Mullen Group Ltd

TSX:MTL

Earnings Call Transcript 2018-Q4

[Operator]

Welcome to the Mullen Group Limited Year-End and Fourth 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, sir.

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

Thank you. Good morning, everyone, and welcome to Mullen Group's quarterly conference call. We'll be discussing our fourth quarter results as well as the year-end financial and operating performance for fiscal 2018, and this will be followed by an update on the outlook and business plan for 2019.And before I commence the review, I'd remind you all that our presentation contains some forward-looking statements that are based upon current expectations and are subject to a number of uncertainties and risks, and actual results may differ materially. Further information identifying the risks, uncertainties and assumptions can be found in the disclosure documents which are filed on SEDAR and at www.mullen-group.comWith me this morning, I have our executive team, which is Stephen Clark, our CFO; Richard Maloney, Senior VP; Joanna Scott, who's Corporate Secretary and VP of Corporate Services; and Carson Urlacher, our Corporate Controller. Stephen will be reviewing the financial operating results, after which I'll provide the outlook and business plan for 2019, and I'll also provide some commentary on the near-term expectations for both the oil and natural gas industry and the overall economy. And then we'll close with the Q&A session.But before I turn the call over to Stephen, I'd like to open with some commentary on the markets, our two operating segments, and the impact that the recent market downturn in the fourth quarter had on our results. For full details about the quarter and for the year ended 2018, I refer you to the MD&A and the news release which was posted on our website and on SEDAR. And in addition, since Stephen will be providing some in-depth look into our latest results, I'll keep my comments to a minimum in this section.Now, it's probably obvious to all now that the Trucking/Logistics segment is a dominant part of our overall business. This is a business that is generally derived from overall economic activity, which I can describe as typically more stable and predictable.The Canadian economy, while not robust by any stretch in 2018, has been relatively stable and has been supported by a robust U.S. economy.Now in contrast, the oilfield services sector of the economy is both dynamic and very cyclical. This business once dominated our results, but today is less than 30%. And given the transformational shift in the energy sector, it is probably wise to avoid big bets in this sector for a while yet.Canada's industry is in the midst of a prolonged downturn which is driven primarily by changes in technology, the resurgence of the U.S. as a dominant producer of crude oil and natural gas in the world today, and it's accompanied by the reluctance by Canadians to endorse a reality that Canada's oil and natural gas industry needs access to new markets. Asia and Quebec come to mind. And we need this to remain an integral part of the Canadian economy, a job creator and an engine of growth once again.And until there's some type of fundamental shift in the way Canadians think, this part of our business will continue to underperform. Is this forever? No, I doubt it, because eventually the U.S. surge in crude oil production will revert back to the norm. And once declines begin to take -- set in, then Canada's oil will be coveted by our U.S. friends once again. This is something I watch very carefully. And while there are early signs that U.S. production may be peaking, I do not see anything to indicate significant declines on the horizon in the near term. As such, we must wait. We wait for U.S. production to fall or for Canadians to embrace the fact that access to new markets for the energy industry in Canada is a necessity.Now as for our 2018 results, I was pleased with our overall operating performance. However, there is no doubt that the market correction we witnessed in late last year hurt our overall results. Little did we realize or anticipate that the events in the fourth quarter would be as disruptive as they became, especially for the oil and natural gas industry here in Western Canada, an industry that has become burdened by so many negatives and investors have virtually tuned the industry out.As the market struggled under the weight of significant selling pressure, we definitely saw a slowdown in freight demand as business became more cautious and the economy really just kind of sputtered, which slowed the momentum that our Trucking/Logistics segment experienced early in the year. Nevertheless, the segment generated positive year-over-year results due to acquisitions and the strong performance by our LTL business unit. Segment revenues grew by $112 million, a very nice 14.7%, and operating profitability or what we call OIBDA by $18.75 million or 17%, capping a record year for this segment.Margins were essentially flat. But this really has a lot to do with our acquisition strategy in which we're acquiring a lot of asset-light businesses these days, which generally have lower margins due to low levels of capital employed.All in all, I must say I'm very pleased with the results and resiliency of our Trucking/Logistics segment.Now the most notable impact of the market downturn was in our drilling activity in Western Canada, which had a meaningful drag on our Oilfield Services segment results because producers just really adjusted their drilling pans and deferred spending in the fourth quarter. And we estimate this impacted our Q4 revenues to be in excess of $6.4 million and roughly $3.1 million of OIBDA. That's clearly a negative. Once again, however, because of the diversified nature of our business model and some timely acquisitions, we were able to overcome the severe declines in drilling-related activity with improved results in the fourth quarter as compared to the prior year. Consider that revenue grew by $24.7 million and OIBDA by $5.4 million, and that's with oilfield service activity related to drilling being down. So certainly this is a positive, given the circumstances on the loss of business associated with the declines in drilling activity.But perhaps the biggest negative on the fourth-quarter collapse in crude oil prices relates to the expectation for the future of Canada's oil and natural gas service industry. As producer cash flows decline under the stress of lower realized commodity prices, accompanied by an inability to raise new equity, new capital, future industry drilling programs will be reduced. This negatively impacts our drilling-related business units. And as a result, we've adjusted our near-term expectations for several of our Oilfield Services segment business units, impacting the goodwill valuation of these business units.We believe it is appropriate to recognize the structural change in the industry, and this is why we took a $100 million write-off in goodwill in the fourth quarter. Now, the truth of the matter is, our shareholders already came to that realization, which is why our stock price was down in the fourth quarter and remains down today. So but we had to take the necessary steps to adjust to what we think are the future earnings, at least in the near term, for our Oilfield Services sector. This is a non-cash event and it stings, but because business in the oilfield looks to be quite soft at least until LNG projects move forward, we have to be realistic. Now, once LNG projects come on, pipelines are built, drilling activity will increase. It'll have to accelerate to meet the increased demand for natural gas demand which is associated with these mega projects.So all in all, it was a good year, which could have been an excellent year except for the market meltdown in the fourth quarter.So I'll now turn the call over to Stephen, who will give a more detailed look at our latest results. So Steph, it's yours.

[P. Stephen Clark, Chief Financial Officer]

Thank you, Murray, and good morning fellow shareholders. Our annual financial review report contains the details that fully explains our performance. As such, I will only provide some high-level commentary.All things considered, the fourth quarter really wasn't that bad. And all things considered, 2018 was reasonably good. For the year, revenue grew by $122.3 million, of which roughly $112 million was in Trucking/Logistics. This was made up of across-the-board growth - $47 million in our truckload businesses, $33 million in our less-than-truckload businesses, $44 million due to acquisitions and a $12 million decline in Smook, which is really a project-dependent business.Total revenue in the Trucking/Logistics segment was $873.3 million, a new record, and was about 70% of our revenue, a dramatic change from a few years ago when it was 35% to 40% of revenue. The major factors of this growth in 2018, was increased revenue at Gardewine, modest economic growth and pricing gains as well as acquisitions.In our Oilfield Services segment, revenue grew by $11.5 million, and total revenue for this segment was $390 million. Revenue declined in the first and second quarters, but there were some nice increases in Q3 and Q4 due to acquisitions and the return of some pipeline work, of course, being offset by lower drilling-related revenue; as Murray articulated quite well earlier, all the challenges that we faced in the fourth quarter.As for profitability, operating income before depreciation and amortization, commonly referred to as EBITDA, was $189 million, an increase of about 10% over 2017. This was despite some well-known challenges, such as the 23% rise in Canadian diesel fuel prices, labor shortage and tough competition.The Trucking/Logistics segment EBITDA grew by $18.7 million or 17%, and $4.4 million of this increase was due to acquisitions.With record revenue, you might expect there was also a new record for EBITDA. But this was not the case. Plainly stated, our margin has declined in the segment as we've been acquiring asset-light businesses over the course of the past 3 years. In 2018, margin was still a very respectable 14.7% and, in fact, up slightly from 14.4% in 2017, but down from the margins we experienced prior to acquiring these lower margin asset-light businesses.But we're always focused on return on invested capital and, thus, we're not concerned with the lower margin.EBITDA in the Oilfield Services segment declined by $7.4 million, a $14.6 million decline in the first half of the year and a $7.2 million increase in the back half, primarily due to acquisitions.Margin was challenged and came in at 17.1%, down from 19.6% in 2017. There are some very well-known challenges in 2018. That being said, I can state that our acquisitions, although a large contributor to our revenue growth in this segment, was also a drag on margins. However, I would categorize the integration of the AECOM assets and is one of our successes in 2018, and the continued margin improvement of our recent acquisitions will be a focus in 2019.As for the fourth quarter, although challenged, came in with revenue of $333.3 million and OIBDA of $51.7 million. It was another record revenue fourth quarter for Trucking/Logistics, the eighth in a row where we experienced quarter-over-quarter revenue gains.As good as it was in the Tucking/Logistics segment generally, as the quarter progressed, drilling activity declined and came to a virtual standstill at the end of December, greatly impacting our Oilfield Services revenue. And the market downturn also had an effect on the Trucking/Logistics segment.Despite all the challenges, both segments experienced revenue and profitability gains. Consolidated OIBDA came in at $51.7 million, up $5.7 million or 12.4%. And our margin was flat at 15.5%. Full details may be found starting on page 19 of our MD&A.On a sequential basis, consolidated revenue was $6.4 million lower than the third quarter, largely due to the seasonal rhythms of the trucking/logistics industry. That segment was down $7 million, and the Oilfield Services segment was essentially flat, as drilling-related revenue declines and seasonal declines in Canadian dewatering were offset by gains at Premay Pipeline.For 2018, our earnings per share was reduced to a loss of $0.42 per share. This was in large part due to our goodwill impairment charge. Adjusting for this impairment and other non-operating items, EPS adjusted, as defined in our financial report, was $0.59 per share, up from $0.41 per share in 2017. Full details of this reconciliation can be found on page 29 of our MD&A.Lastly, a quick word on accounting standard changes. IFRS 15, the revenue recognition standard, brought into effect the new way of recognizing revenue. For the transportation industry, this meant we had to recognize revenue over time or mid-trip, rather than on completion of delivery. This was much to do about nothing, and revenue increased for the year by $650,000 because of this accounting change, or 0.05% or 1/20th of a percentage point. Essentially nothing.As for IFRS 16, the new leasing standard, it will have an effect on our results going forward in 2019. We will now effectively capitalize $42 million of debt and right of use assets on the balance sheet, and this will have the appearance of improving OIBDA by an estimated $11 million in 2019. These operating leases will no longer be expensed, but rather recognized as a reduction of this new debt. Of course, there will also be a new depreciation charge on the right-of-use asset. So net income will largely remain unchanged.I'll go over the effect of IFRS 16 again at the end of the first quarter so we can hopefully solve the Rubik's cube of accounting changes together.So with that, Murray, I'll past the conference back to you.

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

Thanks, Steph. And for those of you that are inclined to do so and want all the details, once again I'll just say, please visit our website, and you'll find over 130 pages of analysis and explanation as it relates to our business and our 2018 results, along with my chairman's message that I released early this year.The bottom line is this. It's a jungle out there. There's nothing easy; never has been. But here at the Mullen Group, we're prepared. We're reasonably constructive in terms of our outlook for 2019. And from that perspective, I would say to you, look I'm not optimistic but I'm constructive. We have a well-structured balance sheet. We have a diversified portfolio of business units distributed across Canada. And we see competitors, especially here in Western Canada, closing their doors.For these reasons, we believe 2019 will be a good year for Mullen group. It is within this context that our plan for 2019 is based upon two fundamental objectives. First, we will invest in our business units to ensure they remain best-in-class and maintain their industry positions and capitalize on any growth opportunities. A $75 million CapEx budget will be allocated to enhance and grow our 31 business units, with a focus on the Trucking/Logistics segment, along with some land and buildings that we will acquire that we consider strategic to our business.Second, we will continue paying our $0.60 annual dividend to shareholders. And to reiterate, we can achieve these two objectives because our business model generates solid cash flow. We are diversified with a well-structured balance sheet, which affords us the luxury of taking a long-term view on the markets we serve.And with these two objectives entrenched into our plan for 2019, let me now share some additional thoughts on where we see the markets and opportunity. Let's start with debunking the theory that the world is ending and that business is about to stop. This was a Q4 2018 thesis. In fact, we've seen, since the start of this year, a pretty robust recovery in the global markets and in commodity prices. As such, I'm of the view that last year's market correction was just that, a correction. The economy, therefore, will not go into significant decline, although will slow down is probably a reasonable assumption.As such, our Trucking/Logistics segment should perform in line or slightly above in 2018, especially given the CapEx we are allocating to the segment. Now as for Oilfield Services segment, there are obviously challenges, especially as it relates to drilling activity in Western Canada. In fact, producers have curtailed and delayed drilling programs for the next few quarters, at the very least. This will hurt our drilling-related business units, which is a negative.But the silver lining is this. To Mullen, we have a lot of competitors that simply will not make it through 2019. As such, it is reasonable to assume that some of our business units will gain market share in 2019. Furthermore, in our Oilfield Services segment, we have a number of business units that derive their business from activity outside of drilling, areas like dewatering, pipeline construction, production services and hydrovacing.As I indicated earlier, it's not going to be easy. But at least we see some opportunity, even if it is at the expense of others.So lastly, let me share our goals and plans for 2019. We have a consolidated general revenue that we'll generate of $1.3 billion is our plan. We will achieve operating earnings in the $200 million range, with volatility, of course, based on how the oil and natural gas sector ultimately performs. And I would reiterate, this is based on our 2019 IFRS standards [ plan ] that's prior to the adoption of IFRS 16.To achieve these goals, we have to focus on what we think are the four initiatives that we've identified that will help us achieve these. We're going to integrate and simplify our recent acquisitions. Now after a hectic period of acquiring a lot of competitors over the last bit, we'll focus on making all of these companies better.Number two, we're going to increase efficiencies across our company. We're going to reduce cost and we're going to strive to increase margin through the use of technology and the streamlining of business processes. In other words, we're going to focus on margin.Three, we're going to invest in technology like moving online. That can change the way we do business. By investing in technology, we are changing our business. Now whether we can reach the scale required to be a standalone business, I am not sure. But I know this. We are a better company because of these investments, since it is forcing our business units to adapt to the digital world and absolutely a necessity, in my view, for the future of any business.Number four, we're going to pursue acquisitions that can make a difference to your business. Now in the current market environment that we see, acquisitions are currently the only way to grow our business. And we have over, what we estimate, over $200 million of balance sheet liquidity when we find the right opportunity. So we're always on the lookout. But I would say to you, unlike 2018, when acquisitions were our number one priority, acquisitions are our number four priority this year. We want to focus on margin improvement and staying in our lane and just seeing what the market does.Now, this concludes my outlook section, and I'd be glad to turn the call over to the operator for a Q&A session.

[Operator]

Certainly. [Operator Instructions] Our first question comes from Michael Robertson with National Bank Financial.

[Michael Storry-Robertson]

I was wondering if you could provide some extra color or breakdown on the use of the $75 million capital budget. I would guess that a lot of that's going to like maintenance and sustaining capital, given the generally it's more or less in line with your annual depreciation. But any more color on that front would be great.

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

Yes, we have outlined that, that I think, Steph, we've got $50 million for the Trucking/Logistics side, which is above our depreciation. And some of that capital will go towards some of the new opportunities that our business units have identified for us. We need some new assets. But generally you're right, a lot of that would be replacement capital. But when you do that, you're actually improving your business, because the new assets that we're buying, particularly trucks, are substantially more fuel-efficient, for example, and we should be able to really -- I think that's going to help us improve our margin. So half of it, a good have or maybe a little bit more, will help us improve margin, and the other half on our Trucking/Logistics side will help us on some growth initiatives. We're going to allocate $15 million to some facilities. These are long-life assets. But in our LTL business, for example, you have to have facilities to be able to grow your business. A lot of our businesses are meeting at peak capacity, and we're going to make sure we're positioned for the future. So that's $15 million. And then we've got about $10 million allocated to the Oilfield Services side, which is really just marginal. Most of that will go to our Envolve group, in which we've identified to improve our facility there so we can double our capacity. We should be finished that by the end of March, I think, Richard

[Richard J. Maloney, Senior Vice President]

Correct. Yes.

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

And then just some basic CapEx for our Oilfield Services side. But all in all, we'll probably -- and these are all net numbers. We'll continue to sell off some assets. So this is net, Michael.

[Michael Storry-Robertson]

That's great. Very helpful. Thank you. Last one for me. I was just wondering if you could provide sort of where you're sitting today and seeing realistic or most likely bookends for the $200 million in operating income. I know it changes a lot with the volatility right now. But for what you're seeing right now.

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

Well, I think, as I said, I articulated, I'm reasonably constructive that our Trucking/Logistics side will continue to grow in 2019. So that we should be above 2018. And that gets us to $135 million of EBITDA there. So that means we need $65 million from our Oilfield Services side. The only part of that Oilfield Services side that we've got that we know it's going to be a struggle, and that's on the drilling-related side. But overall, I would not be surprised if we don't pick up market share. So within that, my plan is, is that we would get $65 million from our Oilfield Services side, which is not a huge stretch. And really it's kind of -- that's where we come up with the $200 million. If there's any risk, it might be that we have another downturn in commodity prices and customers have to quit drilling programs in the last half of the year. But I'm just making an assumption that there will be a slowdown in drilling activity in the first part of the year, but that as we get into the back half with commodity prices where they're at, cash flows improve, that drilling activity might be flat in the last half of this year as compared to '18. So that's our thesis as to where we're coming up with the numbers. That does not include -- it hasn't included if we have any accretion from acquisitions or whatever. We always have done acquisitions. So we continue to look at the deal flow. But acquisitions have to be accretive. They can't just be growth; has to be accretive.

[Operator]

[Operator Instructions] Our next question comes from Jon Morrison with CIBC.

[Jon Morrison]

Can you talk a little bit more about the diversions and tailwinds in the Trucking/Logistics platform? Q3 to Q4, obviously the growth rates showed a fairly meaningful slowdown on a quarter-over-quarter basis once you normalize for acquisitions and fuel surcharges. And what I am really just trying to understand is was the slowing of growth fairly universal across operating businesses? Or was mix a big factor? Because obviously, your trucking business isn't just long-haul and LTL; it's got a lot of different demand drivers there. You mentioned Smook. I guess I'm thinking Kleyson and Cascade as well have different demand drivers. So was it very business line specific or broad-based?

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

Well, Jon, it was actually a combination of both. Smook, we decided at Smook not to chase some really low margin business. So I'm really pleased with our Smook group, because they maintained their margins. But with Smook, we were down what? We were $3.5 million in Smook in the quarter. So from that perspective, that hurt us. But we did see some slowdown also right across the board. It really started to slow down in that fourth quarter. We kind of saw the spot market slowdown in the second and third quarter. I think we articulated that in previous calls. But there was a definite slowdown that we saw go right across the board in a lot of our businesses. So you're right, in the absence of acquisitions, we probably would not have been that strong. The one exception that is the really good outlier for us was our Kleyson group. Our transload center and some of the business that they've derived there, they're going to get a good chunk of the capital again this year that they got last year. They just continue to show great results for us. But they got a competitive advantage. We got that big transload center in Edmonton. And as the rails get busy, a lot of customers come to our rail site up in Edmonton. But outside of that, it was a tough fourth quarter.

[Jon Morrison]

Can you give me any more of an update on AECOM and how the business is performing relative to your expectations? Obviously, it's still new. You just acquired it in June. But Q4 seemed like a bit of an upward surprise relative to our expectations and our understanding of trailing performance. So anything you can give in terms of how it's performing and what you think 2019 looks like would be helpful.

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

Well, that was probably the most impactful thing that we did in 2018. We acquired AECOM assets, the business and the people. And along with that, I think we probably got on a run rate somewhere around $70 million, which is what we anticipated. We totally streamlined that business. We allocated it into three of our existing business units. And as a result of that, we were able to generate some good margin out of the business just because we -- we didn't acquire a great business, but we got rid of a lot of cost. And as a result, we estimate that that business is probably giving us net contribution both $70 million and 17%, something like that, EBITDA. But that was a big plus in the fourth quarter, but very consistent with the third quarter. Very consistent with -- so those are the two, the third and fourth quarter, they were both pretty consistent for that business unit. I would expect that to continue this year, because they're really not tied to drilling activity. They're more in the maintenance side. And I would think that would be reasonably stable in '19, and that's what we're suggesting. So that's where we are with that, Jon. I think it'll be pretty stable at not quite $25 million a quarter, but it'll be about roughly $20 million a quarter and 17 point margins, I think is what makes sense to us from that [indiscernible]. Now we don't show AECOM, as you know, as a business unit. We bought that business, and we rolled it into three businesses - heavy crude, E-Can and Cascade Energy Services. So but that business that we acquired was rolled into those three business units, that's why we were able to get the synergy because we got rid of all the costs and all the terminals, and that's why we're getting margin of that increase business of 17. Now our existing businesses weren't doing 17, because they didn't have enough throughput. But that business has helped all three of those businesses increase their margin, which is what you saw in the fourth quarter.

[Jon Morrison]

For sure that's really helpful. I was really more just trying to kind of triangulate baseline expectations for the rest of the business and netting that out. So that's very helpful.

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

I think production services will be relatively flat next year. You still got to move crude oil. You still got to service the plants. You still got to do all this. I think capital from a producer's perspective is still going to go into maintaining where we're really seeing it. And I mean, you've articulated that. You follow it more closely than we do, or as closely. It's drilling activity that's really being impacted. But they got to maintain production and they got to service. And production service is a service. And by the way, on the service side, there's a lot of our competitors are not going to make it. That's all there is to it. We have too many phone calls. We have too many panic, just take this, take this. No, we're not doing that. I said a couple years ago we weren't going to do many acquisitions in the oil patch, because I said they all got to fail. Well, guess what? There's a lot of failures going on right now. And that's why I think I would not be surprised if we don't gain market share in 2019, because we would be the last man standing.

[Jon Morrison]

Appreciate the markers that you guys have kind of put around the 2019 business plan. Just as a clarification, the operating income guidance that you give, or what we call EBITDA, that would be closer to something around $190 million mark in a pre-IFRS 16 world? Is that fair?

[P. Stephen Clark, Chief Financial Officer]

Yes. So the guidance for $200 million was pre-IFRS 16. So the results might come out, the accounting, as I call it the Rubik's cube, a little bit different. But that was apples-to-apples comparison, 2018, 2019 under the same gap or framework, so.

[Jon Morrison]

So $210 million net of those changes, if it plays out exactly how you think?

[P. Stephen Clark, Chief Financial Officer]

Correct. That's correct.

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

That's what we're planning for, and that's based upon one really outlier, which is drilling activity doesn't stay down 30% every quarter for the whole year. If that's the case, that's going to be tough to recover to do that. But they're going to have to drill some wells here; and when that happens, we'll be well positioned, so.

[Jon Morrison]

Last one just for me. Was all of the greater demand in the large diameter pipeline work-related to Coastal GasLink? Or what was driving that this quarter?

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

Nothing on Coastal Gas. That's a huge project for our pipeline business. We think it's going to go. But this is the business. LNG and Coastal Gas is monstrous for Canada. I don't even want to, as I said to the board, I don't even want to contemplate what the reputation of Canada will get if we don't proceed with LNG on the west coast. It's much bigger than just the LNG project, because it would just reiterate you can't do business in Canada. So there was nothing on Coastal Gas. Those orders for the pipe mills have not been placed as far as we know. But we are very well positioned with all of the players to get a real good chunk of those pipeline hauls. And so you got to bring the pipe in and then you do the stringing in the next phase, which would be 2020. So it's a 2-year project. We think it starts in '19, but it depends on the five hereditary chiefs.

[Jon Morrison]

And would you give any color in terms of what drove the strength in Q4 specifically to projects? Or you'd prefer to keep that closer to the chest?

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

It was just a whole bunch of projects. It was a bunch of pipe being moved around. Some of it was Enbridge Line 3. Some was up in the Montney, there was a couple of -- some tie-ins up there. There's just a lot of nothing big, but we just had a lot of projects that our pipeline group did not have in the first quarter that kind of got pushed into the fourth quarter. But the big ones, we're still -- you got to finish Line 3 for Enbridge. We still, we got Keystone, big -- there's still a lot of work to do on Keystone. And of course, we're waiting on that one. And most of them are going to be gas projects-related now, I think, Jon, is what we're kind of seeing. Still did some work on Trans Mountain. A lot of the pipe is still coming -- the pipe's still coming in. So our federal government must know that they can -- they must know more than the rest of us. They must think they can get approvals when the private sector couldn't, so.

[Jon Morrison]

Appreciate the color and the candor.

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

People will have to give Junior a call on that one. But the pipe is here. The pipe is here, and we were happy to store it. And we'll be happy to help move it once they give us the go-ahead, and then we get it onto the right-of-way. And that's the stringing part, we hope to participate in that once we get those final approvals, which may be '19. Not planning on it, but maybe.

[Operator]

Please give me one moment.

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

No other calls?

[Operator]

There is one other questioner.

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

Okay.

[Operator]

Please hold momentarily. Our next questioner is Elias Foscolos.

[Elias A. Foscolos, Equity Research Analyst]

I have maybe two follow-up questions for you. The first one is capital structure. You have been using your bank line, which is a little unusual historically. Would you be looking at leveling that off based on what you are now, in other words, getting more term debt? Or is it going to be driven -- I'm kind of thinking ahead of an acquisition or behind an acquisition? Or it just depends?

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

Yes. Really good point, once again, Elias, coming from you. So look. We've estimated that within our current debt covenants that we have with our private debt, which is extremely well structured at low interest rates -- what is it? 3.85% and 3.95%, 4%, and none of that debt due until 2024, 2026. But even with those debt covenants, we think we've got about $200 million of liquidity within our current debt structure. So when we see the right opportunity, Elias, we will go and we'll leverage up the balance sheet. But we got to see the right acquisition opportunity, otherwise, we don't need it. This is Canada. There's no growth in Canada. Canada's a great place to live and really nice, people are nice, but there's no growth. And so the oil and gas business still remains under pressure. So for us, we know that acquisitions is the only way we can grow, and we've got $200 million of liquidity in our current balance sheet structure. And now the question would be, would that be longer-term or would that be bank debt? As you know, in the fourth quarter, the longer-term debt markets really just clamped up. And so we just wait it out and let them normalize and those kind of -- we're already starting to see some normalization in those markets vis-a-vis the fourth quarter, what I call a hissy fit the whole market went in. But fourth quarter, kind of the -- we didn't like what we saw, so we just stayed away from it. We'll just let it normalize. But we like long-term debt with short-term debt with bank debt really is just for working capital is really the way we like to structure our balance sheet. I think that answers -- does that answer?

[Elias A. Foscolos, Equity Research Analyst]

Yes, it does. One last question, I guess focusing on your outlook and some of your commentary in your letter. You said that you were now constructive in your outlook versus negative in Q4. And in Q4, which I thought was a pretty decent quarter, ballpark you did $50 million of OIBDA in a negative quarter. And yet I'm looking at 2019 without acquisitions. And I'm just taking the annualized number from last quarter and saying, if things don't change much, I'm kind of there. Is your outlook based on being constructive or is it based on being a little more towards the negative side?

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

Yes, if you take fourth quarter and multiply by four, you're there. If you took this or that. Not sure that the -- I think we saw some slowdown in the overall economy in the trucking/logistics side. We got to see how that will play out. So I think we'll be okay there. But I'm just taking -- I'm constructive, but I'm not optimistic. If I was optimistic -- when we were going through our budgets and everything in Q4, before the meltdown, we were in the range of 220, 240. But we went through a pretty sharp reduction there. I think it'll take a little bit of time for the markets to get their confidence back. And I have to build that into our models for this year. And I'm just being realistic. Obviously, we can ramp up real fast. But that's a reasonable target for us to go after, and that does not include acquisitions. That's just for same-store sales based upon a little bit of softness that we see right now coming out of the first quarter, particularly with drilling activity. It's actually not very good at all. And so that's how we come up with that number, yes. But early in the fourth quarter, we were 220 to 240. So we've clipped it back pretty good.

[Elias A. Foscolos, Equity Research Analyst]

Yes. Thank you very much for that guideline check. And one last question to close off. You are now constructive. What factors would make you turn negative?

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

LNG. If we don't get -- if something happens with LNG, I really would not like -- I don't like that at all. That is really -- LNG is the growth platform for Alberta and British Columbia, natural gas. It's not going to be oilsands for quite a while. I don't see that. LNG is monstrous. That's a huge project, mega project, $40 billion, $50 billion. The spin off of that is significant. And the long-term benefit to us on our drilling-related business is game-changer. That gets us back in where they got to drill, because you're going to have to hit 3, 4, 5, Bcf a day of increased natural gas. So that would be the game -- I don't even want to think about that, that I talk about -- as Canadians, are we going to get significant -- are we going to get Quebec to take Alberta oil and not Saudi Arabia oil? For some reason, you'll have to give them a call and ask them why that is not the case, why Alberta oil is actually worse than Saudi Arabia oil. I haven't been able to come up with any logical rationale. But Quebec has their opinions. We could solve all of the oil and gas problems by getting 1 million barrels out and not having to ship it all down to the U.S., by getting some out to the west coast that goes to Asia and some out for our fellow Canadians in Quebec. And we can't seem to have a reasonable debate in this country of whether that makes any sense or not. That's why I put in my chairman's message it's maddening and frustrating, because the solutions are not complicated but you got to make decisions. Doesn't appear to be high on the current government's platform. So we're stuck. We're just stuck. And shareholders and investors I'm concerned have really just thrown the towel in on the energy space in Canada until we get some catalyst. And without more capital coming into the business, I just don't see how it can be a growth business. It'll be flat at best. And then it'll be flat at best for us unless we gain market share at the expense of our competitors that cannot make it because they don't have good balance sheets and because they are not diversified. Those are the two fundamentals that we say are our competitive advantages right now over nearly everybody else in our sector that is tied with any business in the oil and gas service side. Our balance sheet's well structured and we're diversified. So our shareholders get paid to wait until better days come along. And we're all hopeful they do, but I can't predict when. But you get paid to wait with us. And I've articulated that pretty good in our chairman's message and in our MD&A as to why the dividend looks pretty solid. We had no debt repayments, got nothing. We just can pay the shareholders and we'll be very timely and strategic on acquisitions and gaining market share.

[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]

I think we've covered it all, folks. I want to thank you very much. Look forward to chatting with you in April and giving an update as to how the year has unfolded in the Q1. But until then, we are going to work on our business plan and we'll do that over the next bit. So thank you very much for joining us, and stay warm. Take care.

[Operator]

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