Source Completes Recapitalization Transaction

Calgary, Alberta (December 30, 2020) TSX: SHLE

Source Energy Services Ltd. (together with its affiliates, “Source” or the “Company”) is pleased to announce the completion of its recapitalization transaction (the “Recapitalization Transaction”) pursuant to a plan of arrangement dated November 25, 2020 (the “Plan of Arrangement”) under the Canada Business Corporations Act. The Plan of Arrangement was approved by the Court of Queen’s Bench of Alberta on November 27, 2020.

“We are very pleased to have successfully completed the Recapitalization Transaction with strong support from our key stakeholders,” said Brad Thomson, Chief Executive Officer of Source. “We have significantly improved our capital structure and addressed our liquidity challenges arising from the historic downturn in the Western Canadian oil and gas industry. Completion of the Recapitalization Transaction will provide enhanced financial strength and flexibility and better position Source to pursue our business and strategic objectives. We thank all of our customers, suppliers, employees, shareholders and other stakeholders for their continued commitment to Source.”

As a result of the completion of the Recapitalization Transaction, the Company has extended the maturity under its senior secured credit agreement to 2023 and issued new senior secured first lien notes (the “New Secured Notes”) that mature in 2025. The Recapitalization Transaction achieves a $32.7 million reduction of principal obligations and reduces Source’s near term cash interest expense. Under the Plan of Arrangement, the Company’s 10.5% senior secured first lien notes due 2021 were exchanged for New Secured Notes in the aggregate principal amount of $142,238,201 and new common shares of Source constituting 62.5% of the common shares outstanding on a fully diluted basis immediately following completion of the Recapitalization Transaction. The Company has the option, for all quarterly interest payments on the New Secured Notes due on or before February 15, 2022, to pay interest in kind through the issuance of additional New Secured Notes rather than in cash.

Concurrently with the completion of the Recapitalization Transaction, Source and its lending syndicate have amended and restated the Company’s senior secured credit agreement to enable Source to access incremental liquidity under an additional revolving facility in an initial principal amount of up to $20 million.

Under the Recapitalization Transaction, the common shares of Source outstanding immediately prior to the completion of the Recapitalization Transaction were consolidated on a twelve for one basis and represent 37.5% of the common shares outstanding on a fully diluted basis immediately following completion of the Recapitalization Transaction.

Board of Directors

In connection with the completion of the Recapitalization Transaction, two new directors have been appointed to Source’s board of directors (the “Board”):

• Chris Johnson is the co-founder, CEO and President of Crown Capital Partners Inc. (TSX:CRWN) a public alternative finance provider. Mr. Johnson brings a wealth of finance, M&A and corporate governance experience to the Board, gained through his experience as financier and/or director of numerous public and private companies. Mr. Johnson is a Certified Financial Analyst.
• Steven Sharpe is the Managing Director of The EmBeSa Corporation, a consultancy dealing with corporate restructuring. He is a seasoned business executive and corporate director with experience in a number of sectors including energy, technology, investment banking and hospitality. Mr. Sharpe currently sits on the Advisory Board of the Pine River Institute, and is a director of Dundee Corporation (TSX:DC.A), Essential Energy Services Ltd. (TSX:ESN) and Crown Capital Partners Inc. (TSX:CRWN).

With the appointment of the two new directors, Mr. Jim McMahon and Mr. Mick MacBean have resigned from the Board. Brad Thomson stated, “We’ve been fortunate to have Jim and Mick on the Source Board and will miss the unique perspectives and experience that they provide as Board members. As a co-founder of Source, Jim has been on the Board for many years and Mick joined the Source Board in early 2019. These gentlemen have provided unwavering support to Source through incredibly volatile times faced by the oilfield services sector. It has been an honour and a privilege to work with them.”

ABOUT SOURCE ENERGY SERVICES

Source is a logistics company that focuses on the supply and distribution of high quality Northern White frac sand. Source provides its customers with a full end-to-end solution supported by its Wisconsin mines and processing facilities, its Western Canadian terminal network and its “last mile” logistics capabilities. In addition to its industry leading frac sand transload terminal network and in-basin frac sand storage capabilities, Source also provides storage and logistics services for other bulk oil and gas well completion materials that are not produced by Source. Source has also developed Sahara, a proprietary wellsite mobile sand storage and handling system.

Source’s full-service approach allows customers to rely on its logistics capabilities to increase reliability of supply and to ensure the timely delivery of their requirements for frac sand and other bulk completion materials at the wellsite.

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FORWARD-LOOKING STATEMENTS

Certain statements contained in this press release may contain forward looking statements within the meaning of applicable securities laws. In certain cases and without limitation, forward-looking statements can be identified by the use of words such as “seeks” or variations of such words and phrases, or state that certain actions, events or results “may” or “will” be taken, occur or be achieved or addressed. Such forward-looking statements reflect Source’s beliefs, estimates and opinions regarding the Recapitalization Transaction and related transactions, Source’s 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. 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 expectations regarding the impact of the Recapitalization Transaction and the Plan of Arrangement.

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, the impact of the Recapitalization Transaction and the Plan of Arrangement.

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.