Thank you, operator. Good morning and welcome to Source Energy Services' fourth-quarter 2025 conference call.

My name is Scott Melbourn. I'm the CEO of Source, and I'm joined today by Derren 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 and MD&A that were posted to SEDAR+ 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 tonnes, 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 tonnes for the quarter, an 18% increase over the fourth quarter of 2024. With this strong finish to the year and despite the commodity—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 tonnes per year.

We enhanced our shareholder return by initiating a share purchase—a share repurchase program, which repurchased and cancelled 465,000 shares, and we reduced our term loan by $23.7 million. Some noteworthy items for the year included sand sales volume of 3.7 million tonnes, a 5% increase over last year.

Source also set a record for sand volumes delivered to customers' well sites through our last-mile logistics team. 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—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 Derren.

Thanks, Scott. In the fourth quarter, Source sold 907,000 metric tonnes 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 was completed in the fourth. The average realized sand price per metric tonne decreased by $4.02 compared to the prior year, primarily due to a sales mix of higher sales of lower-priced finer mesh sand.

Wellsite 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 US 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 '24 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 Peace River as Scott previously mentioned.

The increase in cost of sales also reflects higher people costs, higher repairs and maintenance expenses mainly on the 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-tonne 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 US dollar components cost of sales drove a decrease of 25 cents to cost of sales in the—compared to the fourth quarter of last year.

Cost of sales excluding depreciation increased for the fully year compared to '24 due to record sand 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 a full year of Source's trucking operations and 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 US dollars by $2.54 per metric tonne compared to 2024, which was largely offset by movement in exchange rates on revenues denominated in US dollars. Excluding gross margin from mine gate, adjusted gross margins for Q4 were $39.07 per metric tonne compared to $44.88 last year.

Q4 was impacted by the incremental costs 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 52 cents per metric tonne. For the quarter, the strengthening of the Canadian dollar led to a decrease of adjusted gross margin of 2 cents per metric tonne.

For the year, gross margin decreased by $10.8 million compared to '24. Excluding gross margin from mine gate, adjusted gross margin was $43.71 per metric tonne compared to $46.99 per metric tonne in '24.

A shift in terminal mix due to the location of customer well sites, a shift in product mix to lower-priced finer mesh sand sales, the incremental Peace River 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 Source's trucking operations and lower rail transportation costs realized in 20—late 2025.

The weakening of the Canadian dollar negatively impacted adjusted gross margin by 24 cents per metric tonne compared to last year. For Q4 '25, total operating and G&A decreased by $0.1 million.

Operating expenses increased by $0.2 million mainly due to higher royalties included in 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—sorry, for the year, totally 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 previ—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 Source's credit facilities and incremental inter—interest income earned on cash balances as well as lower accretion expense.

These reductions were partly offset by higher interest expense for lease obligations. At 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 compared to 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 fee—Peace River facility as well as expenditures made on the current expansion to expand into its 1 million tonne 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. Lease obligations increased from the prior-year quarter largely due to the timing of the addition of heavy equipment for Peace River and higher renewal rates on yellow iron leases for the Wisconsin mining operations.

Source is now cash taxable in the US 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.

Thanks, Derren. As we look at industry activity in '26—in 2026 and beyond, we believe the continued development in the Montney will be a key growth driver for the industry.

In response to this, Source has focused its capital expenditures over the past few years on the development of its capabilities in the Montney with the expansion of the Chetwynd terminal, the completion of the Taylor terminal, and the expansion of the Peace River mine to 1 million tonnes of production. These improvements have positioned Source to provide an unparalleled mine-to-wellsite services for both Northern White sand and domestic sand.

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 in 2026. We anticipate our net capital expenditures for 2026 to be between $30 and $40 million, with the majority focused on optimization and mine development activities in Peace River and the existing terminal network.

We expect 2026 to be another strong year for Western Canadian Sedimentary Basin completion activity driven by additional export capability via LNG Canada as it ramps up its production. Over the longer term, we continue to believe the increased demand for natural gas driven by LNG exports, increased natural gas pipeline export capabilities, and power generation will drive incremental demand for Source's services.

Source continues to focus on our industry-leading frac sand logistics chain, and we have and will continue to execute on a number of opportunities to grow the company and further our competitive advantage. In addition to growth in our core markets, we continue to explore opportunities to diversify and expand our service offerings and to further utilize our existing Western Canadian terminals.

Thank you for your time this morning. This concludes the formal portion of our call.

We will now ask the operator to open the lines for questions.

Morning, guys.

Morning, Nick.

Just the first question for me, we're two months into '26, any indication how activity levels have trended relative to either the full year or the fourth quarter?

I think as we may have mentioned on our outlook before, we see 20 2026 right now as being a fairly flat year, in terms of volume year over year. I think what we'll see in '26 in comparison to '25 is we'll see a little more steady and so we expect kind of quarter-over-quarter to be much more steady than or much more flat compared to 2025 where we saw really heightened levels of activities in Q1 and Q2, then a significant drop-off in Q3 and then an increase in Q4.

We expect much more steady activity across the quarters in '26. I personally think that we'll have a little more activity in the back end of '26 as we start to see the impact of LNG Canada and we start to see the impact of more export capability out of Western Canada.

As we're looking at it right now, we look like a fairly flat year-over-year in terms of overall volume.

That's helpful. How much visibility do you have or how far out do you have visibility for your sand orders?

For the most part, we've got from our E&P customers, we'll have a fairly good visibility for the entire year. Pads will move from quarter to quarter, and so there still will be some movement within that forecast, but we have a fairly good handle on what the overall volume is going to look like for the full year.

That's

helpful. Then there seems to be some good macro tailwinds from LNG and natural gas for power generation.

Am I correct in interpreting that this will be more of a back half?

I think, as we look at the year, I think that if we see some movement in commodity price, especially natural gas price, that we'll see much more activity sort of driven to the back half of this year. I think you're right in saying that the back half of the year has more upside potential than what we're seeing in the front half of this year.

Got it. Then

maybe one last question for Derren. I know margins were impacted in the fourth quarter by cold weather and Peace River startup costs.

Did any of those carry over into the first quarter?

No, we've seen much better performance so far out of Peace, and cold weather, knocked on wood, while it's snowed, we haven't had quite the challenges that cold snap in December with the crazy amount of snow that fell up in Northern Alberta at the same time hasn't impacted us the same way.

Thanks. I'll pass along.

Thanks, Nick.

Thank you for everyone who joined this morning. If you have any follow-on questions, please feel free to reach out to myself or Derren.