Source Energy Services Ltd., Calgary, Alberta, Canada, announced its financial results for the 12 months ended Dec. 31, 2020.
The year 2020 was a year of unprecedented challenges, the company stated, as the oil and gas industry reeled from a significant reduction in global demand caused by the coronavirus pandemic (COVID-19) and the fallout from a price war between the Organization of Petroleum Exporting Countries (OPEC) and other oil exporting nations. While this was a challenging business environment, Source demonstrated the strength of its business model and its ability to adapt to the rapid swings in activity levels seen during the year.
Some of the key achievements realized for the year were:
• Realized sand sales volumes of 1,968,511 metric tonnes (MT), a decrease of 12% from 2019, and sand revenue of $210.0 million.
• Distributed 2,021,335 MT of sand through Source’s Western Canadian Sedimentary Basin (WCSB) terminal network.
• Realized gross margin of $24.7 million and Adjusted Gross Margin of $56.8 million.
• Implemented and maintained cost control measures that resulted in a 34% reduction of operating and general and administrative expense when compared to 2019.
• Renegotiated the majority of Source’s rail car lease contracts, resulting in a reduction in 2020 lease payments of approximately $9.0 million, compared to 2019, and a reduction to Source’s total outstanding lease obligations.
• Incurred capital costs of $3.7 million which was an 81% reduction from amounts spent in the prior year.
• Reported net loss for the year ended Dec. 31, 2020, of $185.5 million, or $36.81 per share, which included an impairment loss of $143.7 million recognized in the year.
In the fourth quarter, completion activities in the WCSB continued to gain momentum driven by an increasingly positive outlook for commodities. As experienced in previous quarters, Source’s customers continue to demand larger volumes of sand in progressively shorter periods of time.
Source’s activity levels recovered in the latter half of 2020 and have continued to gain momentum into the first quarter of 2021, supported by the strength of commodity prices. Commodity prices stabilized at the end of 2020 and have demonstrated continued strength early in 2021, allowing exploration and production companies to generate stronger cash flows.
Source’s customers continue to be focused on strengthening their balance sheets; however, Source is starting to see more customers developing drilling and completion programs for the second half of 2021 and into 2022.