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Mullen Bulks in Oil Industry Trucking

2008-06-05 00:00:00

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CALGARY - The Mullen Group Income Fund (TSX:MTL.UN) is paying $135 million to haul in the transport division of the Essential Energy Services Trust (TSX:ESN.UN), adding to its already heavy weight in oil and gas industry trucking.

Essential Energy Services units fell as much as 33 per cent to a new low on word of the cash deal and a resultant slashing of the trust's distribution to investors.

Mullen said Thursday the fluid hauling and oilfield transport business - operating in Alberta, northeast B.C. and Saskatchewan as Cascade Services, Jacar Energy Services, Circle D Transport, Prime Oilfield Hauling, Polege Oilfield Hauling and Leachman Oilfield Trucking - brings about $115 million in annual revenue, with "operating margins consistent with other comparable business units in the Mullen Group."

Essential Energy Services, meanwhile, said it is reducing its monthly distribution to 1.5 cents per unit from five cents because of the reduction in its cash flow as it focuses on oilfield downhole services.

Essential units, worth over $7 a year ago, were down by $1.03 or 25 per cent to $3.14 at midday on the TSX, after earlier dropping as low as $2.80.

The assets being sold produced $34 million of revenue in the first quarter, 38 per cent of Essential's total top line.

"This transaction is a critical step to redefine the strategic focus of Essential to a pure-play downhole services company," stated CEO Garnet Amundson.

"We have addressed three important aspects of our future by streamlining the scope of service offerings, reducing debt and setting the distribution at an appropriate level."

For Mullen, whose units added 78 cents to $21.89, "acquiring businesses leveraged to fluid hauling has been a strategic focus ... for several years," said Stephen Lockwood, CEO of the largest provider of specialized trucking services to the energy industry in western Canada. Mullen also has a major general trucking and logistics division.

"We believe there are tremendous opportunities associated with the hauling and management of fluid in connection with resource plays in areas such as British Columbia and Saskatchewan," Lockwood stated.

"The acquisition of Essential's fluid hauling business units greatly expands our fluid hauling capabilities in these important regions and will be a strategic fit with several of our existing business units. The addition of Essential's oilfield transportation business units expands our rig hauling capability into southern Alberta, a region in which we do not currently have a presence."

Essential's chief operating officer, Ken Wagner, is joining Mullen as head of the Cascade and Jacar businesses, which run a total of almost 200 specialized trucks, from tankers to steam trucks and hydrovac units.

Cascade operates out of Fort Nelson, Fort St. John and Dawson Creek in British Columbia and from Grande Prairie, Spirit River, Slave Lake, Swan Hills and Wabasca in Alberta. Jacar has bases in Taber, Cayley, Pincher Creek, Medicine Hat and Brooks in Alberta and at Richmound, Saskatchewan.

Circle D has 80 power units and 185 trailers plus specialized rental equipment in Brooks, Medicine Hat, Taber and Strathmore, Alta., and Swift Current, Sask.

Prime Oilfield Hauling, based in Grande Prairie, Alta., has 20 power units and 33 trailers plus rental equipment.

Polege, based in Edmonton has 22 tractors and 50 trailers specializing in pipe hauling; Leachman, another tube transporter, has 21 tractors and 51 trailers in Provost, Alta.

Canadian Press
The Canadian Press, 2008