OKOTOKS, ALBERTA -- (Marketwired) -- 12/16/15 -- Mullen Group Ltd. ("Mullen Group" and/or the "Company") (TSX: MTL) announced today the business plan for 2016 has been approved by the Board of Directors (the "Board"). As with past practice the annual process encompassed an extensive review of a wide range of issues including: expectations for economic activity in North America, the impact commodity prices have on the oil and natural gas sector, including drilling activity in western Canada and capital investment plans, the balance sheet of Mullen Group, the impact of previously announced acquisitions and expected cash outflows. Taking all of these issues into consideration, the Board approved a capital budget for 2016 of $25.0 million, down $55.0 million from 2015. The majority of the 2016 capital budget will be focused towards acquiring trucks, trailers and specialized equipment to support operations for the Trucking/Logistics segment.
"2015 has been both challenging and difficult for anyone associated with the oil and gas industry. Unfortunately I believe 2016 will not be any better. Crude oil and gas prices are at levels that have a significant negative impact on oil and gas producers. As industry cash flows decline, capital investment and drilling programs - two very important demand drivers for the oil and gas services sector - are slashed. Our Business Plan for 2016 reflects this reality. Nevertheless, our company is well positioned to manage through this very challenging cycle primarily due to our diversified business model, and well-structured balance sheet with over $140.0 million of cash on hand. Our Trucking/Logistics segment is on track for a record year in 2015 and I expect another solid year in 2016," commented Mr. Murray K. Mullen, Chairman of the Board and Chief Executive Officer.
Elements of 2016 Business Plan
Trucking/Logistics Segment
We expect some slowing in the segment in 2016, primarily due to an anticipated contraction in the Alberta economy, associated with declines in the oil and gas industry. However, the Canadian economy is expected to continue to expand as consumers and the manufacturing sector benefit from lower commodity prices, particularly crude oil, and the lower Canadian dollar. Margins are expected to decline slightly primarily due to competitive pricing pressures in western Canada.
Oilfield Services Segment
We anticipate this segment to be down from 2015 due to the continued weakness in commodity prices and competitive pricing. Drilling activity in western Canada is estimated to decline again in 2016, directly impacting those Business Units leveraged to drilling and to a lesser extent our Business Units focused on servicing producing wells. Lower oil prices will also negatively impact investment decisions in Canada's oil sands operations. Several customers have already announced the suspension of their 2015 and 2016 core hole delineation projects. As such we expect no contribution from TREO Drilling Services L.P. Margins will remain under pressure due to the combination of lower revenue, pricing pressures and generally a more competitive market environment in most Business Units. Nevertheless, we expect Premay Pipeline Hauling L.P. will remain active primarily due to the replacement of the Enbridge Pipelines Inc. - Line 3 project. In addition, Canadian Dewatering L.P. is projected to have another steady year providing pumping and dewatering services throughout western Canada, including providing support and services to the oil sands industry in Fort McMurray, Alberta.
2016 Financial Estimates
---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ($ millions) Estimates ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- Revenue Trucking/Logistics $ 700.0 Oilfield Services 500.0 ---------------------------------------------------------------------------- Total Revenue $ 1,200.0 ---------------------------------------------------------------------------- Operating Income (1) Trucking/Logistics $ 115.0 to 125.0 Oilfield Services 85.0 to 100.0 ---------------------------------------------------------------------------- Total Operating Income $ 200.0 to 225.0 ---------------------------------------------------------------------------- Capital Expenditures $ 25.0 ---------------------------------------------------------------------------- (1) Operating Income is defined as net income before depreciation of property, plant and equipment, amortization of intangible assets, finance costs, net unrealized foreign exchange gains and losses, other (income) expense and income taxes. Please note that Mullen Group's businesses are subject to seasonality and therefore equal distribution of annual performance is not appropriate.
We will remain focused on controlling all costs throughout the organization, minimizing discretionary expenditures and rationalizing operations where practical. Our diversified business model supported by our balance sheet and working capital position provide Mullen Group with flexibility to pursue strategic acquisitions that may arise, and to continue the practice of paying shareholders with an annual dividend, such dividend to be paid on a monthly basis, subject to Board approval.
DIVIDEND - 2016
"While I expect 2016 to be another challenging year from an operating and financial perspective due exclusively to the collapse in the oil and gas industry, we will manage through this cycle as we have done so in the past. We have a diversified business model, a well-structured balance sheet and we generate free cash flow. I am most proud of the fact that since 2005 Mullen Group has returned over $1.0 billion to our shareholders, by way of trust distributions and dividends. In addition, in 2015 Mullen Group maintained the $1.20 per share annual dividend, equating to approximately $110.0 million. And for 2016 we could maintain this payout, given our expected outlook for the markets we serve. However, this does not provide the margin of safety that I, or the Board, believe is necessary given the challenges faced in light of the steep declines in commodity prices. As such the prudent move is to temporarily adjust the dividend and protect the balance sheet. Rewarding our shareholders via a sustainable dividend is important to all of us. Protecting the Company's future is paramount," added Mr. Mullen.
The Board announced today that the annual dividend for 2016 has been set at $0.96 per Common Share, such dividend to be paid on a monthly basis, subject to Board approval. The Board will continue to monitor economic conditions as well as the Company's financial results throughout 2016, to ensure that the dividend is sustainable.
We will be holding a conference call on Thursday, December 17, 2015 at 12:00 pm (ET), the details of which can be found in our news release dated December 7, 2015 and on our website at www.mullen-group.com.
Advisories:
This news release includes certain statements regarding Mullen Group's future plans and operations, including the 2016 Business Plan and Dividend Policy, and contains forward-looking statements that we believe allow readers to better understand our business and prospects. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "strategy" and similar expressions are intended to identify forward-looking information or statements. More particularly and without limitation, this news release contains forward-looking statements and information concerning the 2016 Business Plan, Dividend Policy, capital budget, operating income and anticipated revenues.
With respect to the forward-looking statements and information concerning the 2016 Business Plan and Dividend Policy, Mullen Group has provided such in reliance on certain assumptions that it believes are reasonable at this time, including but not limited to the allocation of 2016 capital budget, impact of general economic conditions, volatility of commodity prices and activity in the oil and gas industry in western Canada. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Readers are cautioned that the assumptions used in the preparation of such forward-looking information and statements, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements. Our actual results, performance, or achievement could differ materially from those expressed in, or implied by, these forward-looking statements. We can give no assurance that any of the events anticipated will transpire or occur, or if any of them do, what benefits we will derive from them.
Readers are cautioned that the foregoing list of factors is not exhaustive. Additional information on other factors that could affect the operations or financial results of Mullen Group, are included in reports on file with applicable securities regulatory authorities, including but not limited to Mullen Group's annual information form dated February 11, 2015, under "Principal Risks and Uncertainties" and in Mullen Group's other filings available at www.sedar.com.
Mullen Group is a company that owns a network of independently operated businesses providing a wide range of specialized transportation and related services to the oil and natural gas industry in western Canada and is recognized as one of the leading suppliers of trucking and logistics services in Canada - two sectors of the economy in which Mullen Group has strong business relationships and industry leadership. The corporate office provides management and financial expertise, technology and systems support, shared services and strategic planning to its independent businesses.
Mullen Group is a publicly traded corporation listed on the Toronto Stock Exchange under the symbol "MTL". Additional information is available on our website at www.mullen-group.com or on SEDAR at www.sedar.com.
Contacts:
Mullen Group Ltd.
Mr. Murray K. Mullen
Chairman of the Board, Chief Executive Officer and President
403-995-5200
403-995-5296 (FAX)
Mullen Group Ltd.
Mr. P. Stephen Clark
Chief Financial Officer
403-995-5200
403-995-5296 (FAX)
Mullen Group Ltd.
Mr. Richard J. Maloney
Senior Vice President
403-995-5200
403-995-5296 (FAX)
