UPDATE 2-Mullen Group's Q1 falls on lower demand; eyeing buys

Thu Apr 29, 2010 12:51pm EDT

* Q1 EPS C$0.29/shr vs est EPS C$0.39/shr

* Revenue down 17 percent

* Looking to deploy capital to acquire assets

(Recasts; adds conference call details, analysts comments)

By Aftab Ahmed

BANGALORE, April 29 (Reuters) - Canada's Mullen Group Ltd (MTL.TO) posted a lower-than-expected first-quarter profit, hurt by lower capital investment and changing profile of wells drilled, resulting in rig moves of much shorter distances.

The company, which is a provider of transportation and related services to the oil and gas industry, was also looking to use capital in acquisitions as it sees no value in sitting on cash, a company official said on a conference call with analysts.

Mullen said it was more comfortable now about acquisitions than it was six months to a year ago, and would deploy capital in the trucking and logistics business.

"We would not be surprised to see them complete another deal in 2010," BMO Capital Markets analyst Jason Granger said.

"I see there is likely to be a shake up in the industry in the current period, leading to some nice opportunities for some attractive acquisitions," RBC Capital Markets Walter analyst Spracklin said.

Spracklin said he is extremely confident about the management of the company and thinks the foremost strategy for Mullen would be to deploy capital for acquisitions.

Q1 RESULTS

The company posted a net income of C$23.7 million ($23.49 million), or 29 Canadian cents a share, compared with C$31 million, or 38 Canadian cents a share, a year ago.

Revenue fell 17 percent to C$259.9 million, while operating income was 22 percent lower at C$57.2 million.

Analysts on average were expecting the company to report earnings of 39 Canadian cents a share, excluding items, on revenue of C$315.7 million, according to Thomson Reuters I/B/E/S.

"Most concerning is the changing profile of wells drilled as those are structural changes and not a timing issue, that's something that won't go away," Spracklin said.

Though the results were much below expectations, analysts were still confident that the company would hit back.

Granger said, "Yes i believe so," when asked if the company could see an uptick in the second half of the year.

He added that the company lost out as there was a lag in economic conditions stabilizing and money flowing into the industry.

Shares of the Okotoks, Alberta-based company were trading down 3 percent at C$15.75 Thursday on the Toronto Stock Exchange. ($1=1.009 Canadian Dollar) (Reporting by Aftab Ahmed in Bangalore; Editing by Roshni Menon) (aftab.ahmed@thomsonreuters.com; within U.S. +1 646 223 8780; outside U.S. +91 80 4135 5828; Reuters Messaging: aftab.ahmed.reuters.com@reuters.net))

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