Good morning, and welcome to Mullen Group's quarterly conference call. We will be discussing our financial and operating performance for the first quarter, and this will be followed by an update on the near-term outlook as we see it.

But before I commence the review, let me remind all of you that our presentation contains forward-looking statements that are based upon our current expectations and are subject to a number of uncertainties and risks, and actual results may differ materially. Further information identifying these risks, uncertainties and assumptions can be found in our disclosure documents which are filed on SEDAR and at www.mullen-group.com.

So with me this morning, I have our executive team of Stephen Clark, our CFO; Joanna Scott, our Corporate Secretary and VP of Corporate Services; and Carson Urlacher, who's our Corporate Controller. So this morning, Steph will review the first quarter financial and operating results, after which I will provide our outlook for the balance of 2019 and followed by the Q&A session.

So I'll open today's call with some commentary on our 2 operating segments. But for full details about the quarter, I refer you to our MD&A and news release, which are posted on our website and as I suggested also on SEDAR.

In addition, since Stephen will be providing an in-depth look into our latest results, I'll keep my comments on the financials to a minimum. Growth by acquisition, that's the headline for the first quarter of 2019, which truthfully is the most reasonable, it's the most rational and unfortunately, the only way to grow our business when the governments have orchestrated a no-growth economy.

But let's not spend our limited time this morning venting about the reasons the economy is underperforming. Let me explain how Mullen is dealing with reality.

So the good news is in spite of the headwinds in both sectors of the economy we serve, i.e. the trucking and logistics industry, which is closely tied to the general economy, and the Canadian oil and natural gas industry, which is predominantly centered here in Western Canada, we managed to grow our consolidated reviews by 9.4% with the Trucking/Logistics segment improvement by a modest 3.7% and our Oilfield Services segment expanding by a robust 24.1%.

Now looking more closely at the reasons behind this growth, let me start with our Trucking/Logistics segment. A couple of tuck-in acquisitions completed in 2018 provided the growth in an otherwise challenging freight market here in Canada.

I am of the view that the market disruption experienced in Q4 2018 took its toll on business investors and business confidence right into Q1, 2019. Overall, freight demand was soft in most markets, but this was not unexpected from my perspective and something I cautioned our shareholders about my Chairman's message earlier this year.

The bottom line is we expected a soft patch, we experienced a soft patch and we are hopeful this change -- that this change is now that the capital markets are stabilized and the interest rates have fallen back from what was expected in Q4 of '18. More on this later in my outlook section, but let me just say I am not more concerned today than I was a few months back.

Some other highlights of note in the quarter in our Trucking/Logistics segment are this: Pricing remained firm for the most part except in the spot market where prices have fallen quite dramatically year-over-year. This, in my view, is due to the combination of the slowdown we are seeing in the economy, accompanied by a quite a large build in the truck capacity over the past 12 months.

So much for the driver shortage, truck capacity is there. Profitability, as measured by OIBDA, was up for 2 reasons.

Firstly, I think our business units did a great job managing costs as well as benefiting from pricing improvements and this is on a year-over-year basis. This mitigated the impact of the soft demand.

Secondly, there was this thing called IFRS 16, which is an accounting change, and it will be more accurately described by Stephen. But this accounted for about $2.5 million of the $4.3 million increase in the quarter one.

We invested in new fuel-efficient trucks, and we commenced construction on new facilities for companies like Jay's Transportation Group based on Regina, Saskatchewan, initiatives that we will drive -- that will drive both our future revenue growth and margin improvement. Now let me turn to our Oilfield Services segment, once again it's all about acquisitions because as everyone knows, the drilling segment of the oil and natural gas industry is really being crushed.

And once again this was not unexpected because in late 2018, the price for crude oil fell dramatically as part of the overall market meltdown. But in addition, Canadian crude, i.e.

the differential got hammered, this is what can happen where there's only one market to sell into. Basically, Canadian producers are with the whim of the U.S.

refineries because there is really no access as of yet to alternative markets. The bottom line is oil producers experienced lower prices for their commodity, generated less cash flow and preserve their balance sheets by drilling less.

Okay. This everyone knows and this was not unexpected.

And with crude oil price is now rebounding quite nicely from the December 2018 lows. The question is, will oil producers start increasing capital budget and drilling budgets later this year.

More on this in the outlook section. But suffice it to say, at least there's some hope these days.

Other highlights in the quarter in our Oilfield Services segments are: Pipeline-related activity improved year-over-year, which give some credence to the belief that additional pipeline capacity will eventually help oil exporters in Canada. Canadian dewatering recovered nicely from a disastrous Q1 2018 to more normal business levels.

The acquisition of the AECOM and Canadian Industrial Services Division assets and business drove both revenue and OIBDA growth in our production services segment. And we invested $4.7 million in new CapEx, the majority to expand our facilities that involve energy in Grand Prairie, Alberta.

All in all, a decent quarter given the loss of drilling-related activity, which I hope and expect those are only temporary in nature. But here's the reality.

Our drilling-related business was down $9.2 million in revenue and $3.4 million in OIBDA. Once again I believe this will be temporary but the year has not started well for those involved in drilling within Canada.

In summary, I cannot say I was pleased with our first quarter results because I'm not. But given the circumstances, given the state of the economy here in Canada and given the slowdown in drilling activity in Western Canada, I'm satisfied with our overall financial performance.

We made some difficult decisions in Q1 '19 that we believe will help our overall performance in future quarters, and I will now turn the call over to Stephen Clark for a more detailed look at our first quarter results. Stephen, it's yours.

Thank you, Murray, and good morning, fellow shareholders. Our first quarter interim report contains the details that fully explain our performance.

As such, I will only provide some high-level commentary. From the onset, I would like to talk about some accounting wizardry that is IFRS 16 lease accounting.

The new standard gives the appearance that everyone's EBITDA has risen when none of the fundamentals of the business or cash flows have changed. So IFRS 16, it's effective for the years, year-end after January 1, 2019.

For us, Q1 '19 is our first quarter reporting under this framework, and it does not require the restatement of prior year numbers resulting in an apples-to-oranges comparison. All leases are capitalized by recognizing the net present value of the lease payments as both a right-of-use asset and a corresponding lease liability.

All our contractual obligations have been reviewed and capitalized as appropriate. The rationale from the accounting profession is to have a single framework for all leases.

I suppose people were confused that we would expense rents payment to a landlord for a building that we would never own. That said, this is how we would treat the rent payments under Canadian tax law.

So let me summarize IFRS 16's effect on Mullen Group. First, it makes EBITDA less of a proxy for cash generation.

It added $40.8 million of debt or lease liabilities as of March 31, 2019, and lastly, it improved our OIBDA by $3.1 million in the first quarter. IFRS 16, the new leasing standard had a positive effect on our OIBDA, but little impact on net income.

Our income -- on our income statement, you will now see the right-of-use depreciation expense of $2.8 million as well as increased finance cost of $342,000 related to lease liabilities. In effect, IFRS 16 has about $1 million a month impact -- positive impact on OIBDA.

On the balance sheet, you will now see current and non-current lease liabilities that total $40.8 million. This is a net present value of what were operating lease commitments and previously expensed payments in 2018, again an apples-to-oranges comparison.

This number will fluctuate, this 48 -- $40.8 million will fluctuate as we make payments to our landlords or leasing companies, or if we enter into new leases. I should mention that the majority of our leases, about $35 million worth, are for property leases that extend to as far out as 2028 and came largely as a result of our acquisition of DWS that leases huge warehouses in the GTA and lower mainland.

So we put debt on the balance sheet of about $40 million for leases that extends as far out as 2028, but we only added $3 million of OIBDA for the quarter. This is slightly detrimental to our debt covenants.

However, by year-end, we will have fully annualized the effects of higher OIBDA for about $12 million, and we would reduce debt levels as we continue to make payments throughout the year. So all things being equal, first quarter will be our highest leverage ratio, and it is still at a comfortable 2.62 as compared to 2.46 at year-end.

Debt-to-cash operating cash flows increased by 0.17x due to the adoption of IFRS 16 and would have been 2.48x without the adoption of IFRS 16. Either way you cut it, we are still well below our debt covenant of 3.5x, have significant balance sheet capacity and currently at about 2.5x.

I'll go over the specific impacts of IFRS 16 on each segment as I review the first quarter results. All things considered, the first quarter was reasonably good given the context of a severely challenged Canadian oil patch.

Revenue grew by $27.5 million, of which roughly $20 million was Oilfield Services due to the acquisitions and the return to some pipeline work being offset by lower drilling-related revenue, which Murray spoke to earlier. The remainder of the increase was due to growth in the Trucking/Logistics segment that experienced yet another quarter -- another record quarter.

For those keeping track, this is 9 quarters in a row of year-over-year increased revenue. So a record first quarter Trucking/Logistics revenue and vastly improved Oilfield Services revenue all due to our prudent acquisition strategy.

Here at Mullen, we do acquisitions not just an event but as a journey, and we continually work on improving margin and the benefits of an acquisition outlived the first 12 months on which we report as acquisition growth. As for profitability, operating income before depreciation and amortization commonly referred to as EBITDA but we referred to it as OIBDA, was $44 million, an increase of about 16% over 2018.

This was despite some well-known challenges such as the 30% decline in drilling activity or the brutally cold weather in February. But in truth, half of the rise in OIBDA was due to the adoption of IFRS 16, the new leasing standard.

Half the growth is due to the new accounting rules. However, half of the rise is due to improved Oilfield Services profit.

A testament to our acquisition strategy and our resilient operating model. On a segment basis, the Trucking/Logistics segment EBITDA grew by $4.3 million to $30.1 million.

As Murray stated earlier, $2.5 million of this increase was due to the adoption of IFRS 16, still a $1.8 million increase without any accounting changes. On an IFRS 16 adjusted basis comparing apples-to-apples not apples-to-oranges, our margin was 12.8% in 2019 versus 12.5% in 2018.

Margin improved despite very tough operating conditions in February. The improvement came as a result of continued focus on costs as well as some project-based work that generally garner higher margins.

EBITDA in the Oilfield Services segment improved by $3.6 million, of which only $0.6 million was due to IFRS 16, not a lot of leases for buildings on the oilfield side. Margin on an IFRS 16 adjusted basis was basically flat at 14.7% compared to 14.8% in 2018.

That was despite some very well-known challenges during the quarter. As I said drilling down 30%, intense competition drove what did exist; basically we held our own because of our diversity and because of pipeline work.

Full details may be found on Page 9 of our MD&A. I know many in the analyst community were looking at our results and guessing what our results might be on a sequential basis.

On a sequential basis, consolidated revenue was down $13.7 million, lower than the fourth quarter, largely due to the seasonal rhythms of the trucking industry and Canadian Dewatering. But it's also down because of the slowdown in fluid hauling in a top Canadian oil patch.

For 2019, our earnings per share improved to $0.11 per share as compared to $0.01 per share in 2018. This was in large part due to the effects of foreign exchange on our debt.

Adjusting for this and other non-operating items, EPS adjusted, as defined in our interim report, was $0.10 per share, up from $0.09 per share in 2018. The full details of this reconciliation can be found on Page 17 of our MD&A.

So Murray, with that lesson on IFRS 16 over, I'll pass the conference back to you.

Thanks, Steph. So here's a newsflash for everyone as we look to the outlook.

Yesterday, the Governor of the Bank of Canada, Stephen Poloz, you'll find in his April 24 briefing that the Bank of Canada has officially abandoned its interest rate hike bias amid an economic slowdown in Canada. All I can say that is, come on, man.

Every business leaders has been saying that the policies adopted by the Liberal government, the lack of capital investment, in fact, the flight of capital from Canada would soon be problematic. Well, guess what, Stephen.

Canada has a problem, it's called no growth. Unless of course, you are into cannabis, which by definition is to grow up and as such, a form of economic growth here in Canada I suppose, maybe we should change Canada's name to cannabis and adopt the tagline, the fastest-growing grow up in the world.

I mean, 60,000 people holding a pot vigil in Vancouver last week was a pretty darn good start, don't you think? No wonder our freight numbers were down in British Columbia last week.

We had no workers. They were too busy.

Now on a more serious note, I have been cautioning shareholders for quite some time that the overall economic conditions were problematic and our organic growth would be difficult to obtain given the circumstances. It is within this context that we indicated that acquisitions and consolidation was the only logical way to grow this time, which is precisely what we've done and what we will continue to do here at the Mullen Group.

We take advantage of market disruptions, which creates its own set of opportunities in addition to obvious challenges. Now as I take another step and looking forward, I don't really see anything that changes our thesis for 2019.

In other words, on balance our plan and expectations for this year remains intact. Now I never said it would be easy and I fully appreciate that there will be pockets of weakness, but I doubt there's a reason for despair.

I also cautioned that our 2019 expectations would ultimately depend on the oil and natural gas industry does in 2019. What there is, however, is a sense that some form of new stimulus will be required here in Canada to get the economic engine growing again.

Maybe the pause in interest rates hikes will be sufficient, although I personally doubt it. Maybe world economic growth reaccelerates as the year unfolds with the China-US grand deal.

I don't know exactly what will be the catalyst. But it appears that the doomsday scenario painted by many late last year during the market correction was overblown.

This in itself was a positive because we take away a negative. As such, I wouldn't be surprised to see some acceleration in economic growth over the course of the last 2 quarters in 2019.

In fact, our beloved Mr. Poloz has suggested this very point with a new and revised GDP for Canada coming in at around 1.2% for the year, which doesn't compare very favorably to its own projection just a couple of months ago of 1.7%.

And while the 1.2% isn't very much, the fact is that growth in the last half of the year must be significantly higher than 1.2% because we are currently at 0. So let's take this as a positive for Trucking/Logistics segment, our largest segment by far today as the year unfolds.

Now the only risk I see to this scenario was pricing. Within the current Trucking/Logistics environment, there's too much capacity for the current demand.

As such, we are witnessing pricing headwinds, and I suggest those will continue until the market adjusts. We are already seeing trucking failures.

We are witnessing rising insurance rates, which will put significant pressure on undercapitalized carriers and those with poor safety records. This is why we like logistics, we simply manage the spread.

This also explains why we will continue to pursue acquisitions and answer the consolidation opportunity platform. With our best-in-class operating business units and terminal network, we can simply layer in acquisitions into our organization quite seamlessly.

This is how we can grow and protect margin at the same time. Now let me turn my attention over here to the Oilfield Services segment, the underappreciated or as I referred to as the Charlie Brown of business today.

The current situation, if you are tied to drilling is a disaster. But there are at least some indicators that this is the bottom.

Consider this. Oil prices and E&P cash flows are recovering from Q4 2018 doomsday scenario.

In other words, the pressure on E&Ps to protect the balance sheet is not as intense as it was a few months ago, suggesting to me at least that drilling activity has or will hit bottom shortly. Now how fast it recovers remains an open-ended question.

Two, our competitions get a slam. The largest equipment auction in the history is being held in Edmonton this week.

And if this is an indicator of market disruption then I don't know what would be. The bottom line for our drilling-related business is this: If and when drilling activity picks up, we will be positioned to gain market share.

In other words, while I don't really anticipate a significant rebound in drilling activity for Western Canada, I do expect our business units will do better as the year unfolds. Third, very quietly and methodically, pipelines and projects are being sanctioned here in Canada.

This is good news and that eventually takeaway capacity for crude oil and natural gas will provide some much-needed capacity for the E&P companies. Time, however, remains uncertain.

So my caution is be patient. No business means no capital.

Eventually, new investments will require to remain competitive in any business, and it's my firm belief that our competitors have no money. At best, they are surviving.

So once again, patience will be rewarded. Lastly, on the acquisition front.

Valuations have been compressed and are more reasonable today than they have been for quite some time. Here at Mullen, we acquire not for growth but because it make strategic sense.

We continue to favor logistics, warehousing and final-mile delivery because of the e-commerce and online shopping trend, which is totally reshaping the supply chain. And of course, we will always like to invest in quality businesses with strong regional brands.

This is as we believe we can leverage from our strong network and critical mass. So let me now turn the call over to the conference operator for our Q&A session.

Thanks very much. Hi, guys, how are you doing?

So I'll start with just kind of housekeeping. We've looked at EBITDA in the past.

Stephen, you've indicated that it's probably apples-to-oranges and I think, Murray, you indicated it's not as good a proxy now on what it was before. We've shifted to operating earnings as a better driver.

But when you talk now to us about your expectations, are you going to continue with EBITDA or OIBDA? Would that as from a guidance perspective, do you want to shift more towards earnings because it's perhaps a better proxy?

How are you looking at your communication of your results and the emphasis you put on which line item going forward?

I think, Walter, I'm not the first to mention that. But I would highlight that we had $4.5 million of amortization in the first quarter.

Annualized, it's about $20 million. We're very acquisitive.

So if your -- that's really one -- it's not like depreciation where you have to replenish the fleet. This is really intangibles from acquisitions being amortized over the course of generally 5 years.

So I don't know if that's the better way to do it. I think for now, I think we're going to stick with OIBDA.

But, Murray?

Yes. The accounting world, once again, has created some new rules.

So I think for all of us, we just have to kind of -- we'll report both to everybody until we kind of figure out what the new norm is, Walter. But we'll report both so that you can compare apples and apples, apples and oranges or whatever the hell you wanted.

We just -- at the end of the day, it's going to take a look at cash that we generate and what do you do with the cash? Do you pay dividend?

Do you buy back stock? Do you grow your business?

Do you pay down debt? So at the end of the day, that's the way we ultimately run our business.

But I don't know what the financial world will be focused on. I personally look at cash but EBITDA, OIBDA; we'll give what the market what they want.

We will report both in the short term. Until find what that -- everybody gets accustomed to it.

And I think you're right. I mean at the end of the date, we'll value on the basis of a cash or earnings model.

But to gauge this sense of improvement in your divisional items, I think OIBDA is just the kind of best one we have right now that you're providing good disclosure on. And I guess on that note, in my own notes, I have you guiding for your OFS segment as being EBITDA or OIBDA in line with last years.

And now I just wonder if you could give us a context, A, obviously what's been a little bit more disappointing first quarter and then recontextualized under the new IFRS 16 standard, what the new guidance would be and how you would change from what your last update was.

Well, in our last update, when we came out with our expectations for the year at roughly 200 I said, I think we can do 200 this year on the same-store sales basis, provided that there is not a prolonged and deep, deep kind of recession or depression in the oil and gas business. It's highly dependent on that.

Our sense was Q1 was going to be not very good. So that was all factored in, but my personal view is that and this is factored into the 200 that eventually our customers will go back drilling again.

I mean, if they don't, they can't maintain production. That's just the way the decline curves work, et cetera.

So I think their balance sheets are getting a little bit more getting in line. They've got cash flow come in.

There's not that same intense pressure to protect the balance sheet as it was in Q4. So I think some drilling activity will come back and we're losing competition.

So that was all factored into the -- our expectations early on. So I'm not changing.

I'm not like our Bank of Canada Governor saying, Oh no, I'm off by 30 points in terms of our growth rate. I took all of that into consideration when I said; This is what I think we can do.

It won't be easy. We'll have to do a couple of things.

We'll have to focus on getting some costs down. We'll have to protect margin.

We need some recovery in the oil and gas business. And we probably have to continue to roll a little bit through acquisition until that.

But I thought we could do that.

So now with 200 as kind of the reiterated all things taken into consideration the first quarter, which you've built in, the IFRS changes which may have helped a little bit. Implicit in that as you mentioned, I think, there is some organic growth assumed in your OFS division.

Did I hear you right that you're also assuming in that $200 million that you'll have some more incremental acquisitions to get to that $200 million, is that right?

Well, I think it really is going to be dependent how long and how deep -- when does the Canadian economy recover? We can't stay at 0 growth for much longer, or even my projection's going to be off.

But I don't think we're going to say at 0 for the rest of the year, that's my view on that. But we saw things slowing down quite dramatically in the fourth quarter, and we factored that in.

It's going to take a while to get that recovered. It's no different than once our driver puts the truck in the ditch, it takes a while to get the truck out of the ditch, get it repaired before it goes back working.

I think the economy is in the same position. We got to get things repaired.

But I think it's starting to get there. There's not as much negativism today as it was in December of 2018.

So that lends itself, the business confidence, capital gets going again. So I think growth will start happening.

We'll be okay. But if it stays down for too much longer or with nobody drills another well for the rest of the year, then I guess I'll have to -- give me a call and say I was dead wrong.

But I don't think that's going to happen. I'm not projecting that today.

And then flipping in the truckload -- oh, sorry, in the Trucking/Logistics segment I should say, you were -- you called out spot prices coming down fairly significantly. You highlighted the 0 growth economy we're in right now.

Does your comments with regards to increased drilling activity likely coming eventually this year at some point? Would you say that applies to your Trucking/Logistics segment as well in terms of are we likely to see organic growth in that division through the rest of the year at your $200 million forecast contingent on growth in trucking?

Well, I'll just refer back to our last conference, Walter, and I'll answer it this way, and this is a quote from my last conference call in February. As such, our Trucking/Logistics segment should perform in line or slightly above 2018, especially given the CapEx that we're allocating.

So I think we'll be at the end of this year '19, I think we'll be in our T/L segment, I think we'll slightly above 2018 in our Trucking/Logistics segment. In spite of all these noise we're talking about, in spite of the pricing challenges, in spite of all this and that, I said I think we're working on the cost side, we're working on integration, we got a couple opportunities that are giving us some tailwinds, we got some challenges here and there, but we anticipated a soft first quarter when we came out with our prognosis for the whole year.

So yes, I'm not going to change that. I think I am -- the pricing in the spot market, we saw it starting to trend down last year, and we've talked about this for 2 quarters now.

I can tell you, it accelerated on the spot market in Q1 because we track through our move in online, low postings and truck postings, and I can tell you there are a lot of truckers looking for loads these days on the spot market. Now does that translate into the contract market?

Contract markets more long term. I think it's going to be more difficult to get pricing improvements this year, Walter, given what we're seeing, but it's too early to make that call.

I don't think it will translate totally into the contract market, but I think we're facing a few more headwinds. So I don't want this no-growth economy in these troubles that our Bank of Canada Governor has finally come clean on.

I don't want this to continue much more than Q2, then I think we got a much bigger problem.

Okay. My last question is just on you're CapEx.

Any changes there in terms of your capital envelope for 2019?

Nothing. We haven't changed that at all.

Hey, thanks guys. I just have a quick one here actually.

Recognizing that the quarter was a little bit softer than our expectations -- or your expectations, I should say. I actually thought that your energy services divisions margins performs quite well and didn't contract as much as we were expecting.

Now you pointed a large segment or pipeline hauling and the dewatering recovery there as something that I think is your higher-margin business and probably helped a little bit. Could you give us a little bit of granularity as to the nature of that?

Is it carrying on or accelerating into break up and into Q3? Or what projects it was focused on?

Or is that sort of doing that was just sort of a onetime temporary situation there that we should expect margins to be maybe under more pressure?

I think once we get through Q2, I think we'll be in, I think we'll start to see some momentum, some tailwind, if you will, on the energy services side. I know that on the pipeline side.

Everything that we're hearing and reading about is that the LNG Canada, the coastal gas pipeline that looks like it's going to -- like that's going. And that's the early stages, they're not going to put big camps in place and do this and that, unless they're going to start bringing in pipes.

So I'm hearing the pipe has been ordered. Once the pipe comes on the ships, whether that goes in the ground or not, we got to -- our companies will be involved in stockpiling it.

We've got all our First Nation agreements in place and benefit agreements and those kinds of things. So I think that pipeline stuff is going to add a little tailwind later on this year.

So I don't think it's onetime event in Q1. Q2 is going to be a little softer because just -- you all -- but that's relative to last year, it's always soft because of road bans and just weather, et cetera, et cetera.

But I think that this pipeline will be okay this year and then Canadian Dewatering will be fine. We've invested in new capital in Canadian Dewatering, make sure that they're compliant and got the best-in-class rental equipment and dewatering initiatives and those kinds of things.

So it should be okay. Production services will be -- will start.

We got maybe one more quarter of good comps and then we did the AECOM deal for July 1 of last year. So the comps will get a lot harder in Q3.

Got it. And then speaking about M&A there, you mentioned you evaluated but didn't execute on a bunch of M&A in the quarter or some M&A in the quarter.

Can you just give us a little bit color as to why you didn't choose to pull the trigger there? Was there something as simple as bid-ask spreads or were the targets not the verticals that you were looking for?

Just looking for a little more color as to why you didn't pull the trigger there.

On the energy services side, my personal view, the AECOM deal was, I don't want to say, once in a lifetime, but that's an opportunity that just -- we were in the right spot at the right time to write the check and we know how to do it. So we did a good job there.

But generally speaking, on the oil and gas service side, I am not -- we're not big into acquiring right now because the markets in such chaos and just let this market play it out. And then we'll grow primarily through internal expansion in the energy service side.

I think that's going to be our preferred way to grow there. We passed on a number of other opportunities without our competitors go forth because honestly, we don't want any more old equipment in the energy space because I think in a very short period of time, there's going to have to be a capital replacement cycle start to come in.

I don't want to have any more old equipment because the only way to survive in the future is going to be with new cost-effective equipment and buying old stuff is not going to help you. So less M&A activity in the oil and gas side, but we'll continue to focus on logistics, warehousing and the final mile because I think the supply chain is changing as we talked about and leverage our existing network that we've got here in Canada.

Good morning, everyone. Stephen, I mean, just given some of the changes in the Alberta tax rates and just changes.

Are you able to provide, I guess, some like maybe goalposts or color on where you expect to pay in cash taxes this year, may be based on current guidance or previously released guidance?

Yes. So cash taxes, so we had a bit of a true-up in the first quarter for some.

Our revenue grew quite handsomely last year. So now we had some true-ups and now we have a new base that will require to pay.

So without factoring any cuts, I would say from here on in, we're going to be about $1 million a month on a cash basis. And then of course, we'll true up next February as we need to.

Okay. That's very helpful.

And Murray, as you think about acquisitions and I mean you've done a lot of them over the last number of years, can you maybe talk a little bit about how you're thinking about them from a valuation perspective moving forward? I mean you talk about equipment getting eroded in the industry on the trucking side.

And on the services side, you have loss going to option. So I mean how do you think about paying for these things?

And I guess is there a significant bifurcation between good and bad assets yet?

No. I don't think there's a significant bifurcation there.

I think it's -- I think there's a new reality that everybody has to come to grips with. But there's a new reality in Mullen's stock.

Shareholders have spoken, and the Canadian marketplace has spoken. I think the biggest reason that valuations are coming down is just an indicator of what's going on in Canada.

There's no growth. Well, without growth, you're only going to pay so much money.

And so it hurts private owners' feelings, and it hurts the public markets, but valuation is what valuation is. I'm just saying we had to let it find its equilibrium.

I think it's now found that equilibrium. There's a realization that this is the market price now.

Now the only thing we have not seen a reduction in valuation is land prices in big centers like Vancouver and in Toronto. Commercial real estate prices are parabolic, but that in itself is creating acquisition opportunities because it's squeezing out the little player.

So there's a trend happening there that the commercial real estate is now the new residential real estate. We went through -- we had a big rise in the residential prices, that's now hit in commercial real estate right now.

And that is really causing some consternation among a lot of trucking companies in particular.

And so I guess with that in mind and the low growth in Canada, I mean I've asked about the U.S. before, but what is preventing some sort of U.S.

acquisition at this point in time given the growth does appear to be better there, acknowledging the headwinds that seem to come out of there?

Yes. I think that's a good point.

Our -- I think what holds us back on that is a couple of things. You got to be awfully careful going to the U.S.

Number two is I think I'll just let the U.S. play itself out until we figure out what the next -- what is the next move for the U.S.

economy. In the absence of some type of new stimulus, it would appear that big growth in the U.S.

might run into a headwind. And as such, I got to think valuations have to get a little more realistic down in the U.S.

before we then say, okay, let's make our play into the U.S. market.

And we got to be mindful that when you go into the market, you can't just do one. Like if we go into the U.S.

market, that will be our future growth, and that will mean our company needs to change the way we think. So I have to be very careful on that and mindful because just getting one -- doing one acquisition in the U.S.

would just cause me more headaches than anything else. If we're going to go down, we'll announce we're going down, but that will really reshape Mullen.

Again, I'm not giving up on Canada. I'm mad.

I'm upset. But I think that it's still going to be long term, longer -- maybe medium-term opportunity in Canada.

And that's why we will do the opportunities that we're looking at now. It's not necessarily for the next quarter or 2 quarters but because we're positioning for that future.

Canada's still a very wealthy country. We just have a couple of government-initiated platforms that I think will eventually get resolved.

We're seeing the shift change going on in Canada right now that says, hey, get the -- you got to get this truck out of the ditch and get it repaired. And the only thing that's happened is that the government policies have impacted negatively the flow of capital.

They helped -- the other policies helped other parts of the economy, but they've definitely put a -- some handcuffs on the capital part of the economy, which is what drives our growth. I think there will be some recognition that we need to have capital come back in for Canada to do well longer term.

I can't -- I'm not being a professor, but I'm being pretty practical on this matter. Canadians will understand once there's no opportunity and that the taxes are catching up and we need to change.

And you're seeing that shift change go on right across the country right now, and it's quite pronounced. There's one more government change-out.

That will be in October.

Good morning, gentlemen. And thank you for taking my questions.

When I look at OFS, obviously, CapEx has been depressed for some time now and is actually below depreciation. In the event that OFS turns around, are we going to eventually see some sort of catch-up spending?

Or is there still a lot of useful life in your asset since they have not been sort of utilized here?

Yes. We still got -- we've got enough assets or we still got a lot of horsepower that we're not using right now obviously, David, so that for sure we've got a lot of horsepower left there.

Now in saying that, when activity comes back, I sense that we'll have to increase CapEx in that business, there's no doubt. But I would not -- I will not support new capital into that business for the most part until we see prices go up, pointblank and period.

So -- but it's only a matter of time until new capital must come back in. So when that comes back in, yes.

But that will be correspondingly covered off by pricing increases, and that will typically correspond with growth initiatives at the same time. So that's the way the old patch works, right?

It's highly capital intensive. When it comes back in, we will get more growth, we'll get pricing power and more CapEx to go with it, but we're not there yet.

I'll make sure that all -- everybody knows when we start getting more aggressive because you will hear it when I announce we're increasing our CapEx for the OpEx, but I'm not there yet. It's coming, but it's not here yet.

And how large of an opportunity can LNG Canada be on a full run rate?

Well, I mean -- so I think, first, I think there's already been some -- there's been some activity over the last bit. Most of it's been through lawyers and accountants and activists and all those kinds.

It really hasn't been boots on the ground, but there have been a lot of architects and designing and preplanning and meetings and all that. But I think the next phase is we're starting -- it looks like they're getting ready to start the -- away from planning and negotiating to actually constructing.

That is very good for -- when that happens, that will be good for trucking/logistics pipeline activity, dewatering activity, a whole bunch of things. Once that's built, then that's good for drilling activity.

It won't be good for drilling activity yet. You've got to build the plant, and you got to put the pipeline in the ground before we drill the wells.

They already know what's up in the Montney, in the Duvernay. They already know what's there.

So they don't need to -- and they can bring production online pretty fast these days. So first part, pipeline construction then drilling.

So it'll be -- these are going to be good initiatives for our group over the next many, many years, and we just can't wait for go. We're sitting and waiting and we're being cautious because we got a yellow light, but we're waiting for the green light for it.

And can you remind us; is there any work in your guidance from LNG Canada for this year?

Sorry, I missed that, David.

Is there any work related to LNG Canada in your guidance right now?

Well, I think yes. Part of our guidance is I said I thought we would have some pipeline activity going on later this year, and that's in our current guidance, yes, and a little bit of construction but not significantly.

But yes, there is a little bit of guidance in there because I said I was optimistic there would be some activity with LNG. Not full, it's not full blown, it's just getting started.

But there's a little bit of guidance in there in the last half, yes, that's in our current numbers.

Good morning, all. I realize that you're never going to say a whole lot in M&A.

But as we're going through the tightening trucking cycle and you are showing regular acquisition opportunities as you regularly are, was there any material bump in sellers' expectations when we're going through those improved market conditions? And has that since come off as arguably peak trucking earnings might be in the rearview mirror?

Yes. Last year there was, Jon.

Everybody was riding the wave of, hey, times are good, pricing's up and growing. So everybody thought that, that was the new norm.

But there is a sense of reality now is that they all got might have got ahead of their skis a little bit. And as you know, when you look at our CapEx, we did -- we were quite balanced on how we looked at this market.

So we just sat back and let it -- let the market come to us. And all of a sudden, everybody is coming to the rear, ooh, ooh, ooh, I might add, maybe that's a little aggressive.

So that's -- there's a much -- everybody is a lot more realistic today than last year. Now some of them are going to try and trick you are that last year's results will be sustainable forever.

And I go, well, that's not -- that becomes the negotiating point.

Is it fair then to say the amount of opportunities you've been showing on the P&L side, you expect that meaningfully in the last 3 or 4 months? Or we're not there yet where guys are freaking out to see a truck to sell?

We get -- how many did you get yesterday, Steph?

Five.

Five yesterday.

How many do you get on a normal day?

Just as an example, maybe 2 or 3 a week. And I'm not going to say we're going to get 5 every day, but there are pressure points in the system right now.

And so we're -- we don't run -- as I think everybody knows, we don't run out and just, Hey, I wanted to make sure I had growth for this quarter, no. We take a long-term view and say what is the -- does it fit our strategy?

And then does it fit our economic numbers? And so -- but there's going to be lots of opportunity.

And now a lot of these opportunities, Jon, are coming in not just from the trucking/logistics side, they're coming in from the oil and gas side, service side, which is a total mess right at the moment. And that's why I say you can't have the world -- one of the world's largest auctions -- equipment auctions ever in the history of the world up in Edmonton, Alberta and then say that that's a normal market.

That is not a normal market. So we just let it play out, and we'll pick up the pieces when we think it's time to pick up the pieces.

Well, are you guys seeing anything like DWS become available for purchase? And as you spend more time looking at the warehousing side of the space, does it make you keen to deploy more capital there?

And would it come through acquisition like you've done? Or is there organic opportunity since this is a fairly low capital-intensive business?

Now that's a really good point. And I must say that our view was it was going to be lot -- the organic opportunities were something we'd leveraged, but I'm quite concerned about the -- just the escalation in real estate cost and valuations going on, right?

I mean we've been offered on our real estate portfolio just unsolicited offers on some of our properties that blow my mind. And some of the things that we're looking at are just -- they don't seem to make any sense at the moment.

And I can't figure out where all that money is coming from. It doesn't appear to be logical money.

It appears to be money that just wants to hide from somewhere, and it'll -- it's glad to go into Canada's major markets and just be part. But that is really dislocating the market right now.

And I have to just be -- I just have to be thoughtful on this, in sort of jumping in with both feet. I don't know how deep the pool is right now, I got to be a little careful before I jump in headfirst.

Is that just impacting potential purchase prices to own a facility there? Or are you seeing lease rates move in, in lockstep with the asset value inflation?

Actually, that's another good point. But we're definitely seeing asset price go up, which is causing 2 things.

On the trucking/logistics side, we're seeing some people say, Oh, I could pay that from my real estate. I'm out of here.

I'm not going to take all these headaches. I'll be glad to take that and go fishing.

But we are seeing cap rates, particularly in the big centers, come down. If prices are going up, the cap rates have to come down because that money is just hiding.

There's no way to have a high price and a high cap rate today, like no business would survive. So there is a bit of a yin and a yang to that.

Any update you can give on the Canadian Hydrovac acquisition? And are you at a point where you could potentially need more capital on that business as you could see net fleet addition needs in the coming period?

We've done -- we've been in a restructure on that. They were involved in multiple different markets.

And I think that's how he got himself ahead of his skis. He was trying to be in Alberta, in Saskatchewan and in British Columbia.

So we've done restructuring, and we put those British Columbia assets under our Tenold brand in BC and moved them out of Canadian Hydrovac because I want strong regional brands with strong regional management. So we've transferred I think seven units already out to Tenold group, and we'll leverage off of their strong customer network rather than Canadian Hydrovac going out and trying to hire salesmen and trying to build up there.

Look, we already got a strong regional brand out there. And you'll hear us talk about strong regional brands a whole bunch, and then we'll just do multiple services and verticals within that strong brand.

We've told them just stay in Alberta and run a great business in Alberta. Don't try and go into other markets where you think you know what you're doing.

We are in those markets already, and we know what the opportunities are and what the hazards are. And maybe that's what happens with entrepreneurs.

They think they can do it. So we've told him to just stay in his lane.

So that means just stay, and we'll give you capital to be efficient and be safe, but you let us worry about growth.

Can you give any refresh on your thoughts in the switch to electronic laws in Canada? And do you think that there's a potential for that to create an artificial tightness in the market that maybe people aren't thinking about at this point?

That was a thesis that when I'm in the States, I remember bought into it a whole bunch because I think the market will adapt very, very quickly to any change. So whatever tightness there is, I think that will adapt very quickly.

Canada -- once again, Canada, we're two-year -- we're behind what's going on in the world. We're at least 2 years behind in the U.S.

Most of our businesses were already there because we had to already comply with you to be in the U.S., and we've been moving our companies towards that. But most of our competition, particularly just Canadian, no, they're not there yet.

So that will cause some disruption. But it's funny, the market will adapt, in my view.

It's -- what it does is it probably tightens capacity by 1% or 2% because you have to change some of your lanes that don't fit where people have been living on the edge of doing it properly, legally, safely, whatever you want to call it. So we'll change some but not all.

It will have a small impact overall, but it may have a major impact on certain lanes. Maybe that's the best way to put it.

Last one just for me in terms of the exposure to the three major pipelines: Coastal GasLink, TMX and Line 3. If you were to see any of those go forward or all three of those go forward in terms of figuring out the potential exposure that you'd have in the first 12 to 18 months, is it fair to say that it would be more than $10 million of revenue per line in terms of your exposure in the first year or 1.5 years?

Probably the new ones, but we've already been involved in Enbridge Line 3 and in Keystone positioning that pipe. But whether the pipe's put in the ground or not, that's -- kind of the pipe is built.

It's just they just got to finish the LEGO set. So there's some incremental business, but I would say we've already had some.

Now Coastal Gas and anything to do with LNG, that's a different story. Even on Trans Mountain, Jon, that pipe is here.

Now that pipe has to be put in the ground, and there's some incremental business on that. But we've already seen some of the benefit because the pipe's already here.

I mean it's already -- we get paid to store it, and we're just waiting for when they say, well, you can put it in the ground.

Good morning, all. In your prepared remarks, you guys mentioned some issues in Trucking/Logistics segment that negatively impacted the first quarter and the seasonal nature of the trucking industry.

And if I look back at Q1 margins over the past couple of years, they all appear to be seasonally weaker than the other three quarters of the year. So from a margin perspective, should we be thinking about an improvement in the remaining three quarters of the year and also lower margins again in Q1 of '20?

I think Steph had -- and I don't have that right in front of me, but I'll go off of my history book. I'd say that Q1 is typically in Trucking/Logistics is our lower margin, and that's primarily because Trucking/Logistics is you have -- your fuel cost is more, you have -- your expenses are more because of winter and yada, yada, yada, all those kind of things, repairs and maintenance.

So I would expect that we'll go back to more the norm on our Trucking/Logistics margins as the year unfolds. You guys can opine on that.

They're my detailed folks that look at these things. But that's my overall view is that margins will typically be the lowest in the first quarter for the reasons that I just gave.

We don't have as much throughput. And secondly, your costs are up primarily because of weather, repairs and maintenance and fuel and just kind of a lack of activity in Trucking/Logistics.

Now once you get past Q1, we'll go back into the normal.

Yes. I would concur with that, Aaron.

There really isn't any driver that would say that '19 would be much different from '18 as far as margin goes. It's the seasonal rhythms of the trucking industry where typically third quarter is actually the best quarter.

First quarter is the worst. And it just happens to be now 3 quarters of our revenue is now Trucking/Logistics.

So I think that historically, Oilfield Services typically would have a really good first quarter, but there was nothing typical about this first quarter as far as Oilfield Service. But for Trucking/Logistics, this was pretty much on par.

And as I say, on an IFRS adjusted, comparing apples-to-apples again, it was pretty much in line with last year. I would expect margin to be pretty much in line for the remainder of the year because nothing really has changed from last year.

Okay. So from an order of magnitude perspective, maybe 100 basis points next quarter, 200 from here to Q3 and then kind of back to -

Yes. Q3 is always the best in Trucking/Logistics because you're basically operating at full capacity.

The consumer, the -- just everything gets going starting in kind of mid -- late April, mid-May. So -- but April's still got some hangover effects from the first quarter.

So Q3 is your guess, so that's a reasonable assumption.

Yes. I was just going to say when you look historically, when we have projects that are when our Trucking/Logistics margins go up quite nicely.

We just don't have any of those big Fort Hills projects anymore. So '18 sort of margin sort of average, down around 15%.

Again for '19, I would say we're -- you're going to have those seasonal rhythms, but it's going to average out around 15%. There's no real catalyst there to say that, that much is going to be different.

Okay. And then, Stephen, just sort of splitting hairs here on the guidance.

But the $200 million of guidance is that pre-IFRS 16 or post-IFRS 16 numbers?

That was pre.

Pre, yes.

And that was -- once again, I'll preface that by saying that's assuming that we don't have 3 quarters of really, really tough old patch. We expect it was going to be down.

But Q1 was not just down; it was -- like it was down pretty dramatic. So typical of the old patch, maybe it'll come back as fast as it went down.

I'm still holding out for that as being hopeful, but I did caution if trucking's going to be flat, then really the wildcard is really projects and the oil and gas sector and some timing of some tuck-in acquisitions, nothing major but just blocking-and-tackling stuff, and plus a company with some of our initiatives that we had on cost savings. So that's really what that guidance was all about.

So in February of next year, you guys will report your Q4. And so really when we're looking at it on an apples-to-apples basis, we're looking at guidance in, call it, $212 million range?

That's the -- that's what it would have been on a -- for this year with the IFRS changes. That's correct.

Yes. So Aaron, I would refer you to Page 36.

It was where we have the summary of the quarters. And so we're showing trailing 12 months right now at $195 million.

That would be reduced by about $3 million. So on an apples-to-apples previous EBITDA sort of framework, it's $192 million.

And as Murray alluded to, in the second quarter, we might have some positive comps because of AECOM. But then after that, the back half of the year, it's still yet to be figured out here.

But I mean commodity prices have improved, and there are some positive developments on LNG Canada. So...

In the back half, Steph, right? The comps won't be there from the acquisitions.

But I'm anticipating money and capital is going to work on some pipeline projects and some additional E&P spending. So that's my thesis.

That's what I am cautioning. That's what I'm still holding to.

But I know I haven't seen it yet, but that's what I'm holding to.

I got 3 or 4 questions to ask, some sort of from the macro side to start with. And the first one is streamlining the business, a little bit of color on that if possible.

Was it focused on OFS, trucking and logistics? Was any of that visible in Q1?

Or can we see that later in the year?

Well, the initiatives, we were very, very aggressive in implementing the changes that we wanted to have for this year in Q1, which means that we won't see the benefit until after the fact. And there are some onetime costs in that when you do initiatives in streamlining because that usually means, unfortunately, job losses.

But some of it is streamlining some of these acquisitions we've done. We talked a little bit about, for example, Canadian Hydrovac where we transitioned some assets over to Tenold, that was February 1, as an example.

So that's an example of how we're repositioning some of the assets and trying to get maximum value out of those things. So that's -- when I talk about streamlining and cost-saving initiatives and those kinds of things, some of it is -- we've done most of the heavy lifting in Q1, which means we'll see most of the benefit in the last half of the year.

And we still have some to do. I mean I couldn't do too much in Q1 in our Energy Services side, for example, because you're still trying to just get through the quarter.

But we still got some things that we're working on right now on that side, which will position us with a lower cost structure going into the second half of the year.

Great. A really granular question, Murray.

I think you mentioned and I think I got this right that you said on a year-over-year basis, drilling-related services was down around $9 million, and you lost OIBDA of about $3 million. Did I hear that correct?

It's just a point of clarification if you said it.

You did hear that correct, yes. That was -- I think we're $9.2 million down, Steph, Carson?

Yes, $9.1 million.

$9.1 million, okay.

Yes, and $3.5 million.

$3.5 million, which is -- makes perfect sense because you lose the margin but you also lost pricing leverage in all your remaining business because it -- there just wasn't much business. And the other -- the thing that's really troubling about the drilling side right now is there's not enough business to cover your cost side.

That's why so many of our competitors are having trouble. Not that it's competitive, there's just not enough business now to cover the cost structure.

And I want them to talk about their debt side. A lot of them, as you know, would not have their debt in line with what current reality is for revenues.

So hence why I think there's such a large sale at Ritchie Bros. this -- what started off as a sale has now turned into a tsunami of equipment being sold.

That just tells you there's disruption going on all over. So we just got to let play itself out and position ourselves for the last half of the year.

And hopefully our customers go back, and they've have the cash flow, they drill a little bit more and we have a little bit less competition. That should be good for our business units after we complete our restructuring.

That's my expectation.

Great. Macro, focusing a bit on your real estate assets.

I believe the carrying value, and it's a little bit of a follow-up on Jon's question, is $550 million. Do you -- given that you have some real estate in BC and some in Ontario, would you feel comfortable that the value of the real estate is north of your carrying cost?

Yes. So when we transitioned to IFRS in 2010, we did about $100 million bump.

And you're correct; we do have some key assets that since 2010 have appreciated quite handsomely. I'd expect other terminals in some small towns in Saskatchewan or Manitoba, Alberta probably are flat.

But on the key markets, yes, we're up handsomely. I couldn't hazard a guess really.

But in the GTA, I could tell you like even the last couple of years, you're talking almost a doubling in 3 or 4 years.

Okay. That's good enough for that.

Just one note. In the GTA region, I would tell you right now, real estate values tripled in 5 years.

Commercial real estate that we have some ownership in has tripled in 5 years.

Great. One last question on your equity investments.

Clearly, you have some equity investments on the balance sheet. They seemed to be generally ignored.

How do you look at that internally? And how do you think the market should look at it from understanding the company's valuation?

Well, let me -- I think that's a really insightful question. So I'll answer it from the big picture, and then Stephen and Carson have -- that gives them a couple of minutes to do their homework to find it.

But so I'm playing a little devil's advocate here. But why do we have equity investments?

I've always said this; number one is, well, I couldn't get 100% of the company. I could only get an equity investment.

But once we've got an equity investment, you have the toehold, and it's only a matter of time until we typically would just let it -- let things unfold. Typically, the owners are not quite willing to give up 100% control.

They want to stay in, blah, blah, blah, those kind of things. So that's why we have equity investments because eventually the thesis was we'd like to own 100% of them at some point in time.

On a couple of occasions, we're kind of glad we only took a 30% interest because we don't want to own 100%. But the thesis when we start is we want to own 100%.

On our equity investments, Stephen, Carson, you've done some look at this; just give us some anecdotal evidence on how those equity investments are continuing to perform.

Yes. Elias, I really can't speak to how the market might evaluate it.

But you're right on, with real estate, it's an underappreciated part of our balance sheet, also these equity investments, which we list in -- under investments. There are carrying costs, for instance, with Kriska that we're partnered with.

They've done a series of acquisitions since we've taken equity, a 30% toehold on them. In total, our equity investments are -- have generated $235 million of revenue in 2018.

That's pretty significant. And their EBITDA was about $27 million.

So obviously, we're still keeping cash in Kriska so they can grow. We're keeping cash in Thrive so they can grow.

And they've seen tremendous growth. So we're still in growth mode there.

So how do you value an equity investment in a growth company? It's somewhat difficult I guess for us to share all that information on how much they're growing and such, but there is growth there, and we'll still continue retaining that cash.

And when they have a good year, we'll have a nice dividend. But for the most part, it's still directed towards growth and recap and such.

And so once it could come under the fold and such, then I think you'll see the true value. But right now I agree with you, it's undervalued.

But to what extent, I can't tell you. Anything else, Carson, or --.

So those revenue numbers, I think just to clarify that, the revenue from our equity investments collectively is $200 million and -.

$235 million.

$235 million, Kriska and Thrive and all the elements.

And a partial year for Pacific Coast since we acquired them.

Yes. So $235 million and they had a window of $26.8 million, which is in line with half of our Trucking/Logistics business.

And some of them have EBITDAR because they do a lot of financing with -- in rentals and leasing. So their EBITDAR is substantially higher.

We don't talk about EBITDAR because we don't do a lot of leasing. But that gives you some flavor of how much potential we could add to this company by just buying the rest of those companies.

Yes.

At the appropriate time, when those entrepreneurs are ready to monetize for whatever reason, we've got a put option or we got a buy-sell arrangement, too, and we've got a pretty good toehold in these companies.

Yes. Very good point, Murray.

On an IFRS 16 basis, obviously, this is just old GAAP. Private companies don't have to adopt to IFRS 16 quite yet.

So it's one where the margins would probably be more close to -- or probably above our segment average actually.

Okay. Well, that's great because I -- they exist, but we appreciate the color.

That's it for me. End of Q&A

Thanks, folks. It's been a long -- it's been a fulsome discussion today.

Appreciate you listening in, and we'll look forward to talking with you again in mid- to middle July -- mid- to late July, yes.

Yes. 23rd, 24th.

Thank you very much. Take care.