Mullen Group Ltd

TSX:MTL

Earnings Call Transcript 2017-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Mullen Group Ltd. Year-End and Fourth Quarter Earnings Conference Call and Webcast. [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, CEO & President]

Yes. Thank you, and good morning, and welcome to Mullen Group's quarterly conference call. We'll be discussing our financial and operating performance for fiscal 2017 as well as our fourth quarter results. This will be followed by an update on our near-term outlook as we see it.So -- but before I commence the review, I would remind 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 the disclosure documents, which are filed on SEDAR and at www.mullen-group.com.So with me this morning, I have our senior executive team of: Stephen Clark, our CFO; Richard Maloney, Senior Vice President; and Joanna Scott, Corporate Secretary and VP of Corporate Services.This morning, Stephen will review the financial and operating results of the Mullen Group for the fourth quarter as well as fiscal '17, after which I will provide an outlook for our organization and discuss our near-term expectations for both the oil and natural gas industry and the overall economy from my perspective, which will be followed by Q&A session.Now before I turn it over to Stephen, I'll open with a few comments. So with 2017 now completed, our focus turns to 2018, which looks at the onset to have a few very big issues that need resolved or at least some clarity before anyone can opine on the outlook for '18 with any confidence, especially here in Canada. There are few very important trends that I will discuss and I'll share my views on several macro topics that will undoubtedly have a significant influence on our results in 2018. But before we talk about what might happen, let's spend a few minutes and talk about what did happen.Now I don't find it of valuable use of anyone's time to reiterate what can be read, as such I'll refer all of those that are interested to our very detailed annual financial review and MD&A for Q4 and full year 2017, which is available on our website and on SEDAR. For those of you interested in the condensed version, we have prepared a user-friendly and informative press release, which was released last night. And clearly, I do not need to duplicate what Stephen will present in a few minutes, in which he will add some additional insight into our financial results for Q4 as well as our balance sheet as of December 31 '17.So today, I'll keep my remarks short, we'll focus on macro issues, influence -- how they influenced our 2017 results and then I'll close with what our expectations for the 2 sectors of the economy.So what are the macro factors? Well, firstly as everyone knows, 2017 was a year of economic growth here in Canada, in the U.S. and in fact, in most of the major world economies. Clearly, the easy monetary policy that has been adopted by central bankers on a virtually worldwide basis continued to be an enabler from an economic perspective. In 2017, we saw the demand for freight services grow throughout the year across all geographic regions of the country, which partially explains why our Trucking/Logistics segment grew sequentially quarter-over-quarter in 2017. And we ended 2017 with record revenue.Continued steady monitored growth over the last 10 years means that the economy is now much larger than 1 decade ago. The other contributing factor of course was acquisitions, and since the vast majority of our acquisition strategy has been focus on the Trucking/Logistics sector of the economy, I think you'll start to see why and why we will continue to invest in the Trucking/Logistics sector. More on this shortly.But here's the real story. I believe it relates to our Trucking/Logistics segment. Demand was strong, as I indicated, but margins remained under pressure for the majority of 2017 due to 2 reasons: First, as we've outlined on far too many occasions, 2016 was the last year of the legacy major capital expansions in Alberta, and as such this higher-margin project work was not replaced in 2017. So this hurt our overall margins. Because our business units, like Kleysen Group, one of our larger business units, experienced a pretty dramatic drop in profitability as the projects were completed.In addition, and this is across virtually every sector of the Canadian economy we serve, pricing in the Trucking/Logistics sector was ultra-competitive. It's not because of a tremendously oversupplied market in my view, but more because of e-commerce technology revolution that has gripped nearly every market. In other words, the Amazon effect, where price visibility became the norm, where proprietary markets became exposed. Markets were disrupted, along with this, many of our customers got into trouble exposing flawed business models and from this perspective, let's think retail as an example.The trucking industry was not spared and on far too many occasions, carriers panicked and dropped pricing to defend market share even though there was not a lot of excess industry capacity. In other words, I believe the customers outsmarted the trucking executives. As a result, operating margins were negatively impacted in 2017. But life has a way of working out in ways we often do not contemplate. In fact, the reality is that customers today, in their quest to get the lowest price, virtually crippled most of the trucking industry to the point where no carrier added capacity. Many carriers were forced to downsize. There was no recruiting, no investing, quite simply no nothing by the industry in terms of planning for the future. The only mantra I heard, was survive.And what happens when the market doesn't add capacity and then demand improves? Well, it's simple. Prices start rising, which is exactly what we started to see in the second half of 2017. In fact, it's now at the point where customers are virtually asking for capacity commitments in exchange for higher rates. That's exact opposite of what we've seen in 2016, '17. We started to see early indications of tightening and pricing leverage in the spot market, commencing in the fourth quarter, which is traditionally not the strongest quarter for the Trucking/Logistics industry.So what does all this really mean? We like the market dynamics in the Trucking/Logistics sector because demand is firming at exactly the same time supply has been constrained. 2017 was a year supply and demand fundamentals changed in the trucking industry, and while our research doesn't necessarily reflect this emerging trend, as evidenced by our segment margin incline, I believe this will reverse course in 2018 and beyond.Now let me turn to the oil and gas sector of the economy. The recovery in oil prices has spurred a recovery in the oil and gas industry after 2 brutal years. This is what I refer to as the second macro factor. Oil and gas companies responded by increasing their capital budgets, especially as it related to drilling activity, providing a much-needed boost to service industries -- companies. For our company, this was clearly a positive for those business units focusing on the drill bit. What we referred to as our drilling-related business units in our Oilfield Services segment. However, we have been strategically reducing our exposure to the oil and gas sector for several years. As such, the increase in drilling activity in Western Canada, while positive, was not a meaningful contributor to our overall results. Nevertheless, the recovery in oil prices, along with increased spend by oil companies was positive in 2017.A third macro factor also relates to the oil and gas sector. This is what I will refer to as the lack of energy infrastructure. This is by no means a new topic, but in 2017, this lack of oil pipelines to tidewater, which is really the only viable way to get oil to world markets, became a major bottleneck and will undoubtedly only become a much larger issue in 2018 as new supply, like Suncor Fort Hills, ramp-up production. Likewise, Canada's lack of conviction in creating opportunities for our natural gas industry killed any chance of a sustained recovery in the oil and gas industry. LNG is an absolute must for Canadian natural gas producers. It's just that simple.So why do I say it? Because of 2 fundamentals: Technology, think multistage fracturing, which has absolutely transformed the natural gas business. Today natural gas production in Canada is nearing record highs in spite of the modest rig count. In addition, those dastardly characters from the south are now exporting their natural gas into Eastern Canada, effectively displacing Western Canadian gas. The market for natural gas in Canada is flooded, which means that if access to world markets via LNG projects remains mired in political juggernaut, there is little reason to be optimistic about natural gas in Canada. My opinion.So what does this all really mean? I firmly believe that there's a structural recovery taking place in the oil and gas industry, but without infrastructure, the oil and gas industry in Canada will not be a growth industry. This is how we view the oil and gas sector of the economy, and why we are comfortable maintaining an effective underweight position in terms of capital allocation to this operating segment. At least until Canadians realize there is value to a strong oil and gas industry. The discussions, unfortunately, are wrapped up in political squabbles, whereas in most countries, energy is a national priority.And the last macro trend relates to acquisitions. One of the mainstays of our organization. Over the course of the last 18 months, we've completed 8 acquisitions. We've added over $100 million in annualized new revenues. The vast majority of these opportunities we refer to as tuck-ins because we simply acquire the companies, roll them into one of our existing best in class business units, and in doing so, we look for synergies, which really is an acronym for job cutting, to ensure we can achieve margins that are similar to ours. This strategy is not easy, and it takes a little longer to execute, meaning that margins will be negatively impacted in the short term as was the case in 2017, until we can right size and modernize the business. But the reality is, that if the economy is only growing in a moderate pace, 1% to 2% per annum, then acquisitions are the only way to accelerate growth.So what does this all mean? Well, as you can see, acquisitions were a significant reason for our growth in 2017, which is good news. However, margins were temporarily impacted, that's the bad news. It is the responsibility of this senior executive team to manage the integration process and to ensure operating margins are improved over time. And to this point, this is exactly what our mission statement at Mullen Group is. We acquire companies, and we strive to improve their performance.All in all, a decent, but by no means spectacular year, which is precisely what we articulated to shareholders throughout 2017. We were knew -- we knew we were coming off some pretty nice project work in '16, and that these projects would be difficult, in fact, impossible to replace. We also knew that acquisitions were the only true means to mitigate an otherwise modest economic recovery. So throughout the year I often referred to 2017 as a year of transition, not just for our company, but for the 2 market sectors we service, the Trucking/Logistics segment and the oil and gas industry.I also indicated that I was more optimistic than I've been in a few years, and while our 2017 results didn't necessarily reflect my optimism, I firmly believe a solid foundation for future successes was clearly established. So Stephen will now provide further insight on 2017 results and our balance sheet, which is going to be a real future growth enabler for the Mullen Group. Stephen, it's yours.

[P. Stephen Clark, Chief Financial Officer]

Thank you, Murray, and good morning, fellow shareholders. Firstly, thank you to our best in class team that produced a very detailed MD&A and financial statements in record time, a full week ahead of last year's pace. Our financial -- our annual financial review, available on our website, fully explains our performance. As such, I will only provide some high-level commentary. By all accounts, our fourth quarter was a good quarter. We saw record Trucking/Logistics revenue and improved Oilfield Services results. Consolidated revenue was $296.1 million, an increase of approximately $38 million or 15% as compared to 2016. On a sequential basis, consolidated revenue continued to grow, reflecting both our acquisition strategy and an improved economy. For the fourth quarter though, specifically from a segments perspective, the Trucking/Logistics segment contributed approximately 70% of pre-consolidated revenue and grew by $33.6 million or approximately 20% to $206.6 million. This is a new record not just for our fourth quarter but of any quarter. With new record revenue also came new record fourth quarter OIBDA, or what is commonly referred to as EBITDA. The Oilfield Services segment contributed approximately 30% of the pre-consolidated revenue or approximately $90 million, which was an increase of $5 million year-over-year.In terms of percentage of consolidated revenue, operating margin adjusted for currency fluctuations was relatively stable at 15.5% as compared to 15.6% in the fourth quarter of 2016. Despite the completion of various capital projects in 2016, for the year, 2017, we generated approximately $1.1 billion in revenue, an increase of 10%. And generated an operating margin, again adjusted for currency fluctuations of 15.8% as compared to 17.8% in 2016. This is low in the historical context but consider the following. We are more Trucking/Logistics focused than we once were. With a greater proportion of Trucking/Logistics revenue, it is only natural that the overall margin adjust towards the segment's average rather than the oil field's average of 20% or better. We are still integrating our acquisitions. Collectively, the series of acquisitions we completed in the past 2 years have contributed approximately $100 million in annualized revenue, some of that is yet to come, because our recent acquisitions, such as Marshall and RDK, but certainly, some of it is already baked in the cake, with Caneda and others having completed in 2016. However, many of these acquisitions have yet to produce the margins that we expect and we continue to work with them to improve. And lastly, our Oilfield Services segment margin is remarkably resilient, still around 20%, both in 2017 and 2016. A feat not been have been able to replicate in the services sector. So overall, a bit lower than historic, but partially by design, partially due to acquisitions and partially because of the focus on asset light Trucking/Logistics rather than capital-intensive Oilfield Services. However, concentrating on free cash has always been a mainstay at Mullen Group. As such, our balance sheet remains strong. In September of 2017, we repaid USD 85 million and CAD 20 million of our private placement note, reducing our annual interest cost by approximately $7.5 million, and exited 2017 not only with reduced interest cost but with ample cash, approximately $135 million. We have another $70 million of debt maturing in June of 2018, but not much after that. Our next maturities are in 2024 and 2026. In 2017, we also invested $19.8 million for PP&E, with another $13.4 million of carryover that was included in our announced $40 million CapEx budget in December. So ample cash, relatively low capital expenditures in 2018, and our $75 million credit facility remaining available and undrawn. Many would call this dry powder. I'd simply call it, financial flexibility.So with that, Murray, I'll pass the conference back to you.

[Murray K. Mullen, Chairman, CEO & President]

Thanks, Steph, and I'll reiterate your opening comments, that I think the team did an outstanding job of getting the MD&A out earlier than ever before, and absolutely quality paper. Thank you very much.

[P. Stephen Clark, Chief Financial Officer]

Thank you.

[Murray K. Mullen, Chairman, CEO & President]

So thanks, Steph. Just a few short weeks ago, we outlined our business plan and expectations for 2018, and since really nothing has changed to materially alter our view, I will take just a few minutes to recap our plan and then I'll turn the call over to what I refer to now as our world-famous Q&A session. So generally speaking, we have 2 potential outcomes for the coming year. The first assumes that we continue doing what we've done for quite some time, and that is just to take advantage of what the 2 sectors of the economy provide and layer in some tuck-in acquisitions. Under this scenario, we will improve over 2017 results, continue to delever the balance sheet, which means pay down a $70 million debt note in June as Stephen talked about, and stay focused on our current business to drive as much free cash flow as possible, including returning more to our shareholders.The second scenario is based upon finding a transformational acquisition that we believe will drive future growth. Under this scenario, we will use the cash on hand and most likely use new debt to fund the big one. Either option's attractive, and given our well-structured balance sheet, accompanied by our business model that allows us to generate free cash, we have tremendous optionality heading into 2018.So what are our objectives and goals for '18? I'll just reiterate them, we talked about a little while ago. Our financial goals are to generate consolidated revenue in excess of $1.2 billion, that's a nice increase over 2017, and achieve operating margins in the 16% to 17% range, which equates to an OIBDAR operating income, or EBITDA, whatever we are told to, classified as these days, of approximately $190 million to $200 million. To support these goals, we will continue to pursue acquisitions as a means of growing our business in excess of what the markets give us.Secondly, we will deploy $40 million in capital into our 30 business units, primarily once again focused on the Trucking/Logistics segment. Overall, we refer to our capital plans for 2018 as a neutral waiting, and as you recall, we had an underweight position in 2017.Actual 2017 net CapEx was under $20 million.Three, we'll increase our investment in mobile technology to ensure our business units remain best in class, and ensure our people can take maximum advantage of the digital revolution. Four, we'll introduce our industry-leading business management certificate program to our workforce by combining in class participation with online training, which will allow us to reach more of our people that desire to improve their business skills, as steps toward enhancing their careers in our organization. Five, we will accelerate our investment in Moveitonline, our proprietary online load matching marketplace. In fact, the market penetration and user content are now at a level, after less than one year, that we feel confident that we can take Moveitonline to the next level. We have some very significant plans for Moveitonline in 2018, starting with the introduction of MOB version 3.0, which will have a total new look and an enhanced search component. We have already exceeded our initial expectations, with over 200 certified carriers representing approximately 15,000 trucks and 30,000 trailers. In addition, since the 1st of 2018, the transaction level continues to accelerate. In fact, in the first few weeks of 2018, we've already achieved 25% of all of the loads transacted in 2017. The last remaining item that I'll address this morning is what did we do with our free cash, that our business model generates, and I've already indicated that to achieve our growth plans for 2018, we'll need to pursue some acquisitions. But we already have over $135 million in cash, as such, we really do not need any additional cash for this objective unless of course, we find a transformational target. Our $200 million of OIBDA, with an annualized CapEx of $40 million, low interest payments, based upon our current models will be around $23 million, cash taxes of around $25 million results in $100 million to $110 million of free cash. So our plans are to: Repay the $70 million long-term debt in June of '18; increase the dividend to $0.60 per share annually or $0.05 per month, which is an increase of 67% over last year, which we've already announced; and we may also consider instituting a share buyback plan, if we cannot find accretive acquisitions.So in summary, we have a well-thought-out plan for 2018. We have the flexibility to adapt to changing market conditions and we are generally optimistic about the future for Mullen Group. The trucking and logistics sector of the economy looks very positive today, as good as I've seen in a long time. Demand is expected to remain robust, especially given the economic strength emulating from south of our border. The job market is at historically low levels, meaning it will be a challenge for the industry to add new capacity. As such, pricing should improve in 2018. As for the oil and gas industry, I still believe the fundamentals look positive. Crude oil prices are up substantially over the last 24 months. On the negative side, natural gas prices have been crushed. So one needs to be realistic about the future for our industry in Canada. As such, we are hoping for a little stronger year in '18, but this will only happen if there's an increase in spend by the industry in the second half of the year because thus far, we are not seeing a robust start to the year. We're still hopeful, but limited capital until more clarity.I'll now turn the call back over to the operator, who will open up the lines for our Q&A session. Thank you.

[Operator]

[Operator Instructions] Our first question comes from Walter Spracklin of RBC.

[Suneel Manhas, Senior Associate]

This is Suneel Manhas today on for Walter Spracklin. I just wanted to start on the T/L segment, you mentioned some indications that spot prices are on the rise? Can you provide a sense on what portion of the Q4 revenue growth is attributable to volume growth, and how much is driven by the pricing side?

[P. Stephen Clark, Chief Financial Officer]

No, I can't provide that. That's a granular number. The pricing side's clearly going to show up on the margin side when it -- when you get pricing, but it's not going to show so much up on the top line side. I just don't believe -- that's my view on it. So very difficult for me to give you a, any reasonable estimation on that, I'd be just guessing, and there's no sense doing that, I believe. To the extent we get pricing leverage, that's going to help margin, it'll have a little bit of an impact obviously on the top line, but not the meaningful side.

[Suneel Manhas, Senior Associate]

Okay. And just sticking with the T/L there, a bit broader. In the press release you had mentioned, or one of the releases you mentioned, market share gains, can you talk about, what businesses that landed, and whether there's potential for further gains into 2018?

[P. Stephen Clark, Chief Financial Officer]

Well I think that you're seeing the marketplace tighten significantly. We have seen many of our competitors are now, after a couple of years, are pretty strapped. So they really don't have the same maneuverability. But I would say to you that the market share gains you get are really from the position that our competitors just -- the market's tight. And so we lose market share when we don't chase pricing. But once the prices -- the market improves and pricing comes back, the customers have nowhere to go but back to us. So we're really just regaining market share that we just gave up, when our competitors just drop the prices way too low. So I would we're returning more to the norm than really getting actually new market share, to be blunt. The market share we do get is through acquisitions, that's clearly new market share. The big thing is, we don't trap ourselves in chasing Mr. and Mrs. Stupid. We have a tendency to just say, if that's what you want to do, do it. You won't do it for long because it's stupid. So we just sat back and we gave up market share, and we gave up, and we just sat and ran our business. But now we're seeing the market tighten to the point where the customer's coming back to us because we are there, we've got capacity and we're not gouging, we just want a fair price for what we're providing. So from that perspective, that's really what the biggest change that I see coming on is that -- and I'm hearing that across the board now as the trucking company executives are just sick and tired of giving away their service and doing it for nothing.

[Suneel Manhas, Senior Associate]

Okay and just one last quick one here. On the margin, and just thinking about the push and pull between potential for pricing growth versus some of the cost inflation that could be on the horizon, especially with the tight labor market. Could that cost inflation start to creep up to pricing growth, creating some pressure, or is the conditions, with the demand and the capacity really, really -- that pricing is going to outpace any of that cost inflation we might see.

[Murray K. Mullen, Chairman, CEO & President]

That's a really good observation, is that there is no doubt in my mind that we're seeing some inflationary pressures. We're seeing it across the board, but the one that is probably going to rear its head is going to be in the labor front. And so that's why we're -- absolutely a must that we get some pricing increases because you're going to have some corresponding wage pressures that are coming through the system as well. In addition, we know that fuel's up. In addition, we know that the market in the United States is particularly robust. I know that they kind of hit a record month in terms of truck sales, Class A truck sales, in the month of January, I can tell you, it's not coming from Canada. Most of it's coming from the United States, so that's pushing up prices. So we've got to be aware of these things, and as such, that's part of the reason why prices have to go up. We will be able to improve our margin when we get pricing leverage, but not to the same extent you get a pricing increase because you got cost pressure. So our job is to manage that obviously, to get some margin improvement, that's our objective for 2018, is margin improvement. But it's not a one-to-one relationship, a 5% increase in pricing equals a, it doesn't all flow through the bottom line because you've got cost pressures coming in right behind.

[Operator]

Our next question comes from Turan Quettawala of Scotia Bank.

[Turan Quettawala]

I guess, maybe I'll start off, Murray, you talked -- you gave us quite a bit of detail about the EBITDA outlook for the year and obviously you give that back in December. Am I reading this right, in terms of you seem to be a little bit more encouraged by the trends here in January, February, than maybe you were back in December when you gave that outlook, or am I sort of reading too much into it?

[Murray K. Mullen, Chairman, CEO & President]

Well Turan, as a good analyst, you'll always read too much into it, so I'll give you accolades for that, but -- I think it's kind of a hybrid. I think I'm a little more optimistic now, even when I was in December on the Trucking/Logistics side, we're really seeing some structural change happen. The rails are absolutely swamped, they can't give service, some of that freight's coming back, the U.S. is so robust, that's going to pull and help the Canadian economy. So I'm optimistic from that, it is a brutally tight labor market, you can't get drivers today. So that's all constructive, and it's just more anecdotal evidence we see all the time. Most of the positive news in our optimism is driven by what -- when I'm talking to our peers in the States, and what I'm seeing happen down there. And -- we will not benefit to the same degree as them, but we will definitely, I think, see some benefits.Now in the oil and gas side, I would say I'm a little more cautious than I was in December. We're seeing evidence that our customers are being -- they've got to live within their cash flow today, there is no new capital for them. So cash flow's driven by the price of crude oil times production, price of natural gas times production, that equals cash flow. And so, I'm not -- I'm just a little cautious on that side. I'm not seeing really robust in the first quarter here. So I think structurally it gets better, and I'm hoping that the second half is -- we get a few issues resolved. Maybe we get some good news, maybe we get some good news on some of these infrastructure projects because clearly if not, Canadians are being left at the altar here. We shouldn't be so foolish as to think that the world will change because we don't do something. I don't think the world gives a damn.

[Turan Quettawala]

No, that's fair. No, thank you, that's really helpful. And I guess, the other thing I want to just touch upon quickly here, as you mention the technology angle, and how that might be impacting pricing, and I totally understand the dynamic over the next sort of, call it 12 to 24 months, with regard to the driver shortages and all of that, which will definitely help pricing, it seems in the trucking business. But just more longer term, I'm sort of interested to hear your thoughts on sort of over the next 5 years. It seems like what you're saying is, there's a lot of price discovery that technology allows you to do, which does it longer term mean that your ability to price is harder in the trucking world, or is there something else that maybe will play into it? Just trying to understand whether you guys are sort of winners or did it hurt a little bit, based on more technology coming into the business.

[Murray K. Mullen, Chairman, CEO & President]

I think what price discovery does, is it takes away contract pricing. I see so many -- I'm just seeing is that everybody prices for today, what's my demand today. Nobody's got great visibility for the long term, they just want to know what's your price today, and I think that's where the price visibility comes in. So if it's competitive and more supply than demand, then price is going to go down and customers jump at that, at the heartbeat. On the other side of the coin, if demand improves and supply is tight, then it's our job to price higher to that demand. So that price visibility is a dual-edged sword. You better be flexible, and that's what this technology's designed -- that we're doing. We understand how the game is played. Nobody wants to make long-term commitments today. Amazon has changed the rules of the game. What's your price? What's your price? And you've got to be able to respond very, very quickly to that. I'll change my mind on that if our customers come and say, "I'll sign a two-year contract, give me capacity. " And I'll give you a raise to do it. And then I'll say, "Okay, they're taking a longer-term view, and they're getting concerned about capacity." And the rails can't service them or whatever else, so. But what I would tell you, we're way more meaningful discussions with customers today than we did one year ago, from our perspective. They're not liking it, but I can tell you, I'm liking it.

[Turan Quettawala]

And just maybe one last one, for Stephen. That was a big jump in the D&A at Cascade. Just wondering, is that recurring? Just trying to get a sense of what the run rate is on D&A.

[P. Stephen Clark, Chief Financial Officer]

Yes, so in the fourth quarter, we accelerated the depreciation specifically at Cascade Energy for specialty units. We've come to the realization that these specialty units shouldn't be depreciated the same as trucks and trailers within our fleet, so we accelerated depreciation, we're going to change the depreciation policy going forward to 20% declining balance, rather than 10%. So that did add about $7 million. But on a historic basis, if you look back for a couple of years, we're still around that $70 million to $75 million of depreciation. I would tell you that our sustaining CapEx and our view on CapEx for 2018 certainly hasn't changed, though.

[Murray K. Mullen, Chairman, CEO & President]

I think -- from my perspective, and I'll get it from a business side, Turan, is that, when we had set the original depreciation policies on those assets, we had great utilization, you had a lot of drilling activity. So you could -- well the depreciation policies made sense, but as utilization rates go down, we had to come -- we had to be more realistic in terms of what the true depreciation of those assets might be, is that we're just not getting the same utilization. So depreciation goes up to reflect that because they do depreciate. So I think that's the reality of what happened. And we got lots of specialty equipment. So we just move some of those assets into the specialty equipment category in that depreciation schedule. So that's what happened. Very good question.

[Operator]

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

[Greg R. Colman]

Wanted to start on potential upside risks. Murray, I was wondering if you could comment on what you're hearing or seeing on the ground, or the likelihood of an LNG project on the West Coast there? In the past couple of few weeks we've seen some encouraging signs at LNG Canada, with them shortlisting the number of potential agencies down to 2, and just a couple of rumblings and rumors on them refreshing bids, I'm just wondering if you could comment on what you're hearing with your boots on the ground.

[Murray K. Mullen, Chairman, CEO & President]

Greg, I think -- my view, I'm hearing similar things that you and your colleagues are hearing, and what everybody's hearing. So we don't have anything proprietary. We are getting more activity from our customers on bidding, and revisiting previous bids that you put in, and they're going for -- reinitiating to make sure that they get price discovery and what's your bid today, and whatever. So it's -- that's a very, very encouraging sign. I like some of the tone that we're hearing, it's much more constructive than it's been for quite a while. So I hold to that view that we're hopeful, somewhat optimistic that everyone understands, is that Canadians were fools for not assessing world markets. I can't imagine any other business in the country, where we would not allow for access to world markets, other than the energy business. I don't know of another country that would make that foolish decision. So as I said, we -- what we do in Canada, the world doesn't care about. We need to take bold steps in Canada, with made in Canada solutions, so that all of our companies and all of our products can get access to world markets. We've been hoodwinked by the U.S., we're now crushed by the U.S. and we've got to make bold decisions, it's time. Step up folks, there's a market out there, let's go.

[Greg R. Colman]

I appreciate that. Can you also -- and agree with that, too. Could you also remind us what -- I mean, what the potential impact could be for you? Would this be similar for Mullen as the restart or maybe initiation of a major oil sands project? Or would it be potentially half or twice as much that size? I know it might be getting a little bit over the edge of my skis here because we don't know what it's going to look like. But if it wants to go forward, just order of magnitude, is this similar to a major oil sands project from your perspective? Or is there a structural difference which would make it larger or smaller?

[Murray K. Mullen, Chairman, CEO & President]

I don't think the benefits to Canada are quite as much as an oil sands plant. But -- because I think most of it's going to be constructed offshore, shipped by barge, shipped by ship, landed in and we're just going to LEGO it together. So I think it's going to -- most of the product is going to be built. But most of the labor is going to come from Canada. You got to lay the pipe. That, you have to do, so from that perspective. All in all, I think very, very good for just overall economic activity that job creation is staggering on this. The most important part to me relates to drilling activity. As you know, in the oil sands, there is no drilling activity. It's just mining. It's just digging and -- but to feed the gas pipeline, you got to drill. And if we don't do something for -- to get new markets for our natural gas business, why would anybody drill for natural gas? Makes no sense. So I think that the long-term benefit is on the drilling side and, of course, that has a tremendous economic multiplier to it and not the least to say which is royalties and taxes and all those kinds of things for government coffers and all those kind of things. So I think the biggest long-term benefit, it really supports our natural gas business in pricing and price discovery.

[Greg R. Colman]

Got it. That makes a lot of sense. Okay, so that was on the upside risk. Then on downside risk, we've obviously got a lot of news in the press right now on NAFTA renegotiations and what that's going to look like. From a factual standpoint, could you remind us how much of your business is cross-border and that's from factual side? And then from a conjecture side, could you maybe opine on what a restructuring might look like and what it might do to demand/supply balance for trucking in Canada? Is that a potential risk to your encouraging outlook on the Canadian trucking industry?

[Murray K. Mullen, Chairman, CEO & President]

Truthfully? No. I don't think that would -- I don't the NAFTA negotiations mean anything to trucking to be honest with you. The facts are nearly all of the products that we need in Canada, we have to import. Most of that import comes from the United States, so that's just the reality. For Canadians, you got to ask what do we ship down to the United States? We know what shipped because we haul it, we haul it northbound and we haul it southbound and I can tell you, all the value-added goods come from the United States. Most of the other stuff going south is not value-added goods. Now could it impact the auto sector? Absolutely, which I think is one of the major bottlenecks, if you will, in NAFTA, which is the U.S. wants more content for the cars that they're driving down there. They want it built in the United States and not built in Canada or Mexico. But I don't think that's really -- that's going to impact a bit. But most of the value-added goods for Canadians that we have need for economy, they come from the United States. Energy products, huge part of our -- of the NAFTA. Well, we don't truck energy products. Those are piped, whether it's gas -- natural gas or maybe some -- or oil, maybe a little bit in rail, but generally not trucking. So I don't think there's going to be a huge impact. I think the squabbles that are going on will get resolved one way or the other. It may not be called NAFTA because I don't know what NAFTA really stands for, but it's not going to impact lumber. The U.S. has already decided you're going to pay a tariff on lumber. So I don't see it really changing a whole bunch to be honest. I think there'll be lots of drama and everything goes with it. But at the end of the day, we don't have a lot that we can offer to the United States. They -- but we need lots of stuff because we don't have a strong manufacturing sector in Canada. We use things, we warehouse things, we distribute them to consumers, but we don't manufacture things. We consume. So I'm not troubled by NAFTA. I hope it doesn't get into it tip for tap like in Alberta and BC, but those are little squabbles that go on, give me access for pipeline or I won't use your -- I won't buy your wine. That's for kids. That's foolish. There's no strategy at all, and that's one of the most irritating thing to most of us in the -- that are trying to create jobs and help the middle class get ahead.

[Greg R. Colman]

Agreed. Thank you for that as well. And just actually, how much of your transportation logistics business is cross-border shipping trucking from Canada down south?

[P. Stephen Clark, Chief Financial Officer]

Yes so -- Greg, it's Stephen here. Approximately 20% of our miles is generated in the states in the Trucking/Logistics segment. So we don't have hard fact numbers as far as revenue goes because some of our U.S. customers we bill in Canadian dollars and vice versa.

[Greg R. Colman]

Stephen, would it be approximately 20% of the T&L top line? Or is there a reason that it might be 10% or 30% or it's 20% of goods starting point.

[P. Stephen Clark, Chief Financial Officer]

Well, I think the miles generally there's not big fluctuations between the rate per mile in Canada versus the U.S. on a currency-adjusted basis. So I would think it would be around that.

[Murray K. Mullen, Chairman, CEO & President]

I would concur with that, Greg.

[Operator]

Our next question comes from Andrew Bradford of Raymond James.

[Andrew Bradford, Head of Energy Research]

The -- curious, the pace of acquisitions toward the back half of 2017 was pretty good. And you said that you've become even more optimistic than you were in the December update on trucking and logistics. So because of that, has that changed the opportunity set as you see it vis-à-vis acquisitions in the pace that we saw exiting 2017?

[P. Stephen Clark, Chief Financial Officer]

No, I don't think so, Andrew. I think acquisitions are really a function of what comes available rather than us chasing. We've -- we're -- we just got enough deal flow and it's about what we can get done, what fits, how does it fit in our organization, et cetera, et cetera. But to the extent we'll be -- we're always selective on our acquisitions. And -- but it hasn't changed our view on acquisition. We'll be aggressive on acquisitions, but they've got to fit our strategic plan. And our strategic plan is real simple. It's got to be -- it's either a profitable, well-managed stand-alone business that fits our strategy or it's got to be a tuck-in where we can see we just find synergies and we can drive margins from synergy, not through anything else other than that. So truthfully, over the last couple of years, there's more truckers got into trouble so it's more the second part of layering in and then us managing the business and bringing pricing discipline to the organizations because we've got good business units that know how to price.

[Andrew Bradford, Head of Energy Research]

Do you think some of these potential companies are sort of seeing the same thing you are where they're becoming more optimistic as well and that might increase the bid-ask spread?

[Murray K. Mullen, Chairman, CEO & President]

Well, sure it probably will for the good companies. Andrew, I think that's a very good observation. For the ones that are in trouble, no, it doesn't change it at all because they can't take advantage of it.

[Andrew Bradford, Head of Energy Research]

Okay. When you -- I've noticed over the years that you -- generally your smaller acquisitions tend to be of 2 types. One is where there's almost a competitive mote around the company and others that you describe as tuck-ins where you affect these synergies. When you do that second one, how long does it typically take you before you kind of get to the goals of -- the margin goals that you have for that acquisition? Is that, I guess, a couple of quarters? Or is it closer to a year?

[Murray K. Mullen, Chairman, CEO & President]

Yes, it's more a year. I think 12 to 18 months. The first bid, you got to be very careful going in on day 1. All you do is disrupt. You got to be careful just got to just get in and then you -- it just takes a little bit of time because you're trying to change a culture. And so typically I'd say 12 to 18 months before you get it. Sometimes, Andrew, we do earnout provisions in the transactions, which means there's a difference between the bid-ask, right? So when we have an earnout provision, it just says, "Well, I don't think you'll meet that objective. But if you do, I'll pay you." And typically, we don't pay because they can't earn what we think they could earn. Other than that, I just pay them upfront and get on with life. So during that earnout provision, there's not a lot of change that we institute during that earnout provision because you have -- you'll earn out the provision. So you kind of slow down by a year if that makes any sense to you.

[Andrew Bradford, Head of Energy Research]

Yes, it does for sure.

[Murray K. Mullen, Chairman, CEO & President]

I don't want to go in and somebody blames me because I made changes in the company and that's why they didn't make the earnout. I kind of have to let it be for -- I just got to let it settle for a year sometimes. And we let the market say, "Oh, you sold me the company. Okay, if you think you can do that, I'll pay you that. I don't think you can, so this is what I'm offering." And you've seen that on a few occasions over the last bid. So I think you -- that's how we try and structure the bid-ask.

[Andrew Bradford, Head of Energy Research]

Okay, just 2 more quick ones for me here. In the past, when the market is tightened up like this -- well, first of all, have you seen the market tighten up like this in recent years where it's been this chronic underinvestment? Can you sort of take us back to when that might have -- when you might have seen that before? When have we seen a market like this in trucking?

[Murray K. Mullen, Chairman, CEO & President]

Yes, we saw a great market for trucking in 2014-2015. We came out of a global recession that was pretty nasty. It killed competition, nobody invested for a few years. You got into a really nice -- demand was increasing nicely as monetary policy did its job. And then layered on top of that, there was a major disruption in the supply chain, which was called the -- a strike at Long Beach, the Port of Long Beach, which is the major importing hub in the United States. And there was a -- they just went on strike and as a result that went on too long. Everybody was forced to reshift the supply chain into other ports. And that created a bit of a spike in demand, and I think truckers got sucked into that. They thought it was structural demand when it was just a situational demand and everybody ramped up production, got all excited, business is good, got to meet customer's demand. Guess what the strike was settled. What happened to the supply chain? It went right back through Long Beach and right onto intermodal. And then everybody's held with too much capacity. So they got -- that was a head fake and away it goes. So it's taken us 2, 2.5 years to work through that now, but the economy is growing. But I've never seen a market where you have virtually 0 unemployment. So how do you grow capacity with 0 unemployment? I don't -- I mean -- so there's only one way to do it. If you want it done, I'll do if for you, but here's the price because I got to pay for it. So I don't think I've seen a market where it's been this tight on the labor side for quite -- now we've seen it in Alberta, Andrew, when we were in the peak of the oil patch. Yes, we've seen that here. But I've never seen it broad-based across North America like this. I've never seen that.

[Andrew Bradford, Head of Energy Research]

Okay. So if you've never seen this before, then I don't feel so badly being a bit ham-fisted trying to figure out kind of what impact this could have on your margins. But if I go back and look at previous times of tightness or if any of us go back and look at that and see that kind of margin appreciation is what we should expect going forward, will that be a fair starting point?

[Murray K. Mullen, Chairman, CEO & President]

Well, it's a fair starting point. But since it's new, I don't know. I can think -- I can tell you structurally, I think it's going to get better. But -- and as I've said to all of our business units and to all of us here, I mean, it's up to us to do the best we can on this. To maximize this change in the market condition. So there's probably -- exactly how it's going to work out, Andrew, I gave you my best guess, which says our margin overall will go 16% to 17%, but we got to play it out. This is a very fluid situation right now. It's a tight market but that doesn't mean that things don't slow down in a tight market for a little bit. That doesn't mean it doesn't over-accelerate and whatever. So -- but structurally, I've never seen a situation where we have -- like even for the OPEC. There's no way you can ramp up. There's no people. You'd have to buy them. So we'll have to see how it plays out but I would say -- let me just wrap it up by saying I'm pretty optimistic. I just told my peers are smart enough to figure it out. This is their time to make money and they raise prices, and everybody can do well in our industry after not doing well for a while. It's our turn.

[Andrew Bradford, Head of Energy Research]

Well, what comes around, goes around. So if -- the last thing I just want to ask you is you sort of threw out a comment when you were talking about deployment of cash and paying back the note in June. You also threw the comment in there about a transformational acquisition. I haven't heard that kind of language from you in a while. Is there -- is something changing? Or is the setting changing that's making -- that looked more like it's getting closer to time?

[Murray K. Mullen, Chairman, CEO & President]

No, nothing's changed. We've always talked about whether we do the big one, a big transformational acquisition. That's why you wanted a strong balance sheet is that you can do it. But transformational acquisitions are like black swans, they only come around once in a while. You never know when they're going to come, but you got to be positioned to take advantage of it when it does come. So I'm not predicting it but I'm saying we have the availability and the structure and the capacity and the liquidity to do it, but it's got to be the right one. And the last big acquisition we did was Gardewine, that was 2000 -- January 2015. That thing is totally integrated into our organization. They got now best-in-class safety performance. We got a great management team, great business model and we're looking at now -- we've been -- we're investing in it to make sure that they can get the highest margin they can. So we're looking for the next Gardewine. I'm not looking for the next revenue generator. I'm looking for the next Gardewine. Revenue does nothing for me, it doesn't get my juices going, great businesses do.

[Operator]

Our next question comes from David Tyerman of Cormark Securities.

[David Bruce Tyerman, Analyst of Institutional Equity Research]

My first question is on the margin side. So when we think about price versus cost, do you think that you can actually get the price ahead of cost in Q1? Or is it going to take a while for that to happen in the trucking and logistics sector?

[Murray K. Mullen, Chairman, CEO & President]

I think this is an emerging trend, David. It's not an event. As such, I think it'll be something that will evolve over the -- over this year. It's like it's not -- I can tell you, all of our business units are aware of -- being aware of market trends. Don't get snookered by your customer. This is a tight market negotiated in, but you need that lots of customer lead. You can't just go out and boom, boom, that's the spot market. But -- so I think on the contract market, that's a trend, not an event. The spot market is an event, and there's a certain percentage of our business within the spot market that are -- companies are taking advantage of and -- but that's not 100% of our market from that perspective.

[P. Stephen Clark, Chief Financial Officer]

And I would add, David, even ironically as the things get a bit stronger as we use logistics and move it online more, our margins actually ironically go down but our free cash flow are enhanced. And we've just added 15,000 trucks with moving in online. I mean, that's tremendous. So we're going to take advantage of that. But does that mean that margin will necessarily expand? Actually, ironically it might have a -- the opposite effect.

[Murray K. Mullen, Chairman, CEO & President]

As we expand -- and Stephen's got this nailed and just articulated very well is that, as we expand our logistics portion of our business which is nonasset-based, having access to a massive fleet of 15,000 trucks gives our logistics side the ability to grow faster than adding a truck and a driver. So that's where we see the opportunity. But remember in the logistics business, you're playing the spread. What do you get and what do you have to pay to the subcontractor to get it done? So everything is about the technology, price visibility and like I said that the spot market is an event. The contract pricing, that's not an event, that's a trend. Does that clarify the two?

[David Bruce Tyerman, Analyst of Institutional Equity Research]

Yes, that's really helpful. It's a good discussion. So just when I think about that, you had pretty good growth in P&L in Q4 like 15%. Actually, it's more than that. Is that the kind of numbers we could be seeing where it's really being driven by this move to asset-light so we get much higher growth rates but maybe even shrinkage of margin as you said? Is that how we should really be thinking about the company in 2018?

[Murray K. Mullen, Chairman, CEO & President]

I think that would be our objective and where we're -- what we've telegraphed where we want to head this company towards. Because as I said, I think structurally we think as price visibility comes in and markets are not proprietary and relationships are kind of out the window, you have to be extremely flexible to be able to adapt to the market's whims, whether it's up or down or sideways or whatever. You can't do that if you invest in a bunch of hard assets and whatever. So it's through the new business model that we're just -- that's our focus, which means that's where the highest percentage of our growth could be. Now we still have traditional trucking. We still have LTL. That's more -- that's not going to be a 10% to 15% increase. That's going to be more in line with the economy and if we can do a layered acquisition. But I think our internal growth is more logistics-generated. Our accelerated growth is through acquisitions, and our steady growth and our margin improvement is going to come because our existing hard assets I expect to be paid for them in this robust market.

[David Bruce Tyerman, Analyst of Institutional Equity Research]

Right. And when we think about LTL versus truckload, how big are they relatively speaking in the business now?

[Murray K. Mullen, Chairman, CEO & President]

Our LTL and truckload?

[David Bruce Tyerman, Analyst of Institutional Equity Research]

Yes.

[Murray K. Mullen, Chairman, CEO & President]

We gave you those specific details in the MD&A...

[David Bruce Tyerman, Analyst of Institutional Equity Research]

Yes, actually I think you have. I'll look them up, that's fine.

[Murray K. Mullen, Chairman, CEO & President]

Yes, LTL is -- in our overall business, is going to be 40%, 50% over time of our total Trucking/Logistics segment. The largest business unit is Gardewine, but not all of Gardewine is LTL. The vast majority of their business is, but they do some other bulk calling in specialized stuff within the Gardewine group. But the predominant and the one that gets the most of our capital is in the LTL business for Gardewine, so it's going to be both. LTL is a primary focus of ours. So you should assume that. Logistics is a primary focus. And then just overall, just trucking, well we'll play the market and we'll look for good opportunities where we see it.

[David Bruce Tyerman, Analyst of Institutional Equity Research]

Got it. Yes, and I know where the numbers are. That's fine. Just on the oil and gas, can you just comment on what you think in terms of sales growth and margins based on the market right now for the year?

[Murray K. Mullen, Chairman, CEO & President]

We think -- I think I've made an overarching comment that said, look, I think it'll be up a little bit from '17 in our oilfield service side. But in saying that, it'll be choppy. I don't know if the first half is going to be as good as the second half I think we got to get through some issues. I think our customers are trying to figure out where's the price of natural gas going to be? What are my -- what's my cash flow going to be? So they have to be a little more cautious because they're not sure what the total cash flow for the year is going to be. Some customers have clearly got it right. They're more crude oil or [indiscernible] centric and they can have a little bit more visibility. But nobody can raise capital, so you've got to be -- you got to live within your means so that makes your -- you can't spend to perfection if you don't know what the denominator is. So I think we need to see just a little bit more clarity as to where it's all going to shake out. I think most of the clients we talk to were just hoodwinked by this natural gas thing and how it's really caught everybody. Some of the smartest and best people in the business have been caught. So I think we just have to be realistic, it has to play itself out. And it's really a monk’s game to make a prediction. I said constructively, I think our industry is getting better. But '18, my expectation is what I'm seeing now, it should be up a little bit from '17, but not a blowout. I just don't see it.

[David Bruce Tyerman, Analyst of Institutional Equity Research]

Right. Okay, that's helpful. My last question was just on the acquisition. You cited that the acquisitions are weighing on margins a little bit for the reasons you discussed. Are they weighing in any -- in a way that we would actually see a pickup in margins over time? Or is it always the case if they're going to weight because you're always making acquisitions and so it's really not going to be any different going forward?

[Murray K. Mullen, Chairman, CEO & President]

Yes. I think I've telegraphed this that I see our core business going up. But as I do a new one in, it's not. And so it's always a work in progress.

[David Bruce Tyerman, Analyst of Institutional Equity Research]

Okay, so don't expect a lot of margin expansion from that factor.

[Murray K. Mullen, Chairman, CEO & President]

I think there will be some, but not a lot. That's exactly right for the reasons we just discussed.

[Operator]

[Operator Instructions] Our next question comes from Jon Morrison of CIBC Capital Markets.

[Jon Morrison]

On the trucking and logistics side, would you expect gross pricing increases in 2018 to be above, say, 3% to 5%, call it, GDP and then a little bit?

[P. Stephen Clark, Chief Financial Officer]

We're looking -- we're targeting that for contract pricing, Jon. That's what we're targeting. Spot market, what we've seen over the last bid could be 20% in the spot market. But the spot market can go down by 20% in 2 days. So -- but the general trend is for the first time in a long time, we're getting pricing increase in our trucking and logistics side. We need it because we have cost inflation so all that 3% to 5% doesn't go to us. So I can't predict the 3% to 5% margin improvement in trucking and logistics because at least half of that is going to be through cost.

[Jon Morrison]

Are the general comments that you made about tightening in the Canadian trucking and supply and demand specific to something you witnessed in Q4 either on rate changes about market prices, or a lack of labor availability? Or is it more of the general theme that you've been talking about for 6 months just solidifying?

[Murray K. Mullen, Chairman, CEO & President]

Yes, it’s actually general themes I've been talking about for kind of 2 years. I said that eventually, 1% to 2% growth rate tightens the market. And so we've now had 10-plus years of 1% to 2%, 2.5%, 1.5% growth rate. Well, now your economy is not 1.5% bigger than 2008. Your economy is a heck of a lot bigger than that. You got bottlenecks happening everywhere. It doesn't matter if it's our highways or if it's in our airlines or whatever it is. So we're -- we got a pretty big robust economy. So if you're growing 2% on big and you've got a very, very tight labor market, we've had -- not had a tight labor market for 10 years. And now it appears we have a tight labor market. So it's now at this inflection point which is what I think I said happened in 2017, which gives us the confidence to say I can get pricing. I don't think it leads to a whole bunch more business because the economy is still only growing by 1% to 2%, maybe in the U.S. by 2.5% to 3%, I'm not sure. But I'm not after more growth and no margin. I'm after more margin and smaller growth if you want Mullen's opinion. That's our view on the market, Jon, is that we think there's a -- we're in the cusp of a structural change in the dynamics of it in which people can't add capacity to match demand so that -- you either are way more efficient with technology or price inflation is coming in. You can pick your poison, I don't care, but I think it's a structural change right now with the unemployment level where it's at. We just cannot add capacity. If our business units came in and said, "I want 100 new trucks because I'm going to get -- grow our business." I'd say, "And where do you get those drivers from?" I'll give you 1 -- I'll give 1 anecdotal piece of evidence. In the United States, a very, very major carrier just published, they have 100,000 applicants to become a truck driver. They were only able to hire 2.5% of it -- of 100,000. And I guarantee you that, that didn't replace what they lost in turnover. Can't grow your business. Only through acquisition can you grow it today.

[Jon Morrison]

What would cause the 2018 CapEx program to change at this point outside of M&A, which is obviously unpredictable? Like is oilfield services the only dial that's really going to turn up or down at this point?

[Murray K. Mullen, Chairman, CEO & President]

Trucking and logistics, we're starting to see if there's -- if our business units are coming in with -- they got a new contract that's 3 to 5 years, and it's got the right pricing formula. So we can go out and bid and pay the people to be able to get them from our competitors that can't pay because they don't price properly. That would encourage us to increase in trucking and logistics. In the oil patch, nothing really outside of LNG and new pipelines because that's the -- that tells us that the industry can get back growing a little bit. And once the industry grows a little bit, then you can get pricing leverage a little bit. But until then, it's -- we're just living off of what we made in the past investments and live within our means and we'll just wait it out. But remember, we had to wait it out in the trucking and logistics side for years. And things have -- they'll change, but you got to wait for those events that make it change. I think the only thing that makes -- would make me more confident in trucking and logistics is infrastructure.

[Jon Morrison]

And is it fair to assume that with our improved market access getting solidified for Canada, you'd be unwilling to deploy any real growth CapEx in the services sector even if you saw oil and gas differentials tighten? Without long-term market access, you're just not willing to deploy incremental cash into that business?

[Murray K. Mullen, Chairman, CEO & President]

No, because it's a head fake. That's exactly right. So for us, no. We got better places to go to work than buying into maybe it'll work out. We're not into maybe it'll work out. We want to see the trends, then we can get more constructive on that. But you're right. Until then, we've said until things change, we're underweight in the oil and gas sector.

[Jon Morrison]

Okay. Stephen, you talked about some of the revenue mix issues that are a little bit of a drag to Q4 in oilfield services margins. Would you expect it to continue in Q1 and Q2?

[P. Stephen Clark, Chief Financial Officer]

We have these high performers within our group. And when they go, they go and one of them is Canadian Dewatering in Q1. This is not a good quarter for moving water. The other high performer has been Premay Pipeline. Again there's not much there. So on the drill bit side, we have Formula Powell that's doing well. But then we have other elements, rig moving and the others that aren't doing as well. So it's really hard to predict. But generally, I would say, because drilling-related is such a small portion of our mix now, it really all depends on whether we can get pricing leverage on what we call production services or fluid management. And I just don't see that in the first quarter. Perhaps, Murray, you can opine on that.

[Murray K. Mullen, Chairman, CEO & President]

Well, I think I've opined, Jon, is that I think our Oilfield Services, I've opined on it is that our Oilfield Services will be a little bit up from 2017. I've said a little bit better. But in saying that, I said we're going to need to see some things happen in the second half because I don't see it happening in the first half and for the reasons I said. I just think our customers are being -- they have to watch their balance sheet because there's no new capital so they're just being a little bit hesitant and I think they need to see more clarity before they can be -- before anybody can be excited about the oil patch. And so I'm not going to change that view. I just think we'll just kind of -- it'll be what it'll be but I'm not seeing anything out there that says this is a boomer, I don't see it.

[P. Stephen Clark, Chief Financial Officer]

And you won't see it in the rig count either.

[Jon Morrison]

Given some of the challenges associated or angst that e-commerce brings to the trucking industry in terms of visibility for freight volumes, are you seeing more private trucking platforms engage in potential sale discussions, independent of what the bid-ask is at? Are you seeing more guys potentially look at selling platforms that you haven't seen in the past?

[Murray K. Mullen, Chairman, CEO & President]

Richard's involved in this as much as I am, but we see lots of people in platforms and marketplaces. But I think the trend is definitely marketplaces which is just really price visibility, that's all it is. So yes, that's why I said to you. I think that's a new emerging trend, which is why we're investing and we started on Moveitonline, so much earlier than most and why it's all about content, who gets there first wins the game.

[P. Stephen Clark, Chief Financial Officer]

I think of a lot of -- Jon, a lot of -- and we've communicated this to you guys and our shareholders in the past what we are doing differently with Moveitonline is really focusing on truckers and the 97% of the truckers that exist in North America that are 20 power units or less that we're really trying to avoid are not participating with the 3PLs that really steward our industry. So that's where we're getting great acceptance by the smaller truckers that are signing on and today we're at 200-plus carriers and we're looking at that and how really we are enhancing that. Our team is meeting as we speak on this, and that's really where I think we differentiate ourselves from some of these small IT startups based down in the states and they are really good IT people but they don't understand the trucking industry. And we're supplementing understanding the trucking industry with good IT people. So we -- I think that's how we're looking at things.

[Jon Morrison]

Okay. And Richard, it's fair to assume that the 200 carriers or 15,000 power units would be, call it, materially above perhaps where you thought you'd be at this point?

[Richard J. Maloney, Senior Vice President]

You know what, we're just pleased with -- 2017 was a good year in terms of developing I know a system that isn't gaining acceptance. And I don't know if we really had any real -- the first priority is Moveitonline to make our companies more efficient. It's done that. We know it's working with them. And the dedicated subcontractor they have had we're very pleased that we are at 200 -- just roughly 200 carriers now, and we have grander plans as we move forward.

[Operator]

Our next question comes from Mike Mazar of BMO Capital Markets.

[Michael Mazar, Equity Analyst of Oil and Gas Services]

Most of my questions have been answered. I just wanted to latch on to a number you guys threw out during the preamble. And then -- and I might have misunderstood it or I think I misunderstood it. Did you say that you've done a quarter of the transactions in T&L that -- in January than you did all of 2017?

[Murray K. Mullen, Chairman, CEO & President]

For Moveitonline.

[Michael Mazar, Equity Analyst of Oil and Gas Services]

Oh, of course, okay. I got you. Great. Okay, that makes...

[Murray K. Mullen, Chairman, CEO & President]

On our online marketplace, that's correct. We've done 1 quarter already in 1 month or just over 30 days of transaction than we did all of 2017 so that's kind of that. Moveitonline is a bit like a spider's web. The more they get in -- and the question is did you build a platform that people find value in? Well by getting 200 in and having that many transactions go through, I think we feel pretty confident that we can say now that we're building a pretty robust platform that people say, "Geez, that works." And then it -- whatever works for 1, it works for 2. What works for 2, works for 4. If it works for 4, it goes to 8, and then it becomes its own spider's web. That's what a marketplace is all about. And that's what we're trying to focus 100% on is what's the user experience and what's the -- when we get the content in and it's something that people see value in, then you build the marketplace. And that's what we're trying to accomplish through Moveitonline. As Richard articulated, we at Mullen have already figured out this has been an enabler for our logistics business. We've expanded the amount of content we got with the amount of subcontractors that are available in the marketplace. And in a tight market, you want access to more carriers to get price visibility. That's where price visibility comes from, not from 1. 1 to 1 is a proprietary marketplace. But through many, many, many, who's got the right truck in the right area that wants it that day and wants your price. And so, we're pleased with what we've accomplished in less than 1 year.

[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, CEO & President]

Really, I don't have really more great Q&A session today. We got all the financials of 2017 out. We're -- now with this conference call put closure on '17. We're looking forward to '18. We got opportunity. There's lots of issues; sounds like every other year to me. So thank you very much. We look forward to chatting with you in April. Cheers.

[Operator]

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