OKOTOKS, AB – While recent declines in crude oil pricing will undoubtedly negatively impact the oil and natural gas industry worldwide, the CEO and chairman of Mullen Group Ltd. says it’s important to take a longer view.
“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,” said Murray K. Mullen. “Our Oilfield Services segment will suffer, along with our customers who will be forced to adjust to the reality of lower cash flows.”
He added, however, 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.
“Commodity prices are extremely volatile and unpredictable, as such it is prudent to take a longer term view, remain flexible and be diversified,” he said. “Our business plan for 2015 reflects these fundamentals along with the fact that we maintain a well-structured balance sheet.”
Mullen said the company will continue to invest capital, albeit at reduced levels to prior years, to ensure its operating entities remain best in class and competitive.
The Mullin Group’s 2015 business plan calls for $40 million in replacement capital – the majority of which will be spent on trucks, trailers, and other specialized equipment.
The replacement capital budget comprises fully half of the company’s approved capital budget of $80 million.
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, Alta. A further $5 million will be allocated for contingencies.
Approval of the Mullen Group’s 2015 business plan was announced this morning.
Mullen said 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,” he said.
The 2015 plan does not include any contribution from Mill Creek Motor Freight L.P. as a result of the previously announced merger with Kriska Transportation Group Limited. The company announcement this morning predicted margins will decline slightly primarily due to the previously announced acquisition of Gardewine Group Limited Partnership, which generates lower margins.
“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.
The board announced a monthly dividend of $0.10 per common share payable to the holders of record of common shares at the close of business on Dec. 31, 2014. The dividend will be paid on Jan. 15, 2015.
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