Mullen Group Income Fund reports first quarter financial results and increased capital budget

CALGARY, May. 05 /PRNewswire/ --

CALGARY, May 5 /PRNewswire-FirstCall/ - Mullen Group Income Fund ("Mullen" and/or the "Fund") reported its financial and operating results for the period ended March 31, 2008 with comparisons to the same period last year.

For the three month period ended March 31, 2008 the Fund generated consolidated revenue of $358.1 million and operating income of $83.6 million. The Fund generated $77.9 million of funds from operations which were mainly used, in conjunction with the Fund's cash reserves, to fund distributions of $36.2 million, finance non-cash working capital items of $74.6 million and fund net capital expenditures of $9.8 million.

The Fund's revenue of $358.1 million for the three month period ended March 31, 2008 was a slight decrease of $7.6 million or 2.1 percent over the same period in 2007. This decrease in revenue was mainly attributable to lower revenue in the business units tied to oil and gas drilling activity in western Canada. These business units were impacted by a combination of lower oil and gas drilling activity and a competitive pricing environment. Mitigating the decrease was a strong performance by both the Trucking/Logistics segment, particularly in western Canada, and those business units in the Oilfield Services segment leveraged to the transportation of fluids and the servicing of wells.

"We are pleased with the overall financial performance of our business units in the first quarter. The Drilling Related Services group experienced a significant decline in revenue as a result of lower demand for their services and reduced pricing. This decline was mitigated to a large extent by a strong performance from both our Trucking/Logistics segment and by those business units in our Oilfield Services segment leveraged to the transportation of fluids and the servicing of wells," stated Stephen H. Lockwood, President and Co-Chief Executive Officer.

The Fund had operating income for the quarter of $83.6 million, a decrease of $3.1 million or 3.6 percent over the same period last year. This slight decline was a result of the year-over-year decrease in revenue and rising fuel and other direct operating costs, which was partially offset by continued efforts in all the business units to reduce and control direct operating and administrative expenses.

"We were very successful in limiting our year-over-year decline in operating income by virtue of two fundamental factors. Firstly, because of our diversified business model we had many businesses perform very well in an environment characterized by a slowing economy and rising costs. This mitigated against the decline in operating income experienced by the business units tied to natural gas drilling. Secondly, we were able to realize on the efforts and initiatives we instituted in the middle of 2006 to control and manage our costs. We were very pleased to see year-over-year growth in operating income by our Trucking/Logistics segment and by the businesses in our Production Services group. Despite a significant decline in revenue by the business units dependent on oil and natural gas drilling activity in western Canada, our Oilfield Services segment only experienced a slight decrease in its operating margin. In the Trucking/Logistics segment we saw a marked increase in the margin from 13.2 percent in 2007 to 14.9 percent in 2008, mainly due to a continued focus on controlling costs and increased freight volumes and pricing in specific markets in western Canada," commented Stephen H. Lockwood.

Net income for the period was $49.8 million, a decrease of $8.5 million or 14.6 percent compared to the same period last year. The decrease was mainly attributable to the $5.5 million unrealized foreign exchange loss recorded in 2008 compared to the $3.0 million unrealized foreign exchange gain in 2007.

Capital Budget Increase

The Fund also announced today that it has increased its 2008 capital expenditure budget by $20.0 million from $40.0 million to $60.0 million to allow for additional internal growth in its business units.

"This increase in our capital budget will allow the Fund to capitalize on a number of growth opportunities. In both north-east British Columbia and Saskatchewan the economic environment is presenting many opportunities that our business units are anxious to pursue. In addition, we are becoming increasingly more optimistic about the prospects for 2009. Therefore, this additional capital will ensure we are well prepared throughout our organization for the activity levels that may arise in 2008," commented Stephen H. Lockwood.

Financial Summary

A summary of the Fund's results for the quarter ended March 31, 2008, along with revenues and operating results by segment is as follows:

------------------------------------------------------------------------- SUMMARY Three Months Ended March 31 ------------------------- 2008 2007 Change ------------------------------------------------------------------------- (Unaudited) ($ millions, except per unit amounts) $ $ % Revenue 358.1 365.7 (2.1) Operating income(1) 83.6 86.7 (3.6) Net income 49.8 58.3 (14.6) Earnings per unit(2) $0.62 $0.71 (12.7) Funds from operations(3) 77.9 81.5 (4.4) Funds from operations per unit(4) $0.97 $0.99 (2.0) Distributions declared per unit $0.45 $0.45 - ------------------------------------------------------------------------- Notes: (1) Operating income 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 investments. (2) Earnings per unit is based on weighted average number of units outstanding for the period. (3) Funds from operations is defined as cash flow from operating activities 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 Fund's ability to generate funds from its operations without the seasonality effect on its working capital. References to operating income, funds from operations and funds from operations per unit 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 March 31 ------------------------- 2008 2007 Change ------------------------------------------------------------------------- (Unaudited) ($ millions) $ $ % Revenue Oilfield Services 242.7 257.6 (5.8) Trucking\Logistics 115.7 109.2 6.0 Corporate 1.1 0.2 Intersegment eliminations Oilfield Services (0.6) (0.4) Trucking\Logistics (0.8) (0.9) ------------------------------------------------------------------------- Totals 358.1 365.7 (2.1) Operating income Oilfield Services 68.4 73.1 (6.4) Trucking\Logistics 17.2 14.4 19.4 Corporate (2.0) (0.8) ------------------------------------------------------------------------- Totals 83.6 86.7 (3.6) -------------------------------------------------------------------------

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" statements.

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 First Quarter Interim Report, which includes the Management's Discussion and Analysis and consolidated financial statements for the period ended March 31, 2008, is available on our website at www.mullen-group.com. 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 www.mullen-group.com.