Source Energy Services Ltd. press release
Source Energy Services Reports Q3 2025 Results
TSX - Toronto Stock Exchange · Silicon · Canada
CALGARY, AB / ACCESS Newswire/ November 6, 2025 / Source Energy Services Ltd. (TSX:SHLE) ("Source" or the "Company") is pleased to announce its financial results for the three and nine months ended September 30, 2025.
Q3 2025 PERFORMANCE HIGHLIGHTS
Source experienced lower activity levels during the third quarter, as lower commodity prices and continued economic uncertainty led to customers deferring completion jobs to the fourth quarter or into 2026. Highlights for the quarter include:
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realized sand sales volumes of 665,006 metric tonnes ("MT") and sand revenue of $100.3 million, a decrease of 30% from the third quarter of 2024;
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generated total revenue of $125.3 million, a $57.7 million decrease from the same period last year;
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realized gross margin of $19.6 million and Adjusted Gross Margin(1)of $30.3 million, decreases of 42% and 30%, respectively, when compared to the three months ended September 30, 2024;
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reported net loss of $6.2 million, a decrease of $16.4 million from the same period last year;
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realized Adjusted EBITDA(1)of $20.3 million, a $15.1 million decrease from the third quarter of 2024;
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achieved 62% utilization across the eleven-unit Sahara fleet;
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secured sand processing assets to support the future expansion of Source's domestic sand platform as market demand increases;
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reduced the outstanding balance for the Term Loan by $11.7 million, bringing total repayments for the year to $19.9 million; and
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repurchased 167,500 shares under Source's Normal Course Issuer Bid program, for total repurchases of 392,900 shares to date this year.
Note:
(1) Adjusted Gross Margin (including on a per MT basis) and Adjusted EBITDA are not defined under IFRS (as defined herein) and might not be comparable to similar financial measures disclosed by other issuers, refer to ‘Non-IFRS Measures' below for reconciliations to measures recognized by IFRS. For additional information, please refer to Source's Management's Discussion and Analysis ("MD&A"), dated November 6, 2025, available online at www.sedarplus.ca.
RESULTS OVERVIEW
| | | Three months ended September 30, | | | Nine months ended September 30, | | | | | | | | | | | | | ($000's, except MT and per unit amounts) | | 2025 | | | 2024 | | | 2025 | | | 2024 | | | | | | | Sand volumes (MT)(1) | | | 665,006 | | | | 963,539 | | | | 2,800,584 | | | | 2,759,536 | | | | | | | | | | | | | | | | | | | | | Sand revenue | | | 100,265 | | | | 142,236 | | | | 424,640 | | | | 415,286 | | | Well site solutions | | | 23,941 | | | | 39,908 | | | | 107,585 | | | | 110,988 | | | Terminal services | | | 1,113 | | | | 906 | | | | 3,547 | | | | 2,700 | | | Sales | | | 125,319 | | | | 183,050 | | | | 535,772 | | | | 528,974 | | | Cost of sales | | | 95,016 | | | | 139,768 | | | | 410,665 | | | | 400,364 | | | Cost of sales - depreciation | | | 10,676 | | | | 9,613 | | | | 31,951 | | | | 26,662 | | | Cost of sales | | | 105,692 | | | | 149,381 | | | | 442,616 | | | | 427,026 | | | Gross margin | | | 19,627 | | | | 33,669 | | | | 93,156 | | | | 101,948 | | | Operating expense | | | 7,149 | | | | 6,493 | | | | 23,459 | | | | 18,862 | | | General & administrative expense | | | 3,235 | | | | 3,518 | | | | 12,982 | | | | 14,719 | | | Depreciation | | | 5,484 | | | | 4,753 | | | | 16,616 | | | | 13,252 | | | Income from operations | | | 3,759 | | | | 18,905 | | | | 40,099 | | | | 55,115 | | | Total other expense | | | 10,473 | | | | 6,522 | | | | 58 | | | | 31,001 | | | (Loss) income before income taxes | | | (6,714 | ) | | | 12,383 | | | | 40,041 | | | | 24,114 | | | Current tax expense | | | 1,212 | | | | 812 | | | | 6,437 | | | | 4,550 | | | Deferred tax (recovery) expense | | | (1,709 | ) | | | 1,416 | | | | 2,654 | | | | 2,831 | | | Net (loss) income(2) | | | (6,217 | ) | | | 10,155 | | | | 30,950 | | | | 16,733 | | | Net (loss) earnings per share ($/share) | | | (0.46 | ) | | | 0.75 | | | | 2.31 | | | | 1.24 | | | Diluted net (loss) earnings per share ($/share) | | | (0.46 | ) | | | 0.74 | | | | 2.31 | | | | 1.24 | | | Adjusted EBITDA(3) | | | 20,290 | | | | 35,341 | | | | 89,259 | | | | 98,160 | | | Sand revenue sales/MT | | | 150.77 | | | | 147.62 | | | | 151.63 | | | | 150.49 | | | Adjusted Gross Margin(3) | | | 30,303 | | | | 43,282 | | | | 125,107 | | | | 128,610 | | | Gross margin/MT | | | 29.51 | | | | 34.94 | | | | 33.26 | | | | 36.94 | | | Adjusted Gross Margin/MT(3) | | | 45.57 | | | | 44.92 | | | | 44.67 | | | | 46.61 | |
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, 2025, was $0.7261 and $0.7149, respectively (2024 - $0.7331 and $0.7351, 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.
THIRD QUARTER 2025 RESULTS
Results for the third quarter were significantly impacted by lower customer activity levels across the Western Canadian Sedimentary Basin ("WCSB"), driven by weak commodity pricing, particularly for natural gas, which led to a deferral of capital spending resulting in reduced sand sales volumes realized for the quarter. Total revenue was $125.3 million for the three months ended September 30, 2025, a decrease of $57.7 million, or 32%, compared to the third quarter last year. Average realized sand price per MT increased by $3.15 compared to the third quarter last year, primarily due to a shift in terminal mix, partly offset by an increase in lower priced, finer sand sales. Weakened customer activity levels also impacted sand volumes delivered for "last mile" logistics during the period, as well as Sahara utilization for units operating in Canada, while units operating in the US were 100% utilized during the quarter.
Cost of sales, excluding depreciation, decreased on a quarter-over-quarter basis, driven by lower sand sales volumes and lower transportation costs resulting from a reduction in volumes hauled by "last mile" logistics. On a per MT basis, cost of sales, excluding depreciation, was relatively flat for the third quarter, as lower costs incurred for third party sand purchases were offset by a shift in terminal mix. A weakening of the Canadian dollar increased cost of sales denominated in US dollars by $0.72 per MT, compared to the third quarter of 2024, which was offset by the movement in exchange rates on revenue denominated in US dollars for the quarter.
For the three months ended September 30, 2025, gross margin decreased by $14.0 million compared to the third quarter of 2024, driven by lower sand sales volumes and volumes trucked to the well site, as noted above. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $46.56 per MT compared to $45.89 per MT for the third quarter of 2024. Adjusted Gross Margin per MT benefited from a customer performance bonus achieved, partly offset by incremental production costs incurred with the Peace River facility expansion. The weakening of the Canadian dollar favorably impacted Adjusted Gross Margin by $0.52 per MT for the quarter.
Operating expense increased by $0.7 million on a quarter-over-quarter basis, largely driven by higher royalty-related costs and rail car-related expenses, slightly offset by lower variable incentive compensation expense for the quarter. General and administrative expense decreased by $0.3 million during the third quarter of 2025 due to lower people costs, attributed to lower variable incentive compensation expense, partially offset by an increase in IT costs, driven by the cloud-computing system implemented last year, compared to the third quarter of 2024.
Adjusted EBITDA decreased by 43%, or $15.1 million, to $20.3 million for the third quarter, attributed primarily to the reduction in sand sales volumes and lower revenue from well site solutions, as noted above, compared to the third quarter last year. The weakening of the Canadian dollar favorably impacted Adjusted EBITDA by $0.3 million for the quarter, largely attributed to the movement in exchange rates on the repayment of long-term debt.
Liquidity and Capital Resources
| Free Cash Flow | | Three months ended September 30, | | | Nine months ended September 30, | | | | | | | | | | | | | ($000's) | | 2025 | | | 2024 | | | 2025 | | | 2024 | | | | | | | Adjusted EBITDA(1) | | | 20,290 | | | | 35,341 | | | | 89,259 | | | | 98,160 | | | Financing expense paid | | | (6,500 | ) | | | (6,655 | ) | | | (20,016 | ) | | | (20,092 | ) | | Capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs(2) | | | (18,541 | ) | | | (3,277 | ) | | | (33,234 | ) | | | (13,536 | ) | | Payment of lease obligations | | | (6,832 | ) | | | (5,328 | ) | | | (19,427 | ) | | | (15,434 | ) | | Income taxes paid | | | (1,111 | ) | | | - | | | | (5,715 | ) | | | (1,169 | ) | | Free Cash Flow(1) | | | (12,694 | ) | | | 20,081 | | | | 10,867 | | | | 47,929 | |
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 third quarter of 2025, Source capitalized on an opportunity to acquire sand processing assets to support future expansion at the Peace River production facility. The assets comprise key infrastructure for Source's domestic sand platform and advances its expansion strategy which, once fully executed, would provide nameplate capacity of 3,000,000 MT of domestic sand production. The installation timeline for these assets will be dependent on the overall growth of the proppant market in the WCSB.
Source generated negative Free Cash Flow of $12.7 million for the third quarter of 2025, compared to $20.1 million of Free Cash Flow for the third quarter of 2024. The reduction was due to the impact of lower customer activity levels, as well as an increase in capital expenditures of $15.3 million, primarily due to the acquisition of sand processing assets, as noted above. Free Cash Flow was also impacted by higher amounts paid for lease obligations, due to additional heavy equipment for the Peace River operations, and higher amounts paid for US income taxes, as Source utilizes its loss carry-forward pools.
Capital expenditures, net of proceeds on disposals and reimbursements and excluding expenditures related to the Taylor facility, were $18.5 million for the three months ended September 30, 2025, an increase of $15.3 million compared to the third quarter last year. On a quarter-over-quarter basis and excluding construction for the Taylor facility, growth capital expenditures increased by $12.5 million, mainly attributed to the assets acquired for future expansion at the Peace River facility, as noted above, as well as the addition of trailers for Source's trucking operations. Maintenance and sustaining capital expenditures increased by $2.8 million for the third quarter of 2025, compared to the same period last year, largely attributed to higher amounts for overburden removal for mining operations.
BUSINESS OUTLOOK
As a result of the lower completion activity levels experienced across the WCSB during the third quarter, Source anticipates increased activity levels for the remainder of the year which will result in a solid rebound for the fourth quarter and a full year 2025 proppant demand similar to or slightly ahead of 2024. With the additional natural gas export capability via LNG Canada, Source expects robust proppant demand in 2026.
Over the medium to longer term, the Western Canadian LNG projects currently being constructed, along with the expedited permitting of additional LNG capacity, including the recent approval of the KSI Lisims project by the government of British Columbia and the inclusion of LNG Canada (Phase 2) in the Government of Canada's major projects list, will drive incremental demand for proppant in the WCSB. Source believes it is well-positioned to capitalize on the expected demand increase in northeastern British Columbia and to take advantage of growing proppant demand levels in the WCSB through its existing northern white sand franchise, expanded terminal network and growing domestic sand production at Peace River.
Source believes the increased demand for natural gas, driven by liquefied natural gas exports, increased natural gas pipeline export capabilities and power generation facilities, will drive incremental demand for Source's services in the WCSB. Source continues to see increased demand from customers that are primarily focused on the development of natural gas properties in the Montney, Duvernay and Deep Basin.
Source also continues to focus on increasing its involvement in the provision of logistics services for other items needed at the well site in response to customer requests to expand its service offerings and to further utilize its existing Western Canadian terminals to provide additional services.
THIRD QUARTER CONFERENCE CALL
A conference call to discuss Source's third quarter financial results has been scheduled for 7:30 am MST (9:30 am ET) on Friday, November 7, 2025.
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 2025 Results Call
The call will be recorded and available for playback approximately 2 hours after the meeting end time, until December 7, 2025, using the following dial-in:
Toll-Free Playback Number: 1-855-669-9658
Playback Passcode: 9011466
ABOUT SOURCE ENERGY SERVICES
Source is a company that focuses on the integrated production and distribution of frac sand, as well as the distribution of other bulk completion materials not produced by Source. Source provides its customers with an end-to-end solution for frac sand supported by its Wisconsin and Peace River mines and processing facilities, its Western Canadian terminal network and its "last mile" logistics capabilities, including its trucking operations, and Sahara, a proprietary well site mobile sand storage and handling system.
Source's full-service approach allows customers to rely on its logistics platform to increase reliability of supply and to ensure the timely delivery of frac sand and other bulk completion materials at the well site.
IMPORTANT INFORMATION
These results should be read in conjunction with Source's unaudited interim condensed consolidated financial statements for the three and nine months ended September 30, 2025 and 2024 and the audited consolidated financial statements for the years ended December 31, 2024 and 2023, together with the accompanying notes (the "Financial Statements") and its corresponding MD&A for such periods. The Financial Statements and MD&A and other information relating to Source, including the Annual Information Form, are available under the Company's SEDAR+ profile at www.sedarplus.ca. The Financial Statements and comparative statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board. Unless otherwise stated, all amounts are expressed in Canadian dollars.
NON-IFRS MEASURES
In this press release Source has used the terms Free Cash Flow, Adjusted Gross Margin and Adjusted EBITDA, including per MT, which do not have standardized meanings prescribed by IFRS and Source's method of calculating these measures may differ from the method used by other entities and, accordingly, they may not be comparable to similar measures presented by other companies. These financial measures should not be considered as an alternative to, or more meaningful than, net income and gross margin, respectively, which represent the most directly comparable measures of financial performance as determined in accordance with IFRS.
Reconciliation of Adjusted EBITDA and Free Cash Flow to Net Income (Loss)
| | | Three months ended September 30, | | | Nine months ended September 30, | | | | | | | | | | | | | ($000's) | | 2025 | | | 2024 | | | 2025 | | | 2024 | | | | | | | Net (loss) income | | | (6,217 | ) | | | 10,155 | | | | 30,950 | | | | 16,733 | | | Add: | | | | | | | | | | | | | | | | | | Income taxes | | | (497 | ) | | | 2,228 | | | | 9,091 | | | | 7,381 | | | Interest expense | | | 5,394 | | | | 6,281 | | | | 17,537 | | | | 18,848 | | | Cost of sales - depreciation | | | 10,676 | | | | 9,613 | | | | 31,951 | | | | 26,662 | | | Depreciation | | | 5,484 | | | | 4,753 | | | | 16,616 | | | | 13,252 | | | (Gain) loss on debt modification and extinguishment | | | (204 | ) | | | - | | | | (694 | ) | | | 164 | | | Finance expense (excluding interest expense) | | | 1,174 | | | | 1,936 | | | | 3,072 | | | | 6,718 | | | Share-based compensation expense (recovery) | | | 321 | | | | 1,016 | | | | (3,557 | ) | | | 9,325 | | | Loss (gain) on asset disposal | | | 443 | | | | (862 | ) | | | 983 | | | | (2,840 | ) | | Loss on sublease | | | - | | | | - | | | | 13 | | | | 638 | | | Unrealized foreign exchange loss (gain) | | | 3,529 | | | | - | | | | (4,666 | ) | | | - | | | Other expense (recovery)(1) | | | 187 | | | | 221 | | | | (12,037 | ) | | | 1,279 | | | Adjusted EBITDA | | | 20,290 | | | | 35,341 | | | | 89,259 | | | | 98,160 | | | Financing expense paid | | | (6,500 | ) | | | (6,655 | ) | | | (20,016 | ) | | | (20,092 | ) | | Capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs(2) | | | (18,541 | ) | | | (3,277 | ) | | | (33,234 | ) | | | (13,536 | ) | | Payment of lease obligations | | | (6,832 | ) | | | (5,328 | ) | | | (19,427 | ) | | | (15,434 | ) | | Income taxes paid | | | (1,111 | ) | | | - | | | | (5,715 | ) | | | (1,169 | ) | | Free Cash Flow | | | (12,694 | ) | | | 20,081 | | | | 10,867 | | | | 47,929 | |
Notes:
(1) Includes expenses and recoveries related to the incident at the Fox Creek terminal facility, costs and reimbursements under insurance claims and other one-time expenses. (2) Excludes capital expenditures for the Taylor facility.
Reconciliation of Gross Margin to Adjusted Gross Margin
| | | Three months ended September 30, | | | Nine months ended September 30, | | | | | | | | | | | | | ($000's) | | 2025 | | | 2024 | | | 2025 | | | 2024 | | | | | | | Gross margin | | | 19,627 | | | | 33,669 | | | | 93,156 | | | | 101,948 | | | Cost of sales - depreciation | | | 10,676 | | | | 9,613 | | | | 31,951 | | | | 26,662 | | | Adjusted Gross Margin | | | 30,303 | | | | 43,282 | | | | 125,107 | | | | 128,610 | |
For additional information regarding non-IFRS measures, including their use to management and investors, their composition and discussion of changes to either their composition or label, if any, please refer to the ‘Non-IFRS Measures' section of the MD&A, which is incorporated herein by reference. Source's MD&A is available online at www.sedarplus.caand 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 "anticipates", "expects", "believes", "continues", "focus", or variations of such words and phrases, or statements that certain actions, events or results "may" or "will" be taken, occur or be achieved. Such forward-looking statements reflect Source's beliefs, estimates and opinions regarding its future growth, results of operations, future performance (both operational and financial), and business prospects and opportunities at the time such statements are made, and Source undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or circumstances should change unless required by applicable law. Forward-looking statements are necessarily based upon a number of estimates and assumptions made by Source that are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Forward-looking statements are not guarantees of future performance.