OKOTOKS, Alta. — The time has come to start preparing for a recovery in the oil and gas segment and to position Mullen Group for growth.
That was a message from Mullen Group CEO Murray Mullen to analysts during a conference call today. Mullen said the company intentionally gave up market share in the oil and gas segment rather than chase rates. However, three factors have caused him to change his view and declare the company is ready to start winning back market share and staffing up.
He feels by downsizing the company when commodity prices crashed, Mullen was able to right-size and get its cost structure in line with demand. Also, he feels competitors in the oilfield services segment are financially strained and “in trouble” and he also feels, “sometime over the course of the next 12-18 months” that demand for oilfield services will improve.
“This is the time for Mullen to start to position for some time in late 2017 and we will be more aggressive in the market and will start to regain some market share,” Mullen said. “These initiatives mean our margins will decline in the short term but we will get them back, it’s just a matter of time.”
Waiting until demand improves in 2017 would be too late, Mullen said, adding the time is right because heightened demand coupled with bankruptcies in the segment will put upward pressure on rates.
“This is the time to start getting market share because as demand picks up, pricing will pick up,” Mullen said.
He also said Mullen Group will continue to invest in its regional LTL business. But that doesn’t mean all is rosy. Mullen gave a candid assessment of the Canadian economy as it “muddles along” and the Alberta economy, which he said is in “nasty recession.”
“Really, there are two economies out there today,” he said, noting the public sector economy is not struggling to the same extent as the private sector economy. Mullen has let go more than 1,500 people since oil prices tanked. And Mullen still doesn’t see current oil prices supporting much in the way of capital investments in the oilsands.
“I have an innate desire to give everybody the all-clear signal,” Mullen said. “However it appears to me the storm clouds remain well entrenched.”
He said the next few quarters will be challenging. LNG development, Mullen said, seems to be on hold or “dead in the water.”
Still, Mullen said he’s impressed with the Q2 financial results the company achieved in a challenging environment and he’s now positioning the company to grow.
“If your company is well positioned, this is the time to be opportunistic which is exactly what our strategy will be here at Mullen Group,” he said. “It is our view that this is the time to position for the next business cycle.”