Source Energy Services Ltd. press release
Source Energy Services Reports Q1 2025 Results
TSX - Toronto Stock Exchange · Silicon · Canada
CALGARY, Alberta, May 08, 2025 (GLOBE NEWSWIRE) -- TSX: SHLE
Source Energy Services Ltd. (“Source” or the “Company”) is pleased to announce its financial results for the three months ended March 31, 2025.
Q1 2025 PERFORMANCE HIGHLIGHTS Key achievements for the quarter ended March 31, 2025 include the following:
realized record sand sales volumes of 1,041,223 metric tonnes (“MT”) and sand revenue of $162.9 million, an increase of $29.9 million or 22% from the first quarter of 2024; generated total revenue of $208.6 million, a $39.0 million increase from the first quarter last year; realized gross margin of $36.8 million and Adjusted Gross Margin ( 1) of $46.2 million, increases of 3% and 7%, respectively, when compared to the three months ended March 31, 2024; reported net income of $23.6 million, an increase of $21.7 million from the first quarter of 2024 due to improved business performance, a legal settlement and a recovery under share-based compensation; realized Adjusted EBITDA ( 1) of $33.8 million, a $1.7 million improvement from the first quarter of 2024; delivered record sand volumes to our customer well sites through our “last mile” logistics and realized 88% utilization across the eleven-unit Sahara fleet; completed the initial phase of the Peace River facility expansion, with the new rotary dryer installed and fully operational during the quarter; and commenced the first phase of operations at the Taylor transload facility.
| 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 May 8, 2025, available online at www.sedarplus.ca . | | | |
RESULTS OVERVIEW
| | Three months ended March 31, | | | | | ($000’s, except MT and per unit amounts) | 2025 | | 2024 | | | Sand volumes (MT) ( 1) | 1,041,223 | | 874,849 | | | Sand revenue | 162,903 | | 132,994 | | | Well site solutions | 44,428 | | 35,720 | | | Terminal services | 1,233 | | 854 | | | Sales | 208,564 | | 169,568 | | | Cost of sales | 162,369 | | 126,382 | | | Cost of sales – depreciation | 9,402 | | 7,549 | | | Cost of sales | 171,771 | | 133,931 | | | Gross margin | 36,793 | | 35,637 | | | Operating expense | 7,927 | | 6,042 | | | General & administrative expense | 4,908 | | 5,350 | | | Depreciation | 5,700 | | 4,210 | | | Income from operations | 18,258 | | 20,035 | | | Total other expense (income) | (11,867 | ) | 16,384 | | | Income before income taxes | 30,125 | | 3,651 | | | Current tax expense | 2,777 | | 1,909 | | | Deferred tax expense (recovery) | 3,749 | | (151 | ) | | Net income ( 2) | 23,599 | | 1,893 | | | Net earnings per share ($/share) | 1.74 | | 0.14 | |
| | Three months ended March 31, | | | ($000’s, except MT and per unit amounts) | 2025 | 2024 | | Diluted net earnings per share ($/share) | 1.74 | 0.14 | | Adjusted EBITDA ( 3) | 33,761 | 32,021 | | Sand revenue sales/MT | 156.45 | 152.02 | | Gross margin/MT | 35.34 | 40.74 | | Adjusted Gross Margin ( 3) | 46,195 | 43,186 | | Adjusted Gross Margin/MT ( 3) | 44.37 | 49.36 |
| 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 months ended March 31, 2025, was $0.6968 (2024 - $0.7414). | | (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 . | | | |
FIRST QUARTER 2025 RESULTS
Increased demand from Source customers, driven by Source’s ability to reliably supply large volumes of sand required per completion job, resulted in Source’s highest quarterly performance to date, achieving total revenue of $208.6 million for the three months ended March 31, 2025, an increase of $39.0 million, or 23%, compared to the first quarter last year. Robust activity levels in the Western Canadian Sedimentary Basin (“WCSB”) contributed to the record sand sales volumes delivered for “last mile” logistics, the highest throughput volumes achieved to date at the Canadian terminal facilities, and record Sahara utilization.
Cost of sales, excluding depreciation, increased on a quarter-over-quarter basis, driven by higher sand sales volumes realized and increased transportation costs resulting from the record volumes hauled by “last mile” logistics. These volume-driven increases, as well as an increase in rail transportation costs, were partly offset by a shift in terminal mix compared to the first quarter last year. A weakening of the Canadian dollar increased cost of sales denominated in US dollars by $6.78 per MT, compared to the first quarter of 2024, which was largely offset by the movement in exchange rates on revenue denominated in US dollars for the period.
For the three months ended March 31, 2025, gross margin increased by $1.2 million compared to the same period in 2024. Adjusted Gross Margin benefited from the higher sand sales volumes and sand volumes trucked during the quarter, as well as incremental gross margin generated from the sand trucking assets acquired last year, compared to the first quarter of 2024. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $45.00 per MT compared to $50.93 per MT for the first quarter of 2024 due to a 23% increase in sales of 100 mesh sand which reduced Adjusted Gross Margin by approximately $3.20 per MT. The weakening of the Canadian dollar negatively impacted Adjusted Gross Margin by $0.70 per MT for the quarter, compared to the first quarter last year. Additionally, challenging road conditions in the first quarter led to higher costs for “last mile” logistics, which also impacted Adjusted Gross Margin.
Operating expenses increased by $1.9 million on a quarter-over-quarter basis, largely driven by the higher activity levels realized during the period. Increased compensation expense, including people costs for Source’s trucking operations, additional maintenance costs for the Peace River facility and higher royalty costs associated with increased sand sales volumes contributed to the increase in operating expenses for the first quarter. General and administrative expense decreased by $0.4 million during the first quarter of 2025, largely the result of lower people costs due to lower variable incentive compensation expense, partially offset by an increase in IT costs, due to the cloud-computing system implemented last year, compared to the first quarter of 2024.
Adjusted EBITDA increased by 5%, or $1.7 million, to $33.8 million for the three months ended March 31, 2025, attributed primarily to the record sand sales volumes and well site solutions performance, as well as the incremental benefit from trucking assets acquired in 2024. The weakening of the Canadian dollar favorably impacted Adjusted EBITDA by $0.3 million for the quarter, attributed to the movement in exchange rates on the settlement of working capital.
Liquidity and Capital Resources
| _Free __Cash __Flow _ | Three months ended March 31, | | | | | ($000’s) | 2025 | 2024 | | | | Adjusted EBITDA ( 1) | 33,761 | | 32,021 | | | Financing expense paid | (6,806 | ) | (6,812 | ) | | Growth capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs ( 2) | (564 | ) | (422 | ) | | Maintenance and sustaining capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs | (6,506 | ) | (4,173 | ) | | Payment of lease obligations | (6,274 | ) | (5,119 | ) | | Income taxes paid | (1,692 | ) | — | | | Free Cash Flow ( 1) | 11,919 | | 15,495 | |
| 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 first quarter of 2025, Free Cash Flow decreased by $3.6 million compared to the first quarter of 2024, due to amounts paid for income taxes, driven by improved performance, an increase in maintenance capital expenditures, as described below, and higher amounts paid for lease obligations. The increase in lease obligations is largely attributed to the timing of the addition of heavy equipment for Peace River, done in the latter half of 2024, and yellow iron leases for the mining facilities in Wisconsin, added late in 2024, which replaced expiring leases at slightly higher rates. Lease payments for lease obligations in Wisconsin, including rail car leases, were impacted by the weakening of the Canadian dollar compared to the first quarter of 2024.
Capital expenditures, net of proceeds on disposals and reimbursements and excluding expenditures related to the Taylor facility, were $7.1 million for the three months ended March 31, 2025, an increase of $2.5 million compared to the first quarter last year. On a quarter-over-quarter basis and excluding construction for the Taylor facility, growth capital expenditures were relatively flat. Last year, growth capital expenditures incurred included an amount for the sand trucking asset acquisition, and amounts related to the construction of two Sahara units, which were fully reimbursed by customers, as well as insurance proceeds for equipment that malfunctioned at a terminal facility in 2023. Maintenance and sustaining capital expenditures increased for the first quarter of 2025, compared to last year, largely attributed to improvements made at the Peace River mining facility, higher amounts for overburden removal for mining operations, driven by increased volumes, and amounts related to Source’s trucking operations, compared to the first quarter of 2024.
The board of directors has approved the initiation of a normal course issuer bid with respect to the Company’s common shares. Additional information regarding this program will be forthcoming.
BUSINESS OUTLOOK
Source anticipates continued strong customer activity levels in the Montney basin through the second quarter of 2025. The completion of phase one of the Taylor facility, where rail to truck is now operational, and the installation of the new dryer at the Peace River facility helps set Source up to meet the expected longer-term increase in demand in northeastern British Columbia.
Source continues to evaluate the impact of tariffs imposed by the US government on goods imported from Canada and the counter-tariffs imposed by the Canadian government, as well as the volatility in commodity prices, on long- term capital plans for the industry. Source remains focused on pursuing its application to have the Canadian government’s counter-tariffs on frac sand removed. Source believes in the longer-term that the additional export capability via LNG Canada and the expedited permitting of additional LNG capacity will help mitigate potential impacts related to these events. 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.
In the longer-term, 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. This trend is consistent with Source’s view that natural gas will be an important transitional fuel that is critical for the successful movement to a less carbon-intensive world.
Source continues to focus on increasing its involvement in the provision of logistics services for other items needed at the 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.
FIRST QUARTER CONFERENCE CALL
A conference call to discuss Source’s first quarter financial results has been scheduled for 7:30 am MST (9:30 am ET) on Friday, May 9, 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 Q1 2025 Results Call
The call will be recorded and available for playback approximately 2 hours after the meeting end time, until June 9, 2025, using the following dial-in:
Toll-Free Playback Number: 1-855-669-9658
Playback Passcode: 3122177
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 months ended March 31, 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 March 31, | | | | | ($000’s) | 2025 | | 2024 | | | Net income | 23,599 | | 1,893 | | | Add: | | | | | | Income taxes | 6,526 | | 1,758 | | | Interest expense | 5,835 | | 6,283 | | | Cost of sales – depreciation | 9,402 | | 7,549 | | | Depreciation | 5,700 | | 4,210 | | | (Gain) loss on debt modification and extinguishment | (918 | ) | 115 | | | Finance expense (excluding interest expense) | 1,029 | | 2,433 | | | Share-based compensation (recovery) expense | (4,959 | ) | 9,341 | | | Loss (gain) on asset disposal | 4 | | (1,931 | ) | | Loss on sublease | 13 | | — | | | Unrealized foreign exchange loss | 31 | | — | | | Other (recovery) expense ( 1) | (12,501 | ) | 370 | | | Adjusted EBITDA | 33,761 | | 32,021 | | | Financing expense paid | (6,806 | ) | (6,812 | ) |
| Growth capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs ( 2) | (564 | ) | (422 | ) | | | | | | | | Maintenance and sustaining capital expenditures, net of proceeds on disposal of property, plant and equipment and reimbursement of capital costs | (6,506 | ) | (4,173 | ) | | | | | | | | Payment of lease obligations | (6,274 | ) | (5,119 | ) | | Income taxes paid | (1,692 | ) | — | | | Free Cash Flow | 11,919 | | 15,495 | |
| 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 March 31, | | | ($000’s) | 2025 | 2024 | | Gross margin | 36,793 | 35,637 | | Cost of sales – depreciation | 9,402 | 7,549 | | Adjusted Gross Margin | 46,195 | 43,186 | | | | |
For additional information regarding non-IFRS measures, including their use to management and investors, their composition and discussion of changes to either their composition or label, if any, please refer to the ‘Non-IFRS Measures’ section of the MD&A, which is incorporated herein by reference. Source’s MD&A is available online at www.sedarplus.ca and through Source’s website at www.sourceenergyservices.com .
FORWARD-LOOKING STATEMENTS
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”, “trend”, “driven by”, “anticipates,” “views” 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.
In particular, this press release contains forward-looking statements pertaining, but not limited to: the expectation that LNG Canada will come online; the completion of phase one of the Taylor facility to help Source meet the expected longer-term increase in demand in northeastern British Columbia; expectations regarding the sand trucking asset acquisitions completed during the year; Source’s terminal network footprint and its Wisconsin and Peace River production facilities; the outcomes of countermeasures proposed by the Canadian federal and provincial governments to mitigate any tariff-related impacts; the volatility in commodity prices on long-term capital plans for the industry; Source’s focus on pursuing its application to have the Canadian government’s counter-tariffs on frac sand removed; the belief that the additional export capability via LNG Canada and the expedited permitting of additional LNG capacity will help mitigate potential impacts related to the counter-tariffs; expectations with respect to sand revenue and mine gate sand sales and associated costs; the expectation that Source will continue to grow its business through the balance of the year; expectations that increased demand for natural gas, increased natural gas pipeline export capabilities and liquefied natural gas exports will drive incremental demand for Source’s services in the WCSB; continued increase in demand from customers primarily focused on the development of natural gas properties in Montney, Duvernay and Deep Basin; views that natural gas is an important transitional fuel for the successful movement to a less carbon-intensive world; Source’s focus on and expectations regarding increasing its involvement in the provision of logistics services for other well site items; the benefits of Source’s existing Western Canadian terminals to provide additional services to customers; the benefits that Source’s “last mile” services provide to customers; expectations respecting future conditions; and profitability.