One of Canada’s largest oilfield transportation providers took a big hit in the fourth quarter as a result of a dramatic drop in drilling activity.
Mullen Group reported a $100 million impairment on goodwill during what its CEO called a “market meltdown.”
“The major impact..was felt by our oilfield services segment, particularly those business units tied to drilling activity. The swift declines in crude oil pricing along with a ‘blowout’ in the price for Canadian crude oil virtually brought drilling activity to a halt in the fourth quarter as producers adjusted spending plans to align with cash flow,” Murray Mullen said in a statement on Thursday.
“The industry, especially here in Canada, has been dealing with a multitude of issues the has restricted the ability of most producers to raise new capital. As such, when commodity prices collapse as they did in the fourth quarter, cash flows are negatively impacted forcing producers to reduce spending and investment decisions. The response this time was fast and will be devastating on the services industry in Canada.”
Mullen’s oilfield services revenue actually increased in Q4 by $24.7 million, or 27.6 percent, in part as a result of its acquisition of AECOM’s Canadian Industrial Services Division, as well as from increased demand for large diameter pipeline hauling and stringing, and dewatering services.
The company’s outlook for oilfield services revenue in 2019, however, is not good, resulting in the impairment to goodwill.
“Decisions like this are never easy, however, it does reiterate that the prospects for the oilfield services industry in Canada are troubling at best,” Mullen said.
“And unfortunately it is not just shareholders that will be impacted. A lot of really dedicated and hardworking people and their families are victims of the slowdown in Canada’s oil and natural gas industry.”
Mullen Group reported a net loss of $81.1 million for the fourth quarter and net loss of $43.9 million for the year, compared to 2017 full-year net income of $65.5 million and $5.4 million for Q4.