Thank you, operator. Good morning, and welcome to Source Energy Services Third Quarter 2025 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'll provide a brief overview of the quarter, which will be immediately followed by a question-and-answer period.

Before I get started, I'd like to refer everyone to the financial statements and the 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 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. After a couple of record quarters this year and as anticipated, we experienced a slowdown in completions activity in Q3 as weaker commodity prices in both oil and natural gas, along with some economic uncertainty caused our customers to defer some of their completions to the fourth quarter and into 2026.

During the quarter, natural gas prices were hit particularly hard due to pipeline maintenance and LNG Canada not ramping up as fast as markets had expected, resulting in depressed AECO pricing. This work has not been lost.

It has just been delayed. And as a result, we are expecting a much stronger Q4 than we had last year.

And for the second half of 2025, we expect similar volumes as the second half of 2024. During the third quarter, we continued to build our infrastructure to support the development of the Montney play.

The expansion of the Peace River mine to 1 million tonnes of processing capacity is nearing completion as is the construction of the Taylor terminal, which became fully operational during the quarter. Source also seized on a unique opportunity to acquire sand processing assets at a very attractive price.

These assets, once disassembled and moved will be used for the future expansion of the Peace River facility. The purchase comprises substantially all of the processing assets required to expand the production at the Peace River facility to a total capacity of 3 million tonnes per year.

While we have made the decision to purchase these assets in order to move quickly when the time is right, the time line for bringing these assets into operation will be dependent on the next phase of LNG export capacity and how quickly the overall proppant market in the Western Canadian Sedimentary Basin grows. With lower activity levels in Q3, we realized the following results: Sand sales volumes of 665,000 tonnes, a 31% decrease from last year.

Sand revenue and well site revenues, which include trucking and Sahara results in Canada were impacted proportionately by the lower sales volume, while realized pricing actually improved. Total gross margin were down due to lower sales volume.

Adjusted gross margin per ton of $45.57 is in line with prior years and year-to-date results. Adjusted EBITDA was $20.3 million, a $15.1 million decrease from the third quarter of 2024.

On the capital management front, we remain committed to disciplined balance sheet management, reducing outstanding debt by $11.7 million this quarter and a total of $19.9 million for the year. Building on that progress, we move beyond debt reduction and are now allocating a portion of free cash flow to share repurchases through the normal course issuer bid.

Since launching the program in May, we have repurchased 392,000 shares, including 167,500 in Q3, further enhancing shareholder value and reinforcing our capital structure. With that, I will now turn it over to Darren.

Thanks, Scott. As Scott mentioned, Source sold 665,000 metric tons of sand in Q3 '25 from which we generated $100.3 million in sand revenue.

Sand volumes were 31% lower for the reasons Scott explained, while sand revenue decreased by $42 million. The decrease in revenue was volume driven as the average realized price per metric ton actually increased by $3.15 compared to the prior year.

The increase in the realized price was primarily due to a shift in terminal mix, partly offset by an increase in lower-priced finer sand sales. Wellsite Solutions revenue for Q3 '25 was $23.9 million, a decrease of $16 million compared to Q3 '24.

Lower sand sales volumes impacted the volumes hauled to and handled at the well site. In Canada, this resulted in lower trucking revenue and Sahara utilization, which came in at 47% for the quarter.

The U.S. Sahara fleet, however, was 100% utilized as it is fully contracted.

Terminal services revenue was $1.1 million, an increase of $0.2 million compared to Q3 '24 due to higher revenue from chemical elevation volumes realized in the period, including the impact of the addition of hydrochloric transloading at the Chetwynd terminal. Cost of sales, excluding depreciation, decreased by $44.8 million for the quarter compared to the same period in '24 due to the decreased sand volumes sold and lower truck volumes.

On a per ton basis, cost of sales was increased by a shift in terminal mix and decreased by fewer third-party sand purchases. The movement of foreign exchange rates on the U.S.

dollar-denominated components of cost of sales caused an increase of $0.72 per metric ton compared to the third quarter of last year. Total adjusted gross margins were lower due to lower sales volumes and lower volumes trucked to the well site.

On a per ton basis, excluding gross margin from mine gate volumes, adjusted gross margin was $46.56 compared to $45.89 for the third quarter of '24. During the quarter, adjusted gross margin was favorably impacted by a customer performance bonus that was partially offset by the impact of additional costs attributed to the expansion of operations at the Peace River facility compared to third quarter of last year.

For the 3 months ended September 30, the weakening of the Canadian dollar favorably impacted adjusted gross margin by approximately $0.52 per metric ton. Operating expenses in Q3 increased by $0.7 million due to higher royalty-related fees, insurance premiums and rail expenses for Source's fleet as well as the incremental costs incurred with the Taylor facility beginning operations.

These increases were partially offset by lower people costs, reflecting reduced incentive compensation. General and admin expenses decreased by $0.3 million for Q3 '25, primarily due to lower variable incentive compensation costs.

This reduction was partly offset by the amortization of Source's computing system, which we implemented last year. Finance expense for the Q3 was lower by $1.6 million compared to Q3 '24.

The decrease was due to $0.9 million in lower interest expense for long-term debt outstanding, including an adjustment to capitalize nonutilization fees on delayed draw facility incurred during this year as well as lower accretion expense. Partly offsetting these was an increase in interest expense for outstanding lease obligations driven by the addition of heavy equipment leases and interest income earned.

Interest income realized is attributed to the commencement of the subleases for Sahara units deployed last year as well as cash balances on hand. At quarter end, Source had available liquidity of $65.7 million.

Capital expenditures for Q3 net of proceeds on disposals and excluding expenditures related to Taylor were $18.5 million, an increase of $15.3 million compared to Q3 '24. Growth capital expenditures, excluding the construction of Taylor increased by $12.5 million, substantially attributed to the assets acquired for the future expansion of Peace River facility, as Scott discussed.

We also acquired some trailers for Source's trucking operations. Maintenance and sustaining capital increased by $2.8 million for Q3 '25, largely due to higher amounts for overburden removal from the mining operations.

Lease obligations increased from the prior quarter, largely due to the timing of the addition of heavy equipment for Peace River done in the latter half of '24 and yellow iron leases for the Wisconsin mining operations, which were replaced late in '24 at higher rates. Source is now in a cash taxable position in its U.S.

operations and expects it will be cash taxable next year in Canada. And with that, I'll turn it back to you, Scott.

Thanks, Derren. As a result of the delays in completion activity experienced in the third quarter, Source anticipates increased activity levels for the remainder of the year, which will result in a solid rebound for the fourth quarter and the full year 2025 proppant demand similar or slightly ahead of 2024.

We expect 2026 to be a strong year for Western Canadian Sedimentary Basin completion activity, driven by additional export capability via LNG Canada as it ramps up its production. We are pleased to note positive developments regarding all the proposed and under construction West Coast LNG projects, which will ultimately further expand export capability from the WCSB.

Over the long term, we continue to believe 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 enhancing 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 to further our competitive advantage.

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

We'll now ask the operator to open the lines for questions.

Just the first question for me. You mentioned that completion activity slowed in the quarter.

Can you maybe talk to what you've seen month-to-month through the quarter and maybe into Q4 as well?

Yes. We saw sort of the beginning of Q3 as really status quo.

And then we start -- we -- as we progressed in Q3, the activity level started to slow. We're kind of seeing the reverse of that as we move into Q4, we've seen activity levels starting to ramp.

We expect to continue to ramp throughout the balance of Q4 and then slow down with our normal seasonal slowdown in December for -- as everyone kind of pauses for the holiday period.

That's helpful. And you mentioned sand volumes expect to be flat to slightly up in 2025.

Any indication what you're expecting in 2026 and 2027 based on initial discussions with customers?

I think our initial view of 2026 is we will likely see some growth over where we ultimately end in 2025. I would caution, we're really early days with our customers' budget and the budgeting process.

So there's certainly going to be some ins and outs. However, we do believe that we're going to see some growth '25 to '26.

And as we cycle into '27 and beyond, I would expect that we're going to see additional growth in those years as well.

Great. And maybe a question for Darren.

Any guidance on what -- where CapEx will land for '25 and '26?

You've seen our capital move up. We're sort of in the 45 to 50-ish range right now with capital for '25.

'26 is early days. As we work through kind of where we are with our Peace River expansion and the timing of it, not quite ready to tell the world what the plan is.

That's fair. And then maybe a related question.

There's been some recent news of another mine expansion in Alberta. I'm just wondering how you expect these to impact the overall market going forward?

Sorry, Nick, I missed the first part of that question.

Yes. Just recent news of other mine expansions in Alberta.

Yes. Maybe I'll take that one, Nick.

I think we're not surprised by other domestic players in Alberta expanding their production capability. I think we've seen a movement in the market generally to a little more domestic in their program.

We're very confident in our Peace River asset, and we're very confident in our Northern White offering, especially as it relates to the Montney and the location advantage we have at Peace River and our network throughout the Montney. So we don't anticipate those expansions or those announced expansions to have really much of an impact on our business and our core areas at all.

Obviously, we'll be keeping a close eye on it, but I think our location advantage and our network advantage is substantial, and we won't see much of an impact at all.

Thank you, everyone, for joining our call today. If you have any follow-on questions, please feel free to reach out to myself or Darren.