News Releases Archive - Source Energy Services

Source Energy Services Reports Q3 2023 Results

Posted on November 8, 2023 at 8:20 pm.

Calgary, Alberta (November 8, 2023) TSX: SHLE

Source Energy Services Ltd. (“Source” or the “Company”) is pleased to announce its financial results for the three and nine months ended September 30, 2023.

Q3 2023 PERFORMANCE HIGHLIGHTS

Source achieved the following key highlights during the third quarter of 2023:

realized sand sales volumes of 709,826 per metric tonne (“MT”) and sand revenue of $102.2 million, a $5.0 million increase from the third quarter of 2022;
generated total revenue of $124.7 million, a $4.8 million increase from the third quarter of 2022;
realized gross margin of $25.0 million and Adjusted Gross Margin⁽¹⁾ of $30.8 million, increases of 53% and 46%, respectively, when compared to the same period in 2022;
reduced the principal value of total debt outstanding by $17.1 million from the end of 2022, and repurchased an additional $7.1M aggregate principal value of senior secured notes after the end of the quarter;
achieved new records for the highest monthly revenue realized in the history of Source from the Sahara fleets in both Canada and the United States (“US”);
reported net income of $3.7 million, a $7.6 million improvement from the third quarter of 2022 when excluding the foreign exchange gain on the settlement of forward contracts recognized last year; and
realized Adjusted EBITDA⁽¹⁾ of $22.7 million, a $6.4 million improvement from the third quarter of 2022 when excluding the foreign exchange gain on the settlement of forward contracts recognized last year.

Note:

Adjusted Gross Margin (including on a per MT basis) and Adjusted EBITDA are not defined under IFRS 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 November 8, 2023, available online at sedarplus.ca.

RESULTS OVERVIEW

	Three months ended September 30,		Nine months ended September 30,
($000’s, except MT and per unit amounts)	2023	2022	2023	2022
Sand volumes (MT)⁽¹⁾	709,826	753,233	2,319,388	2,279,470
Sand revenue	102,180	97,173	335,885	271,380
Wellsite solutions	21,725	21,748	76,332	53,620
Terminal services	759	985	3,099	3,461
Sales	124,664	119,906	415,316	328,461
Cost of sales	93,876	98,772	316,567	265,244
Cost of sales – depreciation	5,746	4,732	17,040	15,702
Cost of sales	99,622	103,504	333,607	280,946
Gross margin	25,042	16,402	81,709	47,515
Operating expense	5,306	4,564	17,206	13,701
General & administrative expense	3,119	2,205	11,252	7,392
Depreciation	2,174	2,833	7,998	8,194
Income from operations	14,443	6,800	45,253	18,228
Total other expense	10,711	929	30,908	14,789
Net income⁽²⁾	3,732	5,871	14,345	3,439
Net earnings per share ($/share)	0.28	0.43	1.06	0.25
Diluted net earnings per share ($/share)	0.28	0.38	1.06	0.19
Adjusted EBITDA⁽³⁾	22,735	25,994	70,793	55,047
Sand revenue sales/MT	143.95	129.01	144.82	119.05
Gross margin/MT	35.28	21.78	35.23	20.84
Adjusted Gross Margin⁽³⁾	30,788	21,134	98,749	63,217
Adjusted Gross Margin/MT⁽³⁾	43.37	28.06	42.58	27.73

Notes:

One MT is approximately equal to 102 short tons.
The average Canadian to US dollar exchange rate for the three and nine months ended September 30, 2023, was $0.7457 and 0.7432, respectively (2022 – $0.7659 and 0.7795, respectively).
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 sedarplus.ca.

Third Quarter 2023 Performance

Source realized continued gross margin improvement for the third quarter, driven by strong average realized sand pricing. This resulted in Adjusted EBITDA of $22.7 million for the quarter, an increase of 40% compared to the third quarter of 2022, excluding the gain on settlement of outstanding future forward exchange contracts settled last year. Overall sand sales volumes for the quarter were lower than anticipated due to customer operational delays and schedule changes that resulted in a shift of planned activity into the fourth quarter.

Source recorded total revenue of $124.7 million, an increase of $4.8 million or 4% compared to the third quarter of 2022, due to higher average realized sand pricing. Wellsite solutions revenue was relatively flat, on a quarter-over- quarter basis, also impacted by the customer delays noted above. During the third quarter, Source achieved records for the highest monthly revenue ever generated by the Sahara fleets for units working in both Canada and the US. Continued strength in spot pricing and pricing across all lines of business mitigated the impact of delayed sand sales volumes for the quarter.

Cost of sales, excluding depreciation, decreased for the third quarter of 2023, compared to the same period last year, primarily due to the lower sand sales volumes realized during the period as well as a reduction in cost for transportation fuel surcharges. These reductions were partially offset by a shift in terminal sales mix for the quarter. Cost of sales was impacted by a weakening Canadian dollar on US denominated costs relative to the third quarter last year; however, this impact was completely offset by an increase in US dollar denominated revenue realized during the quarter.

For the three months ended September 30, 2023, gross margin increased by $8.6 million, attributed to improved pricing and operational efficiencies achieved, compared to the third quarter of 2022. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $48.89 per MT, compared to $31.38 per MT in the third quarter of 2022, favorably impacted by improved pricing and lower transportation fuel charges, as noted above, despite the impact of terminal sales mix. Customer job delays, as discussed above, resulted in lower total sand volumes trucked compared to the same period last year, and also impacted gross margin and Adjusted Gross Margin for the third quarter.

Operating expenses increased by $0.7 million on a quarter-over-quarter basis, primarily due to higher royalty costs resulting from increased shipments compared to prior year, and higher people costs and variable incentive compensation cost incurred in the quarter. General and administrative expense increased by $0.9 million during the period, due primarily to higher salaries and variable incentive compensation expense compared to the third quarter last year.

As discussed above, Adjusted EBITDA was $22.7 million for the third quarter, an increase of $6.4 million or 40% when excluding the foreign exchange gain realized last year when Source wound up its outstanding foreign exchange forward contracts prior to the closing of the new revolving asset-backed senior credit facility (the “ABL”). Improved pricing and a reduction to certain transportation and operational costs, as well as production efficiencies, offset the volume reduction attributed to the shift in customer jobs. The weakening of the Canadian dollar negatively impacted cost of sales during the quarter; however, this was offset by an increase in revenue denominated in US dollars, which mitigated the impact of fluctuations in foreign exchange rates on US dollar denominated expenses for the quarter.

Adjusted EBITDA was favorably impacted by $0.3 million during the quarter, attributed to the movement in exchange rates on working capital.

Liquidity and Capital Resources

*Free Cash Flow*	Three months ended September 30,		Nine months ended September 30,
($000’s)	2023	2022	2023	2022
Adjusted EBITDA⁽¹⁾	22,735	25,994	70,793	55,047
Financing expense paid	(7,001)	(3,147)	(21,845)	(12,288)
Capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs	(3,585)	(4,454)	(6,373)	(9,348)
Payment of lease obligations	(4,758)	(3,849)	(14,504)	(11,003)
Free Cash Flow⁽¹⁾	7,391	14,544	28,071	22,408

Note:

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’ The reconciliation to the comparable IFRS measure can be found in the table below.

Source generated Free Cash Flow of $7.4 million for the three months ended September 30, 2023, a decrease of $7.2 million compared to the third quarter of 2022. Excluding the $9.7 million gain realized on the settlement of foreign exchange contracts recognized in the third quarter last year, Source realized an increase in Free Cash Flow of $2.5 million. The increase is mainly attributed to the improvement in Adjusted EBITDA, driven by increased gross margin compared to the same period last year, as well as lower net expenditures for capital assets during the third quarter of this year, as outlined below. Finance expense paid was higher compared to the third quarter last year, due to the timing of the August 2022 interest payment for the senior secured notes which was not completed until after the closing of the new ABL facility in the fourth quarter of 2022. Payments for lease obligations for the third quarter of 2023 were higher than the prior year due to the replacement of short-term rentals with lower cost, longer-term leases for certain mine processing equipment and the impacts of a weaker Canadian dollar on US dollar denominated leases.

Source’s capital expenditures for the third quarter of 2023 were $3.6 million, a decrease of $0.8 million compared to the same period last year. Expenditures for maintenance and sustaining capital decreased by $0.9 million for the three months ended September 30, 2023. The change was primarily driven by a reduction in expenditures for the Peace River facility, now fully online and operational, partially offset by higher costs associated with overburden removal for mining operations, attributed to higher year-to-date sand sales volumes when compared to 2022. Capital expenditures were also impacted by the cost to rebuild a piece of equipment at a terminal facility which malfunctioned during the quarter; however, costs incurred will be recovered by insurance proceeds received in the fourth quarter. Management continues to assess equipment and other assets required to service Source’s operations to ensure optimal levels are maintained on an on-going basis.

BUSINESS OUTLOOK

Third quarter volumes were impacted by operational delays experienced by a number of Source customers. These delays pushed activity into the fourth quarter, a historically slower quarter where exploration and production (“E&P”) companies exhaust budgets as they approach the end of the year. Activity levels into the fourth quarter were strong in October and are expected to remain that way until the industry’s holiday slowdown, which begins in mid-December. Source renewed customer contracts with terms and conditions reflective of the current operating environment earlier in the year, and continues to improve production efficiencies through an expansion of mesh sizes and ongoing operating cost management. Source’s leading service offerings and logistics capabilities required for larger volumes of sand per well, as well as Source’s terminal network footprint, will continue to support strong gross margins for 2024. Source anticipates increases in activity levels in 2024, particularly in northeastern British Columbia with the expectation that LNG Canada will be online in 2025.

In the longer-term, Source believes the increased demand for natural gas, driven by power generation facilities, increased natural gas pipeline export capabilities and liquefied natural gas exports will drive incremental demand for Source’s services in the Western Canadian Sedimentary Basin (“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. This trend is consistent with Source’s view that natural gas will be an important transitional fuel that is critical for the successful movement to a less carbon-intensive world.

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

THIRD QUARTER CONFERENCE CALL

A conference call to discuss Source’s third quarter financial results has been scheduled for 7:30 am MST (9:30 am ET) on Thursday, November 9, 2023.

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 Q3 2023 Results Call

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until December 9, 2023, using the following dial-in:

Toll-Free Playback Number: 1-800-319-6413

Playback Passcode: 9674

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, its “last mile” logistics capabilities and Sahara, a proprietary wellsite 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 wellsite.

IMPORTANT INFORMATION

These results should be read in conjunction with each of Source’s interim condensed consolidated financial statements for the three and nine months ended September 30, 2023 and 2022, and Source’s audited consolidated financial statements for the year ended December 31, 2022, 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 (loss) 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 Income

	Three months ended September 30,		Nine months ended September 30,
($000’s)	2023	2022	2023	2022
Net income	3,732	5,871	14,345	3,439
Add:
Interest expense	6,117	7,003	19,794	20,289
Cost of sales – depreciation	5,746	4,732	17,040	15,702
Depreciation	2,174	2,833	7,998	8,194
Gain on debt extinguishment	(280)	—	(280)	—
Finance expense (excluding interest expense)	2,660	1,520	7,473	4,046
Share-based compensation expense (recovery)	1,567	(271)	5,038	302
Gain (loss) on asset disposal	356	2	(1,776)	(1,181)
Unrealized loss on derivative assets	—	4,157	—	1,718
Loss on sublease	—	—	3	—
Other expense⁽¹⁾	663	147	1,158	2,538
Adjusted EBITDA	22,735	25,994	70,793	55,047
Financing expense paid	(7,001)	(3,147)	(21,845)	(12,288)
Capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs	(3,585)	(4,454)	(6,373)	(9,348)
Payment of lease obligations	(4,758)	(3,849)	(14,504)	(11,003)
Free Cash Flow	7,391	14,544	28,071	22,408

Note:

Includes expenses related to the incident at the Fox Creek terminal facility, asset repairs reimbursed by insurance claims and other one-time expenses, refer to ‘Contractual Obligations’ and ‘Operating and Financial Results’ above.

Reconciliation of Gross Margin to Adjusted Gross Margin

	Three months ended September 30,		Nine months ended September 30,
($000’s)	2023	2022	2023	2022
Gross margin	25,042	16,402	81,709	47,515
Cost of sales – depreciation	5,746	4,732	17,040	15,702
Adjusted Gross Margin	30,788	21,134	98,749	63,217

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

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: costs incurred by the rebuilding of a piece of equipment at a terminal facility which malfunctioned and will be recovered by insurance proceeds received in the fourth quarter; expectations that activity levels will remain strong until the industry’s holiday slowdown; predictions for strong gross margins in 2024; anticipated increased activity levels in 2024, particularly in northeastern British Columbia with the expectation that LNG Canada will be online in 2025; 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; continued increase in demand from customers primarily focused on the development of natural gas properties in Montney, Duvernay and Deep Basin; views that natural gas is an important transitional fuel for the successful movement to a less carbon-intensive world; Source’s focus on and expectations regarding increasing its involvement in the provision of logistics services for other wellsite items; expectations with respect to improved production efficiencies through expanding mesh sizes and operating cost management; expectations respecting future conditions; 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; 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; 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; 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; 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; labour 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 such as COVID-19, 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.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn	Derren Newell
Chief Executive Officer	Chief Financial Officer
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Announces Upcoming Earnings Release

Posted on October 11, 2023 at 5:27 pm.

Written by Meghan Somers

Calgary, Alberta (October 11, 2023) TSX: SHLE

THIRD QUARTER RESULTS RELEASE AND CONFERENCE CALL

Source is pleased to announce that its third quarter financial results for the period ending September 30, 2023, will be released following the Toronto Stock Exchange market close on November 8, 2023.

A conference call has been scheduled for 7:30 am (Calgary time) on Thursday, November 9, 2023. 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:

Click Below to Register for the Results Conference Call:

Source Energy Services Q3’23 Results Call

Results Conference Call Playback Access:

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until December 9, 2023. Below are the details to access the call playback:

Toll-Free Playback Number: 1-800-319-6413

Playback Passcode: 9674

ABOUT SOURCE ENERGY SERVICES

Source is a company that focuses on the integrated production and distribution of high quality 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, its “last mile” logistics capabilities and Sahara, a proprietary wellsite mobile sand storage and handling system.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn	Derren Newell
Chief Executive Officer	Chief Financial Officer
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Reports Q2 2023 Results

Posted on August 2, 2023 at 7:11 pm.

Written by Meghan Somers

Calgary, Alberta (August 2, 2023) TSX: SHLE

Source Energy Services Ltd. (“Source” or the “Company”) is pleased to announce its financial results for the three and six months ended June 30, 2023.

Q2 2023 PERFORMANCE HIGHLIGHTS

Despite a challenging operating environment impacted by wildfires, floods and rail outages, Source recorded a strong quarter and achieved the following key highlights during the second quarter of 2023:

realized sand sales volumes of 702,079 MT and sand revenue of $102.0 million, an $8.4 million increase from the second quarter of 2022;
achieved total revenue of $126.9 million, a 14% increase from the second quarter of 2022, and the third highest quarterly revenue generated since the inception of Source;
achieved a new record for the largest daily sand volume fed into a blender in twenty-four hours and set a new daily record for sand volume throughput at Source’s Wembley terminal facility;
recorded utilization of 82% for the Canadian Sahara fleet;
executed a contract to build and operate Source’s tenth Sahara unit, to be located in the state of Alaska, the cost of which is fully reimbursed by the customer through progress payments received during construction;
realized gross margin of $24.9 million and Adjusted Gross Margin⁽¹⁾ of $30.2 million, increases of 51% and 39%, respectively, when compared to the same period in 2022;
reported net income of $2.7 million, a $2.6 million improvement from the second quarter of 2022 when excluding the unrealized gain on derivative instruments recognized last year; and
realized Adjusted EBITDA⁽¹⁾ of $20.4 million, a 38% increase from the second quarter of 2022.

Note:

Adjusted Gross Margin (including on a per MT basis) and Adjusted EBITDA are not defined under IFRS 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 August 2, 2023, available online at www.sedarplus.ca.

RESULTS OVERVIEW

	Three months ended June 30,		Six months ended June 30,
($000’s, except MT and per unit amounts)	2023	2022	2023	2022
Sand volumes (MT)⁽¹⁾	702,079	800,136	1,609,562	1,526,237

Sand revenue	101,950	93,546	233,705	174,207
Wellsite solutions	23,980	16,456	54,607	31,872
Terminal services	998	1,584	2,340	2,476
Sales	126,928	111,586	290,652	208,555
Cost of sales	96,764	89,869	222,691	166,472
Cost of sales – depreciation	5,249	5,177	11,294	10,970
Cost of sales	102,013	95,046	233,985	177,442
Gross margin	24,915	16,540	56,667	31,113
Operating expense	6,016	4,801	11,900	9,137
General & administrative expense	3,904	2,698	8,133	5,187
Depreciation	2,733	2,707	5,824	5,361
Income from operations	12,262	6,334	30,810	11,428
Total other expense	9,528	2,126	20,197	13,860
Net income (loss)⁽²⁾	2,734	4,208	10,613	(2,432)
Basic and diluted earnings (loss) per share ($/share)	0.20	0.31	0.78	(0.18)
Adjusted EBITDA⁽³⁾	20,440	14,836	48,058	29,053
Sand revenue sales/MT	145.21	116.91	145.20	114.14
Gross margin/MT	35.49	20.67	35.21	20.39
Adjusted Gross Margin⁽³⁾	30,164	21,717	67,961	42,083
Adjusted Gross Margin/MT⁽³⁾	42.96	27.14	42.22	27.57

Notes:

One MT is approximately equal to 1.102 short tons.
The average Canadian to United States (“US”) dollar exchange rate for the three and six months ended June 30, 2023, was $0.7447 and 0.7421, respectively (2022 – $0.7832 and 0.7865, respectively).
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.

Second Quarter 2023 Performance

Source had strong second quarter results, due to continued gross margin performance and logistics operations that achieved several daily records. This resulted in EBITDA of $20.4 million for the quarter, an increase of 38% compared to the same period last year, despite the unprecedented Alberta wildfires, floods and rail outages which negatively impacted sand sales volumes during the period. Source recorded total revenue of $126.9 million, an increase of $15.3 million or 14% compared to the second quarter of 2022 due to higher average realized sand pricing. Wellsite solutions revenue remained strong through the second quarter, achieving a 46% increase in revenue compared to the same period last year. During the month of April, Source realized the second highest monthly volumes trucked in Source history and achieved a new daily record for throughput at the Wembley terminal facility. Pricing improvements across all lines of business were achieved, and spot sand prices remained strong for the second quarter.

Cost of sales, excluding depreciation, increased for the second quarter of 2023, compared to the same period last year, due primarily to higher costs for transportation and a shift in terminal sales mix during the quarter. These increases were partially offset by production efficiencies achieved, attributed in part to the introduction of an additional mesh size early this year. Cost of sales was impacted by a weakening Canadian dollar on US denominated costs relative to the second quarter last year; however, this impact was offset by an increase in US dollar denominated revenue realized during the quarter.

For the three months ended June 30, 2023, gross margin increased by $8.4 million, attributed to improved pricing and operational efficiencies achieved, compared to the second quarter of 2022. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $46.73 per MT, compared to $29.07 per MT in the second quarter of 2022, favorably impacted by improved pricing, as noted above, despite higher costs for transportation and the impact of terminal sales mix. Gross margin and Adjusted Gross Margin also benefited from the 28% increase in sand volumes trucked and strong Sahara fleet utilization during the quarter, driving a 40% increase in Sahara-related revenue, compared to the same period last year.

Operating expenses increased by $1.2 million on a quarter-over-quarter basis, attributed to an executive severance payment, higher repairs and maintenance costs for the Peace River facility and higher variable incentive compensation cost incurred in the quarter. General and administrative expense increased by $1.2 million during the period, due primarily to the timing of recognition of variable incentive compensation expense compared to the same period in 2022. This timing difference will be largely eliminated by the end of the year.

Adjusted EBITDA was $20.4 million for the second quarter, an increase of $5.6 million or 38% compared to the three months ended June 30, 2022. As noted above, improved pricing and operational efficiencies offset the volume reduction attributed to the wildfires and floods, and increased costs related to transportation costs and terminal sales mix. The weakening of the Canadian dollar negatively impacted Adjusted EBITDA by $0.4 million, attributed to the movement in exchange rates on working capital during the quarter. An increase in revenue denominated in US dollars mitigated the impact of fluctuations in foreign exchange rates and the impact on US dollar denominated expenses for the quarter.

Liquidity and Capital Resources

*Free Cash Flow*	Three months ended June 30,		Six months ended June 30,
($000’s)	2023	2022	2023	2022
Adjusted EBITDA⁽¹⁾	20,440	14,836	48,058	29,053
Financing expense paid	(7,305)	(6,794)	(14,844)	(9,141)
Capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs	(641)	(2,869)	(2,788)	(4,894)
Payment of lease obligations	(4,696)	(3,638)	(9,746)	(7,156)
Free Cash Flow⁽¹⁾	7,798	1,535	20,680	7,862

Note:

(1) Adjusted EBITDA and Free Cash Flow are not defined under IFRS, refer to ‘Non-IFRS Measures’ below. The reconciliation to the comparable IFRS measure can be found in the table below.

Source generated Free Cash Flow of $7.8 million for the three months ended June 30, 2023, an increase of $6.3 million compared to the second quarter of 2022. The increase is mainly attributed to a $5.6 million improvement in Adjusted EBITDA, reflecting increased gross margin compared to the same period last year, as well as lower net expenditures for capital assets during the second quarter of this year, as outlined below. Lease obligations were higher than the prior year due to an increase in renewal rates on previously contracted rail cars and the impacts of a weaker Canadian dollar on US dollar denominated leases.

Source’s capital expenditures for the second quarter of 2023 were $6.2 million, an increase of $2.1 million compared to the same period last year. Net capital expenditures were $0.6 million for the second quarter of 2023, compared to $2.9 million for the second quarter of 2022. Expenditures for maintenance and sustaining capital increased by $0.2 million for the three months ended June 30, 2023, resulting from costs associated with overburden removal for mining operations attributed to higher year-to-date sand sales volumes when compared to 2022. Growth capital expenditures increased, on a quarter-over-quarter basis, as a result of the commencement of a contract to construct Source’s tenth Sahara unit on behalf of a customer who will fully reimburse Source for these construction costs during the construction phase. During the second quarter of 2023, Source sold excess equipment, generating proceeds of $0.5 million and, in June of 2023, Source sold its previously closed terminal facility located in Berthold, North Dakota. Management continues to assess equipment and other assets required to service Source’s operations to ensure optimal levels are maintained on an on-going basis.

BUSINESS OUTLOOK

Source expects strong industry activity levels to continue through the third quarter of 2023, as delays resulting from the wildfires in Alberta shifted activity into the third quarter. While contracted customer orders are strong through the third quarter, commodity uncertainty and capital program deployment, as exploration and production companies exhaust budgets as they approach the end of the year, could impact activity levels during the fourth quarter. Source renewed customer contracts with terms and conditions reflective of the current operating environment earlier in the year, and continues to improve production efficiencies through an expansion of mesh sizes and ongoing operating cost management. Source believes these fundamentals, coupled with Source’s leading service offerings and logistics capabilities required for larger volumes of sand per well, as well as Source’s terminal network footprint, will continue to support strong gross margins for the remainder of 2023 and 2024.

SECOND QUARTER CONFERENCE CALL

A conference call to discuss Source’s second quarter financial results has been scheduled for 7:30 am MST (9:30 am ET) on Thursday, August 3, 2023.

Source Energy Services Q2 2023 Results Call

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until September 3, 2023, using the following dial-in:

Toll-Free Playback Number: 1-800-319-6413

Playback Passcode: 9673

ABOUT SOURCE ENERGY SERVICES

IMPORTANT INFORMATION

These results should be read in conjunction with each of Source’s interim condensed consolidated financial statements for the three and six months ended June 30, 2023 and 2022, and Source’s audited consolidated financial statements for the year ended December 31, 2022, 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

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

	Three months ended June 30,		Six months ended June 30,
($000’s)	2023	2022	2023	2022
Net income (loss)	2,734	4,208	10,613	(2,432)
Add:
Interest expense	6,547	6,618	13,676	13,286
Cost of sales – depreciation	5,249	5,177	11,294	10,970
Depreciation	2,733	2,707	5,824	5,361
Finance expense (excluding interest expense)	2,655	1,291	4,814	2,526
Share-based compensation expense (recovery)	1,934	(186)	3,471	573
Gain on asset disposal	(1,681)	(1,183)	(2,132)	(1,183)
Unrealized gain on derivative assets	—	(4,058)	—	(2,439)
Loss on sublease	—	—	3	—
Other expense⁽¹⁾	269	262	495	2,391
Adjusted EBITDA	20,440	14,836	48,058	29,053
Financing expense paid	(7,305)	(6,794)	(14,844)	(9,141)
Capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs	(641)	(2,869)	(2,788)	(4,894)
Payment of lease obligations	(4,696)	(3,638)	(9,746)	(7,156)
Free Cash Flow	7,798	1,535	20,680	7,862

Note:

Includes expenses related to the incident at the Fox Creek terminal facility and one-time retirement payments.

Reconciliation of Gross Margin to Adjusted Gross Margin

	Three months ended June 30,		Six months ended June 30,
($000’s)	2023	2022	2023	2022
Gross margin	24,915	16,540	56,667	31,113
Cost of sales – depreciation	5,249	5,177	11,294	10,970
Adjusted Gross Margin	30,164	21,717	67,961	42,083

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 “expects”, “believes”, “continues”, “focus”, “could”, “trend”, or variations of such words and phrases, or state 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: the anticipated elimination of a timing difference causing an increase to general and administrative expense; expectations that industry activity levels will remain strong through 2023; expectations that lowered sand sales volumes and industry activity levels caused by wildfires, floods and rail outages will improve in the third and fourth quarters of 2023; beliefs respecting strong gross margins for the remainder of 2023 and 2024; 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; continued increase in demand from customers primarily focused on the development of natural gas properties in Montney, Duvernay and Deep Basin; views that natural gas is an important transitional fuel for the successful movement to a less carbon-intensive world; Source’s focus on and expectations regarding increasing its involvement in the provision of logistics services for other wellsite items; expectations with respect to improved production efficiencies through expanding mesh sizes and operating cost management; expectations respecting future conditions; and profitability.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn	Derren Newell
Chief Executive Officer	Chief Financial Officer
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Announces Upcoming Earnings Release

Posted on June 29, 2023 at 5:22 pm.

Written by Meghan Somers

Calgary, Alberta (June 29, 2023) TSX: SHLE

SECOND QUARTER RESULTS RELEASE AND CONFERENCE CALL

Source is pleased to announce that its second quarter financial results for the period ending June 30, 2023, will be released following the Toronto Stock Exchange market close on August 2, 2023.

A conference call has been scheduled for 7:30 am (Calgary time) on Thursday, August 3, 2023. 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:

Click Below to Register for the Results Conference Call:

Source Energy Services Q2’23 Results Call

Results Conference Call Playback Access:

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until September 3, 2023. Below are the details to access the call playback:

Toll-Free Playback Number: 1-800-319-6413

Playback Passcode: 9673

ABOUT SOURCE ENERGY SERVICES

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn	Derren Newell
Chief Executive Officer	Chief Financial Officer
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Reports 2023 AGM Voting Results

Posted on May 5, 2023 at 7:48 pm.

Written by Meghan Somers

Calgary, Alberta (May 5, 2023) TSX: SHLE

Source Energy Services Ltd. (“Source” or the “Company”) reports results from its annual meeting of shareholders held May 5, 2023 (the “Meeting”).

2023 AGM VOTING RESULTS

Election of Directors

All of the proposed nominees were elected to Source’s board of directors (the “Board”) by Shareholders present or represented by proxy at the Meeting. The voting results are as follows:

Name of Nominee	Votes for (percentage)	Withheld (percentage)
Scott Melbourn	100	0
Jeff Belford	99.97	0.03
Chris Johnson	99.99	0.01
Carrie Lonardelli	99.97	0.03
Steven Sharpe*	59.08	40.92

The voting results for Steven Sharpe are a result of the proxy advisory firm Glass Lewis’s recommendation that shareholders withhold from voting for Mr. Sharpe solely because of his position as Chair of the Compensation and Corporate Governance Committee. Glass Lewis has indicated that it generally recommends against the chair of the nominating committee if the board has less than 30% gender diverse directors. Source has 20% gender diverse directors. In contrast, the proxy advisory firm Institutional Shareholder Services Inc. recommended shareholders vote in favour of Mr. Sharpe’s election. Source has learned that the significant shareholder which in fact withheld its votes from Mr. Sharpe did so in error, attempted to rectify its error prior to the vote, but was unable to. The board of Source remains of the view that Mr. Sharpe has made a valuable contribution and brings extensive and valuable experience to Source’s Board.

Shareholder Approval of Other Matters

Shareholders also voted at the Meeting to approve each of the other resolutions described in Source’s Notice of Annual Meeting of Shareholders and Management Information Circular, dated March 8, 2023 (the “Information Circular”), as follows: (i) the ordinary resolution to fix the number of directors to be elected at the meeting at five (5) was approved by 100% of the votes cast by Shareholders; and (ii) the ordinary resolution approving the appointment of Ernst & Young LLP as the auditor of the Company was approved by 100% of the votes cast by Shareholders.

ABOUT SOURCE ENERGY SERVICES

FOR FURTHER INFORMATION PLEASE CONTACT:</strong

Scott Melbourn	Derren Newell
Chief Executive Officer	Chief Financial Officer
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Reports Q1 2023 Results

Posted on May 4, 2023 at 7:02 pm.

Written by Meghan Somers

Calgary, Alberta (May 4, 2023) TSX: SHLE

Source Energy Services Ltd. (“Source” or the “Company”) is pleased to announce its financial results for the three months ended March 31, 2023.

Q1 2023 PERFORMANCE HIGHLIGHTS

Source achieved the following results for the first quarter of 2023:

realized record sand sales volumes of 907,483 MT, the highest quarterly sand sales volumes in Source’s history, and a 25% increase from the first quarter of 2022;
achieved total revenue of $163.7 million, a 69% increase from the first quarter of 2022, and the highest quarterly revenue generated since the inception of Source;
recorded utilization of 94% for the Canadian Sahara fleet and 73% for the US Sahara fleet, and achieved a record for the highest trucked volumes in Source history;
realized gross margin of $31.8 million and Adjusted Gross Margin⁽¹⁾ of $37.8 million, increases of 118% and 86%, respectively, when compared to the same period in 2022;
reported net income of $7.9 million, a $14.5 million improvement from the $6.6 million net loss recognized in the first quarter of 2022; and
realized Adjusted EBITDA⁽¹⁾ of $27.6 million, a 94% increase from the first quarter of 2022.

Note:

Adjusted Gross Margin (including on a per MT basis) and Adjusted EBITDA are not defined under IFRS 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 MD&A available online at sedar.com.

RESULTS OVERVIEW

	Three months ended March 31,
($000’s, except MT and per unit amounts)	2023	2022
Sand volumes (MT)⁽¹⁾	907,483	726,101
Sand revenue	131,755	80,661
Wellsite solutions	30,627	15,416
Terminal services	1,342	892
Sales	163,724	96,969
Cost of sales	125,927	76,603
Cost of sales – depreciation	6,045	5,793
Cost of sales	131,972	82,396
Gross margin	31,752	14,573
Operating expense	5,884	4,336
General & administrative expense	4,229	2,489
Depreciation	3,091	2,654
Income from operations	18,548	5,094
Total other expense	10,669	11,734
Net income (loss)⁽²⁾	7,879	(6,640)
Basic and diluted earnings (loss) per share ($/share)	0.58	(0.49)
Adjusted EBITDA⁽³⁾	27,618	14,217
Sand revenue sales/MT	145.19	111.09
Gross margin/MT	34.99	20.07
Adjusted Gross Margin⁽³⁾	37,797	20,366
Adjusted Gross Margin/MT⁽³⁾	41.65	28.05

Notes:

One MT is approximately equal to 1.102 short tons.
The average Canadian to United States (“US”) dollar exchange rate for the three months ended March 31, 2023, was $0.7394 (2022 – $0.7898).
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 sedar.com.

First Quarter 2023 Performance

Source recorded total revenue of $163.7 million, an increase of $66.8 million or 69% compared to the first quarter of 2022, driven by strong sand sales volumes and higher average realized sand pricing. Strong Western Canadian Sedimentary Basin (“WCSB”) completion activity levels throughout the first quarter of the year drove records in sand sales volumes, trucked sand volumes and utilization days for the Canadian Sahara fleet. Pricing improved for all lines of business, as renewed contract pricing became effective and spot pricing remained strong. The renewal of a major customer contract in the quarter positions the Company for strong pricing performance for the near term.

Cost of sales, excluding depreciation, increased during the first quarter of 2023, due to the 25% increase in sand sales volumes and higher costs for transportation, compared to the three months ended March 31, 2022. During the first quarter, Source incurred costs for third party sand purchases, procured to complement production from the Wisconsin facilities and to ensure no supply interruptions due to the significant increase in customer demand for certain mesh sizes. During the first quarter of 2022, no third party sand purchases were completed. These cost increases were partly mitigated by improved sales distribution across mesh sizes resulting in improved yields. Cost of sales was also impacted by a weakening Canadian dollar on US denominated costs relative to the first quarter last year.

For the three months ended March 31, 2023, gross margin increased by $17.2 million, attributed to higher sand sales volumes and improved pricing. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $44.87 per MT, compared to $28.54 per MT in the first quarter of 2022, favorably impacted by improved contract customer and spot market pricing, despite higher costs for transportation. Gross margin and Adjusted Gross Margin also benefited from the 51% increase in sand volumes trucked and strong Sahara fleet utilization for the first quarter, driving a 61% increase in Sahara-related revenue, compared to the same period last year.

Operating expenses increased on a quarter-over-quarter basis, largely attributed to the increased activity realized during the period, as higher sand shipments drove increased royalty costs, higher repairs and maintenance costs and higher variable incentive compensation cost. General and administrative expense also increased relative to the first quarter of 2022, primarily driven by higher people costs resulting from increased variable incentive compensation expense.

Adjusted EBITDA was $27.6 million for the first quarter, an increase of $13.4 million or 94% compared to the three months ended March 31, 2022, the result of record activity levels and strong sales pricing realized. The weakening of the Canadian dollar negatively impacted Adjusted EBITDA by $0.6 million for the first quarter; however, the renegotiation of certain customer contracts which are now denominated in US dollars will assist with mitigating the impact of fluctuations in foreign exchange rates for the balance of the year.

Liquidity and Capital Resources

*Free Cash Flow*	Three months ended March 31,
($000’s)	2023	2022
Adjusted EBITDA⁽¹⁾	27,618	14,217
Financing expense paid	(7,539)	(2,347)
Capital expenditures, net of proceeds on disposal of property, plant and equipment	(2,146)	(2,024)
Payment of lease obligations	(5,047)	(3,518)
Free Cash Flow⁽¹⁾	12,886	6,327

Note:

Adjusted EBITDA and Free Cash Flow are not defined under IFRS, refer to ‘Non-IFRS Measures’ below. The reconciliation to the comparable IFRS measure can be found in the table below.

Source generated Free Cash Flow of $12.9 million for the three months ended March 31, 2023, compared to $6.3 million generated for the first quarter of 2022. The increase is attributed to a $13.4 million improvement in Adjusted EBITDA, reflecting strong activity levels and increased prices compared to the prior year. This was partially offset by higher financing expense paid, as $4.4 million of interest on the senior secured first lien notes (the “Notes”) was paid in cash during the quarter, compared to 2022 where interest incurred for the Notes during the first quarter was paid in kind. An increase in payments for lease obligations, including interest expense for these lease obligations, was attributed to lease payments for the Peace River facility which did not commence until April of 2022.

Source’s capital expenditures for the first quarter of 2023 were $2.6 million, an increase of $0.6 million compared to the same period last year. The increase in expenditures for maintenance and sustaining capital was primarily related to maintenance completed for the Peace River facility, and an increase in costs associated with overburden removal for mining operations of $0.4 million, driven by higher sand sales volumes. Growth capital expenditures were lower, on a quarter-over-quarter basis, due to the completion of assessments for the drilling program at the Peace River mine, and the completion of Source’s ninth Sahara unit mid-last year. During the first quarter of 2023, Source sold excess equipment, generating proceeds of $0.5 million. Management continues to assess equipment and other assets required to service Source’s operations to ensure optimal levels are maintained on an on-going basis.

ESG UPDATE

Source is committed to operating in a sustainable manner and works closely with its stakeholders to go above and beyond current regulatory requirements through various ongoing initiatives. Source’s third annual ESG report will be released later this year and will detail the Company’s 2022 ESG performance, including recent developments related to greenhouse gas emissions reductions, its production water recycling program and community involvement.

For more information, Source’s most recent ESG report is available at www.sourceenergyservices.com.

BUSINESS OUTLOOK

Strong industry activity continued to favorably impact frac sand supply and demand fundamentals in the WCSB which are expected to remain strong through 2023. Previous well permitting issues in the northeastern British Columbia region, which caused customer delays through 2022, have now been resolved and customers are expected to bring increased activity to the region again as exploration and production (“E&P”) companies catch up on their development plans. Source has renewed customer contracts with terms and conditions reflective of the current operating environment and continues to improve production efficiencies through an expansion of mesh sizes and ongoing operating cost management. Source believes these fundamentals, coupled with Source’s leading service offerings and logistics capabilities required for larger volumes of sand per well, as well as Source’s terminal network footprint, will continue to support strong gross margins for the remainder of 2023.

In the longer-term, Source believes the increased demand for natural gas, driven by power generation facilities, increased natural gas pipeline export capabilities and liquefied natural gas exports 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. This trend is consistent with Source’s view that natural gas will be an important transitional fuel that is critical for the successful movement to a less carbon intensive world.

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 5, 2023.

Source Energy Services Q1 2023 Results Call

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until June 5, 2023, using the following dial-in:

Playback Number (Toll-Free): 1-800-319-6413

Playback Passcode: 9672

2023 ANNUAL MEETING OF SHAREHOLDERS

Source’s 2023 Annual Meeting of Shareholders (the “AGM”) will be held on Friday, May 5, 2023 at 10:00 a.m. MST (12:00 pm ET) in a virtual, audio only, webcast format. Shareholder engagement is extremely important to Source and all shareholders will have equal opportunity to ask questions. Below are the details to attend the virtual-only AGM:

Log in: https://web.lumiagm.com/#/246590899 Password: source2023

If you experience technical or logistical issues related to accessing the virtual AGM, technical support is available:

1-888-290-1175 (toll-free in Canada and the United States)

1-587-885-0960 (long distance charges may apply)

ABOUT SOURCE ENERGY SERVICES

IMPORTANT INFORMATION

These results should be read in conjunction with each of Source’s interim condensed consolidated financial statements for the three months ended March 31, 2023 and 2022, 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 (“AIF”), are available under the Company’s SEDAR profile at www.sedar.com. 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

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

Three months ended March 31,
($000’s)	2023	2022
Net income (loss)	7,879	(6,640)
Add:
Income taxes	—	—
Interest expense	7,129	6,669
Cost of sales – depreciation	6,045	5,793
Depreciation	3,091	2,654
Finance expense (excluding interest expense)	2,159	1,234
Share-based compensation expense	1,537	759
Gain on asset disposal	(451)	—
Unrealized loss on derivative assets	—	1,619
Loss on sublease	3	—
Other expense⁽¹⁾	226	2,129
Adjusted EBITDA	27,618	14,217
Financing expense paid	(7,539)	(2,347)
Capital expenditures, net of proceeds on disposal of property, plant and equipment	(2,146)	(2,024)
Payment of lease obligations	(5,047)	(3,518)
Free Cash Flow	12,886	6,327
Note: (1) Includes expenses related to the incident at the Fox Creek terminal facility and one-time retirement payments.
Reconciliation of Gross Margin to Adjusted Gross Margin
Three months ended March 31,
($000’s)	2023	2022
Gross margin	31,752	14,573
Cost of sales – depreciation	6,045	5,793
Adjusted Gross Margin	37,797	20,366

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.sedar.com 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 “expects”, “believes”, “continues”, “focus”, “trends”, “anticipates”, “positions” or variations of such words and phrases, or state 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: expectations that the renewal of a major customer contract will position the Company for strong pricing performance; plans to renegotiate certain customer contracts denominated in US dollars and expectations that this renegotiation will mitigate the impact of fluctuations in foreign exchange rates; ESG initiatives and goals, including but not limited to those related to greenhouse gas emissions reduction, production water recycling, health and safety, and contributions to charitable initiatives; expectations that frac sand supply and demand fundamentals will remain strong through 2023; expectations that the resolution of permitting issues in northeastern British Columbia will bring increased activity to the region; beliefs respecting strong gross margins in 2023; 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; continued increase in demand from customers primarily focused on the development of natural gas properties in Montney, Duvernay and Deep Basin; views that natural gas is an important transitional fuel for the successful movement to a less carbon intensive world; Source’s focus on and expectations regarding increasing Source’s involvement in the provision of logistics services for other wellsite items; expectations respecting future conditions; and profitability.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn	Derren Newell
Chief Executive Officer	Chief Financial Officer
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Announces Upcoming Earnings Release

Posted on April 3, 2023 at 5:32 pm.

Written by Meghan Somers

Calgary, Alberta (April 3, 2023) TSX: SHLE

FIRST QUARTER RESULTS RELEASE AND CONFERENCE CALL

Source is pleased to announce that its first quarter financial results for the period ending March 31, 2023, will be released following the Toronto Stock Exchange market close on May 4, 2023.

A conference call has been scheduled for 7:30 am (Calgary time) on Friday, May 5, 2023. 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:

Click Below to Register for the Results Conference Call:

Source Energy Services Q1’23 Results Call

Results Conference Call Playback Access:

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until June 5, 2023. Below are the details to access the call playback:

Toll-Free Playback Number: 1-800-319-6413

Playback Passcode: 9672

ANNUAL GENERAL MEETING

Source also wishes to announce that its 2023 Annual Meeting of Shareholders (the “AGM”) will be held on Friday, May 5, 2023, at 10:00 a.m. (Calgary time) in a virtual, audio only, webcast format. Shareholder engagement is extremely important to Source and all shareholders will have equal opportunity to ask questions. Below are the details to attend the virtual-only AGM:

Password: source2023

If you experience technical or logistical issues related to accessing the virtual meeting, technical support is available:

1-888-290-1175 (toll-free in Canada and the United States)
1-587-885-0960 (long distance charges may apply)

ABOUT SOURCE ENERGY SERVICES

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn	Meghan Somers
Chief Executive Officer	Communications Advisor
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Reports Q4 2022 and Year End Results

Posted on March 8, 2023 at 6:28 pm.

Written by Meghan Somers

Calgary, Alberta (March 8, 2023) TSX: SHLE

Source Energy Services Ltd. (“Source” or the “Company”) is pleased to announce its financial results for the three and twelve months ended December 31, 2022.

2022 PERFORMANCE HIGHLIGHTS

Key highlights for the year ended December 31, 2022, included the following:

realized Adjusted EBITDA⁽¹⁾ of $61.5 million, a 59% increase from 2021;
reported a net loss of $8.8 million, a $15.6 million improvement from 2021;
realized sand sales volumes of 2,845,600 MT and total revenue of $415.9 million, a 15% and 30% increase, respectively, from 2021;
recorded utilization of 75% for the Canadian Sahara fleet and 74% for the US Sahara fleet for the year;
closed a transaction with Canadian Silica Industries (“CSI”) to assume operation of CSI’s Peace River frac sand facility, complementing Source’s Northern White proppant resources;
closed a transaction for a new $75.4 million (US$55.0 million) credit facility;
lowered borrowing costs by 200 basis points by commencing cash interest payments for the senior secured notes and further improved borrowing costs due to lower effective interest rates on the new credit facility;
reduced amounts outstanding for the credit facilities by $9.8 million at December 31, 2022 compared to prior year;
renewed one major customer contract at the end of the year and a second major contract in early 2023; and
realized gross margin of $58.1 million and Adjusted Gross Margin⁽¹⁾ of $79.0 million, increases of 48% and 31%, respectively, when compared to 2021.

Note:

Adjusted Gross Margin (including on a per MT basis) and Adjusted EBITDA 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.sedar.com.

RESULTS OVERVIEW

	Three months ended December 31,		Year ended December 31,
($000’s, except MT and per unit amounts)	2022	2021	2022	2021
Sand volumes (MT)⁽¹⁾	566,130	528,977	2,845,600	2,483,362

Sand revenue	70,291	54,989	341,671	258,545
Wellsite solutions	16,170	11,913	69,790	57,621
Terminal services	990	648	4,451	3,695
Sales	87,451	67,550	415,912	319,861
Cost of sales	71,696	59,290	336,940	259,429
Cost of sales – depreciation	5,125	4,071	20,827	21,102
Cost of sales	76,821	63,361	357,767	280,531
Gross margin	10,630	4,189	58,145	39,330
Operating expense	6,374	4,142	20,075	16,514
General & administrative expense	2,642	1,990	10,034	9,283
Depreciation	2,361	2,426	10,555	9,873
Income (loss) from operations	(747)	(4,369)	17,481	3,660
Total other expense	11,462	10,197	26,251	28,063
Net loss⁽²⁾	(12,209)	(14,566)	(8,770)	(24,403)
Net loss per share ($/share)	(0.90)	(1.08)	(0.65)	(1.80)
Diluted net loss per share ($/share)	(0.90)	(1.08)	(0.65)	(1.80)
Adjusted EBITDA⁽³⁾	6,454	1,656	61,501	38,587
Sand revenue sales/MT	124.16	103.95	120.07	104.11
Gross margin/MT	18.78	7.92	20.43	15.84
Adjusted Gross Margin⁽³⁾	15,755	8,260	78,972	60,432
Adjusted Gross Margin/MT⁽³⁾	27.83	15.62	27.75	24.33

Notes:

One MT is approximately equal to 1.102 short tons.
The average Canadian to United States (“US”) dollar exchange rate for the three and twelve months ended December 31, 2022, was $0.7365 and 0.7686, respectively (2021 – $0.7935 and 0.7978, respectively).
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.sedar.com.

2022 RESULTS

Western Canadian Sedimentary Basin (“WCSB”) completion activity levels remained strong throughout the year which drove improved sand sales volumes and increased pricing in the spot market for sand, as supply and demand dynamics rebalanced during the year. Source achieved a $96.1 million or 30% increase in total revenue compared to 2021, driven by higher sand sales volumes, higher average realized sand pricing and improved wellsite solutions revenue.

Cost of sales, excluding depreciation, increased for the year due to higher sand sales volumes and higher costs for transportation and freight, due to increased prices for fuel, compared to last year. Source incurred additional costs for third party sand purchases, procured to ensure no customer supply interruptions resulting from increased customer demand, relative to 2021. These cost increases were partly mitigated by improved sales distribution across mesh sizes resulting in improved yields. Cost of sales was also impacted by a weakening Canadian dollar on US denominated costs relative to last year; however, this was offset by gains realized on foreign currency forward contracts settled during the year.

For the year ended December 31, 2022, gross margin increased by $18.8 million, attributed to higher sand sales volumes and improved pricing. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $29.80 per MT, compared to $24.33 per MT in 2021, favorably impacted by improved customer and spot market pricing, despite higher costs for transportation and freight due to increased fuel costs compared to last year. Higher volumes of mine gate sales, relative to last year, contributed further reductions to cost of sales and further benefited gross margin for 2022. The weakening of the Canadian dollar negatively impacted Adjusted Gross Margin; however, this impact was largely offset by the settlement of foreign currency forward contracts in the third quarter.

Operating expenses increased on a year-over-year basis, primarily attributed to increased repairs and maintenance costs, including expenditures required to bring the new Peace River facility online, and an increase in royalty payments, directly related to higher activity levels. In 2021, general and administrative expense benefited from proceeds of the Canada Emergency Wage Subsidy (“CEWS”) program and the reversal of a provision for bad debt expense. Adjusted EBITDA was $61.5 million for 2022, a reflection of the strong sand sales volumes and sand sales pricing realized.

New Senior Credit Facility

On October 14, 2022, the Company closed a new revolving asset backed senior credit facility (the “ABL”) with a syndicate comprised of FGI Worldwide LLC and CIT Northbridge Credit, as advised by CIT Asset Management LLC, providing access to funding of approximately $75.4 million (US$55.0 million). The ABL provides Source with a lower cost of borrowing and less restrictive covenants.

Upon closing of the ABL, Source repaid all outstanding draws on the former ABL facility and senior secured term loan (collectively, the “Credit Facility”). The Company also entered into a supplemental indenture that governs the Notes which permitted Source to execute the ABL facility in exchange for a one percent consent fee to the noteholders which was paid in kind on closing. For additional information, including the financial covenants of the ABL facility, refer to ‘Long-term Debt’ within Source’s MD&A, available online at www.sedar.com.

Liquidity and Capital Resources

*Free Cash Flow*	Three months ended December 31,		Year ended December 31,
($000’s)	2022	2021	2022	2021
Adjusted EBITDA⁽¹⁾	6,454	1,656	61,501	38,587
Financing expense paid	(16,311)	(1,888)	(28,599)	(7,897)
Capital expenditures, net of proceeds on disposal of property, plant and equipment	(3,940)	(2,000)	(13,288)	(6,442)
Payment of lease obligations	(4,746)	(3,586)	(15,751)	(13,224)
Free Cash Flow⁽¹⁾	(18,543)	(5,818)	3,863	11,024

Note:

Adjusted EBITDA and Free Cash Flow are not defined under IFRS, refer to ‘Non-IFRS Measures’ below. The reconciliation to the comparable IFRS measure can be found in the table below.

Source generated Free Cash Flow of $3.9 million for the year ended December 31, 2022, compared to $11.0 million generated for 2021. The decrease is attributed to higher financing expense paid, as interest incurred for the Notes in 2021 was paid in kind, compared to $12.9 million of cash interest payments recognized for the Notes through 2022. Higher interest expense incurred for the ABL facility, reflecting higher average draws outstanding and an increase in the variable interest rates for the facility, as well as incremental costs incurred for the closing of the ABL facility, also contributed to the reduction in Free Cash Flow. An increase in capital expenditures for the year, largely due to maintenance work performed at the Peace River facility and increased overburden removal costs, as well as $1.5 million in incremental interest expense for lease obligations, largely due to lease payments related to the Peace River facility, further contributed to the reduction. The increase in cash outflows were partially offset by a $22.9 million improvement in Adjusted EBITDA, reflecting strong volumes and increased average sand prices, compared to the prior year.

During the fourth quarter of 2022, Free Cash Flow was impacted by an increase in financing expense paid, attributed to the payment of two quarterly interest payments during the period, for a total of $8.7 million, compared to the same period last year when interest incurred for the Notes was paid in kind. Source was not permitted to make the August 15, 2022 quarterly interest payment for the Notes until after the closing of the ABL facility, which occurred in October, 2022. Source realized an increase in capital expenditures and interest expense for lease payments during the quarter, as noted above, compared to the fourth quarter of 2021.

Source’s capital expenditures for the fourth quarter of 2022 were $4.2 million, an increase of $2.2 million compared to the same period last year. The increase in expenditures for maintenance and sustaining capital was primarily related to the Peace River facility maintenance, and a $1.9 million increase in costs associated with overburden removal for mining operations, as continued strong sand sales volumes are expected. Growth capital expenditures were lower, on a quarter-over-quarter basis, due to the completion of Source’s ninth Sahara unit in the fourth quarter of last year.

For the year ended December 31, 2022, capital expenditures increased by $8.3 million compared to 2021, driven by expenditures for the Peace River facility and increased overburden removal, as noted above. During 2022, Source sold excess production equipment, generating proceeds of $1.5 million. Management continues to assess equipment and other assets required to service Source’s operations to ensure optimal levels are maintained on an on-going basis.

Q4 2022 RESULTS

Source sold sand volumes of 566,130 MT for the three months ended December 31, 2022, generating sand revenue of $70.3 million, an increase of $15.3 million or 28% from the fourth quarter of 2021. The increase was primarily due to a 33% increase in average realized sand price ($35.08 per MT, excluding mine gate sales). During the fourth quarter, revenue from mine gate sales lowered the average realized sand price by $14.87 per MT; however, the impact of mine gate sales on average realized sand pricing was more than offset by the pricing increases for spot and contract customers. The sale of lower-value mine gate sales has a favorable impact on production costs, creating efficiencies which result in increased production yields. The increased sand revenue reflects meaningful pricing gains realized for both spot customers and contracted customers, relative to the fourth quarter of last year, as certain contracts reflect pricing increases implemented late in 2022.

For the three months ended December 31, 2022, wellsite solutions revenue was $16.2 million, an increase of $4.3 million or 36% compared to the same period in 2021. During the quarter, trucking volumes were lower compared to the fourth quarter of 2021, impacted by certain customer job and permitting delays. Despite the lower volumes, last mile trucking solutions generated a 32% increase in revenue over the same quarter last year, favorably impacted by longer trips from terminal to the wellsite and increased pricing realized. Sahara-related revenue increased 44% on a quarter-over-quarter basis, due to a 35% increase in days utilized across the nine-unit fleet. Sahara units operating in the US achieved utilization of 85%, with recently added customers operating in New Mexico and Montana.

For the fourth quarter of 2022, terminal services revenue was $1.0 million, an increase of $0.3 million compared to last year. The increase during the fourth quarter was primarily due to higher chemical elevation volumes, as well as revenue generated from the transloading of other non-sand materials, reflecting the commencement of an agreement to transload condensate rail cars through the first quarter of 2023. A reduction in sand elevation volumes for the quarter, compared to the same period last year, partially offset these increases.

Cost of sales, excluding depreciation, increased by $12.4 million for the fourth quarter of 2022 compared to the same period in 2021. Higher sand sales volumes realized impacted cost of sales, as well as of higher costs for transportation and freight. In the fourth quarter of 2022, increased amounts of third party sand were purchased, and incremental fuel surcharges were incurred on these purchases, unfavorably impacting cost of sales, excluding depreciation. These increases were partially offset by a reduction in production costs, attributed to warmer weather experienced during the fourth quarter, which contributed to increased production efficiencies. Last year, cost of sales was favorably impacted by proceeds received from the CEWS program totaling $0.1 million for the fourth quarter of 2021. Significant components of cost of sales are denominated in US dollars, including sand processing and rail freight, and are therefore subject to exchange rate fluctuations. During the fourth quarter of 2022, a weakening of the Canadian dollar on US dollar denominated components of cost of sales contributed an increase of $6.38 per MT to cost of sales, compared to the same period last year.

Gross margin increased by $6.4 million for the quarter. Excluding gross margin from mine gate volumes, Adjusted Gross Margin for the fourth quarter was $30.15 per MT, favorably impacted by improved customer and spot market pricing, as well as certain production adjustments to offset increasing costs for fuel. These improvements more than offset higher costs for transportation and freight due to higher fuel costs, compared to the fourth quarter of 2021. Excluding the impact of the weakening Canadian dollar during the three months ended December 31, 2022, and the benefit of proceeds from the CEWS program during the fourth quarter of 2021, Adjusted Gross Margin (excluding margin from mine gate volumes) increased by $14.65, or 94%, compared to the same period last year. The weakening of the Canadian dollar negatively impacted Adjusted Gross Margin by approximately $3.29 per MT.

For the fourth quarter of 2022, total operating and general and administrative expense increased $2.9 million, compared to the same period in 2021. During the three months ended December 31, 2022, operating expense increased by $2.2 million from the same period last year. The increase is primarily due to increased people costs as a result of higher compensation expense, including variable incentive compensation, as well as higher repairs and maintenance for Source’s rail car fleet which resulted in increased equipment costs compared to prior year. Royalty costs incurred grew as a result of higher sand shipments from mines that require royalty payments and, combined with increased insurance expense, led to increased selling and administrative costs compared to the same period last year. General and administrative expense increased $0.7 million in the fourth quarter of 2022 compared to the same quarter in 2021, primarily due to increased people costs as a result of higher compensation expense, including higher variable incentive compensation in the current quarter. Higher selling and administrative costs were incurred during the quarter as a result of increased professional fees compared to last year.

ESG UPDATE

Source is committed to operating in a sustainable manner and works closely with its stakeholders to go above and beyond current regulatory requirements through initiatives such as voluntary greenhouse gas emissions reduction programs, as well as Source’s production water recycling program. During 2022, Source reduced its greenhouse gas emissions rate by 2.4% compared to the previous year, and 23.4% compared to the base year. Source’s water recycling program reduces the reliance on local well water and in 2022 Source recycled over four hundred million litres of water, ensuring Source remained far below its permitted well water allowance. Source has reclaimed just under fourteen acres of land adjacent to its Wisconsin processing facilities, part of Source’s continued effort to return the land to a thriving vegetative state. In 2022, Source purchased wetland credits to ensure any wetlands impacted by future mine expansion initiatives would be protected.

As an active member of its community, Source supports initiatives that align with its corporate values, support the charitable efforts of our employees and are located close to its operations. Source supports community needs in the areas of Arts and Culture, Education, Environment, Health and Wellness and Sports and Recreation through financial donations and employee volunteer hours.

For more information, Source’s most recent ESG report is available at www.sourceenergyservices.com.

BUSINESS OUTLOOK

Strong industry activity continues to favorably impact frac sand supply and demand fundamentals which are expected to remain strong through 2023. Previous well permitting issues in the northeastern British Columbia region, which caused customer delays in late 2021 and through 2022, have now been resolved and are expected to bring increased activity to the region again as exploration and production (“E&P”) companies catch up on their development plans. Source has renewed customer contracts with terms and conditions reflective of the current operating environment. Source believes these fundamentals, coupled with Source’s leading service offerings and logistics capabilities required for larger volumes of sand per well, as well as Source’s terminal network footprint, would support further improved gross margins in 2023.

In the longer-term, Source believes the increased demand for natural gas, driven by power generation facilities, increased natural gas pipeline export capabilities and liquefied natural gas exports 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. This trend is consistent with Source’s view that natural gas will be an important transitional fuel that is critical for the successful movement to a less carbon intensive world.

UPDATED NI 43-101 TECHNICAL REPORTS FOR THE MINERAL PROJECTS IN WISCONSIN, UNITED STATES

Source is pleased to announce that it has filed with the applicable Canadian securities regulatory authorities updated National Instrument 43-101 – Standards of Disclosure for Mineral Projects (“NI 43-101”) technical reports for each of its three mineral projects in Wisconsin, United States (collectively, the “Technical Reports”).

The Technical Reports have each been prepared with an effective date of December 31, 2022 and were updated as part of an annual assessment that accounts for conventional mining depletion of the mineral resources and include updated production records. The updated resources do not represent a 100% or greater change in the total mineral resources.

Mineral resources are not mineral reserves and do not have demonstrated economic viability. There is no guarantee that all or any part of the mineral resource will be converted into a mineral reserve. Source has not based its production decisions and ongoing mine production on mineral reserve estimates, preliminary economic assessments, prefeasibility studies or feasibility studies. As a result, there may be an increased uncertainty of achieving any particular level of recovery of minerals or the cost of such recovery and historically projects without any mineral reserves have increased uncertainty and risk of failure.

Further details with respect to the scientific and technical information contained in this press release are available in the Technical Reports, which are available under the Company’s SEDAR profile at www.sedar.com.

FOURTH QUARTER CONFERENCE CALL

A conference call to discuss Source’s fourth quarter financial results has been scheduled for 7:30 am MST (9:30 am ET) on Thursday, March 9, 2023.

Source Energy Services Q4 2022 Results Call

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until April 9, 2023, using the following dial-in:

Playback Number: Toll-Free 1-800-319-6413

Playback Passcode: 9671

ABOUT SOURCE ENERGY SERVICES

IMPORTANT INFORMATION

These results should be read in conjunction with each of Source’s audited consolidated financial statements for the years ended December 31, 2022 and 2021, 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 (“AIF”), are available under the Company’s SEDAR profile at www.sedar.com. 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

Reconciliation of Adjusted EBITDA and Free Cash Flow to Net Loss

	Three months ended December 31,		Year ended December 31,
($000’s)	2022	2021	2022	2021
Net loss	(12,209)	(14,566)	(8,770)	(24,403)
Add:
Interest expense	6,812	6,594	27,102	25,677
Cost of sales – depreciation	5,125	4,071	20,827	21,102
Depreciation	2,361	2,426	10,555	9,873
Loss on debt extinguishment	862	—	862	—
Finance expense (excluding interest expense)	2,000	1,215	6,045	4,643
Share-based compensation expense	645	476	947	643
Gain on asset disposal	(11)	—	(1,192)	(63)
Unrealized loss (gain) on derivative assets	—	173	1,718	(247)
Other expense⁽¹⁾	869	108	3,407	203
Adjusted EBITDA	6,454	1,656	61,501	38,587
Financing expense paid	(16,311)	(1,888)	(28,599)	(7,897)
Capital expenditures, net of proceeds on disposal of property, plant and equipment	(3,940)	(2,000)	(13,288)	(6,442)
Payment of lease obligations	(4,746)	(3,586)	(15,751)	(13,224)
Free Cash Flow	(18,543)	(5,818)	3,863	11,024

Note:

Includes expenses related to the incident at the Fox Creek terminal facility and one-time retirement payments.

Reconciliation of Gross Margin to Adjusted Gross Margin

	Three months ended December 31,		Year ended December 31,
($000’s)	2022	2021	2022	2021
Gross margin	10,630	4,189	58,145	39,330
Cost of sales – depreciation	5,125	4,071	20,827	21,102
Adjusted Gross Margin	15,755	8,260	78,972	60,432

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 available online at www.sedar.com 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 “expects”, “believes”, “continues”, “focus”, “trends”, “anticipates” or variations of such words and phrases, or state 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: our expectation that strong sand sales volumes will continue; our continued assessment of equipment and other assets required to service our operations; anticipated high activity levels in the first quarter of 2023; Source’s efforts to return the land of a thriving vegetative state; our expectation that frac sand supply and demand fundamentals will remain strong through 2023; our expectation that the resolution of permitting issues in northeastern British Columbia will bring increased activity to the region; our beliefs respecting improved gross margins in 2023; 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; continued increase in demand from customers primarily focused on the development of natural gas properties in Montney, Duvernay and Deep Basin; the Company’s view that natural gas is an important transitional fuel for the successful movement to a less carbon intensive world; expectations respecting future conditions; and profitability.

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; 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; 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 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 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; and risks and uncertainties related to COVID-19 or its variants, including changes in energy demand.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn	Derren Newell
Chief Executive Officer	Chief Financial Officer
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Announces Upcoming Earnings Release

Posted on February 9, 2023 at 5:38 pm.

Written by Meghan Somers

Calgary, Alberta (February 9, 2023) TSX: SHLE

FOURTH QUARTER RESULTS RELEASE AND CONFERENCE CALL

Source is pleased to announce that its fourth quarter financial results for the period ending December 31, 2022, will be released following the Toronto Stock Exchange market close on March 8, 2023.

A conference call has been scheduled for 7:30 am (Calgary time) on Thursday, March 9, 2023. 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:

Registering for the Results Conference Call:

Source Energy Services Q4 2022 Results Call

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until April 9, 2023. Below are the details to access the call playback:

Toll-Free Playback Number: 1-800-319-6413

Playback Passcode: 9671

ABOUT SOURCE ENERGY SERVICES

Source is a company that focuses on the production and distribution of high quality Northern White 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 mines and processing facilities, its Western Canadian terminal network, its “last mile” logistics capabilities and Sahara, a proprietary wellsite mobile sand storage and handling system.

Media Inquiries:	Investor Relations Inquiries:
Meghan Somers	Scott Melbourn
Communications Advisor	Chief Executive Officer
(403) 262-1312	(403) 262-1312
communications@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Source Energy Services Reports Q3 2022 Results

Posted on November 8, 2022 at 8:05 pm.

Written by Meghan Somers

Calgary, Alberta (November 8, 2022) TSX: SHLE

Source Energy Services Ltd. (“Source” or the “Company”) is pleased to announce its financial results for the three and nine months ended September 30, 2022.

THIRD QUARTER 2022 HIGHLIGHTS

Key highlights for the three months ended September 30, 2022, included the following:

realized sand sales volumes of 753,233 MT and sand revenue of $97.2 million, a 22% increase from the third quarter of 2021;
achieved a 28% increase in average realized sand price, excluding revenue from mine gate sales volumes;
distributed 691,242 MT of proppants and chemicals through Source’s Western Canadian Sedimentary Basin (“WCSB”) terminal network;
achieved a record for the highest number of days on site for the Sahara fleet in Canada;
recorded utilization of 87% for the quarter and added two new Sahara customers;
reported $30.5 million of available liquidity on its asset backed loan (“ABL”) facility at the end of the quarter, reflecting a reduction of total net debt outstanding of $17.2 million;
realized gross margin of $16.4 million and Adjusted Gross Margin⁽¹⁾ of $21.1 million;
reported net income of $5.9 million;
realized Adjusted EBITDA⁽¹⁾ of $16.3 million, excluding the $9.7 million realized gain on the settlement of outstanding future forward exchange contracts during the quarter, a 44% increase from the third quarter of 2021; and
subsequent to quarter end, closed a transaction for a new $75.4 million (US$55.0 million) credit facility.

Note:
(1) Adjusted Gross Margin (including on a per MT basis) and Adjusted EBITDA 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.sedar.com.

RESULTS OVERVIEW

	Three months ended September 30,		Nine months ended September 30,
($000’s, except MT and per unit amounts)	2022	2021	2022	2021
Sand volumes (MT)⁽¹⁾	753,233	751,611	2,279,470	1,954,385

Sand revenue	97,173	79,343	271,380	203,556
Wellsite solutions	21,748	17,554	53,620	45,708
Terminal services	985	789	3,461	3,047
Sales	119,906	97,686	328,461	252,311
Cost of sales	98,772	79,994	265,244	200,139
Cost of sales – depreciation	4,732	4,921	15,702	17,031
Cost of sales	103,504	84,915	280,946	217,170
Gross margin	16,402	12,771	47,515	35,141
Operating expense	4,564	4,606	13,701	12,372
General & administrative expense	2,205	2,299	7,392	7,293
Depreciation	2,833	2,336	8,194	7,447
Income from operations	6,800	3,530	18,228	8,029
Total other expense	929	7,109	14,789	17,866
Net income (loss)⁽²⁾	5,871	(3,579)	3,439	(9,837)
Net earnings (loss) per share ($/share)	0.43	(0.26)	0.25	(0.73)
Diluted net earnings (loss) per share ($/share)	0.38	(0.26)	0.19	(0.73)
Adjusted EBITDA⁽³⁾	25,994	11,310	55,047	36,931
Sand revenue sales/MT	129.01	105.56	119.05	104.15
Gross margin/MT	21.78	16.99	20.84	17.98
Adjusted Gross Margin⁽³⁾	21,134	17,692	63,217	52,172
Adjusted Gross Margin/MT⁽³⁾	28.06	23.54	27.73	26.69

Notes:
(1)    One MT is approximately equal to 1.102 short tons.
(2)    The average Canadian to United States (“US”) dollar exchange rate for the three and nine months ended September 30, 2022, was $0.7659 and 0.7795, respectively (2021 – $0.7937 and 0.7992, respectively). Refer to ‘Q3 2022 Results’ for additional information.
(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.sedar.com.

Q3 2022 RESULTS

Source generated $97.2 million of sand revenue during the third quarter, an increase of 22% over the same period in 2021 and an increase of $3.6 million over the second quarter of 2022. This is the highest quarterly sand revenue generated since the third quarter of 2018, and reflects improved sand sales pricing primarily due to improved industry dynamics. As a result, Source realized a 28% increase in average realized sand price, or $29.64 per MT, excluding the impact of mine gate sales, compared to the third quarter last year, favorably impacting sand revenue. Commodity prices for oil and natural gas remain strong, resulting in sustained high levels of activity through the third quarter in the WCSB.

During the third quarter, cost of sales, excluding depreciation, was impacted by higher costs for transportation and freight, due to increased prices for fuel compared to the same period last year and additional costs for third party sand purchases, procured to ensure no customer supply interruptions resulting from increased customer demand. Despite continued cost pricing pressure, Source was able to mitigate certain cost increases through increased efficiencies at its Wisconsin facilities and pricing increases. Cost of sales was impacted by a weakening Canadian dollar on US denominated costs relative to the third quarter of 2021. The impact of the weaker Canadian dollar was offset in Adjusted EBITDA by gains realized on foreign currency forward contracts settled during the quarter.

Gross margin increased by $3.6 million for the quarter. Excluding gross margin from mine gate volumes, Adjusted Gross Margin for the third quarter was $30.27 per MT, favorably impacted by improved customer and spot market pricing, as well as strong sand sales volumes. Compared to the same quarter last year, Adjusted Gross Margin per MT increased by 55% after adjusting for the impact of the weakening Canadian dollar and the benefit of proceeds from the Canada Emergency Wage Subsidy (“CEWS”) program, as well as certain production credits recorded last year. The weakening of the Canadian dollar negatively impacted Adjusted Gross Margin by approximately $2.07 per MT; however, this impact was offset by the settlement of foreign currency forward contracts settled during the quarter (see below).

Higher repairs and maintenance costs were offset by lower people costs realized, due to lower variable compensation expense recorded, resulting in slightly lower total operating expense for the third quarter of 2022 compared to the same period last year, despite no proceeds received from the CEWS program during the current quarter. General and administrative expense was also lower on a quarter-over-quarter basis, primarily attributed to lower selling and administrative costs driven by a lower provision for bad debt expense.

After excluding the realized gain on the settlement of foreign exchange forward contracts of $9.7 million, Adjusted EBITDA was $16.3 million for the third quarter, a reflection of the strong sand sales volumes and sand sales pricing realized despite the unfavorable impact of higher costs incurred for fuel and freight. The weakening of the Canadian dollar negatively impacted Adjusted EBITDA by $2.0 million during the quarter, which was offset by $2.1 million realized from the settlement of normal course foreign exchange contracts executed during the quarter.

In addition to the normal course foreign exchange contracts settled, as noted above, Source is renegotiating certain of its customer contracts to be denominated in US dollars which will further reduce its exposure to US dollar fluctuations. As a result of rebalancing US dollar denominated revenue, combined with the new ABL facility (see below) which is denominated in US dollars, Source wound up its outstanding foreign exchange forward contracts prior to September 30, 2022, resulting in a realized foreign exchange gain of $9.7 million during the quarter. Approximately $3.3 million of this realized foreign exchange gain is related to foreign exchange forward contracts that were expiring in the fourth quarter of 2022, with $6.4 million of the realized gain related to contracts due to mature in 2023.

New Senior Credit Facility

On October 14, 2022, the Company closed a new revolving asset backed senior credit facility (the “new ABL”) with a syndicate comprised of FGI Worldwide LLC and CIT Northbridge Credit, as advised by CIT Asset Management LLC, providing access to funding of approximately $75.4 million (US$55.0 million). The new ABL provides Source with a lower cost of borrowing and less restrictive covenants which will allow Source to focus on the generation of free cash flow and the reduction of debt.

Upon closing of the new ABL, Source completed the August 15, 2022 cash interest payment for the Notes and repaid all outstanding draws on the ABL and senior secured term loan. For additional information, including the financial covenants of the new ABL facility, refer to ‘Long-term Debt’ within Source’s MD&A.

Liquidity and Capital Resources

*Free Cash Flow*	Three months ended September 30,		Nine months ended September 30,
($000’s)	2022	2021	2022	2021
Adjusted EBITDA⁽¹⁾	25,994	11,310	55,047	36,931
Financing expense paid	(3,147)	(1,857)	(12,288)	(6,009)
Capital expenditures, net of proceeds on disposal of property, plant and equipment	(4,454)	(1,829)	(9,348)	(4,443)
Payment of lease obligations	(3,849)	(3,149)	(11,003)	(9,637)
Free Cash Flow⁽¹⁾	14,544	4,475	22,408	16,842

Note:
(1) Adjusted EBITDA and Free Cash Flow are not defined under IFRS, refer to ‘Non-IFRS Measures’ below. The reconciliation to the comparable IFRS measure can be found in the table below.

At September 30, 2022, Source had $30.5 million of available liquidity on its ABL facility. Source generated Free Cash Flow of $14.5 million for the three months ended September 30, 2022, compared with $4.5 million generated for the third quarter of 2021. The increase was driven primarily by a $5.0 million improvement in Adjusted EBITDA (excluding the gain realized from the settlement of outstanding future foreign exchange forward contracts of $9.7 million). This increase was partially offset by capital expenditures for the quarter, largely due to the maintenance work performed at the Peace River facility. Free Cash Flow was negatively impacted by higher interest expense incurred for the ABL facility, reflecting higher average draws outstanding prior to the end of the quarter and an increase in the variable interest rates for the facility.

Source’s capital expenditures for the third quarter of 2022 were $4.5 million, an increase of $2.6 million compared to the second quarter last year. The increase in capital expenditures for the period was primarily due to maintenance and sustaining capital, related to a $0.2 million increase in costs associated with overburden removal for mining operations and the Peace River facility maintenance, as noted above. Growth capital expenditures were lower, on quarter-over-quarter basis, due to the Sahara unloading capacity enhancements and the purchase of production equipment to improve yields completed in the third quarter of last year.

ESG UPDATE

Source is committed to operating in a sustainable manner and works closely with its stakeholders to go above and beyond current regulatory requirements through initiatives such as voluntary enrollment with the Department of Natural Resources Sustainable Growth Program and Managed Forest Program, as well as Source’s production water recycling process. Thus far in 2022, Source has reclaimed eleven acres of land adjacent to its Wisconsin processing facilities, part of Source’s continued effort to return the land to a thriving vegetative state. Source is continually looking to implement efficiencies to lessen the impact of Source’s activities on the environment and specifically to reduce greenhouse gas emissions, and has several additional initiatives currently underway at its processing and terminal facilities to further reduce Source’s operational emissions.

For more information, Source’s most recent ESG report is available at www.sourceenergyservices.com.

BUSINESS OUTLOOK

Sustained levels of industry activity continue to favorably impact frac sand supply and demand fundamentals which are expected to remain favorable through 2023. These fundamentals, coupled with Source’s leading service offerings and logistics capabilities, have translated into meaningful pricing gains and improved gross margins in 2022, particularly in the spot sand sales market, a trend that is expected to continue through 2023. Source’s main customer contracts will expire over the next few quarters, with contract renewals creating opportunity for further growth in margins. Source customers have signaled growing confidence related to operating in the northeastern British Columbia region. Operations in this geological region require larger volumes of sand per well and, combined with Source’s terminal network footprint, would support strong activity levels for Source next year.

In the longer-term, Source believes the increased demand for natural gas, driven by the conversion of coal-fired power generation facilities, increased natural gas pipeline export capabilities and liquefied natural gas exports 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. This trend is consistent with Source’s view that natural gas will be an important transitional fuel that is critical for the successful movement to a less carbon intensive world.

In support of the move to a less carbon intensive world, Source has begun focusing on developing economic growth opportunities which transition from traditional fossil fuels to less carbon intense energy solutions. As a pathway to diversifying Source’s business, and to participate in the decarbonization of the economy, Source is advancing opportunities in its own operations as well as at the well site and at its terminals. Source also continues to focus on increasing its involvement in the provision of logistics services for other items needed at the wellsite in response to customer requests to expand its service offerings and to further utilize its existing Western Canadian terminals to provide additional services.

THIRD QUARTER CONFERENCE CALL

A conference call to discuss Source’s third quarter financial results has been scheduled for 9:00 am MST (11:00 am ET) on Wednesday, November 9, 2022.

Source Energy Services Q3’22 Results Call

Results Conference Call Playback Access:

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until December 9, 2022. Below are the details to access the call playback:

Toll-Free Playback Number: 1-800-319-6413

Playback Passcode: 9547

ABOUT SOURCE ENERGY SERVICES

IMPORTANT INFORMATION

These results should be read in conjunction with each of Source’s audited consolidated financial statements for the three and nine months ended September 30, 2022 and 2021, 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 (“AIF”), are available under the Company’s SEDAR profile at www.sedar.com. 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

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

	Three months ended September 30,		Nine months ended September 30,
($000’s)	2022	2021	2022	2021
Net income (loss)	5,871	(3,579)	3,439	(9,837)
Add:
Interest expense	7,003	6,456	20,289	19,083
Cost of sales – depreciation	4,732	4,921	15,702	17,031
Depreciation	2,833	2,336	8,194	7,447
Finance expense (excluding interest expense)	1,520	1,182	4,046	3,428
Share-based compensation expense (recovery)	(271)	(3)	302	167
Loss (gain) on asset disposal	2	(54)	(1,181)	(63)
Unrealized loss (gain) on derivative assets	4,157	—	1,718	(420)
Other expense⁽¹⁾	147	51	2,538	95
Adjusted EBITDA	25,994	11,310	55,047	36,931
Financing expense paid	(3,147)	(1,857)	(12,288)	(6,009)
Capital expenditures, net of proceeds on disposal of property, plant and equipment	(4,454)	(1,829)	(9,348)	(4,443)
Payment of lease obligations	(3,849)	(3,149)	(11,003)	(9,637)
Free Cash Flow	14,544	4,475	22,408	16,842

Note:
(1) Includes expenses related to the incident at the Fox Creek terminal facility and one-time retirement payments.

Reconciliation of Gross Margin to Adjusted Gross Margin

	Three months ended September 30,		Nine months ended September 30,
($000’s)	2022	2021	2022	2021
Gross margin	16,402	12,771	47,515	35,141
Cost of sales – depreciation	4,732	4,921	15,702	17,031
Adjusted Gross Margin	21,134	17,692	63,217	52,172

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 available online at www.sedar.com 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 “expects”, “believes”, “continues”, “focus”, “trends” or variations of such words and phrases, or state 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 efforts to return the land of a thriving vegetative state; our search for efficiencies to implement in order to lessen the impact of Source’s activities on the environment and specifically to reduce greenhouse gas emissions; our expectation that frac sand supply and demand fundamentals will remain favorable through 2023; our expectation that meaningful pricing gains will continue through 2023; our belief that improved gross margins, particularly in the spot sand sales market, will continue through 2023; our expectation that contract renewals over the next few quarters creates opportunity for further growth in margins; consumers’ increasing activity levels and confidence in connection with operating in northeastern British Columbia, and our expectation that operations in such geological region would support strong activities for Source next year; 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; continued increase in demand from customers primarily focused on the development of natural gas properties in Montney, Duvernay and Deep Basin; the Company’s view that natural gas is an important transitional fuel for the successful movement to a less carbon intensive world; our focus on exploring and developing, and advancement of economic growth opportunities related to the transition to less carbon intense energy solutions; our focus on and expectations regarding increasing Source’s involvement in the provision of logistics services for other wellsite items; outlook for commodity prices and sales volumes; expectations respecting future conditions; and profitability.

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; 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; 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 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 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; and risks and uncertainties related to COVID-19 or its variants, including changes in energy demand.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn	Derren Newell
Chief Executive Officer	Chief Financial Officer
(403) 262-1312	(403) 262-1312
investorrelations@sourceenergyservices.com	investorrelations@sourceenergyservices.com

Newsletter Sign-up

Newsletter Sign-up