Source Energy Services Ltd. press release
Source Energy Services Reports Q4 2024 and Year End Results
TSX - Toronto Stock Exchange · Silicon · Canada
CALGARY, Alberta, Feb. 26, 2025 (GLOBE NEWSWIRE) -- TSX: SHLE
Source Energy Services Ltd. (“Source” or the “Company”) is pleased to announce its financial results for the three and twelve months ended December 31, 2024.
2024 PERFORMANCE HIGHLIGHTS
Key achievements for the year ended December 31, 2024 include the following:
realized sand sales volumes of 3,527,248 metric tonnes (“MT”) and sand revenue of $532.9 million, an increase of $72.8 million or 16% from 2023;
generated total revenue of $674.0 million, a $104.2 million increase from 2023; realized gross margin of $127.3 million and Adjusted Gross Margin ( 1) of $162.6 million, increases of 16% and 20%, respectively, when compared to last year; reported net income of $9.5 million; realized Adjusted EBITDA ( 1) of $123.9 million, a $24.8 million improvement from 2023; refinanced the Company’s existing credit facilities by entering into a new five-year, US$135.0 million Term Loan (as defined below) and a new $40.0 million credit facility, achieving targeted improved liquidity of $68.8 million at year end; announced a partnership with Trican Well Service Ltd. (“Trican”) to construct a unit train capable terminal facility located in Taylor, British Columbia; closed two acquisitions for sand trucking assets, further strengthening Source’s well site solutions platform; completed the expansion of the Chetwynd terminal facility to a full unit train facility; and deployed Source’s tenth and eleventh Sahara units, both operating on the North Slope in Alaska, driving utilization of 78% across the eleven unit fleet for the year.
Note :
| (1) | Adjusted Gross Margin (including on a per MT basis) and Adjusted EBITDA are not defined under IFRS and might not be comparable to similar financial measures disclosed by other issuers, refer to ‘Non-IFRS Measures’ below for reconciliations to measures recognized by IFRS. For additional information, please refer to Source’s Management’s Discussion and Analysis (“MD&A”), dated February 26, 2025, available online at www.sedarplus.ca. |
RESULTS OVERVIEW
| | Three months ended December 31, | | Year ended December 31, | | | | | | | ($000’s, except MT and per unit amounts) | 2024 | | 2023 | | 2024 | | 2023 | | | Sand volumes (MT) ( 1) | 767,712 | | 819,113 | | 3,527,248 | | 3,138,501 | | | Sand revenue | 117,658 | | 124,302 | | 532,944 | | 460,187 | | | Well site solutions | 26,701 | | 29,359 | | 137,689 | | 105,691 | | | Terminal services | 617 | | 771 | | 3,317 | | 3,870 | | | Sales | 144,976 | | 154,432 | | 673,950 | | 569,748 | | | Cost of sales | 110,957 | | 118,000 | | 511,321 | | 434,567 | | | Cost of sales – depreciation | 8,630 | | 8,735 | | 35,292 | | 25,775 | | | Cost of sales | 119,587 | | 126,735 | | 546,613 | | 460,342 | | | Gross margin | 25,389 | | 27,697 | | 127,337 | | 109,406 | | | Operating expense | 6,618 | | 5,717 | | 25,480 | | 22,923 | | | General & administrative expense | 4,768 | | 2,722 | | 19,487 | | 13,974 | | | Depreciation | 3,832 | | 3,811 | | 17,084 | | 11,809 | | | Income from operations | 10,171 | | 15,447 | | 65,286 | | 60,700 | | | Total other expense (income) | 16,432 | | (120,176 | ) | 47,433 | | (89,268 | ) | | Income (loss) before income taxes | (6,261 | ) | 135,623 | | 17,853 | | 149,968 | | | Current tax expense | 517 | | 905 | | 5,067 | | 905 | | | Deferred tax expense (recovery) | 446 | | (18,282 | ) | 3,277 | | (18,282 | ) | | Net income (loss) ( 2) | (7,224 | ) | 153,000 | | 9,509 | | 167,345 | |
| | Three months ended December 31, | | Year ended December 31, | | | | | | | ($000’s, except MT and per unit amounts) | 2024 | | 2023 | | 2024 | | 2023 | | | Net earnings (loss) per share ($/share) | (0.53 | ) | 11.30 | | 0.70 | | 12.35 | | | Diluted net earnings (loss) per share ($/share) | (0.53 | ) | 10.71 | | 0.70 | | 11.88 | | | Adjusted EBITDA ( 3) | 25,757 | | 28,322 | | 123,917 | | 99,115 | | | Sand revenue sales/MT | 153.26 | | 151.75 | | 151.09 | | 146.63 | | | Gross margin/MT | 33.07 | | 33.81 | | 36.10 | | 34.86 | | | Adjusted Gross Margin ( 3) | 34,019 | | 36,432 | | 162,629 | | 135,181 | | | Adjusted Gross Margin/MT ( 3) | 44.31 | | 44.48 | | 46.11 | | 43.07 | |
| 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 twelve months ended December 31, 2024, was $0.7152 and $0.7300, respectively (2023 - $0.7341 and $0.7409, 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.sedarplus.ca. |
2024 RESULTS
Total revenue for the year ended December 31, 2024 grew $104.2 million, or 18%, to $674.0 million compared to last year. The addition of new customers and continued strong customer activity levels in the Western Canadian Sedimentary Basin (“WCSB”) contributed to the increase in sand sales volumes and revenue for the year. Additional customers and activity levels also resulted in record volumes delivered for “last mile” logistics, and the completion of two new Sahara units late in the year contributed to solid utilization rates for 2024.
Cost of sales, excluding depreciation, increased compared to 2023, due to the higher sand sales volumes realized, as well as increased transportation costs resulting from the record volumes hauled by “last mile” logistics. These volume- driven increases were partly offset by lower costs to produce sand across all mining facilities and the cost savings realized through the acquisition of sand trucking assets completed during the year. A weakening of the Canadian dollar increased cost of sales denominated in US dollars by $1.59 per MT, compared to 2023, which was largely offset by the movement in exchange rates on revenue denominated in US dollars for the year.
For the year ended December 31, 2024, gross margin increased by 17,931, or 16% compared to 2023. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $46.99 per MT compared to $46.07 per MT in 2023. Adjusted Gross Margin benefited from increased sand sales volumes and sand volumes trucked, lower costs to produce sand, as noted above, and $3.2 million of incremental gross margin generated from the sand trucking assets acquired, compared to 2023. The weakening of the Canadian dollar negatively impacted Adjusted Gross Margin by $0.31 per MT for the year, compared to last year.
Operating expenses increased by $2.6 million on a year-over-year basis, attributed to higher royalty costs associated with increased sand sales volumes, as well as increased insurance and compensation expense due to higher activity levels realized. General and administrative expense increased by $5.5 million during 2024, largely the result of higher people costs, due to increased well site activity and the trucking assets acquired, as well as professional fees for legal expenses and IT costs compared to last year.
Adjusted EBITDA increased by 25%, or $24.8 million, to $123.9 million for the year ended December 31, 2024, attributed primarily to the record sand sales volumes and well site solutions performance, and incremental benefit from trucking assets acquired during the year. Adjusted EBITDA also benefited from the commencement of the leases for Source’s tenth and eleventh Sahara units, both now operating on the North Slope in Alaska. The weakening of the Canadian dollar favorably impacted Adjusted EBITDA by $1.2 million for the year, attributed to the movement in exchange rates on the settlement of working capital.
Refinancing Transaction
On December 20, 2024 the Company completed a refinancing of its credit facilities (the “Refinancing Transaction”). Pursuant to the Refinancing Transaction, the Company closed a new five-year term loan (the “Term Loan”) with Silver Point Finance, LLC for total proceeds of $187.2 million (US$135.0 million), and a new revolving asset backed credit facility with Canadian Imperial Bank of Commerce, providing access to funding of $40.0 million. Upon closing of the Refinancing Transaction, the Company repaid all amounts outstanding for the senior secured notes (the “Notes), the Company’s prior revolving asset-backed senior credit facility (the “Prior ABL”) and the Promissory Notes (as defined below). The Refinancing Transaction will drive a lower cost of borrowing and injects incremental liquidity into the business, allowing Source to capitalize on anticipated increasing activity levels. Material documents related to the Refinancing Transaction are available under the Company’s SEDAR+ profile at www.sedarplus.ca .
Taylor Facility
On July 25, 2024, Source announced the execution of a partnership arrangement with Trican to construct a new terminal facility located in Taylor, British Columbia. Construction of the facility has commenced, and will result in a unit train capable terminal which will accommodate approximately 55,000 MT of sand storage and more than 12,000 MT of daily sand throughput capacity (the “Taylor Facility”). The project is expected to be fully operational in 2025.
Under the terms of the arrangement, Trican will advance funding for construction on a cost-to-complete basis in exchange for transloading and sand supply services, as well as a fee payable to Trican on each advance drawn, repayable through transloading credits at the Taylor Facility and optional cash payments over a three-year term.
Acquisition of Sand Trucking Assets
During 2024, Source completed two sand trucking asset acquisitions, further strengthening Source’s mine to well site offering in the WCSB. Source purchased the sand trucking assets of RWR Trucking Inc. for a total aggregate purchase price of $8.1 million, comprised of cash, a promissory note payable and lease obligations for certain of the trucking assets acquired. A second sand trucking asset acquisition was also completed during the year, with PVT Group Ltd., for an aggregate purchase price of $2.2 million, comprised of cash and a promissory note. Pursuant to the Refinancing Transaction, amounts outstanding for the two promissory notes (the “Promissory Notes”) were repaid.
| Liquidity and Capital Resources | | | | | | | | | | | | | | | | | | | | | | Free Cash Flow | | Three months ended December 31, | | Year ended December 31, | | | | | | | ($000’s) | | 2024 | | 2023 | | 2024 | | 2023 | | | Adjusted EBITDA (1) | | 25,757 | | 28,322 | | 123,917 | | 99,115 | | | Financing expense paid | | (15,861 | ) | (7,305 | ) | (35,903 | ) | (29,150 | ) | | Growth capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs (2) | | (1,945 | ) | (3,509 | ) | (4,715 | ) | (562 | ) | | Maintenance and sustaining capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs | | (3,592 | ) | (3,149 | ) | (14,359 | ) | (12,483 | ) | | Payment of lease obligations | | (5,941 | ) | (5,088 | ) | (21,375 | ) | (19,592 | ) | | Income taxes recovered (paid) | | 190 | | — | | (979 | ) | — | | | Free Cash Flow (1) | | (1,392 | ) | 9,271 | | 46,586 | | 37,328 | |
| Notes | | | | | (1) | | | Adjusted EBITDA and Free Cash Flow are not defined under IFRS and might not be comparable to similar financial measures disclosed by other issuers, refer to ‘Non-IFRS Measures’ below. The reconciliation to the comparable IFRS measure can be found in the table below. | | (2) | | | Excludes capital expenditures for the Taylor Facility. |
During the fourth quarter of 2024, Free Cash Flow decreased by $10.7 million compared to the fourth quarter of 2023, primarily due to an increase in financing expense paid. Financing expense paid included $6.0 million of transaction costs related to the Refinancing Transaction, as well as $2.6 million of incremental Notes interest paid in accordance with requirements of the notice of redemption, compared to the same period last year. Excluding amounts related to the Refinancing Transaction, total finance expense paid during the fourth quarter was $0.5 million lower than the same period in 2023, reflecting lower interest incurred for the Notes of $0.6 million and lower interest paid for the Prior ABL facility of $0.5 million, partially offset by increased interest for outstanding lease obligations. Lower realized Adjusted EBITDA for the quarter, as outlined above, and an increase in payments for lease obligations, attributed to certain trucking assets acquired and additional yellow iron equipment for the Wisconsin mining facilities, also contributed to the reduction in Free Cash Flow compared to the fourth quarter of 2023. The reduction was partially offset by lower net capital expenditures, as outlined below.
For the year ended December 31, 2024, Source generated Free Cash Flow of $46.6 million, an increase of $9.3 million or 25% compared to last year, driven by higher Adjusted EBITDA realized. The increase was partially offset by higher financing expense paid, including transaction costs and interest related to the Refinancing Transaction, as described above. Excluding these amounts, finance expense paid was lower by $2.3 million, compared to 2023, due to Note repurchases completed in 2023 and early 2024, and lower average draws on the Prior ABL. Payments for lease obligations increased, on a year-over-year basis, attributed to the trucking assets acquired, as noted above, and renewed equipment at mining facilities in Wisconsin and Alberta. Higher net payments for capital expenditures, as noted below, also partially offset the increase to Free Cash Flow for 2024, compared to last year.
Capital expenditures, net of proceeds on disposals and reimbursements and expenditures for the Taylor Facility, were $5.5 million for the fourth quarter of 2024, a reduction of $1.1 million compared to the same period in 2023. Total capital expenditures increased with the commencement of construction for the Taylor Facility and improvements at the Peace River mining facility, partly offset by lower capital costs incurred for a piece of equipment which malfunctioned last year at a terminal facility, and lower costs associated with overburden removal for mining operations compared to the prior year quarter.
For the year ended December 31, 2024, Source’s capital expenditures, net of proceeds on disposals and reimbursements, increased by $6.0 million compared to 2023. Total capital expenditures increased, primarily due to the commencement of construction for the Taylor Facility, as outlined above, as well as construction costs associated with building Source’s tenth and eleventh Sahara units, fully reimbursed by customers, expenditures for the rail expansion project at the Chetwynd terminal facility and higher amounts for the removal of overburden, compared to the prior year. Amounts spent on the purchase of sand trucking assets completed during the year also contributed to the increase in capital expenditures compared to last year.
Q4 2024 RESULTS
Source sold sand volumes of 767,712 MT for the three months ended December 31, 2024, generating sand revenue of $117.7 million, a decrease of $6.6 million from the fourth quarter of 2023 which was an unusually busy quarter. During the fourth quarter, Source customer activity levels slowed compared to the same period last year, as capital budgets were exhausted and additional capital funding was not added prior to the end of the year. Revenue generated from the sale of sand from the Peace River facility increased by 20%, compared to the same period in 2023. During the fourth quarter of 2024, volumes from mine gate sales lowered the average realized sand price by $0.76 per MT; however, the sale of lower-value mine gate sales has a favorable impact on production costs by creating sand processing efficiencies and increasing production yields.
For the three months ended December 31, 2024, well site solutions revenue was $26.7 million, a decrease of $2.7 million or 9% compared to the fourth quarter of 2023. As noted above, lower sand sales volumes impacted trucked volumes, resulting in lower trucking revenue for the quarter. Sahara units in the US were 85% utilized during the fourth quarter, with two units now deployed and fully operational on the North Slope in Alaska. In Canada, Sahara units were 48% utilized for the period, impacted by capital budget exhaustion, as noted above. For the three months ended December 31, 2024, terminal services revenue was $0.6 million, a decrease of $0.2 million compared to the fourth quarter of 2023, primarily attributed to lower revenue from chemical elevation volumes realized during the period.
Cost of sales, excluding depreciation, decreased by $7.0 million for the three months ended December 31, 2024 compared to the same period in 2023, due to the lower sand volumes sold and lower trucked volumes from “last mile” logistics, as well as lower rail transportation costs realized during the fourth quarter. Higher people costs and increased repairs and maintenance expenses for equipment were incurred, compared to the fourth quarter of 2023, attributed to the sand trucking assets purchased during the year. During the fourth quarter of 2024, a weakening of the Canadian dollar on US dollar denominated components of cost of sales contributed to an increase of $2.72 per MT to cost of sales, compared to the same period in 2023. This impact was largely offset by US dollar denominated revenue for the quarter.
Gross margin decreased by $2.3 million for the three months ended December 31, 2024, the result of lower sand sales volumes, trucked volumes and Sahara utilization, as noted above, compared to the same period last year. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $44.88 per MT, compared to $47.45 per MT for the same period in 2023. Adjusted Gross Margin was impacted by the lower customer activity levels realized during the period, and higher trucking expenses, attributed to severe weather conditions experienced late in the quarter and longer trips to customer well sites, resulting in increased standby charges. These impacts were partly offset by incremental gross margin generated from the sand trucking assets acquired during the year.
For the fourth quarter of 2024, total operating and general and administrative expense increased by $2.9 million compared to the fourth quarter of 2023. During the three months ended December 31, 2024, operating expense increased by $0.9 million from the same period last year, primarily due to higher compensation expense and increased selling and administrative costs as a result of increased royalty costs attributed to higher sand shipments from mines that require royalty payments, as well as increased insurance expense.
General and administrative expense increased $2.0 million during the three months ended December 31, 2024, compared to the same period in 2023, largely due to increased people costs driven by higher compensation expense. Selling and administrative costs also increased, on a quarter-over-quarter basis, due to higher IT expenses incurred for a new cloud-based computing system.
BUSINESS OUTLOOK
Source anticipates growth in customer activity levels in the Montney basin in 2025, through completion of the Taylor Facility and the momentum attained with certain new large exploration and production customers. Source has enhanced its strategic position in northeastern British Columbia through the trucking assets acquired, construction of the Taylor Facility and expansions at the Chetwynd and Peace River facilities. Recent announcements by the US government to impose tariffs on goods imported from Canada could impact the long-term capital plans of Source’s customers. However, additional export capability via LNG Canada and the expedited permitting of additional LNG capacity will help mitigate any potential impacts. Despite these uncertainties, Source believes it is well-positioned to accommodate increased demand for mine to well site services as LNG Canada comes online and take advantage of activity levels in the WCSB.