Source Energy Services Reports Q1 2026 Results

Calgary, Alberta (May 7, 2026) TSX: SHLE

Source Energy Services Ltd. (“Source” or the “Company”) is pleased to announce its financial results for the three months ended March 31, 2026.

Q1 2026 PERFORMANCE HIGHLIGHTS

First quarter activity levels moderated relative to 2025 as ongoing economic uncertainty and lower commodity pricing for most of the period led Source customers to plan for more balanced activity levels throughout 2026. For the three months ended March 31, 2026, Source achieved the following results: 

• realized sand sales volumes of 871,581 metric tonnes (“MT”) and sand revenue of $125.8 million, a decrease of 23% compared to the first quarter of 2025;
• generated total revenue of $160.2 million, a $48.3 million decrease from the first quarter of 2025;
• realized gross margin of $22.0 million and Adjusted Gross Margin⁽¹⁾ of $35.4 million, decreases of 40% and 23%, respectively, when compared to the three months ended March 31, 2025;
• reported net loss of $3.3 million, a reduction of $26.9 million from the first quarter of 2025;
• realized Adjusted EBITDA⁽¹⁾ of $26.3 million, a $7.4 million decrease from the same period in 2025;
• achieved 78% utilization across the eleven-unit Sahara fleet, with operating units in the United States achieving 100% utilization during the first quarter of 2026;
• accepted delivery of the first unit train at the Taylor transload facility;
• repurchased 2,500 common shares during the period under the Normal Course Issuer Bid (the “NCIB”), resulting in cumulative repurchases of 467,300 common shares under the program; and
• renewal of the NCIB, as approved by Source’s board of directors, upon expiry of the existing program on May 12, 2026 and subject to Toronto Stock Exchange approval, subsequent to the end of the quarter. 

Note:

1. Adjusted Gross Margin (including on a per MT basis) and Adjusted EBITDA are not defined under IFRS (as defined herein) and might not be comparable to similar financial measures disclosed by other issuers, refer to ‘Non-IFRS Measures’ below for reconciliations to measures recognized by IFRS. For additional information, please refer to Source’s Management’s Discussion and Analysis (“MD&A”), dated May 7, 2026, available online at www.sedarplus.ca.

RESULTS OVERVIEW

Notes:

1. One MT is approximately equal to 1.102 short tons. 
2. The average Canadian to United States (“U.S.”) dollar exchange rate for the three months ended March 31, 2026, was $0.7290 (2025 - $0.6968).
3. Adjusted EBITDA and Adjusted Gross Margin (including on a per MT basis) are not defined under IFRS, refer to ‘Non-IFRS Measures’ below for reconciliations to measures recognized by IFRS. For additional information, please refer to Source’s MD&A available online at www.sedarplus.ca.
   

FIRST QUARTER 2026 RESULTS

Total revenue for the three months ended March 31, 2026 was $160.2 million compared to $208.6 million for the three months ended March 31, 2025, a decrease of $48.3 million. Despite a surge in oil prices late in the quarter, revenue for the period was impacted by planned lower activity levels across the Western Canadian Sedimentary Basin (“WCSB”), as broader economic uncertainty and lower commodity prices resulted in Source customers planning for more balanced activity levels across 2026. Average realized sand price decreased by $12.14 per MT compared to the first quarter of 2025, impacted by more than a fifteenfold increase in domestic sand sales volumes as well as a higher proportion of lower priced, finer-mesh sand sales, partly offset by incremental spot market sales. 

Cost of sales, excluding depreciation, decreased by $37.5 million on a quarter-over-quarter basis, primarily due to lower sales volumes realized. Cost of sales, excluding depreciation, benefited from lower production costs incurred and a reduction in third-party sand purchases, partly offset by higher costs for transportation, compared to the first quarter last year. The shift in sales mix, attributed to increased domestic sand sales, favorably impacted cost of sales due to the lower landed cost of domestic sand. The strengthening of the Canadian dollar decreased cost of sales denominated in U.S. dollars by $5.12 per MT, compared to the first quarter of 2025.

For the three months ended March 31, 2026, gross margin decreased by $14.8 million compared to the prior year period, primarily due to lower sales volumes as noted above. Excluding margin from mine gate volumes, Adjusted Gross Margin was $41.22 per MT for the quarter compared to $45.00 per MT for the first quarter of 2025. The decrease reflected a shift in sales mix and incremental costs of $0.8 million for fuel at the Taylor terminal, while the connection to the electrical grid is being completed. These impacts were partly offset by the increase in domestic sand sales volumes compared to the first quarter of 2025. The strengthening of the Canadian dollar positively impacted Adjusted Gross Margin by $1.26 per MT for 2026, compared to the same period last year.

Operating expense decreased by $1.7 million on a quarter-over-quarter basis, primarily due to lower costs for variable incentive compensation, lower professional fees incurred and a decrease in rail car-related expenses during the period. General and administrative expense also decreased by $1.7 million for the quarter, compared to the first quarter of 2025, driven primarily by lower people costs attributed to reduced variable incentive compensation expense. 

Adjusted EBITDA decreased by 22%, or $7.4 million, to $26.3 million for the three months ended March 31, 2026. The decrease was primarily attributable to lower customer activity levels experienced during the first quarter, as discussed above. The first quarter of 2025 benefited from record Source customer activity levels and settlement proceeds related to the incident at the Fox Creek terminal facility.

LIQUIDITY AND CAPITAL RESOURCES

Notes:

1. Adjusted EBITDA and Free Cash Flow are not defined under IFRS and might not be comparable to similar financial measures disclosed by other issuers, refer to ‘Non-IFRS Measures’ below. The reconciliation to the comparable IFRS measure can be found in the table below. 
2. Excludes capital expenditures related to the Taylor facility and customer-funded equipment purchases. During the period, Source entered into an arrangement to support the purchase of sand trucking assets and specialized well site equipment, funded by a customer and repayable within two years.

For the first quarter of 2026, Free Cash Flow decreased by $15.8 million compared to the first quarter of 2025, primarily due to lower activity levels realized and an increase in capital expenditures, as described below. The increase in quarter-over-quarter lease obligations was largely driven by heavy equipment additions at the Peace River facility, and replacements for expiring yellow iron leases at the Wisconsin mining facilities completed last year at slightly higher rates.

Capital expenditures, net of proceeds on disposals and reimbursements and excluding expenditures related to the Taylor facility and customer-funded equipment purchases, were $16.0 million for the three months ended March 31, 2026, an increase of $8.9 million compared to the first quarter last year. Excluding construction for the Taylor facility and customer-funded equipment purchases, growth capital expenditures increased by $4.6 million for the quarter, largely attributed to expenditures for the Peace River facility, including amounts related to dismantling the domestic sand processing assets acquired last year and debottlenecking activities. Maintenance and sustaining capital expenditures increased by $4.3 million for the first quarter of 2026, compared to the same period last year, primarily due to various maintenance projects completed at the terminal facilities and the Wisconsin mining operations, leasehold improvements for the new corporate head office, which will be subsequently reimbursed by the landlord, and an increase in overburden removal for mining operations.

BUSINESS OUTLOOK

Source anticipates most customers will maintain a flexible approach to their capital budget for the remainder of the year, a reflection of heightened geopolitical uncertainty and resulting impact on the commodity price environment. Despite a softer than expected first quarter, as Source customers planned for and deferred work to the latter part of the year, Source continues to expect full-year 2026 Canadian customer activity levels to be broadly consistent with 2025 activity levels. The recent movement in crude oil prices, driven by conflict in the Middle East, is supportive of a strong mine gate market for deliveries into the Lower 48 states.

Over the medium to longer term, Western Canadian liquefied natural gas (“LNG”) projects currently being constructed, along with the expedited permitting of additional LNG capacity and the inclusion of LNG Canada (Phase 2) in the Government of Canada’s major projects list, will drive incremental demand for proppant in the WCSB. Source believes it is well positioned to capitalize on the expected demand increase in northeastern British Columbia and to take advantage of growing proppant demand levels in the WCSB through its existing northern white sand franchise, expanded terminal network and growing domestic sand production at Peace River.

Source believes the increased demand for natural gas, driven by LNG exports, increased natural gas pipeline export capabilities and power generation facilities, will drive incremental demand for Source’s services in the WCSB. Source continues to see increased demand from customers that are primarily focused on the development of natural gas properties in the Montney, Duvernay and Deep Basin.

Source also continues to focus on increasing its involvement in the provision of logistics services for other items needed at the well site in response to customer requests to expand its service offerings and to further utilize its existing Western Canadian terminals to provide additional services.

FIRST QUARTER CONFERENCE CALL

A conference call to discuss Source’s first quarter financial results has been scheduled for 7:30 am MST (9:30 am ET) on Friday, May 8, 2026.

Interested analysts, investors and media representatives are invited to register to participate in the call. Once you are registered, a dial-in number and passcode will be provided to you via email. The link to register for the call is on the Upcoming Events page of our website and as follows:

Source Energy Services Q1 2026 Results Call

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until June 8, 2026, using the following dial-in:

Toll-Free Playback Number: 1-855-669-9658

Playback Passcode: 3587244

ABOUT SOURCE ENERGY SERVICES

Source is a company that focuses on the integrated production and distribution of frac sand, as well as the distribution of other bulk completion materials not produced by Source. Source provides its customers with an end-to-end solution for frac sand supported by its Wisconsin and Peace River mines and processing facilities, its Western Canadian terminal network and its “last mile” logistics capabilities, including its trucking operations, and Sahara, a proprietary well site mobile sand storage and handling system.

Source’s full-service approach allows customers to rely on its logistics platform to increase reliability of supply and to ensure the timely delivery of frac sand and other bulk completion materials at the well site.

IMPORTANT INFORMATION

These results should be read in conjunction with Source’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2026 and 2025 and the audited consolidated financial statements for the years ended December 31, 2025 and 2024, together with the accompanying notes (the “Financial Statements”) and its corresponding MD&A for such periods. The Financial Statements and MD&A and other information relating to Source, including the Annual Information Form, are available under the Company’s SEDAR+ profile at www.sedarplus.ca. The Financial Statements and comparative statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Unless otherwise stated, all amounts are expressed in Canadian dollars.

NON-IFRS MEASURES

In this press release Source has used the terms “Free Cash Flow”, “Adjusted Gross Margin” and “Adjusted EBITDA”, including per MT, which do not have standardized meanings prescribed by IFRS and Source’s method of calculating these measures may differ from the method used by other entities and, accordingly, they may not be comparable to similar measures presented by other companies. These financial measures should not be considered as an alternative to, or more meaningful than, net income and gross margin, respectively, which represent the most directly comparable measures of financial performance as determined in accordance with IFRS. 

Reconciliation of Adjusted EBITDA and Free Cash Flow to Net (Loss) Income

Notes: 

1. Includes expenses and recoveries related to the incident at the Fox Creek terminal facility and other one-time expenses.
2. Excludes capital expenditures for the Taylor facility and customer-funded equipment purchases.

Reconciliation of Gross Margin to Adjusted Gross Margin

For additional information regarding non-IFRS measures, including their use to management and investors, their composition and discussion of changes to either their composition or label, if any, please refer to the ‘Non-IFRS Measures’ section of the MD&A, which is incorporated herein by reference. Source’s MD&A is available online at www.sedarplus.ca and through Source’s website at www.sourceenergyservices.com.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release constitute forward-looking statements relating to, without limitation, expectations, intentions, plans and beliefs, including information as to the future events, results of operations and Source’s future performance (both operational and financial) and business prospects. In certain cases, forward-looking statements can be identified by the use of words such as “approach”, “anticipates”, “expects”, “believes”, “continues”, “focus”, “could”, “may”, “should”, “position” or variations of such words and phrases, or statements that certain actions, events or results “may” or “will” be taken, occur or be achieved. Such forward-looking statements reflect Source’s beliefs, estimates and opinions regarding its future growth, results of operations, future performance (both operational and financial), and business prospects and opportunities at the time such statements are made, and Source undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or circumstances should change unless required by applicable law. Forward-looking statements are necessarily based upon a number of estimates and assumptions made by Source that are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Forward-looking statements are not guarantees of future performance. 

In particular, this press release contains forward-looking statements pertaining, but not limited to: Source’s continued focus on the integrated production and distribution of frac sand and the distribution of other bulk completion materials not produced by Source; Source’s full-service approach which allows customers to rely on its logistics platform to increase reliability of supply and to ensure the timely delivery of frac sand and other bulk completion materials at the well site; expectation that customers will maintain a flexible approach to their capital budget and balanced activity levels in 2026; the expectation that Western Canadian LNG projects will drive incremental demand for proppant in the WCSB; the belief that Source is well-positioned to capitalize on the increase in demand in northeastern British Columbia and take advantage of growing proppant demand and activity levels in the WCSB; belief that 2026 customer activity levels are to be broadly consistent with 2025 activity levels; Source’s expected reimbursement from its landlord on leasehold improvements for the new corporate head office; expectations with respect to sand revenue and mine gate sand sales and associated costs; expectations that increased demand for natural gas, increased natural gas pipeline export capabilities and liquefied natural gas exports will drive incremental demand for Source’s services in the WCSB; expectations regarding the growing domestic sand production at the Peace River facility; continued increase in demand from customers primarily focused on the development of natural gas properties in Montney, Duvernay and Deep Basin; Source’s focus on and expectations regarding increasing its involvement in the provision of logistics services for other well site items; the benefits of Source’s existing Western Canadian terminals to provide additional services to customers; the benefits that Source’s “last mile” services provide to customers; expectations respecting future conditions; the renewal of the NCIB; and profitability.

By their nature, forward-looking statements involve numerous current assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Source to differ materially from those anticipated by Source and described in the forward-looking statements. 

With respect to the forward-looking statements contained in this press release, assumptions have been made regarding, among other things: proppant market prices; future oil, natural gas and liquefied natural gas prices; future global economic and financial conditions, including the results of ongoing tariff and trade negotiations in North America, as well as globally; predictable inflationary pressures; future commodity prices, demand for oil and gas and the product mix of such demand; levels of activity in the oil and gas industry in the areas in which Source operates; the continued availability of timely and safe transportation for Source’s products, including without limitation, Source’s rail car fleet and the accessibility of additional transportation by rail and truck; the maintenance of Source’s key customers and the financial strength of its key customers; the maintenance of Source’s significant contracts or their replacement with new contracts on substantially similar terms and that contractual counterparties will comply with current contractual terms; operating costs; that the regulatory environment in which Source operates will be maintained in the manner currently anticipated by Source; future exchange and interest rates; geological and engineering estimates in respect of Source’s resources; the recoverability of Source’s resources; the accuracy and veracity of information and projections sourced from third parties respecting, among other things, future industry conditions and product demand; demand for horizontal drilling and hydraulic fracturing and the maintenance of current techniques and procedures, particularly with respect to the use of proppants; Source’s ability to obtain qualified staff and equipment in a timely and cost-efficient manner; Source’s ability to maintain their information assets and critical infrastructure and cyber security; impacts of U.S. legislation and regulatory policies; the regulatory framework governing royalties, taxes and environmental matters in the jurisdictions in which Source conducts its business and any other jurisdictions in which Source may conduct its business in the future; future capital expenditures to be made by Source; future sources of funding for Source’s capital program; Source’s future debt levels; the impact of competition on Source; and Source’s ability to obtain financing on acceptable terms.

A number of factors, risks and uncertainties could cause results to differ materially from those anticipated and described herein including, among others: the effects of competition and pricing pressures; the risk of ongoing geopolitical instability, including the Russia-Ukraine conflict and the U.S.-Iran conflict and consequences resulting from the same; volatility in crude oil; the risk that the TSX may not approve the renewal of the NCIB on the timing and conditions expected, or at all; risks inherent in key customer dependence; effects of fluctuations in the price of proppants; risks related to indebtedness and liquidity, including Source’s leverage, restrictive covenants in Source’s debt instruments and Source’s capital requirements; risks related to interest rate fluctuations and foreign exchange rate fluctuations; changes in general economic, financial, market and business conditions in the markets in which Source operates, including with respect to tariff and trade policy in North America, as well as globally; changes in the technologies used to drill for and produce oil and natural gas; Source’s ability to obtain, maintain and renew required permits, licenses and approvals from regulatory authorities; the stringent requirements of and potential changes to applicable legislation, regulations and standards; the ability of Source to comply with unexpected costs of government regulations; liabilities resulting from Source’s operations; the results of litigation or regulatory proceedings that may be brought by or against Source; the ability of Source to successfully bid on new contracts and the loss of significant contracts; uninsured and underinsured losses; risks related to the transportation of Source’s products, including potential rail line interruptions or a reduction in rail car availability; the geographic and customer concentration of Source; the impact of extreme weather patterns and natural disasters; the impact of climate change risk; the ability of Source to retain and attract qualified management and staff in the markets in which Source operates; labor disputes and work stoppages and risks related to employee health and safety; general risks associated with the oil and natural gas industry, loss of markets, consumer and business spending and borrowing trends; limited, unfavorable, or a lack of access to capital markets; uncertainties inherent in estimating quantities of mineral resources; sand processing problems; implementation of recently issued accounting standards; the use and suitability of Source’s accounting estimates and judgments; the impact of information systems and cyber security breaches; the impact of inflation on capital expenditures; and risks and uncertainties related to pandemics, including changes in energy demand. 

Although Source has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will materialize or prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Readers should not place undue reliance on forward-looking statements. These statements speak only as of the date of this press release. Except as may be required by law, Source expressly disclaims any intention or obligation to revise or update any forward-looking statements or information whether as a result of new information, future events or otherwise.

Any financial outlook and future-oriented financial information contained in this press release regarding prospective financial performance, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action based on management’s assessment of the relevant information that is currently available. Projected operational information contains forward-looking information and is based on a number of material assumptions and factors, as are set out above. These projections may also be considered to contain future oriented financial information or a financial outlook. The actual results of Source’s operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. Actual results will vary from projected results. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The forward-looking information and statements contained in this document speak only as of the date hereof and have been approved by the Company’s management as at the date hereof. The Company does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.

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