Source Energy Services (SHLE) Q4 2023 earnings summary

Executive summary

• FY2023 revenue reached a record $569.7M, up 37% YoY; record Adjusted EBITDA was $99.1M, up $37.6M from 2022.

• Net income was $167.3M, including a $128.6M impairment reversal; excluding that reversal, net income improved $47.6M from 2022.

• Stronger sand volumes and pricing, higher trucked volumes, and greater Sahara utilization supported results despite early-year wildfire and flood disruption and weaker commodity prices.

Financial highlights

• FY2023 sand revenue was $460.2M, up $118.5M or 35% YoY; total revenue increased $153.8M or 37%.

• Gross margin was $109.4M, up 88% YoY; Adjusted Gross Margin was $135.2M, up 71%.

• Net income was $167.3M versus a $8.8M loss in 2022; the 2023 result included a $128.6M impairment reversal.

• Q4 sand revenue was $124.3M, up $54.0M or 77% YoY; sand volumes reached a record fourth-quarter 819,113 MT.

Outlook and guidance

• WCSB activity is expected to remain strong in 2024, with modest Montney completion growth, particularly in northeastern British Columbia as LNG Canada comes online.

• Attachie-area demand for mine-to-wellsite services is expected to create growth opportunities; production efficiencies and service capabilities are intended to support 2024 performance.

• Longer-term natural gas demand, pipeline export capacity, and LNG exports are expected to support demand for WCSB services; expansion into logistics for other wellsite materials remains a focus.