Q2 2026 Source Energy Services Ltd Earnings Call

July 30, 2026

Speaker #1: Good morning, and thank you for standing by. This is the conference operator. Welcome to the Source Energy Services second quarter 2026 results conference call.

Operator: Good morning, and thank you for standing by. This is the conference operator. Welcome to the Source Energy Services Q2 2026 results conference call. As a reminder, all participants are in a 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. 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 Melbourn, CEO. Mr. Melbourn, please proceed.

Speaker #1: 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.

Speaker #1: To join the question queue, you may press *1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing *0.

Speaker #1: I would now like to turn the conference over to Scott Melbourne, CEO. Mr. Melbourne, please proceed.

Speaker #2: Thank you, operator. Good morning. Welcome to Source Energy Services second quarter 2026 conference call. My name is Scott Melbourne. I'm the CEO of Source.

Scott Melbourn: Thank you, operator. Good morning, and welcome to Source Energy Services Q2 2026 conference call. My name is Scott Melbourn. I'm the CEO of Source. I'm joined today by Derren Newell, our CFO. This morning, we will provide a brief overview of the quarter, which will immediately be followed by a question and answer period. Before I get started, I'd like to refer everyone to the financial statements in the MD&A that were posted to SEDAR on 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 for the items just mentioned, our financial information is prepared in accordance with IFRS.

Scott Melbourn: Thank you, operator. Good morning, and welcome to Source Energy Services' Q2 2026 conference call. My name is Scott Melbourn; I'm the CEO of Source. I'm joined today by Derren Newell, our CFO. This morning, we will provide a brief overview of the quarter, which will immediately be followed by a question-and-answer period. Before I get started, I'd like to refer everyone to the financial statements in the MD&A that were posted to SEDAR on 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 for the items just mentioned, our financial information is prepared in accordance with IFRS.

Speaker #2: I'm joined today by Darren Newell, our CFO. This morning, we will provide a brief overview of the quarter, which will immediately be followed by a question-and-answer period.

Speaker #2: Before I get started, I'd like to refer everyone to the financial statements and the MD&A that were posted to Cedar 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.

Speaker #2: 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.

Speaker #2: Which are non-IFRS measures, as described in our MD&A. Except for the items just mentioned, our financial information is prepared in accordance with IFRS. The second quarter continued the trend of slow slower natural gas-based completion activity as Western Canadian natural gas prices remained weak.

Scott Melbourn: The Q2 continued the trend of slower natural gas-based completion activity as Western Canadian natural gas prices remained weak. As a result of the weak commodity prices, our customers have planned or deferred a larger portion of their completion activity to the H2 of this year. Over the balance of 2026, we are expecting Canadian activity levels to improve from the H1 levels with a focus on liquids-rich plays. However, we have seen some play-specific completions canceled and some uncertainty related to M&A, which has resulted in us tempering our expectations with respect to overall Canadian volumes for 2026. Offsetting the Canadian market is a significant increase in mine gate sales as the increased oil prices have led to more completion activity in the lower 48 and an increased call for Northern White sand.

Scott Melbourn: The Q2 continued the trend of slower natural gas-based completion activity as Western Canadian natural gas prices remained weak. As a result of the weak commodity prices, our customers have planned or deferred a larger portion of their completion activity to the H2 of this year. Over the balance of 2026, we are expecting Canadian activity levels to improve from the H1 levels with a focus on liquids-rich plays. However, we have seen some play-specific completions canceled and some uncertainty related to M&A, which has resulted in us tempering our expectations with respect to overall Canadian volumes for 2026. Offsetting the Canadian market is a significant increase in mine gate sales as the increased oil prices have led to more completion activity in the Lower 48 and an increased call for Northern White sand.

Speaker #2: As a result of the weak commodity prices, our customers have planned or deferred a large portion a larger portion of their completion activity to the last half of this year.

Speaker #2: Over the balance of 2026, we are expecting Canadian activity levels to improve from the first half levels with a focus on liquids-rich plays. However, we have seen some play-specific completions cancelled and some uncertainty related to M&A, which has resulted in us tempering our expectations with respect to overall Canadian volumes for 2026.

Speaker #2: Offsetting the Canadian market is a significant increase in Minegate sales, as the increased oil prices have led to more completion activity in the lower 48 and an increased call for Northern White Sands.

Speaker #2: Noteworthy items from the quarter include total sales volume of 831,000 tons, a 24% decrease from last year. We generated total revenue of $137.1 million, a decrease from the second quarter of 2025 due to lower customer activity, a more than 60-times increase in US Minegate sales, and a significant increase in domestic sand sales.

Scott Melbourn: Noteworthy items from the quarter include total sales volume of 831,000 tons, a 24% decrease from last year. Generated total revenue of CAD 137.1 million, a decrease from the Q2 of 2025 due to lower customer activity, a more than 60 times increase in US mine gate sales, and a significant increase in domestic sand sales. We realized gross margin of CAD 17.4 million and adjusted gross margin of CAD 29.8 million. Gross margins were impacted by lower sales volume, a shift in sales mix to more mine gate volumes, and a lower than anticipated production level at our Peace River facility. Adjusted EBITDA was CAD 18.5 million, a CAD 16.7 million decrease from the same period in 2025. During the quarter, we renewed our NCIB program, and we completed the largest wet sand job in Canada to date, which pumped over 71,000 tons in 23 days.

Speaker #2: We realized gross margin of $17.4 million and adjusted gross margin of $29.8 million. Gross margins were impacted by lower sales volumes, a shift in sales mix to more MineGate volumes, and a lower than anticipated production level at our Peace River facility.

Speaker #2: Adjusted EBITDA was $18.5 million, a $16.7 million decrease from the same period in 2025. During the quarter, we renewed our NCIB program and completed the largest wet sand job in Canada to date, which pumped over 71,000 tons in 23 days.

Speaker #2: Subsequent to the quarter, I'm pleased to announce that Jeffrey Bowers has been appointed to the board of directors. Jeffrey is a seasoned energy executive with more than 25 years of leadership experience in the energy industry, spanning finance, capital markets, and corporate governance.

Scott Melbourn: Subsequent to the quarter, I'm pleased to announce that Jeffrey Bowers has been appointed to the board of directors. Jeffrey is a seasoned energy executive with more than 25 years of leadership experience in the energy industry, spanning finance, capital markets, and corporate governance. With that, I will now turn it over to Derren.

Speaker #2: With that, I will now turn it over to Darren.

Speaker #3: Thanks, Scott. In the second quarter, Source generated 107.8 million in sand revenue. The average realized sand price decreased 17 dollars and 87 cents compared to the prior year, due to the increased Minegate sales, which lowered the average price by 12 dollars and 34 cents a ton.

Derren Newell: Thanks, Scott Melbourn. In the Q2, Source generated CAD 107.8 million in sand revenue. The average realized sand price decreased CAD 17.87 compared to the prior year due to the increased mine gate sales, which lowered the average price by CAD 12.34 a ton. The average price was also impacted by the increase in domestic wet and dry sand sales in the quarter. Well site solutions revenue was CAD 28.3 million for the Q2, a decrease of CAD 10.9 million compared to Q2 last year. This decrease was driven by lower volumes delivered through last-mile logistics, reflecting lower customer activity levels. Sahara units in Canada were 45% utilized in the Q2, and the Sahara units deployed in the US remain fully contracted and 100% utilized. Terminal services revenue decreased CAD 0.1 million compared to Q2 2025 due to lower chemical transloading volumes.

Speaker #3: The average price was also impacted by the increase in domestic wet and dry sand sales in the quarter. Wellsite Solutions revenue was $28.3 million for the second quarter, a decrease of $10.9 million compared to Q2 last year.

Speaker #3: This decrease was driven by lower volumes delivered through last mile logistics, reflecting lower customer activity levels. Sahara Units in Canada were 45% utilized in the second quarter, and the Sahara Units deployed in the US remain fully contracted and 100% utilized.

Speaker #3: Terminal Services revenue decreased by $0.1 million compared to Q2 2025, due to lower chemical elevation volumes. Cost of sales excluding depreciation decreased by $4.6 million for Q2, primarily due to lower sales volumes.

Derren Newell: Cost of sales, excluding depreciation, decreased by CAD 46 million for Q2, primarily due to lower sales volumes. The decrease also reflects lower production costs in Wisconsin and the change in sales mix to more mine gate and domestic sand, which have lower landing costs. These improvements were partly offset by the impact of lower production levels of Peace River, as that facility is working through some operational issues as it scales up. The Taylor facility continued to have higher than expected fuel costs as they were still on temporary power while we wait for BC Hydro to connect the facility to the grid. Excluding gross margins from mine gate, adjusted gross margins for Q2 were 38.81% compared to 44.49% in Q2 2025. The decrease reflects the shift in sales mix, weaker production performance at Peace River, and higher fuel costs.

Speaker #3: The decrease also reflects lower production costs in Wisconsin and the change in sales mix to more Minegate and domestic sand, which have lower landing costs.

Speaker #3: These improvements were partly offset by the impact of lower production levels at Peace River, as that facility is working through some operational issues as it scales up.

Speaker #3: The tailored facility continued to have higher-than-expected fuel costs as they were still on temporary power while we wait for PC Hydro to connect the facility to the grid.

Speaker #3: Excluding gross margins from Minegate adjusted gross margins for Q2 were 38.81, compared to 44.49 in Q2 25. The decrease reflects the shift in sales mix, weaker production performance at Peace River, and higher fuel costs.

Speaker #3: Partly offsetting this was the improved operational performance of the trucking group, and it will note currency had a minimal impact on gross margins in the quarter.

Derren Newell: Partly offsetting this was the improved operational performance of the trucking group. I will note currency had a minimal impact on gross margins in the quarter. For Q2 2026, total operating and G&A expenses decreased by CAD 1.3 million, operating expenses decreased by CAD 0.4 million, and G&A was down by CAD 0.9 million, both due to lower incentive compensation costs. Finance expense for Q2 2026 increased by CAD 0.4 million compared to 2025. The increase was mainly driven by higher interest on the ABL facility and higher interest on lease obligations due to the addition of heavy equipment. These increases were partly offset by lower interest expense on the term loan and due to its lower average principal outstanding and lower other interest costs. At quarter end, Source had available liquidity of CAD 27 million.

Speaker #3: For Q2 26, total operating and G&A expenses decreased by 1.3 million, operating expenses decreased by 0.4, and G&A was down by 0.9, both due to lower incentive compensation costs.

Speaker #3: Finance expense for Q2 2026 increased by $0.4 million compared to 2025. The increase was mainly driven by higher interest on the EBL facility and higher interest on lease obligations due to the addition of heavy equipment.

Speaker #3: These increases were partly offset by lower interest expense on the term loan due to its lower average principal outstanding and lower other interest costs.

Speaker #3: At quarter-end, Source had available liquidity of 27 million. Capital expenditures met a proceed-on-disposals reimbursements excluding expenditures for tailored facility and customer-funded equipment were 13.6 million for Q2, an increase of 5.9 million compared to last year.

Derren Newell: Capital expenditures net of proceeds on disposals were reimbursements excluding expenditures for Taylor facility and customer-funded equipment were CAD 13.6 million for Q2, an increase of CAD 5.9 million compared to last year. Gross capital expenditures, excluding construction for the Taylor facility and customer-funded equipment purchases, increased by CAD 3.7 million, largely attributed to expenditures of Peace River facility. Maintenance capital expenditures increased by CAD 2.2 million, primarily due to increased overburden removal. In the back half of the year, CapEx will be focused on customer-funded projects, overburden spending, and some smaller capital projects. Lease obligations increased from the prior year, largely due to the timing of the addition of heavy equipment for Peace River and higher renewal rates on yellow iron leases for mining in Wisconsin. With that, I will turn it back to you, Scott.

Speaker #3: Gross capital expenditures excluding construction for the and customer-funded equipment purchases increased by 3.7 million, largely attributed to expenditures at the Peace River facility. Maintenance capital expenditures increased by 2.2 million, primarily due to increased overburden removal.

Speaker #3: In the back half of the year, CapEx will be focused on customer-funded projects, overburden spending, and some smaller capital projects. Lease obligations increased on the prior year, largely due to the timing of the addition of heavy equipment for Peace River, and higher renewal rates on Yellow Iron leases for mining in Wisconsin.

Speaker #3: With that, I'll turn it back to you, Scott.

Speaker #2: Thanks, Darren. For the remainder of the year, we are anticipating our customers will maintain a flexible approach to their capital budgets as they deal with uncertainty and fluctuating commodity price.

Scott Melbourn: Thanks, Derren. For the remainder of the year, we are anticipating that our customers will maintain a flexible approach to their capital budgets as they deal with uncertainty and fluctuating commodity price, especially in the Western Canadian Sedimentary Basin where we see natural gas prices continue to remain challenged. For our Canadian volumes, we expect a busier H2 of the year with continued demand for wet and dry domestic Northern White. For the Lower 48, we expect the strong mine gate sales to continue for the balance of the year. We are quoting volumes into 2027. As we look at industry activity in 2027 and beyond, the continued development in the Montney will be a key growth driver for the industry.

Speaker #2: Especially in the Western Canadian Sedimentary Basin, where we see natural gas prices continue to remain challenged. For our Canadian volumes, we expect a busier second half of the year with continued demand for wet and dry domestic Northern White, and for the Lower 48, we expect the strong minegate sales to continue for the balance of the year, and we are quoting volumes into 2027.

Speaker #2: As we look at industry activity in 2027 and beyond, the continued development in the Motoney will be a key growth driver for the industry.

Speaker #2: Source has an unparalleled mind to Wellsite Services for both Northern White and domestic sand, which will continue to specifically serve Northeast BC. In addition to our offerings in frac sand and related logistics, we have expanded our chemical transloading capability, which we believe will be a growth area for Source.

Scott Melbourn: Source has an unparalleled mine-to-well site services for both Northern White and domestic sand, which will continue to support market share gains in the Montney and specifically Northeast BC. In addition to our offerings in frac sand and related logistics, we've expanded our chemical transloading capability, which we believe will be a growth area for Source. Over the longer term, we believe the macro picture has strengthened considerably and the increased demand for natural gas, natural gas liquids driven by condensate demand, LNG exports, increased natural gas pipeline export capability, and power generation will drive incremental demand for Source's services. Source continues to focus on enhancing our industry-leading frac sand logistics chain, and we will continue to execute on a number of opportunities to grow the company and further our competitive advantage.

Speaker #2: Over the longer term, we believe the macro picture has strengthened considerably, and the increased demand for natural gas natural gas liquids driven and natural gas liquids driven by condensate demand, LNG exports, increased natural gas pipeline export capability, and power generation will drive incremental demand for Source Services.

Speaker #2: Source continues to focus on enhancing our industry-leading frac sand logistics chain, and we have and we will continue to execute on a number of opportunities to grow the company and further our competitive advantage.

Speaker #2: In addition to growth in our core market, we continue to explore opportunities to diversify and expand our service offering, and to further utilize our Western Canadian terminals.

Scott Melbourn: In addition to growth in our core market, we continue to explore opportunities to diversify and expand our service offering and to further utilize our Western Canadian terminals. Thank you for your time this morning. This concludes the formal portion of the call. We'll now ask the operator to open the lines for questions.

Speaker #2: Thank you for the your time this morning. This concludes the formal portion of the call. We'll now ask the operator to open the lines for questions.

Speaker #1: Thank you. And ladies and gentlemen, we will now begin the question-and-answer session. To ask a question, you may press star then 1 on your telephone keypad.

Operator 3: Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question today will come from Nick Corcoran with Acumen Capital. Please go ahead.

Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. Our first question today will come from Nick Corcoran with Acumen Capital. Please go ahead.

Speaker #1: You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then 2.

Speaker #1: And our first question today will come from Nick Coracon with a cumin capital. Please go ahead.

Speaker #4: Morning, guys, and thanks for taking my questions.

Nick Corcoran: Morning, guys, thanks for taking my questions.

Speaker #5: Morning, Nick.

Scott Melbourn: Morning, Nick.

Speaker #4: Just the first question for me. You mentioned a wet sand frac in the quarter. Are there additional jobs like this in the pipeline?

Nick Corcoran: Just the first question from me, you mentioned a wet sand frac in the quarter. Are there additional jobs like this in the pipeline? How do margins for wet sand compare to your traditional dry sand?

Speaker #4: And how do margins for wet sand compare to your traditional dry sand?

Speaker #5: Yeah. Thanks, Nick. Good question. Yeah. And so the answer to the first question is, yeah, we do have a number of wet sand jobs coming up in the queue.

Scott Melbourn: Yeah. Thanks, Nick. Good question. Yeah, so the answer to the first question is, yeah, we do have a number of wet sand jobs coming up in the queue. So we, you know, we do expect this trend to continue throughout the warmer months for the balance of this year. We do expect the trend to kind of pick up pace next year as well. You know, in terms of margins for our wet and dry domestic, you know, they're fairly similar. So there's no negative to Source for a wet sand versus a dry sand.

Speaker #5: And so we you know, we do expect this trend to continue throughout the the warmer months for the balance of this year and we we do expect the trend to kind of pick up pace next year as well.

Speaker #5: You know, in in terms of margins for our our wet and and dry domestic, you know, they're they're fairly similar. And so there there's no negative to to Source for a wet sand versus a a dry sand.

Speaker #5: So you know, the the one win for Source on on wet sand versus dry sand jobs is, you know, when we look at the Peace River facility and we look at at capital expenditures going forward, we do expect that there there is going to be less capital required to meet sort of growing volumes if those volumes are growing on the wet sand of the equation versus the dry sand of the equation.

Scott Melbourn: You know, the one win for Source on wet sand versus dry sand jobs is, you know, when we look at the Peace River facility and we look at capital expenditures going forward, we do expect that there is going to be less capital required to meet sort of growing volumes if those volumes are growing on the wet sand of the equation versus the dry sand of the equation. I hope that answers your question.

Speaker #5: So so that's I hope that answers your question.

Speaker #4: Yeah, that does. And then on Peace River it sounds like there's a lower production in the quarter. What what drove that and have you been able to wrap it up in the third quarter?

Nick Corcoran: Yeah, that does. On Peace River, it sounds like there's lower production in the quarter. What showed that, and have you been able to ramp it up in Q3?

Speaker #5: Yeah. The the real the real driver behind the lower volumes at at Peace River was a slower than anticipated start. You know, through the the shutdown over the winter, we had improved some aspects of of the wet plant.

Scott Melbourn: Yeah. The real driver behind the lower volumes at Peace River was a slower than anticipated start. Through the shutdown over the winter, we had improved some aspects of the wet plant, which the final touches on those were straggling into the washing season, and so we got a little less washing at the beginning of the season. We do expect as we continue to ramp the facility, that those issues will go away. That was the real driver behind the lower volumes at Peace River this year or this quarter.

Speaker #5: Which were the the final touches on those were straggling into the the washing season. And so we got a little less washing at the at the beginning of the season.

Speaker #5: You know, we do expect as as we continue to ramp the the facility, that those those issues will go away. And so but that was the the real driver behind the lower volumes at at Peace River this year.

Speaker #5: Or this quarter.

Speaker #4: One last question from me, just on the CapEx. What are you expecting for the full year?

Nick Corcoran: Maybe one last question from me, just on the CapEx. What are you expecting for the full year?

Speaker #5: Darren, you want to take that one?

Scott Melbourn: Derren, do you want to take that one?

Speaker #3: I think we're sort of comfortable with our guidance that's out in the 30 to 40 range. We'll probably be towards the middle to upper end of that range, but that's kind of where we're at.

Derren Newell: I think we're sort of comfortable with our guidance that's out in the 30 to 40 range. We'll probably be towards the middle to upper end of that range. That's kind of where we're at.

Speaker #5: And Nick, maybe I'll just add a little color. You know, our capital program, and I think as we we mentioned in the our comments last quarter, was very much front end loaded.

Scott Melbourn: Nick, maybe I'll just add a little color. Our capital program, and I think as we mentioned in our comments last quarter, was very much front-end loaded. For H2 of the year, we expect a much smaller capital program. We actually expect a very small amount outside of overburden removal and the customer-funded capital.

Speaker #5: So for the second half of the year, you know, we expect a much smaller capital program. And we we actually expect a very small amount outside of of overburden removal and and the customer funded capital.

Speaker #4: Okay, Keller. Thanks for taking my question. That's all for me.

Nick Corcoran: Good color. Thanks for taking my question. That's all for me.

Speaker #5: Thanks, Nick.

Scott Melbourn: Thanks, Nick.

Speaker #1: And once again, if you'd like to ask a question, please press star then 1. Our next question will come from John Gibson with BMO Capital Markets.

Operator 3: Once again, if you'd like to ask a question, please press star then 1. Our next question will come from John Gibson with BMO Capital Markets. Please go ahead.

Operator: Once again, if you'd like to ask a question, please press star then 1. Our next question will come from John Gibson with BMO Capital Markets. Please go ahead.

Speaker #1: Please go ahead.

Speaker #4: Morning. Thanks for taking my questions. Just on the the wet sand trend. How is this impacting your volumes from Wisconsin? Obviously, the the US market has picked up.

John Gibson: Morning. Thanks for taking my questions. Just on the wet sand trend, how is this impacting your volumes from Wisconsin? Obviously, the US market has picked up. I just kind of wondering if it's able to offset what you're seeing or what's been taken away from the wet sand jobs.

Speaker #4: Just kind of wondering if it's able to throw off what you're seeing or what's being taken away from the wet sand jobs.

Speaker #5: Yeah. You know, specifically on the on the wet sand jobs, John, you know, we we see this as as sort of interchangeable with dry domestic.

Scott Melbourn: Yeah. Specifically on the wet sand jobs, John, we see this as sort of interchangeable with dry domestic. The more wet sand jobs that are, or the more wet sand volumes that are hitting Source are probably impacting dry domestic more than they're impacting Northern White. With that said, we also see as a year like, or a quarter like this where we see lower volumes, we're seeing some of our domestic sales impact what historically would be our Northern White sales. As we go forward as I think we get a more normal quarter in terms of volume in Canada, that balances out a little more. We still expect a robust Northern White volumes coupled with growing domestic wet or dry volumes.

Speaker #5: And so you know, the more wet sand jobs that are—or the more wet sand volumes that are—hitting Source are probably impacting dry domestic.

Speaker #5: More than than they're impacting Northern White. But you know, with that said, we also see as you know, a year like like or a quarter like this where we where we see lower volumes, you know, we're we're we're seeing, you know, some of the domestic our domestic sales impact our our what what historically would be our Northern White sales.

Speaker #5: You know, as we go forward and as I think we get a a more normal quarter in terms of of volume in in Canada, I think that balance is out a a little more.

Speaker #5: And so we we still expect a a robust Northern White volumes. And and coupled with growing domestic wet or dry volumes.

Speaker #4: Okay, great. Second one, have you seen any or I know it's probably a bit early, but have you heard any indications about 27 capital programs from from your customers?

John Gibson: Okay, great. Second one. Have you seen any, or I know it's probably a bit early, have you heard any indications about 2027 capital programs from your customers?

Speaker #5: Yeah. We're we're a bit early on on 27 to be having those discussions. And you know, I think they're they're there's there's probably a little bit too it's probably a little bit too early in the market.

Scott Melbourn: Yeah. We're a bit early on 2027 to be having those discussions. I think it's probably a little bit too early in the market. Our expectation for 2027 will be growth over top of the 2025 numbers and certainly over top of the 2026 volume numbers. We're a little early in the discussion period with our customers to confirm that.

Speaker #5: You know, our our expectation for 27 will be will be growth. You know, over top of of the 25 numbers and certainly over top of the 2026 volume numbers.

Speaker #5: But we were a little early in the discussion period with our customers to confirm that.

Speaker #4: Okay, great. Last one from me. We've seen some positive third-party data around sand needs going forward in the basin, with LNG demand rising.

John Gibson: Okay, great. Last one from me. We know we've seen some positive third-party data around sand needs going forward in the basin with LNG demand rising. I guess where could you see peak demand for the basin over the next few years, I guess off the base of this year?

Speaker #4: I guess where could you see peak demand for the basin over the next few years? You know, I guess off the base of this year.

Speaker #5: Yeah. You know, I I I think you know, there there's a number of parties that have kind of put out some some sand forecasts.

Scott Melbourn: Yeah. I think there's a number of parties that have kind of put out some sand forecasts, I think if we see all of the LNG export capacity, the pipe capacity, and the power generation for data centers or for other kind of come to fruition, I can see this basin growing from 8 to 9 million, where it is today, to 15 to 16 million at some point in the next 5 years. Obviously that's why we mentioned on the call we see the macro improving considerably and probably has improved considerably over the last 3 months. I think for overall sand demand in the market, it's looking very bright for Source and for the overall industry.

Speaker #5: And I think, you know, as we if we see you know, all of the LNG export capacity, the pipe capacity, and and you know, the the power generation for for data centers or for other kind of come to fruition, you know, I I I can see this basin growing from 8 to 9 million where it is today to, you know, 15 to 16 million at at some point in the next 5 years.

Speaker #5: And so that, you know, obviously, that's why we we mentioned on the on the call, we see the the macro you know, improving considerably and probably has improved considerably over the last 3 months.

Speaker #5: So I think, you know, for overall sand demand in the in the market, it's it's it's looking very bright for for for Source and for the overall industry.

Speaker #4: Got it. Thanks a lot. I'll turn it back to you.

John Gibson: All right. Thanks a lot. I'll turn it back here.

Speaker #5: Thanks, John.

Scott Melbourn: Thanks, John.

Speaker #1: And this will conclude our question and answer session. I'd like to turn the conference back over to Scott Melbourne for any closing remarks.

Operator 3: This will conclude our question and answer session. I'd like to turn the conference back over to Scott Melbourn for any closing remarks.

Operator: This will conclude our question and answer session. I'd like to turn the conference back over to Scott Melbourn for any closing remarks.

Speaker #5: Yeah. Thank you for your interest in Source and thank you for your time today. Hope everyone has a has a great day.

Scott Melbourn: Thank you for your interest in Source, and thank you for your time today. Hope everyone has a great day.

Operator 3: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Operator: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.

Q2 2026 Source Energy Services Ltd Earnings Call

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