Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Source Energy Services Ltd (SCEYF, Financial) reported a record third consecutive quarter in sand volumes, total revenues, and EBITDA.
- The company achieved an 83% utilization rate on its Sahara fleet, indicating strong operational efficiency.
- Source Energy Services Ltd (SCEYF) successfully acquired sand trucking assets from the PVT Group, enhancing its last-mile logistics capabilities.
- The company reported a significant increase in sand revenue, up by $40 million from the third quarter of 2023.
- Free cash flow for the third quarter was $20.1 million, marking a $12.7 million increase compared to the previous year.
Negative Points
- The weakening Canadian dollar negatively impacted gross margins due to higher U.S. denominated costs.
- Cost of sales increased by $45.9 million compared to the third quarter of 2023, driven by higher sales volumes and rail costs.
- Operating general and administrative expenses rose by $1.6 million, primarily due to increased compensation and royalty costs.
- The company is facing upcoming maturities of both its notes and ABL facility, necessitating refinancing efforts.
- Adjusted gross margin per metric tonne slightly decreased compared to the same period last year, impacted by extreme heat affecting rail transportation.
Q & A Highlights
Q: How are volumes trending in the fourth quarter?
A: The fourth quarter is typically unpredictable due to seasonality in the completions industry. However, current activity levels are pleasantly surprising, with some customers pulling capital from 2025 into Q4. We are cautiously optimistic about favorable Q4 volumes. - Scott Melbourn, CEO
Q: How is the construction of the Taylor facility progressing, and what is the potential for expanding the relationship with Trican?
A: The Taylor facility is under construction, with the first phase expected to be complete within the next month. The full completion is targeted for 2025. The relationship with Trican could potentially expand, but there is nothing specific to report at this time. - Scott Melbourn, CEO
Q: Can you explain the working capital build in the quarter and expectations for the fourth quarter?
A: The working capital build was primarily due to timing differences. We expect working capital to reduce slightly as we close out the year, following historical patterns. - Derren Newell, CFO
Q: What is the impact of foreign exchange on your financials, and can you provide the revenue mix in U.S. and Canadian dollars?
A: The weakening Canadian dollar slightly increased costs more than revenues due to customer-specific sales. We generally maintain a natural balance between U.S. dollar costs and revenues. - Derren Newell, CFO
Q: Are there any updates on the refinancing of your debt for next year?
A: We have selected partners and are actively working on the refinancing transaction, with more news expected soon. - Derren Newell, CFO
Q: Given recent performance, are you considering providing more detailed forward guidance?
A: We evaluate this annually and aim to provide more guidance as we receive capital programs from customers and see volume trends for the year. - Scott Melbourn, CEO
Q: What is your estimated market share in the Western Canadian Sedimentary Basin?
A: We estimate our market share to be between 45% and 48%, though it can vary slightly quarter-to-quarter. - Scott Melbourn, CEO
Q: If activity levels remain flat into 2025, what volume growth could be expected from customer additions in 2024?
A: We anticipate a 5% to 10% increase in overall volume growth due to customer additions, with potential slight growth from increased well intensity. - Scott Melbourn, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
