Mullen Group Income Fund reports third quarter financial results

    CALGARY, Nov. 6 /CNW/ - Mullen Group Income Fund ("Mullen" and/or the
"Fund") reported its financial and operating results for the period ended
September 30, 2007 with comparisons to the same period last year.
    "The decline in both revenue and operating profit during the quarter was
directly related to the continued slowdown in natural gas drilling activity in
western Canada and the absence of sustained growth in either the Canadian or
the U.S. economies. This combination is proving to be a real challenge to our
immediate growth plans. Nevertheless, the Fund continues to operate profitably
due to the diversification of our business model and our leverage to the
western Canadian economy, which remains the strongest in Canada," commented
Stephen H. Lockwood, President and Co-Chief Executive Officer.
    During the three month period ended September 30, 2007 the Fund recorded
consolidated revenue of $261.3 million and earnings before interest, taxes,
depreciation and amortization (EBITDA) of $48.3 million. From a cash
perspective, the Fund's operations generated $44.2 million and it earned
$2.7 million from equity investments. These funds were used to pay monthly
distributions to unitholders in the quarter of $36.7 million and to fund
normal net property, plant and equipment additions of approximately
$5.2 million. In addition, the Fund invested $16.1 million in long-term assets
such as land and buildings, $3.8 million in the equipment needed to capitalize
on growth opportunities and received $108.5 million from the previously
announced closing of a private placement of debt. At the end of the quarter
the Fund had a very healthy cash balance of $111.6 million and working capital
of $222.1 million.
    The consolidated revenue of $261.3 million for the period was a decline
of $12.1 million, or 4.4 percent, from the $273.4 million generated in the
same three month period one year earlier. This decline was due to a
$10.8 million drop in revenues generated by the Fund's Oilfield Services
segment, as drilling activity in western Canada remained soft. Industry
statistics indicate that drilling activity declined by 23.0 percent to 5,379
wells drilled in the third quarter of 2007 as compared to 6,987 wells in 2006,
primarily as a result of lower natural gas drilling activity. This drop in
activity had a significant impact on the Fund's Drilling Services and Drilling
Related Services business units, with revenues falling by 34.3 percent to
$74.9 million as compared to $114.0 million in 2006. Conversely, revenues in
the Fund's Production Services and Specialized Services business units grew by
$28.6 million due to strong demand for fluid hauling and related services, as
well as the continued growth related to the development of the oilsands and
other infrastructure projects. Revenue generated by the Trucking/Logistics
segment was essentially flat in the current period at $108.0 million compared
with $108.5 million in 2006. Growth was hampered due to a combination of the
slowing U.S. economy, as well as the rise in the Canadian dollar as compared
to the U.S. dollar, both of which were hurting Canadian exporters. As a
result, the overall demand for trucking and logistic services in eastern
Canada was weak.
    Operating income, or EBITDA, for the current three month period was
$48.3 million, a decline of 11.4 percent, or $6.2 million, over the prior
year's results of $54.5 million. The decrease was attributable to declines in
the Fund's Drilling Services and Drilling Related Services business units.
These business units generated EBITDA of $12.1 million in 2007, as compared to
$23.6 million in 2006, primarily as a result of lower equipment utilization
rates and competitive pricing. In the Production Services and Specialized
Services business units EBITDA grew by 54.5 percent or $7.9 million as a
result of strong demand, the addition of new operating assets to meet this
demand, acquisitions and generally consistent year-over-year pricing.
    Operating margins fell to 18.5 percent of revenue as compared to
19.9 percent in the prior year due to the declines in Drilling Services and
Drilling Related Services. Net income, however, for the period rose to
$38.0 million, an increase of $5.9 million or 18.4 percent compared to the
same period last year. The increase was due to an unrealized net foreign
exchange gain of $11.0 million on the Fund's long-term U.S. dollar debt and
its U.S. dollars cash holdings and equity earnings of $2.7 million associated
with the Fund's 50 percent interest in Pe Ben USA Inc., offset by a decline in
operating income of $6.2 million in the current period.
    Stephen H. Lockwood added, "Generally we are pleased with the overall
performance of the Fund in light of the significant operating challenges faced
by many of our business units, especially those in Drilling Services and
Drilling Related Services. During difficult markets such as this we focus our
efforts on operating efficiencies, cost containment and process improvement,
all of which sets the stage for improved profitability once market conditions
improve. From a cash position the Fund is in a very strong position to grow
but our current view is that we will remain on the sidelines for the near term
and until the right opportunities are available. With respect to our current
distribution and distribution policy we have considered the impact of the
current economic environment on our overall business and see no reason for a
    For the nine months ended September 30, 2007, consolidated revenues rose
to $845.9 million, a 17.6 percent increase over the prior year's results of
$719.3 million. EBITDA increased to $159.7 million, up 7.3 percent over last
year's results of $148.8 million. Net income declined marginally to
$112.9 million from $114.1 million. The Fund declared cash distributions to
unitholders of $110.2 million as compared to $87.2 million in 2006.
    In June of 2007 the Federal government enacted legislation concerning
SIFT's and in October of 2007 the Alberta government announced its intention
to change the royalty regime in Alberta. These actions by the Federal
government and the Alberta government have created uncertainty for many of our
oil and gas customers. In 2006, the Fund completed a number of acquisitions
based upon the then existing rules relating to income funds and Alberta
royalty regime. Today, we have a much different tax and royalty regime and
economic environment which may impact the goodwill the Fund booked in
conjunction with the oilfield services acquisitions completed in 2006. This
matter will be addressed again after the Fund's year-end and further
information will be conveyed to unitholders.

    Financial Summary

    A summary of the Fund's results for the three and nine month period ended
September 30, 2007, along with revenues and operating results by segment is as

    SUMMARY                      Three Months Ended       Nine Months Ended
                                    September 30            September 30
                              ----------------------- -----------------------
                                2007    2006  Change    2007    2006  Change
    ($ millions, except
     per unit amounts)             $       $       %       $       $       %

    Revenue                    261.3   273.4    (4.4)  845.9   719.3    17.6

    Operating income(1)         48.3    54.5   (11.4)  159.7   148.8     7.3
    Net income                  38.0    32.1    18.4   112.9   114.1    (1.1)
    Earnings per unit(2)      $ 0.46  $ 0.39    17.9  $ 1.38  $ 1.77   (22.0)

    Funds from operations(3)    44.2    51.9   (14.8)  149.0   144.4     3.2
    Funds from operations
     per unit(4)              $ 0.54  $ 0.63   (14.3) $ 1.82  $ 2.24   (18.8)
    Distributions declared
     per unit                 $ 0.45  $ 0.45       -  $ 1.35  $ 1.35       -

    (1) Operating income, (or EBITDA), is defined as net income before
        interest, income taxes, depreciation on property, plant and
        equipment, amortization on intangible assets, earnings or losses from
        equity investments, unrealized gains or losses on foreign exchange
        and gains or losses on sale of property, plant and equipment and
    (2) Earnings per unit is based on weighted average number of units for
        the period.
    (3) Funds from operations is defined as cash provided by operations
        before changes in non-cash working capital items.
    (4) Funds from operations per unit is calculated by dividing funds from
        operations by the weighted average number of units outstanding for
        the period.

    Operating income, funds from operations and funds from operations per
    unit are not recognized measures under Canadian generally accepted
    accounting principles ("GAAP"). Management believes these measures are
    useful supplemental measures. Operating income provides an indication of
    the results generated by the Fund's principal business activities prior
    to financing activities, amortization of assets, or taxation in various
    jurisdictions. Funds from operations indicate the funds available for
    finance and investing activities. References to operating income, funds
    from operations and distributable funds are not measures recognized by
    GAAP and do not have standardized meanings prescribed by GAAP. Investors
    should be cautioned that these indicators should not replace net earnings
    as an indicator of GAAP performance.

    SEGMENTED RESULTS            Three Months Ended      Nine Months Ended
                                    September 30            September 30
                              ----------------------- -----------------------
                                2007    2006  Change    2007    2006  Change
    ($ millions)                   $       $       %       $       $       %

      Oilfield Services        154.1   164.9    (6.5)  525.2   429.6    22.3
      Trucking\Logistics       108.0   108.5    (0.5)  323.3   290.5    11.3
      Corporate                  0.7     1.1             1.3     1.9
    Intersegment eliminations
      Oilfield Services         (0.8)   (0.6)           (1.7)   (1.3)
      Trucking\Logistics        (0.7)   (0.5)           (2.2)   (1.4)
    Totals                     261.3   273.4    (4.4)  845.9   719.3    17.6

    Operating income
      Oilfield Services         34.5    38.1    (9.4)  120.1   106.1    13.2
      Trucking\Logistics        16.1    15.8     1.9    45.2    41.9     7.9
      Corporate                 (2.3)    0.6            (5.6)    0.8
    Totals                      48.3    54.5   (11.4)  159.7   148.8     7.3

    This press release may contain forward-looking statements that are
subject to risk factors associated with the oil and gas business and the
overall economy. The Fund believes that the expectations reflected in this
press release are reasonable, but results may be affected by a variety of
variables. The Fund relies on litigation protection for "forward-looking"

    Mullen is an open-ended income fund that owns a network of independently
operated businesses. Today the Mullen Group is recognized as the largest
provider of specialized transportation and related services to the oil and
natural gas industry in western Canada and as one of the leading suppliers of
trucking and logistics services in Canada - two sectors of the economy in
which the Fund has strong business relationships and industry leadership.
Administration of the Fund is delegated to Mullen Group Inc. which, in
addition to managing the Fund, provides management and financial expertise,
technology and systems support to its independent businesses.
    Additional information on the Fund, including the 2006 Financial Report,
the 2007 First Quarter Interim Report, 2007 Second Quarter Interim Report, and
2007 Third Quarter Interim Report (which includes the Management's Discussion
and Analysis and financial statements for the period ended
September 30, 2007), is available on our website at and
on SEDAR at Mullen is a publicly traded income trust listed on
the Toronto Stock Exchange under the symbol "MTL.UN". Additional information
is available on our website at

    %SEDAR: 00022408E

For further information:

For further information: Mr. Murray K. Mullen - Chairman of the Board
and Chief Executive Officer, Mr. Stephen H. Lockwood - Co-Chief Executive
Officer and President, Mr. David E. Olson - Vice President, Finance and Chief
Financial Officer, P.O. Box 87, 1 Maple Leaf Road, Aldersyde, Alberta, Canada,
T0L 0A0, Tel: (403) 652-8888, Fax: (403) 601-8301

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Mullen Group Ltd.

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