Source Energy Services Grows Market Share

Source Energy Services Ltd. said that for the three months ended June 30, the company grew market share in the Western Canadian Sedimentary Basin (WCSB), realizing sand sales volumes of 557,208 metric tonnes (MT) and sand revenue of $58.1 million

The company executed a new customer contract for proppant, Sahara and logistics services with a key exploration and production (E&P) company and secured contract extensions with two major E&P companies, all operating in the Montney.

Source also achieved utilization of 76% for its Sahara fleet currently operating in Canada; realized gross margin of $11.7 million and adjusted gross margin of $16.2 million; and obtained full forgiveness for $2.1 million of outstanding obligations related to proceeds received in 2020 from the Paycheck Protection Program of the Coronavirus Aid, Relief and Economic Security Act.

Customers continued to focus on improving frac efficiencies with higher volumes being required over shorter periods of time.

Brad Thomson, CEO, commented, “Frac efficiency has become a common theme for the leading operators in the WCSB. These companies have come to appreciate that optimal frac efficiency requires a combination of reliable frac sand supply, specialized logistics capabilities and operational precision at the wellsite. This plays to Source’s strength in that we have the unique ability to enable our customers to achieve these requirements in the most active portions of the Montney and the Duvernay. In July, we set new operating records that saw the largest daily sand sales volume in the history of Source, and also set daily sand throughput records at two of our terminal facilities.”

Rebounding global economies and energy demand drove a third consecutive quarter of higher oil prices and stronger natural gas pricing, favorably impacting activity levels in the WCSB during the second quarter. Source realized strong sand sales volumes for the period, generating $58.1 million of sand revenue.

Wellsite solutions revenue was $14.0 million for the second quarter. As activity levels are improving in the WCSB, customers are demanding greater volumes of frac sand over shorter periods of time. Source’s ability to consistently meet this challenge with its logistics capabilities was highlighted in the quarter, as dispatch services continued to execute innovative solutions to meet increased customer demand. The Sahara units remain a key component in the frac programs of many of Source’s customers resulting in the seven Sahara units located in Canada achieving 76% utilization for the quarter, with Sahara demand remaining strong for the balance of this year.

Gross margin was favorably impacted by Source’s focus on maintaining lower costs and improving production efficiencies. Adjusted gross margin benefited from strong volumes realized in the quarter and, on a per MT basis, improved by 3% compared to the first quarter of the year.

While substantially all of Source’s sales in the quarter were under long-term contracts, the increase in activity levels in the quarter also resulted in higher spot sales. This increased the average sand price realized in the quarter relative to the first quarter of the year, the company said.

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