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Mullen Group Ltd.  (TSX:MTL)
Q1 2019 Earnings Call
April 25, 2019, 12:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Limited First Quarter Earnings Conference Call and Webcast. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. (Operator Instructions)

I would now like to turn the conference over to Murray K. Mullen, Chairman, CEO and President. Please go ahead.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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, I have to 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 document, which are filed on SEDAR and at www.mullen-group.com.

So, with me this morning, I have our executive team of Stephen Clark, who's our CFO; Joanna Scott, our Corporate VP -- 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 two 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 that, 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 in Canadian oil and natural gas industry, which is predominately centered here in Western Canada, we managed to grow our consolidated revenues by 9.4% with the Trucking/Logistics segment improving 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 2018. More on this later in my outlook section, but let me just say, I am not as 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 two 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 CAD2.5 million of the CAD4.3 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 when there is only one market to sell into. Basically Canadian producers are with the whim of the US 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 preserved the balance sheets by drilling less. Okay. This everyone knows and this was not unexpected. And with crude oil prices now rebounding quite nicely from the December 2018 lows, the question is, will oil producers start increasing the capital budget and drilling budgets later this year. More on this in the outlook section. But suffice to say, at least there is some hope these days.

Other highlights in the quarter in our Oilfield Services segments are: pipeline-related activity improved year-over-year, which gives 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 Canadian Industrial Services Division assets and business drove both revenue and OIBDA growth in our production services segment. And we invested CAD4.7 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 is only temporary in nature. But here is the reality, our drilling-related business was down CAD9.2 million in revenue and CAD3.4 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 stagnant 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 2019 that we believe will help our overall performance in future quarters.

And I will now turn this -- the call over to Stephen Clark for a more detailed look at our first quarter results. Stephen, it's yours.

P. Stephen Clark -- Chief Financial Officer

Thank you, Murray, and good morning fellow shareholders. Our first quarter interim report contains the details that fully explains 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 2019 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 rent payments 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 CAD40.8 million of debt or lease liabilities as of March 31, 2019. And lastly, it improved our OIBDA by CAD3.1 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 CAD2.8 million, as well as increased finance cost of CAD342,000 related to lease liabilities. In effect, IFRS 16 has about CAD1 million a month impact -- positive impact on OIBDA.

On the balance sheet, you will now see current and non-current lease liabilities that total CAD40.8 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 CAD40.8 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 CAD35 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 CAD40 million for leases that extend as far out as 2028, but we only added CAD3 million of OIBDA for the quarter. This is slightly detrimental to our debt covenants. However, by year-end, we will have fully annualized the effect of higher OIBDA for about CAD12 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 comparable 2.62 as compared to 2.46 at year-end. Debt-to-cash operating cash flows increased by 0.17 times due to the adoption of IFRS 16 and would have been 2.48 times without the adoption of IFRS 16. Either way you cut it, we are still well below our debt covenant of 3.5 times, have significant balance sheet capacity and currently at about 2.5 times. I'll go over the specific impacts of IFRS 16 on each segment as I view 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 CAD27.5 million, of which roughly CAD20 million was in 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 nine quarters in a row of year-over-year increased revenue. So record first quarter Trucking/Logistics revenue and vastly improved Oilfield Services revenue all due to our prudent acquisition strategy. Here at Mullen, we view acquisitions not just as 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 it as acquisition growth.

As profitability, operating income before depreciation and amortization commonly referred to as EBITDA, but we've referred to it as OIBDA was CAD44 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 of the growth due to new accounting rules, however, half of the rise was due to improved Oilfield Services profits. A testament to our acquisition strategy and our resilient operating model.

On a segment basis, the Trucking/Logistics segment EBITDA grew by CAD4.3 million to CAD30.1 million. As Murray stated earlier, CAD2.5 million of this increase was due to the adoption of IFRS 16, still a CAD1.8 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 the very tough operating conditions in February. 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 CAD3.6 million, of which only CAD0.6 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 nine 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 CAD13.7 million lower than the first -- 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 tough Canadian oil patch.

For 2019, our earnings per share improved to CAD0.11 per share as compared to CAD0.01 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 CAD0.10 per share, up from CAD0.09 per share in 2018. The full details of this reconciliation could 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.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Yeah. Thanks, Steph. So, here is a newsflash for everyone as we look to the outlook. Yesterday, the Governor of the Bank of Canada, Stephen Poloz, opined 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 leader 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 a 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 tag line, 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 then organic growth would be difficult to attain, given the circumstances. It is within this context, that we indicated that acquisitions and consolidation was the only logical way to grow at 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 stab at 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 is a reason for despair. I also caution that our 2019 expectations would ultimately depend on all 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 get the economic engine growing again. Maybe the pause in interest rates hike 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 is 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 two 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 his own very -- his own projection just a couple of months ago if 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 zero. 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 is too much capacity for the current demand. As such, we're witnessing pricing headwinds, and I suggest this 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 through 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 refer to as the Charlie Brown of business today. The current situation, if you are tied to drilling is a disaster, but there is 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&P's 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 getting slammed. The largest equipment auction in history is being held in Edmonton this week. And if this isn't 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 required to remain competitive in any business, and it is my firm belief that our competitors have no money. At best, they are surviving. So, once again, patients 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. But 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. Businesses 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 a Q&A session.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions) Our first question comes from Walter Spracklin of RBC Capital Markets.

Walter Spracklin -- RBC Capital Markets -- Analyst

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

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Good morning, Walter.

P. Stephen Clark -- Chief Financial Officer

Good morning.

Walter Spracklin -- RBC Capital Markets -- Analyst

So, on -- I'll start with just kind of a 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 toward earnings because of 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?

P. Stephen Clark -- Chief Financial Officer

I think, Walter, I'm not the first to mention that, but I would highlight that, we had CAD4.5 million of amortization in the first quarter, annualized, it's about CAD20 million. We're very acquisitive. So, if your -- that's really one of the -- 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 five 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?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Yeah. 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 want to. 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? But at -- 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, OBITA, I don't -- we'll give the market what they want. But we'll report both in the short-term. Until we find what that -- everybody gets accustomed to it.

Walter Spracklin -- RBC Capital Markets -- Analyst

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, for -- 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?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Well, in our last update, we -- when we came out with our expectations for the year at roughly CAD200 million I said, I think we can do CAD200 million this year on a 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 CAD200 million 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 coming in. There's not that same intense pressure to protect the balance sheet as it was in Q4.

So, I think some drilling activity come back and we're losing competition. So that was all factored in to the -- our expectations early on. So, I'm not changing -- I'm not like our Bank of Canada Governor, where I'm 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'll probably have to continue to grow a little bit through acquisition until that. But I thought we could do that.

Walter Spracklin -- RBC Capital Markets -- Analyst

So now with CAD200 million 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 CAD200 million that you'll have some more incremental acquisitions to get to that CAD200 million, is that right?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Well, I think, it really is going to be depend on how long and how deep -- when does the Canadian economy recover? We can't stay at zero growth for much longer or even my projection is going to be off. But I don't think we're going to stay at zero 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 is 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 is 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 OK, and -- but if it stays down for too much longer, or if 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.

Walter Spracklin -- RBC Capital Markets -- Analyst

And then flipping into truckload then -- oh, sorry, in the Trucking/Logistics segment I should say, you were -- you called out spot prices coming down fairly significantly. You highlighted the zero 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 CAD200 million forecast contingent on growth in trucking?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Well, I'll just refer back to our last conference, Walter, and I'll answer it this way, and this is where I does 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, 2019, I think we'll be -- in our TL segment, I think we'll be slightly above 2018.

Walter Spracklin -- RBC Capital Markets -- Analyst

Okay. All right.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

In our Trucking/Logistics segment.

Walter Spracklin -- RBC Capital Markets -- Analyst

Right.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

In spite of all this noise we're talking about, in spite of the pricing challenges, in spite of all this and that, I said, what I think we're working on the cost side, we're working on integration, we've got a couple opportunities that are giving us some tailwinds, we got some challenges here and there, but we anticipated a soft first quarter.

Walter Spracklin -- RBC Capital Markets -- Analyst

Right.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

When we came out with our prognosis for the whole year. So, yeah, I'm not going to change that. I think I am -- the pricing in the spot market, we saw it's starting to trend down last year. We've talked about this for two 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 is 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 I got to -- it's too early to make that call. I don't think it'll translate totally into the contract market, but I think it's -- 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've got a much bigger problem.

Walter Spracklin -- RBC Capital Markets -- Analyst

Okay. My last question is just on your CapEx. Any changes there in terms of your capital envelope for 2019?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Nothing. We haven't changed that at all. No.

Walter Spracklin -- RBC Capital Markets -- Analyst

Okay. Great. That's all. Thank you very much.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Thanks, Walter.

Operator

Our next question comes from Greg Colman of National Bank Financial.

Greg Colman -- National Bank Financial -- Analyst

Hey, thanks, guys. I just have a quick one here actually. Recognizing that the quarter was a little bit softer than expectations, or your expectations, I should say. I actually thought that your Energy Services division's margins performed quite well, and didn't contract as much as we were expecting. Now, you point to the large diameter 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 work? Is it carrying on or accelerating into break up and into Q3? Or what projects it was focused on? Or is that sort of thing that was just sort of a one-time temporary situation there and we should expect margins to be -- maybe under more pressure?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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 -- there is -- like that's going. And that's the early stages. They're not going to put big camps in place and do this unless they're going to start bringing in pipe. 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 still our stock -- our companies will be involved in stockpiling it. We've got all our First Nation agreements in place and benefit agreements and those kind of things. So we're -- I think that pipeline stuff that's going to add a little tailwind later on this year. So, I don't think it's a one-time 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 the thesis is pipeline will be OK this year, I think 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 issues and those kind of thing. So, it should be OK. Production services will be -- we'll start -- we got maybe one more quarter of good comps and then we did the AECOM deal and -- for July 1 of last year. So, the comps will get a lot harder in Q3.

Greg Colman -- National Bank Financial -- Analyst

Got it. And then you just -- speaking about M&A there, you mentioned that you evaluated but didn't execute on a bunch of M&A in the quarter or some M&A in the quarter. Could you just give us a little bit color as to why that -- 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 you were looking for? Just looking for a little more color as to why you didn't pull the trigger there?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Well, on the Energy Services side, my personal view, the AECOM deal was a -- I don't want to say it once a lifetime, but that was an opportunity that just -- we were in the right spot at the right time, where we can 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'm not -- we're not big into acquiring right now, because the markets in such chaos and just let this market self play it out and then we'll grow primarily through internal expansion in the Energy Services side. I think that's going to be our preferred way to grow there. We passed on a number of other opportunities. We let our competitors go forth, because honestly, we don't want anymore old equipment in the energy space, because I think in a very short period of time, there is 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 I want to leverage our existing network that we've got here in Canada.

Greg Colman -- National Bank Financial -- Analyst

Got it. Thanks very much, Murray. That's it for me.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Thanks, Greg.

Operator

Our next question comes from Ian Gillies of GMP Securities.

Ian Gillies -- GMP FirstEnergy -- Analyst

Good morning, everyone.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Good morning, Ian.

P. Stephen Clark -- Chief Financial Officer

Good morning.

Ian Gillies -- GMP FirstEnergy -- Analyst

Stephen, I mean, just given some of the changes in the Alberta tax rates and changes, are you able to provide, I guess, some maybe goalposts or color on what you expect to pay in cash taxes this year? Maybe based on current guidance or previously released guidance?

P. Stephen Clark -- Chief Financial Officer

Yeah. 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, we're -- from here on in we're going to be about a CAD1 million a month on a cash basis. And then, of course, will true-up next February as we need to.

Ian Gillies -- GMP FirstEnergy -- Analyst

Okay. That's very helpful. Thank you very much. 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 equipments getting eroded in the industry on the trucking side and on the services side you have 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?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

No. I don't think there is a significant bifurcation there. I think it's -- I think there is a new reality that everybody has to come to grips with. But there is a new reality in Mullen 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 because there is 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 is a trend happening there that commercial real estate is now the new residential real estate went through, we had a big rise in 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.

Ian Gillies -- GMP FirstEnergy -- Analyst

And so, I guess, with that in mind in the low growth in Canada, I mean, I've asked you about the US before, but what is preventing some sort of US 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 (multiple speakers)

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Yeah. I think that's a good point. I think what holds us back on that is a couple things, you've got to be awfully careful going to the US. Number two is, I think I'll just let the US play itself out until we figure out what the next -- what is the next move for the US economy. In the absence of some type of new stimulus, it would appear that big growth in the US might run into a headwind. And as such, I got to think valuations have to get a little more realistic down in the US before we then say, OK, let's make our play into the US 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 US 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, Ian.

Ian Gillies -- GMP FirstEnergy -- Analyst

Got it.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Because just getting one -- doing one acquisition in the US 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.

Ian Gillies -- GMP FirstEnergy -- Analyst

Understood. Thank you.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Again, I'm not giving up on Canada. I'm mad. I'm upset. But I think that there is 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 two quarters, but because we're positioning for that future. Canada is still a very wealthy country. We just have a couple 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 has impacted negatively the flow of capital. They've helped -- the other policies helped other parts of the economy, but they've definitely put 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 is no opportunity and that the taxes are catching up to and we need a change and you're seeing that shift change go on right across the country right now and it's quite pronounced. There is one more government to change out that'll be an October.

Ian Gillies -- GMP FirstEnergy -- Analyst

Got it. Well, thank you very much.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Okay.

Operator

Our next question comes from David Ocampo of Cormark Securities.

David Ocampo -- Cormark Securities -- Analyst

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 assets since they have not been sort of utilized here?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Yeah. We still got -- we've got enough assets here. 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 it will 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, point-blank and period. So -- but it's only a matter of time until new capital must come back in.

David Ocampo -- Cormark Securities -- Analyst

Right. And how (multiple speakers)

Murray K. Mullen -- Chairman, Chief Executive Officer and President

So when that comes back in -- yeah. 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 oil 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 be -- make sure that all -- everybody knows when we start getting more aggressive because you'll hear when I announce, we're increasing our CapEx for the oil patch, but I'm not there yet. It's coming, but it's not here yet.

David Ocampo -- Cormark Securities -- Analyst

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

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Well, I mean, I think -- personally I think there has already been some -- there has been some activity over the last bid. Most of it's been through lawyers and accountants and activists, and all those kind of it. Really hasn't been boots on the ground, but there has been a lot of architects and designing and pre-planning 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'll 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've got to put the pipeline on 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 the 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've got a yellow light, but we're waiting for the green light for.

David Ocampo -- Cormark Securities -- Analyst

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

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Sorry, I missed that, David.

David Ocampo -- Cormark Securities -- Analyst

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

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Well, I think, yeah, 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, yeah, 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 is a little bit of guidance in there in the last half, yes, that's in our current numbers.

David Ocampo -- Cormark Securities -- Analyst

That's all for me.

Operator

Our next question comes from Jon Morrison of CIBC Capital Markets.

Jon Morrison -- CIBC Capital Markets -- Analyst

Good morning, all. I realized that you're never going to say a whole lot in M&A, but as we were 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 sense come off as arguably peak trucking earnings might be in the rearview mirror?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Yeah. Last year there was, Jon, everybody was riding the wave of, hey, times are good, pricing is up and growing. So everybody thought that that was the new norm. But there is a sense of reality now is that, they all might have got ahead of their skis a little bit. And as you know, and you look at our CapEx, we did -- we were quite balanced in how we looked at this market. So we just sat back and let the market come to us. And all of a sudden everybody's coming to the rear, ooh, ooh, ooh, I might add, maybe that's a little aggressive. So, that's -- yeah, there is a much. Everybody is a lot more realistic today than last year. Now, some of them are going to try and trick you is that, last year's results will be sustainable forever and go well, that's not -- that becomes the negotiating point.

Jon Morrison -- CIBC Capital Markets -- Analyst

Is it fair then say the amount of opportunities you've been shown on the T&L side, you expect that meaningfully in the last three or four months, we're not there yet, where guys are freaking out to see and try to solve?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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

P. Stephen Clark -- Chief Financial Officer

Five.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Five, yesterday.

Jon Morrison -- CIBC Capital Markets -- Analyst

How many would you get on a normal day?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Just as an example.

Jon Morrison -- CIBC Capital Markets -- Analyst

Okay.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Maybe two or three a week. And I'm not going to say we're going get five every day, but there is pressure points in the system right now. And so, we're -- we don't run -- as a -- 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 is going to be lots opportunity. And 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 -- it's a total mess right at the moment. And that's why I said, 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.

Jon Morrison -- CIBC Capital Markets -- Analyst

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 opportunities since it is a fairly low capital intensive business?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

That's a really good point, and I must say that our view was it was going to be the organic opportunities was something we'd leverage. But I'm quite concerned about the -- just the escalation in real estate costs and valuations going on right now. I mean, we've been offered on our real estate portfolio just unsolicited offers on some of our properties that blew 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's all that money 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 it Canada's major markets and just be part. But that is really dislocating the market right now. And I have to just -- I just have to be thoughtful on this and sort of jumping in with both feet. I don't know how deep the pool is right now. I've got to be a little careful before I jump in headfirst.

Jon Morrison -- CIBC Capital Markets -- Analyst

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

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Actually that's another good point. But we're definitely seeing asset price go up, which is causing two things: on the Trucking/Logistics side, we're seeing, some people say, well, I get paid that for 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. Prices are going up, but 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.

Jon Morrison -- CIBC Capital Markets -- Analyst

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?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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 then 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 here in Alberta. And 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 stay in his lane.

Jon Morrison -- CIBC Capital Markets -- Analyst

Okay.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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

Jon Morrison -- CIBC Capital Markets -- Analyst

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

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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, Jon. 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 two years behind the US. Most of our businesses were already there, because we had to already comply with -- to be in the US, and we've been moving our companies toward 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 a 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 will change some, but not all.

Jon Morrison -- CIBC Capital Markets -- Analyst

Okay.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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

Jon Morrison -- CIBC Capital Markets -- Analyst

Last one just from 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 months to 18 months, is it fair to say that it would be more than CAD10 million of revenue per line in terms of your exposure in the first year or year and a half?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Probably the new ones but we've already been involved in Enbridge Line 3 and in Keystone positioning that pipe. Whether the pipes 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 is 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, 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 is 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 on the ground.

Jon Morrison -- CIBC Capital Markets -- Analyst

Okay. Very helpful.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Thanks.

Jon Morrison -- CIBC Capital Markets -- Analyst

Thanks, guys.

Operator

(Operator Instructions) Our next question comes from Aaron MacNeil of TD Securities.

Aaron MacNeil -- TD Securities -- Analyst

Good morning, all.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Good morning, Aaron. How are you?

Aaron MacNeil -- TD Securities -- Analyst

Not too bad. You guys?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Good.

Aaron MacNeil -- TD Securities -- Analyst

Excellent. In your prepared remarks you guys mentioned some issues 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 2020?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

I think Steph that -- 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 of 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 of the norm on our Trucking/Logistics margins as the year unfolds.

P. Stephen Clark -- Chief Financial Officer

Yeah. I would -- yeah.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Joanna, Carson, 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 you. 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 the lack of activity in Trucking/Logistics. Now, once you get past Q1, we'll go back into the normal.

P. Stephen Clark -- Chief Financial Officer

Yeah. I would concur with that, Aaron, there really isn't any driver that would say that 2019 would be much different from 2018 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 three 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 Services. But for Trucking/Logistics this was pretty much on par and they say on an IFRS adjusted comparing apples-to-apples again, it was pretty much in line with last year. And I would expect margin to be pretty much in line for the remainder of the year, because nothing really has changed from last year.

Aaron MacNeil -- TD Securities -- Analyst

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...

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Yeah. 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 still got some hangover effects from the first quarter. So Q3 is your best. So that's a reasonable assumption.

Aaron MacNeil -- TD Securities -- Analyst

Okay. And then -- sorry.

P. Stephen Clark -- Chief Financial Officer

Yeah. I was just going to say, when you look historically, when we have projects that's when our Trucking/Logistics margins go up quite nicely. We just don't have any of those big Fort Hills projects anymore. So 2018 sort of margin to sort of averaged out around 15%, again for 2019, 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 much is going to be different.

Aaron MacNeil -- TD Securities -- Analyst

Okay. And then, Stephen, just sort of splitting hairs here on the guidance, but the CAD200 million of guidance, is that pre-IFRS 16 or post-IFRS 16 numbers?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Yeah. That was pre.

P. Stephen Clark -- Chief Financial Officer

Pre, yeah.

Aaron MacNeil -- TD Securities -- Analyst

Okay.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

And that was -- once again I'll preface that by saying that was -- that's assuming that we don't have three quarters of really, really tough old patch. We expect it was going to be down. But the Q1 was not just down. It was like -- it was down pretty dramatic. So, typical of the oil patch and 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 is 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 accompanied with some of our initiatives that we had on cost savings. So that's really what that guidance was all about.

Aaron MacNeil -- TD Securities -- Analyst

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, CAD212 million range?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Yeah. That's would have been on a -- for this year with the IFRS changes. That's right.

P. Stephen Clark -- Chief Financial Officer

Yeah. So, Aaron, I would refer you to page 36, where we have the summary of the quarters. And so, we're showing trailing 12 months right now, CAD195 million, that would be reduced by about CAD3 million. So on an apples-to-apples previous EBITDA, sort of framework, it's CAD192 million. And as Murray alluded to, on 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...

Murray K. Mullen -- Chairman, Chief Executive Officer and President

In the back half, Steph, you're 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 haven't seen it yet, but that's what I'm holding to.

Aaron MacNeil -- TD Securities -- Analyst

Okay. That's all for me. I'll turn it over.

P. Stephen Clark -- Chief Financial Officer

Thanks.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Thank you.

Operator

Our next question comes from Elias Foscolos of Industrial Alliance Securities.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Good morning, Elias.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

Good morning. I've got a three or four 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?

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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's some one-time costs in that, when you do initiatives and 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 kind 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.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

Okay. Thank you.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

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 were down around CAD9 million and you lost OIBDA of about CAD3 million. Did I hear that correct? Just -- it's just a point of clarification if you said it.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

You did hear that correct, yeah. That was -- I think we were CAD9.2 million down, Steph, Carson?

P. Stephen Clark -- Chief Financial Officer

Yeah. CAD9.1 million.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

CAD9.1 million. Okay. (inaudible).

P. Stephen Clark -- Chief Financial Officer

Yeah. And CAD3.5 million.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

CAD3.5 million, which is -- makes perfect sense because you lose the margin, but you also lost pricing leverage in all your remaining business because it's -- 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 their cost structure. And I want them to talk about their debt side, a lot of, as you know, would not have their debt in line with what current reality is for revenues.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

Great.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

So hence why I think there's such a large sale at Ritchie Bros, this -- it was 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 it play itself out and position ourselves for the last half of the year and hopefully, our customers go back and they 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.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

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 CAD550 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?

P. Stephen Clark -- Chief Financial Officer

Yeah. So when you transitioned to IFRS in 2010, we did about CAD100 million bump. And you're correct, we do have some key assets that since 2010 have appreciated quite handsomely. I would expect other terminals in some small towns in Saskatchewan or Manitoba, Alberta, probably are flat. But on the key markets, yeah, 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 three or four years.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

Okay. That's good enough for that.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Just one anecdotal -- in the GTA region, I would tell you right now real estate value has tripled in five years. Commercial real estate that we have some ownership in, it's tripled in five years.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

Great. One last question on your equity investments. Clearly, you have some equity investments on the balance sheet. They seem 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?

P. Stephen Clark -- Chief Financial Officer

Well, let me...

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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 a 100% of the Company. I could only get an equity investment. But once we've got an equity investment, you have a 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 the 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 own a 100%. But the thesis when we start is we want to own a 100%.

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

P. Stephen Clark -- Chief Financial Officer

Yeah. 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 an equity 30% toehold on them. In total, our equity investments are -- have generated CAD235 million of revenue in 2018. That's pretty significant. And their EBITDA was about CAD27 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 and how much they're growing and such, but there is growth there. And we will 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 toward growth and recap and such. And so, once it could come under the hold 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...

Murray K. Mullen -- Chairman, Chief Executive Officer and President

So those revenue numbers, I think just to clarify that. The revenue from our equity investments collectively is CAD235 million, Kriska and Thrive and all the others ones.

P. Stephen Clark -- Chief Financial Officer

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

Murray K. Mullen -- Chairman, Chief Executive Officer and President

CAD235 million and they had a window of CAD26.8 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. If I just want to buy -- buying the rest of those companies.

P. Stephen Clark -- Chief Financial Officer

Yeah.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

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

P. Stephen Clark -- Chief Financial Officer

Yeah. Very good point, Murray. On 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 two or probably above our segment average actually.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

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

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Okay.

Elias Foscolos -- Industrial Alliance Securities -- Analyst

That's it for me. Thank you.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Thank you.

Operator

This concludes the question-and-answer session. I would like to turn the conference back over to Mr. Mullen for any closing remarks.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Thanks, folks. 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.

P. Stephen Clark -- Chief Financial Officer

Yeah.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Mid- to late-July. Yeah.

P. Stephen Clark -- Chief Financial Officer

23, 24. Yeah.

Murray K. Mullen -- Chairman, Chief Executive Officer and President

Thank you very much. Take care.

Operator

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.

Duration: 76 minutes

Call participants:

Murray K. Mullen -- Chairman, Chief Executive Officer and President

P. Stephen Clark -- Chief Financial Officer

Walter Spracklin -- RBC Capital Markets -- Analyst

Greg Colman -- National Bank Financial -- Analyst

Ian Gillies -- GMP FirstEnergy -- Analyst

David Ocampo -- Cormark Securities -- Analyst

Jon Morrison -- CIBC Capital Markets -- Analyst

Aaron MacNeil -- TD Securities -- Analyst

Elias Foscolos -- Industrial Alliance Securities -- Analyst

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