In The News / Mullen Transportation
Mullen counts on drilling upturn for 2003 revival Acquisitions should pay off as activity rises
Grant Robertson
Calgary Herald
Tuesday, February 25, 2003
A slowdown in the drilling sector last year stalled earnings at Mullen Transportation Inc., but the Alberta trucking company expects a dramatic change in 2003 as oil and gas prices climb to record highs.
Mullen, one of Canada's largest trucking firms and a major hauler of crude oil, said surging energy markets and increased drilling activity have kick-started its oil services business in recent months.
However, sluggish spending by oil and gas companies in early 2002 hindered drilling last year and led to a 31 per cent decline in fourth-quarter earnings, the company said.
"Our results reflect the obvious -- 2002 was a very challenging year. The oil and gas industry curtailed capital investment," said Murray Mullen, chief executive of the Aldersyde-based company.
"It appears, however, that the trend has reversed and that 2003 will be a very good year."
Energy prices have soared in recent weeks amid a cold snap in the eastern United States and fears that a war in Iraq could disrupt oil shipments from the region.
Crude oil for April delivery on the New York Mercantile Exchange hit a 29-month high last week, while natural gas futures reached their highest point in two years Monday.
Though the transportation sector is generally hit hard by high fuel costs, companies such as Mullen rely on a busy drilling sector to drive their oilfield services units.
"It's a double-edged sword," said Kim Royal, executive director of the Alberta Motor Transport Association.
"It's your ticket to income, but it also increases your expenses greatly."
Drilling activity in Canada has risen 25 per cent over the past year.
Yet, with total drilling activity for the U.S. and Canada still lower than it was more than two years ago, analysts are optimistic the sector will remain strong throughout the year.
"The upturn is mainly in gas drilling and that's being prompted by the higher prices. . . . This is the real thing," Robin Shoemaker, an analyst with Bear Stearns & Co., told Bloomberg.
Mullen Transportation went on an acquisition spree last year in anticipation of a reinvigorated energy sector. The company picked up seven rival firms linked to the oil and gas business.
The trucking company expects the impact of those acquisitions -- which include the $50-million purchase of Lloydminster Heavy Crude Services Ltd., Temor Oil Services, Dominion Rathole Drilling and Kam's Oilfield Hauling -- will be seen in 2003.
"We've restructured our company so we're really leveraged to the oil and gas sector," Mullen said in an interview.
"Now that commodity prices are so high, (drilling companies) have just got to go back and run hard."
Mullen Transportation recorded net earnings of $4.6 million, or 31 cents a share, in the fourth quarter, compared with $6.7 million, or 46 cents a share, during the October-to-December period in 2001.
Revenues rose seven per cent to $85.4 million, from $79.8 million the year before.
For the year, the company recorded net earnings of $18.6 million, or $1.27 a share in 2002, compared with income of $30.5 million, or $2.13 a share, in 2001.
Revenues fell to $302 million from $349 million.
Mullen shares fell $1 to $30.50 on the Toronto stock exchange Monday and recouped the $1.00 on Tuesday. |
