Source Energy Services Reports Q3 2022 Results

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

20212022

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

20212022

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.

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

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.

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 Q3’22 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

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.

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 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

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 (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

20212022

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.

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 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.

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 MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312(403) 262-1312
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Announces Upcoming Earnings Release

Calgary, Alberta (October 18, 2022) 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, 2022, will be released following the Toronto Stock Exchange market close on November 8, 2022.

A conference call has been scheduled for 9:00 am (Calgary time) on Wednesday, November 9, 2022. 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 Q3’22 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

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.

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.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312(403) 262-1312
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Completes Refinancing of Senior Credit Facility, Amends Senior Secured Note Indenture and Makes the Payment of Cash Interest

Calgary, Alberta (October 17, 2022) TSX: SHLE

Source Energy Services Ltd. (together with its affiliates, “Source” or the “Company”) is pleased to announce it has closed a new revolving asset backed senior credit facility (the “ABL”) with a syndicate comprised of FGI Worldwide LLC (“FGI”) and CIT Northbridge Credit, as advised by CIT Asset Management LLC (“CIT”), providing access to funding of approximately CAD $75 million (USD $55 million), and has made the August 15, 2022 cash interest payment on its 10.5% senior secured first lien notes due March 15, 2025 (the “Senior Notes”).

This new ABL facility provides Source with a lower cost of borrowing, less restrictive covenants and an improved liquidity profile. This will allow Source to capitalize on anticipated increasing activity levels in 2023 (and beyond) and focus on generation of free cash flow and reduction of the outstanding principal amount of its Senior Notes. The Company has also entered into a supplemental indenture to the indenture that governs its Senior Notes (the “Supplemental Indenture”) which permits Source to execute the new ABL credit facility.

The ABL facility includes financial covenants which are less restrictive than Source’s prior credit facility and align with Source’s longer-term goals. The covenants take into account Source’s current operating environment, utilizing inputs which reflect only current year operating results and beyond. Key financial covenants of the facility include:

  • a fixed charge coverage ratio of 1:15:1 tested monthly and prior to a distribution based on trailing 12-month inputs starting January 1, 2022;
  • maximum capital expenditures in a fiscal year equal to the lesser of $13.5 million or 35% of trailing 12-month EBITDA, commencing January 1, 2022;
  • a minimum level of the average of the prior three months trailing twelve months of earnings before interest, tax, depreciation and amortization calculated at each fiscal calendar month equal to CAD $25.0 million for October 31, 2022 to December 31, 2022; and
  • a minimum level of excess availability that begins at CAD $3.0 million and rises to CAD $5.0 million by March 31, 2023.

The new ABL facility bears interest at the Secured Overnight Financing Rate (“SOFR”), plus applicable margin, and is secured by a first lien charge on cash, the accounts receivable and inventory of the Company and a second lien charge on all other assets of the business. The ABL facility matures on the earlier of October 14, 2025 or six months prior to the maturity of the Senior Notes, with amounts available under the ABL subject to a borrowing base formula applied to accounts receivable and inventory. Additional terms of the Supplemental Indenture include a limit on capital expenditures incurred beyond overburden removal, mine development and maintenance activities, and limits on incurrences of additional debt and liens by Source.

With the payment of the August 15, 2022 cash interest payment for the Senior Notes and the execution of the Supplemental Indenture, all prior events of default under the indenture have been cured and waived.

The Company’s advisors in connection with the transaction were Canaccord Genuity and its legal advisors were Norton Rose Fulbright Canada LLP. FGI and CIT’s legal advisors were Blank Rome LLP and Blake Cassels & Graydon LLP. A committee of the holders of the Senior Notes was advised by Bennett Jones LLP.

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.

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.

ABOUT FGI

FGI (www.FGIWW.com) is a global leader in the commercial finance and services industry, equipping small and medium enterprises with the tools they need to safely grow their business. FGI’s two principal business units, FGI Finance and FGI Risk, provide clients with flexible and customized lending, as well as risk mitigation solutions designed to support international and domestic growth. Headquartered in New York City, FGI maintains a presence on six continents with clients in over sixty countries around the world.

ABOUT CIT

CIT is a division of First Citizens Bank, the largest family-controlled bank in the United States, continuing a unique legacy of strength, stability and long-term thinking that has spanned generations. Parent company, First Citizens BancShares, Inc. (NASDAQ: FCNCA) is a top 20 U.S. financial institution with more than $100 billion in assets. The company’s commercial banking segment brings a wide array of best-in-class lending, leasing and banking services to middle-market companies and small businesses from coast to coast. First Citizens also operates a nationwide direct bank and a network of more than 550 branches in 22 states, many in high-growth markets. Industry specialists bring a depth of expertise that helps businesses and individuals meet their specific goals at every stage of their financial journey. Discover more at cit.com/firstcitizens.

CIT Northbridge Credit is a trusted financial partner supporting middle-market companies with a broad range of flexible asset-based debt solutions. A joint venture advised by CIT Asset Management, it provides revolving and term loan commitments from $15 million to $150 million to companies across various industries and business cycles, and serves primarily as sole lender, agent, club participant or co-lender.

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”, “estimates”, “anticipates”, “believes”, “continues”, “focus” 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.

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 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.

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 MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312(403) 262-1312
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Update on Refinancing Process and Extension of the Waiver from Lenders under its Credit Agreement

Calgary, Alberta (September 22, 2022) TSX: SHLE

Source Energy Services Ltd. (together with its affiliates, “Source” or the “Company”) announces that it continues to make progress and is now in the final stages of closing the previously announced senior credit facility. As noted in our news release of September 15, 2022, the Company received a waiver from its lenders, which has now been extended to October 14, 2022, to allow Source time to complete closing its new credit facility.

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.

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.

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”, “estimates”, “anticipates”, “believes”, “continues”, “focus” 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 discussions with its debtholders and lenders, and the noteholders’ intention to not accelerate repayment of the Senior Notes; Source’s expectations of its ability to complete a refinancing of its credit facility.

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 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.

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 MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312(403) 262-1312
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Update on Refinancing Process and Receipt of Waiver of Cross Default from Lenders under its Credit Agreement

Calgary, Alberta (September 15, 2022) TSX: SHLE

Source Energy Services Ltd. (together with its affiliates, “Source” or the “Company”) announces that it is in the advanced stages of closing a new USD $60 million senior credit facility. As noted in our news release of August 15, 2022, the Company did not make the August 15, 2022, interest payment (the “August Interest Payment”) due on the senior secured first lien notes (the “Senior Notes”). Source has still not made the August Interest Payment as the Company continues to be prohibited under the terms of the Company’s existing credit facility from doing so. The prohibition relates specifically to the Company not meeting a trailing financial test as a result of the Company’s financial results in the fourth quarter of 2021.

Source has now exceeded the cure period for the non-payment of the August Interest Payment and is currently in default on the Senior Notes. The Company is in discussions with noteholders representing a significant portion of the outstanding principal of the Senior Notes, who have expressed to Source that they are supportive of the Company’s efforts to complete a refinancing of its credit facility. Based on such discussions, the Company does not expect the noteholders to take any immediate steps to accelerate repayment of the Senior Notes under the indenture that governs the Senior Notes. Upon closing of the new senior credit facility, the Company intends to pay the August Interest Payment. Further, the lenders under the Company’s current credit facility have provided a conditional waiver on the cross default (the “Waiver”) arising from the default of the Senior Notes.

The Waiver is effective until the earlier to occur of: (i) September 21, 2022, and (ii) the date that the trustee appointed under the indenture governing the Senior Notes, or holders of not less than 25% of the aggregate principal amount of Senior Notes then outstanding, declares an acceleration of the outstanding Senior Notes such that the notes become immediately due and payable (such earlier date to occur is referred to as the “Extension Period”).

The Company is current with all its suppliers, industry partners and contractors and intends to remain so. The utilization of the Extension Period will not affect any of the Company’s operations or commercial obligations, as the Company currently has more than $20 million of available liquidity.

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.

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.

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”, “estimates”, “anticipates”, “believes”, “continues”, “focus” 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 discussions with its debtholders and lenders, and the noteholders’ intentions to not accelerate repayment of the Senior Notes; Source’s expectations of its ability to complete a refinancing of its credit facility; Source’s expectation that it will remain current with all its suppliers, industry partners and contractors; and that the Company’s operations and commercial obligations will not be affected by the matters disclosed herein.

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 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.

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 MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312(403) 262-1312
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Provides an Update on the Credit Facility Refinancing and Announces Decision to Utilize Interest Payment Grace Period

Calgary, Alberta (August 15, 2022) TSX: SHLE – Source Energy Services (“Source” or the “Company”) announced today that it has made significant progress on the previously announced refinancing of its ABL and Term Loan (the “Credit Facility”) and expects the refinancing to close on or before August 31, 2022. In conjunction with the refinancing and to facilitate an efficient closing, the Company has elected to utilize the 30-day grace period (the “Grace Period”) under the indenture governing its 10.5% senior secured first lien notes due March 15, 2025 (the “Senior Notes”). The Company does not expect to utilize the full Grace Period and intends on making the August 15, 2022 Senior Notes interest payment (the “August Interest Payment”) on the closing of the refinancing.

While the Company has not disbursed the CAD $4.3 million August Interest Payment, the Company has ample liquidity available to fund the disbursement, and is current with all its suppliers, industry partners and contractors and intends to remain so. The utilization of any portion of the Grace Period will not affect any of the Company’s operations, or commercial obligations.

The election to not make the August Interest Payment on the scheduled date does not constitute an event of default under the indenture that governs the Senior Notes, or the credit agreement that governs the Credit Facility, until the expiry of the Grace Period.

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.

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.

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”, “estimates”, “anticipates”, “believes”, “continues”, “focus” 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 discussions with its debtholders and lenders and Source’s expectation that it will remain current with all its suppliers, industry partners and contractors during the Grace Period.

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 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.

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 MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312(403) 262-1312
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Reports Q2 2022 Results

Calgary, Alberta (July 27, 2022) 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, 2022.

SECOND QUARTER 2022 HIGHLIGHTS

Key achievements for the three months ended June 30, 2022, included the following:

  • realized sand sales volumes of 800,136 MT, a 44% increase from the second quarter of 2021, and realized sand revenue of $93.5 million, a 61% increase from the second quarter of 2021;
  • distributed 772,940 MT of proppants and chemicals through Source’s Western Canadian Sedimentary Basin (“WCSB”) terminal network;
  • achieved an 18% increase in the average realized sand price, excluding revenue from mine gate sales volumes;
  • closed a transaction with Canadian Silica Industries (“CSI”) to assume operations of CSI’s Peace River frac sand facility, complementing Source’s Northern White proppant resources;
  • achieved utilization for the Sahara fleet of 69% and added a new global exploration and production (“E&P”) Sahara customer;
  • realized gross margin of $16.5 million, and Adjusted Gross Margin(1) of $21.7 million;
  • reported net income of $4.2 million; and
  • realized Adjusted EBITDA(1) of $14.8 million, a 43% increase from the second quarter of 2021 when excluding proceeds received from the Paycheck Protection Program of US$2.1 million recognized last year.

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

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 six months ended June 30, 2022, was $0.7832 and 0.7865, respectively (2021 – $0.8142 and 0.8019, respectively).
  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.

Q2 2022 RESULTS

Source generated $93.5 million of sand revenue during the second quarter, an increase of 61% over the same period in 2021 and an increase of 16% over the first quarter of 2022. This is the first time since 2018 where second quarter activity levels exceeded those realized during the first quarter of the year, despite the impact of spring break-up. These results highlight the strength of activity levels that continue to prevail in the WCSB, driven by high commodity prices for oil and natural gas. The increase in sand sales revenue generated was also attributed to an 18% increase in average realized sand price, or $18.91 per MT, excluding the impact of mine gate sand sales volumes, compared to the second quarter last year, as sand supply tightens in the WCSB and sand sale prices trend higher.

During the second quarter, cost of sales, excluding depreciation, was impacted by higher costs for transportation and freight, due to increased prices for fuel and a continued constrained trucking market, compared to the same period last year. Cost of sales, excluding depreciation, was also impacted by increased costs for third party sand purchases, procured to ensure no customer supply interruptions as demand continues to increase. Through the second quarter, Source successfully maintained efficient production at its Wisconsin facilities, maintaining average costs while producing at anticipated levels despite continued cost pricing pressure through the quarter. Cost of sales was impacted by a weakening Canadian dollar on US denominated costs relative to the second quarter of 2021.

Excluding gross margin from mine gate volumes, Adjusted Gross Margin for the second quarter was $28.84 per MT, favorably impacted by improved spot market pricing and higher sand sales volumes. Compared to the same quarter last year, Adjusted Gross Margin per MT increased by 14% 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. Gross margin was unfavorably impacted by higher cost of sales – depreciation realized, attributed to higher rates of inventory depreciation per MT relative to the second quarter last year.

Higher selling costs, the result of increased royalty expense resulting from increased activity levels, and higher repairs and maintenance costs for rail cars drove higher operating expense for the second quarter of 2022, compared to the same period last year. General and administrative expense was higher on a quarter-over-quarter basis, primarily attributed to the reversal of a bad debt provision that occurred in the second quarter of 2021. Adjusted EBITDA was $14.8 million for the second quarter, a reflection of the strong sand sales volumes and sand sales pricing realized, partially offset by the unfavorable impact of higher costs incurred for fuel and freight, and the weakening of the Canadian dollar during the quarter.

Peace River Transaction

In April 2022, Source entered into a transaction with CSI to assume operation of its Peace River frac sand facility, which adds approximately 400,000 MT of annual production capability to Source’s existing production capabilities. The transaction consolidates Source’s adjacent mineral resource exploration rights with the production facility and complements Source’s existing product and service offerings. The facility was not fully operational during the quarter, as Source focused on operational reviews and maintenance to ensure the facilities will operate at a standard consistent with the Company’s Wisconsin processing facilities. The benefits from the Peace River expenditures will be realized in future quarters when the facility is fully operational.

Liquidity and Capital Resources

The Company has a banking operating facility, comprised of an asset backed loan facility (“ABL”), a standby letter of Credit Facility and a senior secured term loan (collectively, the “Credit Facility”). As of June 30, 2022, Source had $28.9 million drawn under its ABL facility. The Credit Facility was also being used to support $10.1 million of letters of credit, leaving $11.8 million of available liquidity. Source is subject to externally imposed capital requirements for its Credit Facility and as of June 30, 2022, Source and its subsidiaries were compliant with all covenants. Source remains focused on reducing its debt levels in 2022.

Over the last several quarters, the Company has experienced a rapid increase in demand and achieved levels of activity that exceed pre-pandemic operating levels. The Company’s existing Credit Facility (as defined above) predates this period of high demand and was negotiated during a period of extreme uncertainty in the oil and gas industry. While Source has more than adequate liquidity available on its ABL facility, the current Credit Facility structure contains restrictive covenants which limit Source’s flexibility and ability to appropriately operate at the high levels demanded by activity in the WCSB. To address this, Source decided to seek alternative financing and replace the current Credit Facility. To that end, the Company has executed a non-binding term sheet with a new financial institution, and is working with its existing lenders and the new institution, in order to complete the refinancing in an expedited manner. Due to the timing of the expected closing of the refinancing, Source is seeking, and expects to receive, consent from its current lenders which will be required to complete the closing in an orderly manner.

Source’s capital expenditures for the second quarter of 2022 were $4.1 million, an increase of $2.8 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 $0.6 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 a quarter over quarter basis, due to the Sahara unloading capacity enhancements completed in the second quarter of last year. Source disposed of excess production equipment during the second quarter, realizing proceeds of $1.2 million.

ESG UPDATE

Source has completed its annual environment, social and governance (“ESG”) performance assessment, which benchmarks Source’s 2021 ESG performance relative to the Sustainability Accounting Standards Board framework and the recommendations of the Task Force on Climate-related Financial Disclosures. Source’s 2022 ESG report has been released and is available at www.sourceenergyservices.com.

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 eight 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.

BUSINESS OUTLOOK

With increased industry activity levels across North America, frac sand supply and demand fundamentals have improved and are expected to remain tight for 2022. These fundamentals, coupled with Source’s leading service offerings and logistics capabilities, have translated into meaningful pricing gains in 2022, a trend that is expected to continue for the balance of the year and into 2023. These pricing increases have led to improved gross margins in the spot market over 2021 levels which are expected to continue into 2023. While contracted customer margins have dragged down overall gross margin, it is expected there will be significant growth in these margins as current contracts expire over the next few quarters. After a somewhat slower than expected first quarter, the second quarter was very strong, especially considering this is the traditional spring break-up quarter. Looking ahead, it is anticipated that the third quarter will have higher than usual activity levels during what is historically a very busy quarter in the industry. Source expects the expansion of capital programs will increase through the balance of the year, as Source customers signal increasing activity levels and growing confidence related to ongoing permitting issues in the north-eastern British Columbia region, as well as continued strength in commodity pricing.

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’s 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. Over the longer-term, it is anticipated that these opportunities will be a meaningful part of Source’s business.

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, July 28, 2022.

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 Q2’22 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 August 28, 2022. Below are the details to access the call playback:

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

Playback Passcode: 9152

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.

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 audited consolidated financial statements for the three and six months ended June 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

In this press release Source has used the terms 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 to Net Income (Loss)

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

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”, “intends”, “anticipates”, “believes”, “continues”, “plans”, “projects”, “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: the strength of activity levels continuing to prevail in the WCSB; tightening of sand supply in the WCSB and trends of sand sales prices; our focus on reducing debt levels in 2022; our expectation that benefits from the Peace River expenditures will be realized in future quarters; Source’s expectation that it will receive the consent required from its current lenders to close the refinancing of its existing Credit Facility; 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; our expectation that frac sand supply and demand fundamentals will remain tight for 2022; our expectation that pricing gains will continue for the remainder of 2022 and into 2023; our belief that gross margins in the spot market, currently over 2021 levels, will continue into 2023; our expectation that there will be significant growth in customer margins over the next few quarters; our expectation that the third quarter will have higher than usual activity levels and the expansion of capital programs will increase through the balance of 2022; consumers’ increasing activity levels and confidence in connection with permitting issues in northeastern British Columbia; 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 revenue 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 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.

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 MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312 (ext. 222)(403) 262-1312 (ext. 233)
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Announces Upcoming Earnings Release

Calgary, Alberta (June 29, 2022) 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, 2022, will be released following the Toronto Stock Exchange market close on July 27, 2022.

A conference call has been scheduled for 7:30 am (Calgary time) on Thursday, July 28, 2022. 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 Q2’22 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 August 28, 2022. Below are the details to access the call playback:

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

Playback Passcode: 9152

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.

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.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312 (ext. 222)(403) 262-1312 (ext. 233)
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Announces Receipt of Lender Waiver and Payment of Cash Interest

Calgary, Alberta (May 25, 2022) TSX: SHLE – Source Energy Services Ltd. (“Source” or the “Company”) announced today that it has successfully concluded its discussions with the syndicate of lenders under its senior secured credit facility (the “Credit Facility”) and obtained a waiver from such lenders to permit the Company to make the payment of cash interest on the Company’s outstanding 10.5% senior secured first lien notes due March 15, 2025 (the “Senior Notes”). As previously announced, the Company had elected to utilize the 30 day grace period (the “Grace Period”) under the indenture governing its Senior Notes (the “Indenture”) to permit the Company to obtain such waiver and, as the waiver has now been obtained from the Company’s lenders, the Company has deposited with the trustee under the Indenture, in cash, the CAD$4.2 million interest payment that was due on May 16, 2022 in connection with the Senior Notes (the “May Interest Payment”).

The Company remains current with all its suppliers, industry partners and contractors and intends to remain so. Neither the utilization of the Grace Period nor the terms of the waiver affected, or will affect, any of the Company’s operations, or commercial obligations.

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.

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.

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”, “estimates”, “anticipates”, “believes”, “continues”, “focus” 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 expectation that it will remain current with all its suppliers, industry partners and contractors.

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 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.

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 MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312 (ext. 222)(403) 262-1312 (ext. 233)
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com

Source Energy Services Announces Decision To Utilize Interest Payment Grace Period

Calgary, Alberta (May 16, 2022) TSX: SHLE – Source Energy Services Ltd. (“Source” or the “Company”) announced today that it has elected to utilize the 30-day grace period (the “Grace Period”) under the indenture governing its 10.5% senior secured first lien notes due March 15, 2025 (the “Senior Notes”). The Company is utilizing the Grace Period to permit the continuation and conclusion of discussions with the syndicate of lenders under its senior secured credit facility (the “Credit Facility”) to obtain a waiver from such lenders related to the payment of the cash interest payment due on May 16, 2022, in connection with the Senior Notes (the “May Interest Payment”). The Company does not expect to utilize the Grace Period in its entirety and anticipates concluding its discussions with the lenders imminently.

While the Company has not disbursed the CAD $4.2 million May Interest Payment, the Company has ample liquidity available to fund the disbursement, with $18.9 million of liquidity available as of the date of this release. The Company is current with all its suppliers, industry partners and contractors and intends to remain so. Neither the utilization of any portion of the Grace Period nor the terms of the waiver contemplated would affect any of the Company’s operations, or commercial obligations.

The election to not make the May Interest Payment on the scheduled date does not constitute an event of default under the indenture that governs the Senior Notes, or the credit agreement that governs the Credit Facility, until the expiry of the Grace Period.

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.

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.

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”, “estimates”, “anticipates”, “believes”, “continues”, “focus” 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 discussions with its debtholders and lenders and Source’s expectation that it will remain current with all its suppliers, industry partners and contractors during the Grace Period.

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 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.

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 MelbournDerren Newell
Chief Executive OfficerChief Financial Officer
(403) 262-1312 (ext. 222)(403) 262-1312 (ext. 233)
investorrelations@sourceenergyservices.cominvestorrelations@sourceenergyservices.com