly negatively impact the oil and natural gas industry worldwide. Our Oilfield Services segment will suffer along with our customers who will be forced to adjust to the reality of lower cash flows. As a result I expect 2015 will be a very challenging year for the oil and gas industry in western Canada, and for our organization, particularly in terms of drilling and oil sands coring activity. However, it is important to remember that the oil and gas sector will still generate significant cash flow even at current pricing levels and will most likely continue to invest to maximize production from existing producing wells. In addition, commodity prices are extremely volatile and unpredictable, as such it is prudent to take a longer term view, remain flexible and be diversified. Our business plan for 2015 reflects these fundamentals along with the fact that we maintain a well-structured balance sheet. We will invest capital, albeit at reduced levels to prior years, to ensure our Operating Entities remain best in class and competitive. We will also invest in operating facilities ensuring that we can continue to reduce expenses and be positioned for the future", said Mr. Murray K. Mullen, Chairman of the Board and Chief Executive Officer.

ELEMENTS OF 2015 BUSINESS PLAN

Trucking/Logistics Segment

We expect growth in the segment primarily due to previously announced acquisitions. In addition, the Canadian economy is expected to continue to expand as consumers and the manufacturing sector benefit from lower commodity prices, particularly crude oil. However, we do expect the economy in western Canada to slow due to reductions in drilling activity and energy related capital investments. The 2015 results do not include any contribution from Mill Creek Motor Freight L.P. as a result of the previously announced merger with Kriska Transportation Group Limited. Margins will decline slightly primarily due to the previously announced acquisition of Gardewine Group Limited Partnership, which generates lower margins.

Oilfield Services Segment

We anticipate this segment to experience a significant reduction in revenue due to the recent decline in commodity prices, delays in pipeline approvals and uncertainties related to LNG projects. Drilling activity in western Canada will decline by an estimated 20% year over year, directly impacting those Operating Entities leveraged to drilling and to a lesser extent our Operating Entities focused on servicing producing wells. Lower oil prices will also negatively impact investment decisions in Canada's oil sands operations. Several customers have already announced the suspension of their 2015 core hole delineation projects. As such we expect TREO Drilling Services L.P.'s drilling activity to decline significantly. Margins will decline due to the combination of lower revenue, pricing pressures and generally a more competitive market environment in most Operating Entities.

2015 Summary

($ millions) Estimates
Revenue
Oilfield Services $ 740.0
Trucking/Logistics 760.0
Total Revenue $ 1,500.0
Operating Income (1)
Oilfield Services $ 165.0
Trucking/Logistics 110.0
Total Operating Income $ 275.0
Capital Expenditures
Equipment $ 40.0
Facilities and Contingencies 40.0
Total Capital Expenditures $ 80.0
(1) Operating Income is defined as net income before depreciation on property, plant and equipment, amortization on intangible assets, finance costs, net unrealized foreign exchange gains and losses, other (income) expense and income taxes.
Please note that Mullen Group's businesses are subject to seasonality and therefore equal distribution of annual performance is not appropriate.

The focus will be on controlling all costs throughout the organization, minimizing discretionary expenditures and rationalizing operations where practical. Our diversified business model supported by a strong balance sheet and working capital position provide Mullen Group with flexibility to pursue strategic acquisitions that may arise and to continue the practice of paying shareholders with an annual dividend of $1.20 per Common Share over the course of 2015, such dividend to be paid on a monthly basis, subject to Board approval.

"While I expect 2015 to be a challenging year from an operating and financial perspective, we will manage through this cycle. We remain focused on rewarding our shareholders with a consistent dividend as well as investing for the future. The initiative we took earlier this year related to securing $400.0 million in long-term debt at favourable interest rates is an important element of our long-term strategic plan", added Mr. Mullen.

MONTHLY DIVIDEND

The Board announced today that it has declared a monthly dividend of $0.10 per Common Share payable to the holders of record of Common Shares at the close of business on December 31, 2014. The dividend will be paid on January 15, 2015. For Canadian resident shareholders, this dividend is designated as an "eligible dividend" for purposes of the enhanced dividend tax credit rules contained in the Income Tax Act (Canada) and any corresponding provincial and territorial tax legislation.

Advisories:

This news release includes certain statements regarding Mullen Group's future plans and operations, including the 2015 Business Plan and Dividend Policy, and contains forward-looking statements that we believe allow readers to better understand our business and prospects. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "strategy" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this news release contains forward-looking statements and information concerning the 2015 Business Plan, Dividend Policy, capital budget, operating income and anticipated revenues.

With respect to the forward-looking statements and information concerning the 2015 Business Plan and Dividend Policy, Mullen Group has provided such in reliance on certain assumptions that it believes are reasonable at this time, including but not limited to the allocation of 2015 capital budget, impact of general economic conditions, volatility of commodity prices and activity in the oil and gas industry in western Canada. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Readers are cautioned that the assumptions used in the preparation of such forward-looking information and statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them.

Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of Mullen Group, are included in reports on file with applicable securities regulatory authorities, including but not limited to Mullen Group's annual information form dated February 12, 2014, under "Risk Factors" and in Mullen Group's other filings available at www.sedar.com.

Mullen Group is a company that owns a network of independently operated businesses. Mullen Group provides a wide range of specialized transportation and related services to the oil and natural gas industry in western Canada and is 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, 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.

Contact Information

  • Mullen Group Ltd.
    Mr. Murray K. Mullen
    Chairman of the Board, Chief Executive Officer and President
    403-995-5200 / Toll-free: 1-866-995-7711
    403-995-5296 (FAX)

    Mullen Group Ltd.
    Mr. P. Stephen Clark
    Chief Financial Officer
    403-995-5200 / Toll-free: 1-866-995-7711
    403-995-5296 (FAX)

    Mullen Group Ltd.
    Mr. Richard J. Maloney
    Senior Vice President
    403-995-5200 / Toll-free: 1-866-995-7711
    403-995-5296 (FAX)