Truck News

News

Trucking/logistics Mullen Group’s “favourite area of focus” for investments


OKOTOKS, Alta. — Any near-term growth from Mullen Group is likely to occur on the trucking/logistics side of its business, at least until oil prices stabilize.

Murray K. Mullen, chairman and CEO of Mullen Group, indicated on a conference call with investors today the company has no appetite to expand its capacity in the oilfield services segment.

“We are always looking a acquisitions to augment our growth, but we do not do acquisitions for growth, we do them because they are strategic, and because they meet our financial thresholds. Trucking and logistics is our favourite area of focus at this time,” Mullen said.

Demand for oilfield services is so diminished, and rates under such intense downward pressure, that Mullen said the company prefers to park equipment than participate in a predatory pricing environment.

“We will never go to work for predatory pricing,” he said. “We’ll be competitive with anybody but we will not do stupid things and I will not allow our business units to work with clients that don’t respect our people and put them in harm’s way – I just won’t do it…we’re not market share-driven organization. That’s just not our game. This is a capital-intensive business. We’ll let everybody else wear out your equipment, wear out your people, have safety issues – we’ll wait in the weeds and go back to work when it makes sense. We are not shutting the doors but we don’t chase dumb business.”

Fortunately for Mullen Group, its diversification is paying off, and its growing trucking/logistics business is helping offset revenue losses in the oilfield services division. Last year the company acquired Gardewine Group – now its single largest entity – and the company has been working hard to improve that division’s profitability.

“We’re really pleased with the structural reforms we put in (at Gardewine Group),” Mullen said. “They are putting in place all the right processes to be able to get that margin up to where they need it to be and where we want to see them, but big ships take a little bit longer to move. They’re working hard at it.”

Freight demand has been soft in Alberta, and flat but consistent across most of Canada, Mullen said, allowing the trucking and logistics division to hold its own.

“The good news is, at least there was some demand whereas the oilfield services segment experienced another brutal quarter,” he said.

This year’s capital budget for Mullen was $80 million, down from $100 million in 2014, and will likely see a further reduction next year, with most or all capital funding to be directed towards investments in the trucking/logistics segment. Mullen is also keen on purchasing the real estate it operates from, but has already secured ownership of most of it.

As for when the Western Canadian oil and gas industry will recover, Mullen wasn’t making any guesses.

“Very few people predicted it would decline, so I don’t know how you can predict when it will go back up,” he said.

While current oil prices are unsustainable, Mullen added “One needs to be really cautious, because unsustainable levels does not necessarily mean there will be a quick recovery. We think the oil and gas industry will remain under stress a little longer than most people believe.”

What will it take to convince Mullen to begin reinvesting capital into its oilfield services segment? Mullen said he’ll be watching for three key things:

  1. Oil and gas prices need to recover from current levels;
  2. West Coast LNG projects must receive sanctioning from government, First Nations and final investment approvals from the developers;
  3. And oil pipelines must be endorsed by Canadians, “Otherwise it will be virtually impossible to see how Canada’s oil industry can grow anywhere near what we have seen the last couple of decades.”

For now, that segment of the business will focus on controlling costs and waiting out the storm.

“Until business improves we have to manage our costs,” Mullen said. “I’m not deploying any more capital in the oilfield services side until I see we get an appropriate return on it. We’re de-marketing customers, parking our very good equipment. We’re not going to wear it out for nothing. We’ll wait until the market improves and outwait our competitors.”


James Menzies

James Menzies

James Menzies is editor of Truck News magazine. He has been covering the Canadian trucking industry for more than 15 years and holds a CDL. Reach him at james@newcom.ca or follow him on Twitter at @JamesMenzies.
All posts by

Print this page
Related Articles
TruckNews
TodaysTrucking


Have your say:

Your email address will not be published. Required fields are marked *

*