Cost of sales, excluding depreciation, increased on a quarter-over-quarter basis, driven by higher sand sales volumes realized and increased transportation costs resulting from the record volumes hauled by “last mile” logistics. These volume-driven increases, as well as an increase in rail transportation costs, were partly offset by a shift in terminal mix compared to the first quarter last year. A weakening of the Canadian dollar increased cost of sales denominated in US dollars by $6.78 per MT, compared to the first quarter of 2024, which was largely offset by the movement in exchange rates on revenue denominated in US dollars for the period.

For the three months ended March 31, 2025, gross margin increased by $1.2 million compared to the same period in 2024. Adjusted Gross Margin benefited from the higher sand sales volumes and sand volumes trucked during the quarter, as well as incremental gross margin generated from the sand trucking assets acquired last year, compared to the first quarter of 2024. Excluding gross margin from mine gate volumes, Adjusted Gross Margin was $45.00 per MT compared to $50.93 per MT for the first quarter of 2024 due to a 23% increase in sales of 100 mesh sand which reduced Adjusted Gross Margin by approximately $3.20 per MT. The weakening of the Canadian dollar negatively impacted Adjusted Gross Margin by $0.70 per MT for the quarter, compared to the first quarter last year. Additionally, challenging road conditions in the first quarter led to higher costs for “last mile” logistics, which also impacted Adjusted Gross Margin.

Operating expenses increased by $1.9 million on a quarter-over-quarter basis, largely driven by the higher activity levels realized during the period. Increased compensation expense, including people costs for Source’s trucking operations, additional maintenance costs for the Peace River facility and higher royalty costs associated with increased sand sales volumes contributed to the increase in operating expenses for the first quarter. General and administrative expense decreased by $0.4 million during the first quarter of 2025, largely the result of lower people costs due to lower variable incentive compensation expense, partially offset by an increase in IT costs, due to the cloud-computing system implemented last year, compared to the first quarter of 2024.

Adjusted EBITDA increased by 5%, or $1.7 million, to $33.8 million for the three months ended March 31, 2025, attributed primarily to the record sand sales volumes and well site solutions performance, as well as the incremental benefit from trucking assets acquired in 2024. The weakening of the Canadian dollar favorably impacted Adjusted EBITDA by $0.3 million for the quarter, attributed to the movement in exchange rates on the settlement of working capital.

Liquidity and Capital Resources

During the first quarter of 2025, Free Cash Flow decreased by $3.6 million compared to the first quarter of 2024, due to amounts paid for income taxes, driven by improved performance, an increase in maintenance capital expenditures, as described below, and higher amounts paid for lease obligations. The increase in lease obligations is largely attributed to the timing of the addition of heavy equipment for Peace River, done in the latter half of 2024, and yellow iron leases for the mining facilities in Wisconsin, added late in 2024, which replaced expiring leases at slightly higher rates. Lease payments for lease obligations in Wisconsin, including rail car leases, were impacted by the weakening of the Canadian dollar compared to the first quarter of 2024.

Capital expenditures, net of proceeds on disposals and reimbursements and excluding expenditures related to the Taylor facility, were $7.1 million for the three months ended March 31, 2025, an increase of $2.5 million compared to the first quarter last year. On a quarter-over-quarter basis and excluding construction for the Taylor facility, growth capital expenditures were relatively flat. Last year, growth capital expenditures incurred included an amount for the sand trucking asset acquisition, and amounts related to the construction of two Sahara units, which were fully reimbursed by customers, as well as insurance proceeds for equipment that malfunctioned at a terminal facility in 2023. Maintenance and sustaining capital expenditures increased for the first quarter of 2025, compared to last year, largely attributed to improvements made at the Peace River mining facility, higher amounts for overburden removal for mining operations, driven by increased volumes, and amounts related to Source’s trucking operations, compared to the first quarter of 2024.

The board of directors has approved the initiation of a normal course issuer bid with respect to the Company’s common shares. Additional information regarding this program will be forthcoming.

BUSINESS OUTLOOK

Source anticipates continued strong customer activity levels in the Montney basin through the second quarter of 2025. The completion of phase one of the Taylor facility, where rail to truck is now operational, and the installation of the new dryer at the Peace River facility helps set Source up to meet the expected longer-term increase in demand in northeastern British Columbia.

Source continues to evaluate the impact of tariffs imposed by the US government on goods imported from Canada and the counter-tariffs imposed by the Canadian government, as well as the volatility in commodity prices, on long- term capital plans for the industry. Source remains focused on pursuing its application to have the Canadian government’s counter-tariffs on frac sand removed. Source believes in the longer-term that the additional export capability via LNG Canada and the expedited permitting of additional LNG capacity will help mitigate potential impacts related to these events. Despite these uncertainties, Source believes it is well-positioned to accommodate increased demand for mine to well site services as LNG Canada comes online and take advantage of activity levels in the WCSB.

In the longer-term, Source believes the increased demand for natural gas, driven by liquefied natural gas exports, increased natural gas pipeline export capabilities and power generation facilities, will drive incremental demand for Source’s services in the WCSB. Source continues to see increased demand from customers that are primarily focused on the development of natural gas properties in the Montney, Duvernay and Deep Basin. This trend is consistent with Source’s view that natural gas will be an important transitional fuel that is critical for the successful movement to a less carbon-intensive world.

Source continues to focus on increasing its involvement in the provision of logistics services for other items needed at the well site in response to customer requests to expand its service offerings and to further utilize its existing Western Canadian terminals to provide additional services.

FIRST QUARTER CONFERENCE CALL

A conference call to discuss Source’s first quarter financial results has been scheduled for 7:30 am MST (9:30 am ET) on Friday, May 9, 2025.

Interested analysts, investors and media representatives are invited to register to participate in the call. Once you are registered, a dial-in number and passcode will be provided to you via email. The link to register for the call is on the Upcoming Events page of our website and as follows:

Source Energy Services Q1 2025 Results Call

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until June 9, 2025, using the following dial-in:

Toll-Free Playback Number: 1-855-669-9658

Playback Passcode: 3122177

ABOUT SOURCE ENERGY SERVICES

Source is a company that focuses on the integrated production and distribution of frac sand, as well as the distribution of other bulk completion materials not produced by Source. Source provides its customers with an end-to-end solution for frac sand supported by its Wisconsin and Peace River mines and processing facilities, its Western Canadian terminal network and its “last mile” logistics capabilities, including its trucking operations, and Sahara, a proprietary well site mobile sand storage and handling system.

Source’s full-service approach allows customers to rely on its logistics platform to increase reliability of supply and to ensure the timely delivery of frac sand and other bulk completion materials at the well site.

IMPORTANT INFORMATION

These results should be read in conjunction with Source’s unaudited interim condensed consolidated financial statements for the three months ended March 31, 2025 and 2024 and the audited consolidated financial statements for the years ended December 31, 2024 and 2023, together with the accompanying notes (the “Financial Statements”) and its corresponding MD&A for such periods. The Financial Statements and MD&A and other information relating to Source, including the Annual Information Form, are available under the Company’s SEDAR+ profile at www.sedarplus.ca. The Financial Statements and comparative statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board. Unless otherwise stated, all amounts are expressed in Canadian dollars.

NON-IFRS MEASURES

In this press release Source has used the terms Free Cash Flow, Adjusted Gross Margin and Adjusted EBITDA, including per MT, which do not have standardized meanings prescribed by IFRS and Source’s method of calculating these measures may differ from the method used by other entities and, accordingly, they may not be comparable to similar measures presented by other companies. These financial measures should not be considered as an alternative to, or more meaningful than, net income and gross margin, respectively, which represent the most directly comparable measures of financial performance as determined in accordance with IFRS.

Reconciliation of Adjusted EBITDA and Free Cash Flow to Net Income (Loss)

Reconciliation of Gross Margin to Adjusted Gross Margin

For additional information regarding non-IFRS measures, including their use to management and investors, their composition and discussion of changes to either their composition or label, if any, please refer to the ‘Non-IFRS Measures’ section of the MD&A, which is incorporated herein by reference. Source’s MD&A is available online at www.sedarplus.ca and through Source’s website at www.sourceenergyservices.com.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release constitute forward-looking statements relating to, without limitation, expectations, intentions, plans and beliefs, including information as to the future events, results of operations and Source’s future performance (both operational and financial) and business prospects. In certain cases, forward- looking statements can be identified by the use of words such as “expects”, “believes”, “continues”, “focus”, “trend”, “driven by”, “anticipates,” “views” or variations of such words and phrases, or statements that certain actions, events or results “may” or “will” be taken, occur or be achieved. Such forward-looking statements reflect Source’s beliefs, estimates and opinions regarding its future growth, results of operations, future performance (both operational and financial), and business prospects and opportunities at the time such statements are made, and Source undertakes no obligation to update forward-looking statements if these beliefs, estimates and opinions or circumstances should change unless required by applicable law. Forward-looking statements are necessarily based upon a number of estimates and assumptions made by Source that are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Forward-looking statements are not guarantees of future performance.

In particular, this press release contains forward-looking statements pertaining, but not limited to: the expectation that LNG Canada will come online; the completion of phase one of the Taylor facility to help Source meet the expected longer-term increase in demand in northeastern British Columbia; expectations regarding the sand trucking asset acquisitions completed during the year; Source’s terminal network footprint and its Wisconsin and Peace River production facilities; the outcomes of countermeasures proposed by the Canadian federal and provincial governments to mitigate any tariff-related impacts; the volatility in commodity prices on long-term capital plans for the industry; Source’s focus on pursuing its application to have the Canadian government’s counter-tariffs on frac sand removed; the belief that the additional export capability via LNG Canada and the expedited permitting of additional LNG capacity will help mitigate potential impacts related to the counter-tariffs; expectations with respect to sand revenue and mine gate sand sales and associated costs; the expectation that Source will continue to grow its business through the balance of the year; expectations that increased demand for natural gas, increased natural gas pipeline export capabilities and liquefied natural gas exports will drive incremental demand for Source’s services in the WCSB; continued increase in demand from customers primarily focused on the development of natural gas properties in Montney, Duvernay and Deep Basin; views that natural gas is an important transitional fuel for the successful movement to a less carbon-intensive world; Source’s focus on and expectations regarding increasing its involvement in the provision of logistics services for other well site items; the benefits of Source’s existing Western Canadian terminals to provide additional services to customers; the benefits that Source’s “last mile” services provide to customers; expectations respecting future conditions; and profitability.

By their nature, forward-looking statements involve numerous current assumptions, known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Source to differ materially from those anticipated by Source and described in the forward-looking statements.

With respect to the forward-looking statements contained in this press release, assumptions have been made regarding, among other things: proppant market prices; future oil, natural gas and liquefied natural gas prices; future global economic and financial conditions; predictable inflationary pressures; future commodity prices, demand for oil and gas and the product mix of such demand; levels of activity in the oil and gas industry in the areas in which Source operates; the continued availability of timely and safe transportation for Source’s products, including without limitation, Source’s rail car fleet and the accessibility of additional transportation by rail and truck; the maintenance of Source’s key customers and the financial strength of its key customers; the maintenance of Source’s significant contracts or their replacement with new contracts on substantially similar terms and that contractual counterparties will comply with current contractual terms; operating costs; that the regulatory environment in which Source operates will be maintained in the manner currently anticipated by Source; future exchange and interest rates; geological and engineering estimates in respect of Source’s resources; the recoverability of Source’s resources; the accuracy and veracity of information and projections sourced from third parties respecting, among other things, future industry conditions and product demand; demand for horizontal drilling and hydraulic fracturing and the maintenance of current techniques and procedures, particularly with respect to the use of proppants; Source’s ability to obtain qualified staff and equipment in a timely and cost-efficient manner; the regulatory framework governing royalties, taxes and environmental matters in the jurisdictions in which Source conducts its business and any other jurisdictions in which Source may conduct its business in the future; future capital expenditures to be made by Source; future sources of funding for Source’s capital program; Source’s future debt levels; the impact of competition on Source; and Source’s ability to obtain financing on acceptable terms.

A number of factors, risks and uncertainties could cause results to differ materially from those anticipated and described herein including, among others: the effects of competition and pricing pressures; risks inherent in key customer dependence; effects of fluctuations in the price of proppants; risks related to indebtedness and liquidity, including Source’s leverage, restrictive covenants in Source’s debt instruments and Source’s capital requirements; risks related to interest rate fluctuations and foreign exchange rate fluctuations; changes in general economic, financial, market and business conditions in the markets in which Source operates; changes in the technologies used to drill for and produce oil and natural gas; Source’s ability to obtain, maintain and renew required permits, licenses and approvals from regulatory authorities; the stringent requirements of and potential changes to applicable legislation, regulations and standards; the ability of Source to comply with unexpected costs of government regulations; liabilities resulting from Source’s operations; the results of litigation or regulatory proceedings that may be brought by or against Source; the ability of Source to successfully bid on new contracts and the loss of significant contracts; uninsured and underinsured losses; risks related to the transportation of Source’s products, including potential rail line interruptions or a reduction in rail car availability; the geographic and customer concentration of Source; the impact of extreme weather patterns and natural disasters; the impact of climate change risk; the ability of Source to retain and attract qualified management and staff in the markets in which Source operates; labor disputes and work stoppages and risks related to employee health and safety; general risks associated with the oil and natural gas industry, loss of markets, consumer and business spending and borrowing trends; limited, unfavorable, or a lack of access to capital markets; uncertainties inherent in estimating quantities of mineral resources; sand processing problems; implementation of recently issued accounting standards; the use and suitability of Source’s accounting estimates and judgments; the impact of information systems and cyber security breaches; the impact of inflation on capital expenditures; and risks and uncertainties related to pandemics, including changes in energy demand.

Although Source has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in the forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking statements will materialize or prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. The forward-looking statements contained in this press release are expressly qualified by this cautionary statement. Readers should not place undue reliance on forward-looking statements. These statements speak only as of the date of this press release. Except as may be required by law, Source expressly disclaims any intention or obligation to revise or update any forward-looking statements or information whether as a result of new information, future events or otherwise.

Any financial outlook and future-oriented financial information contained in this press release regarding prospective financial performance, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action based on management’s assessment of the relevant information that is currently available. Projected operational information contains forward-looking information and is based on a number of material assumptions and factors, as are set out above. These projections may also be considered to contain future oriented financial information or a financial outlook. The actual results of Source’s operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. Actual results will vary from projected results. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The forward-looking information and statements contained in this document speak only as of the date hereof and have been approved by the Company’s management as at the date hereof. The Company does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn
Chief Executive Officer
(403) 262-1312
investorrelations@sourceenergyservices.com

Derren Newell
Chief Financial Officer
(403) 262-1312
investorrelations@sourceenergyservices.com