Source Energy Services Ltd.

Thank you for standing by. This is the conference operator. Welcome to the Source Energy Services fourth quarter 2025 results conference call. As a reminder, all participants are in listen only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Scott Melbourne, CEO. Mr. Melbourne, please proceed.

Thank you, operator. Good morning, and welcome to Source Energy Services' fourth quarter 2025 conference call. My name is Scott Melbourne. I'm the CEO of Source. I'm joined today by Darren Newell, our CFO. This morning, we will provide a brief overview of the quarter and the year, which will immediately be followed by a question and answer period. Before I get started, I would like to refer everyone to the financial statements in the MD&A that were posted to CDAR and the company's website last night and remind you of the advisory on forward-looking information found in our MD&A and press release. On this call, Source's numbers are in Canadian dollars and metric tons. And we will refer to adjusted gross margin, adjusted EBITDA, and free cash flow, which are non-IFRS measures as described in our MD&A. Except the items just mentioned, our financial information is prepared in accordance with IFRS. As we expected, fourth quarter activity levels rebounded, and we recorded sales volume of 907,000 tons for the quarter, an 18% increase over the fourth quarter of 2024. With this strong finish to the year, and despite the commodity price challenges earlier in the year, 2025 was another good year for Source. We delivered record volumes and record revenue. We enhanced our logistics capability with the Taylor Terminal, strengthened our last mile logistics with additional trucking assets, and expanded our domestic sand capability to 1 million tons per year. We enhanced our shareholder return by initiating the share repurchase program, which repurchased and canceled 465,000 shares, and we reduced our term loan by $23.7 million. Noteworthy items for the year included sand sales volume of 3.7 million tons, a 5% increase over last year. Source also set a record for sand volumes delivered to customers' well sites through our last mile logistics meeting. Source generated total revenue of $700.3 million, a $26.4 million increase over 2024. We realized gross margin of $116.6 million and adjusted gross margin of $159.3 million, decreases of 8% and 2% respectively when compared to last year. Gross margins were impacted by a shift in terminal and product mix, as well as incremental Peace River commissioning costs. Net income for 2025 was $33.1 million, an increase of $23.6 million over 2024, as source benefited from lower share-based compensation expense and a recovery from the settlement of the Fox Creek lawsuit. Adjusted EBITDA was $112.3 million, an $11.6 million decrease from 2024. With that, I will now turn it over to Derek.

Thanks, Scott. In the fourth quarter, source sold 907,000 metric tons of sand generated 135.3 million in sand revenue. Sand volumes were 18% higher and sand revenue increased by 17.7 million as most of the delayed work from the third quarter of 25 is completed in the fourth. The average realized sand price per metric ton decreased by $4.02 compared to the prior year, primarily due to the sales mix of higher sales of lower-priced finer mesh sand. Well site solution revenue was $28.3 million for the fourth quarter, an increase of $1.6 million or 6% compared to the fourth quarter of 24. This increase was driven by higher volumes delivered by the last mile logistics reflecting higher customer activity levels and longer trips to well sites compared to last year. Sahara units in Canada were 50% utilized during the fourth quarter, and Sahara units deployed in the U.S. remained fully contracted and 100% utilized. Terminal services revenue was $0.9 million, an increase of $0.3 million compared to the fourth quarter of 2024 due to higher chemical elevation volumes as well as an increase in sand elevation storage rates. As Scott said, total revenue for the year was $700.3 million, driven by increased sales volumes. Cost of sales, excluding depreciation, increased by $19.4 million for the fourth quarter compared to last year due to higher sand volumes and the incremental costs incurred at P-Server, as Scott previously mentioned. The increase in cost of sales also reflects higher people costs, higher repairs and maintenance expenses, mainly on sand trucking assets we purchased last year, and incremental royalties for the Peace River facility due to increased production. Lower third-party trucking costs partially offset these increases. On a per-ton basis, cost of sales was impacted by a shift in terminal mix, which was partly offset by lower rail transportation costs in the quarter. The impact of foreign exchange on the U.S. dollar components cost of sales drove a decrease of 25 cents to cost of sales compared to the fourth quarter of last year. Cost of sales excluding depreciation increased for the full year compared to 24 due to records and sales volumes higher transportation costs to move the volumes to the terminals and the customer well sites, and the incremental costs of Peace River, as well as the full year of sources trucking operations on the Taylor Terminal beginning its operations. Cost of sales did benefit from lower production costs achieved at the Wisconsin mining facilities. A weaker dollar increased cost of sales denominated in U.S. dollars by $2.54 per metric ton compared to 2024, which was largely offset by movement in exchange rates on revenues denominated in U.S. dollars. Excluding gross margin from Mindgate, adjusted gross margins for Q4 were $39.07 per metric ton compared to $44.88 Last year, Q4 was impacted by the incremental cost of Peace River, as well as extremely cold temperatures and heavy snowfall in certain source customer operating areas, resulting in additional performance-related charges, which impacted gross margin by $0.52 per metric ton. For the quarter, the strengthening of the Canadian dollar led to a decrease of just a gross margin of $0.02 per metric ton. For the year, gross margin decreased by $10.8 billion compared to 24. Excluding gross margin from mine gate, adjusted gross margin was $43.71 per metric ton compared to $46.99 per metric ton in 24. A shift in terminal mix due to the location of customer well sites, a shift in product mix to lower birth price finer mesh sand sales, the incremental P-server costs, and incremental costs from commencing operations at Taylor all contributed to the decrease. These impacts were partly offset by 3.6 million of incremental margin generated from sources trucking operations and lower rail transportation costs realized in late 25. The weakening of the Canadian dollar negatively impacted adjusted gross margin by 24 cents per metric ton compared to last year. For Q4-25, total operating in G&A decreased by 0.1 million. Operating expenses increased by 0.2 million, mainly due to higher royalties, including selling and administrative costs. This was partly offset by lower incentive compensation expense. G&A decreased by 0.3 million due to lower incentive compensation expenses. and a reduction in related IT expenses. In Q4-24, Source implemented a new cloud computing software system, which resulted in incremental expenses in that period. For the fourth quarter, or sorry, for the year totaling, operating and G&A expenses increased by 2.8 million. Operating expenses increased by 4.8 million due to increased royalty-related costs. higher people costs because of increased activity levels and incremental terminal and trucking operations, as well as higher workers' compensation insurance premiums. There were also additional repairs and maintenance costs on rail cars and facilities in 2025. G&A costs were down $2 million due to lower incentive compensation costs, partly offset by the amortization of costs to implement the new cloud computing arrangement in 2024, and higher professional fees. Finance expense for Q4 2025 increased by 0.7 million compared to Q4 24. In the quarter, the decision was made to allow the delayed draw facility to expire, which previously which resulted in previously deferred capitalized costs being recognized. Source also incurred higher interest expense on lease obligations. These impacts were partially offset by lower accretion expense and higher interest income compared to the fourth quarter of 24. For the year, finance expense decreased by 4.2 million compared to 2024. The decrease was attributable to lower interest expense incurred for sources, credit facilities, and incremental interest income earned on cash balances, as well as lower accretion expense. These reductions were partly offset by higher interest expense for these obligations. A year-end source had available liquidity of $59.9 million. Capital expenditures net of proceeds on disposals and reimbursements and excluding expenditures on the Taylor facility were $7.1 million for the quarter, an increase of $1.6 million near the last year. Growth capital increased by $2.1 million, mainly attributed to the expansion of Peace River facility. Q4 24, a customer reimbursement related to the Peace River facility expansion lowered their total expenditures in that quarter. Maintenance capital expenditures decreased by $0.5 million for the fourth quarter of 25 due to lower expenditures on the facilities. For the year, capital expenditures net of proceeds on disposal and reimbursements and excluding Taylor increased by $21.3 million. Growth capital increased by 15.7 million, primarily due to assets acquired in the third quarter for the future expansion of the Peace River facility, as well as expenditures made on the current expansion to expand into its 1 million ton capability. Maintenance expenditures increased by 5.5 million, driven by higher amounts for overburden removal and increased expenditures for Sahara improvements and upgrades as well as some equipment rebuilds for Source's trucking operations. These obligations increased from the prior quarter largely due to the timing of the addition of heavy equipment for P-Server and higher renewal rates on yellow iron leases for the Wisconsin mining operations. Source is now cash taxable in the U.S. and expects that it will be cash taxable in Canada in the next year or so. With that, I'll turn it back to you, Scott.