“Optimism” returns to oil patch: Mullen

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OKOTOKS, AB – Revenues are still lower than peak levels, but Mullen Group chairman and Chief Executive Officer Murray K Mullen is reporting a “sense of optimism” in the oil and gas sector — and he expects the good news to continue in the second half of 2017.

“After two years of reporting declining revenues we are finally starting to experience some growth,” he said last week when unveiling the first quarter’s financial results. “The results are 4.9% above last year, representing that some early stage stability is returning to the battered oil and natural gas service industry as well as reinforcing our acquisition strategy. “

“I remain of the view that the markets we serve are fragile and that a period of adjustment is still required before our financial performance improves in a more meaningful way but there is a sense of optimism returning to the oil and natural gas industry, which I fully expect will benefit our organization in the second half of the year,” he added. “In terms of the overall Canadian economy the story is very similar. Freight demand is starting to increase, which will ultimately lead to improved pricing later this year. In the meantime, however, the trucking and logistics sector of the economy remains very competitive.”

The company generated an extra $13.2 million of consolidated revenue in the first quarter of this year as compared to 2016, thanks to a 4% increase in trucking and logistics business, and 4.8% bump in oilfield services. Operating income before depreciation and amortization was up $2.8 million to $41.7 million.

The increase in trucking and logistics was mainly due to recent acquisitions, greater demand for freight services in western Canada, and a $4.3 million increase in revenue from fuel surcharges, the company said. Recently completed acquisitions included Envolve Energy Services and Kel-West Carriers. But there was still some downward pressure. Major work such as the completed Suncor Fort Hills oil sands project has not been replaced.

An increase in oilfield work was linked to higher drilling activity and incremental revenue generated by Envolve. In contrast, there was a drop in demand for pipeline hauling and stringing services because of fewer pipeline construction projects overall.

The trucking and logistics segment generated $6.6 million less than it did in the first quarter of 2016, dropping to $21.4 million. That’s largely because some major capital projects served by Kleysen Group have not been replaced, the company adds. Operating margins in the segment dropped to 11.8%, compared to 16.1% in 2016.

 

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John G. Smith is Newcom Media's vice-president - editorial, and the editorial director of its trucking publications -- including Today's Trucking, trucknews.com, and Transport Routier. The award-winning journalist has covered the trucking industry since 1995.


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