(via TheNewswire)
THIRD QUARTER 2022 HIGHLIGHTS
Key highlights for thethree months ended
realized sand sales volumes of753,233MT and sand revenue of
$97.2 million , a22%increase from thethird quarterof 2021;
achieved a28%increase in average realized sand price, excluding revenue from mine gate sales volumes;
distributed691,242MT 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 of87%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, a44%increase from thethird quarterof 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
Notes:
(1) One MT is approximately equal to 1.102 short tons.
(2) The average Canadian to
(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
During thethird 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
Gross margin increased by
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 of2022compared 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
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
New Senior Credit Facility
On
Upon closing of the new ABL, Source completed the
Liquidity and Capital Resources
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
Source’s capital expenditures for thethird quarterof 2022 were
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
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 atwww.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
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
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’sthirdquarter financial results has been scheduled for
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 theUpcoming Eventspageof 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
Toll-Free Playback Number:
1-800-319-6413
Playback Passcode:
9547
ABOUT
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
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 thethree and nine months ended
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)
Note:
(1) Includes expenses related to the incident at the
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”, “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
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 releaseassumptions 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 thispress releaseare 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 thispress 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 thispress releaseregarding 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:
Chief Executive Officer
(403) 262-1312
investorrelations@sourceenergyservices.com
Chief Financial Officer
(403) 262-1312
investorrelations@sourceenergyservices.com
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Copyright (c) 2022 TheNewswire - All rights reserved., source