OKOTOKS, Alta. – Mullen Group earnings were down in the fourth quarter, due to falling revenues in both the oilfield services and trucking/logistics segment.
Overall revenue was down 10.4% to $257.8 million. Oilfield services revenue shrunk 23.1% and trucking/logistics revenue was off by 2.5% compared to the fourth quarter in 2015. The company blamed challenging market conditions in both segments for the declines.
The decline in trucking/logistics revenue was mainly due to lower freight demand in western Canada and a drop in fuel surcharge revenue. The company recorded a net loss of $700,000 in the fourth quarter, down 129.2% compared to net income of $2.4 million year-over-year.
“Quite simply business fundamentals remained difficult in the fourth quarter. Demand remained our biggest challenge for many of the reasons we have articulated throughout the year. Reduced capital investment, spending and drilling activity by the oil and natural gas industry in western Canada directly impacts the oil and gas service industry, the Alberta economy and, by association, the demand for trucking and logistics services,” said Murray Mullen, chairman and CEO of Mullen Group.
“This in turn becomes a negative drag on the Canadian economy, as evidenced by the GDP numbers, which continue to show the economy struggling to grow at even a very modest pace. And in the absence of real economic growth, markets become very competitive. In particular the few remaining larger capital projects associated with the development of Alberta’s oil sands neared completion further reducing the demand for trucking and transload services. All in all generating revenue and producing acceptable profitability in periods of low demand is very difficult.”
But Mullen said he is pleased with the company’s performance in light of the challenging market conditions it faces.
For the full year 2016, Mullen Group saw revenues of $1.035 billion, down 14.8% compared to 2015. Net income increased to $52 million compared to $13.4 million in 2015.
Mullen said he’s maintaining his more positive outlook on the oil and gas industry and the Canadian economy in general.
“After a couple of very difficult years, I have a more positive outlook for the overall Canadian economy and for the oil and natural gas industry. In particular, commodity prices are much more constructive than a year ago and this will translate into additional investment activity and spending by the industry,” Mullen said.
“In fact we are already seeing evidence of this increase in western Canada with drilling activity higher than last year at this time. In addition, recent developments regarding major pipeline infrastructure projects is promising, not just for the short-term economic activity but also for the long-term viability of the oil and natural gas industry in Canada.”
Mullen said the company will continue to evaluate acquisition opportunities.