Source Energy Services Ltd. announced its financial results for the three and 12 months ended Dec. 31, 2020.
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.
- Realized Adjusted EBITDA of $37.7 million.
- 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.
Some of Source’s fourth quarter accomplishments include:
- Completed a Recapitalization Transaction resulting in reduced debt, enhanced liquidity and increased financial flexibility, enabling Source to withstand industry volatility while continuing to build on its position as the largest frac sand provider in the WCSB.
- Realized sand sales volumes of 474,345 MT and sand revenue of $48.9 million.
- Achieved a new service record in December for the amount of sand delivered through Sahara to the blender in a single day of 4,436 MT.
- Renewed a sales contract for an additional three-year term and achieved a new direct sale customer contract for a one-year term.
- Forward-placed 300,000 MT of inventory in the WCSB in order to ensure service quality in the first quarter of 2021.
- Realized Adjusted EBITDA of $12.2 million, an increase of $3.0 million, or 32% when compared to the fourth quarter of 2019.