Source Energy Services Announces Preliminary Q1 Results, Operational Update, and Postponement of Earnings Release and Annual General Meeting

Calgary, Alberta (April 27, 2020) TSX: SHLE

PRELIMINARY Q1 2020 RESULTS AND OPERATIONAL UPDATE
The following provides a preliminary update on certain items and is not intended to be a full summary as Q1 2020 results are not yet final, and actual results may differ, in some cases materially, from those included below.

Preliminary Q1 Highlights

• Achieved Q1 2020 sales volumes of 762,322 MT(1), which represents an increase of 9% over Q1 2019;
• Signed a contract extension with a major Duvernay customer;
• Increased Sahara revenue 9% when compared to Q1 2019; and
• Continued to diversify the business by increasing non-sand terminal revenue by $391K compared to Q1 2019.

Notes:
(1) One MT is approximately equal to 1.102 short tons.

Source Energy Services Ltd. (“Source” or the “Company”) is pleased to report preliminary results for the three months ended March 31, 2020. For Q1 2020, Source achieved quarterly volumes of 762,322 MT and revenue between CAD $93 million and CAD $98 million for the quarter. Source anticipates that EBITDA for the first quarter of 2020 will be in a similar range to that seen in the first quarter of 2019. Source was in compliance with its bank covenant requirements at March 31, 2020.

In order to address the current market challenges as a result of the global pandemic and collapse of commodity prices, Source has undertaken a number of measures to reduce operational costs including lowering the level of operational staff and operating hours, and implementing board, executive and salaried staff wage and benefit rollbacks throughout the organization. Source continues to examine all areas of its operations and expects to achieve additional fixed cost reductions throughout the organization in Q2 2020.

COVID-19 Update
In addition to reducing costs, Source has implemented a COVID-19 Program to protect the health and well-being of our employees and we are pleased to announce that we have been able to continue uninterrupted operations with these enhanced safety measures in place.

The COVID-19 pandemic and related economic repercussions have created extraordinary volatility, uncertainty, and turmoil in the oil and gas industry in general but especially in the Western Canadian Sedimentary Basin. Oil demand has significantly deteriorated as a result of the virus outbreak and corresponding preventative measures taken around the world to mitigate the spread of the virus. The impacts of the COVID-19 pandemic have been further impacted by actions taken by the Organization of Petroleum Exporting Countries. The convergence of these events has created the unprecedented dual impact of a decline in global oil demand coupled with the risk of a substantial increase in oil supply.

These events have negatively impacted and are expected to continue to negatively impact Source’s business. Demand for the Company’s products and services is declining as its customers revise their capital budgets downwards and adjust their operations in response to the rapid decline in oil prices.

Given the dynamic nature of these events, Source cannot reasonably estimate the period of time that adverse business conditions will persist, the impact they will have on the Company’s business, liquidity, consolidated results of operations and consolidated financial condition, or the pace of any subsequent recovery. While our financial results for the first quarter of 2020 were not materially impacted by these events, the Company expects a decline in revenue and profitability for the remainder of 2020.

EARNINGS RELEASE
Due to the ongoing COVID-19 pandemic, Source announces it is relying upon the exemption announced by the Alberta Securities Commission in its blanket order issued on March 23, 2020 that provides relief to issuers from the requirement to file interim financial statements and MD&A on or before the 45th day after the end of its most recently completed quarter. Source anticipates its first quarter financial results for the period ending March 31, 2020, and the accompanying MD&A (collectively the Q1 Results) will be released prior to the start of trading on the Toronto Stock Exchange on June 29, 2020.

Source confirms that management and other insiders are subject to a trading black-out policy that reflects the principles in section 9 of National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions; accordingly, Source management and insiders will be subject to a trading black-out until the expiration of the requisite time period after the Q1 Results are issued.

Source further confirms that, other than the negative impact on Source’s business attributable to the COVID-19 pandemic outlined above, there have been no undisclosed material business developments since March 6, 2020, the date of filing its audited annual financial statements for the year ended December 31, 2019 that have not been otherwise disclosed in a Source press release.

A conference call has been scheduled for 2:30 pm (Calgary time) on June 29, 2020. 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 2020 RESULTS CALL REGISTRATION

The call will be recorded and available for playback approximately 2 hours after the meeting end time, until July 29, 2020, using the following dial-in:
Playback Number - Toll-Free: 1-800-319-6413
Passcode - 4302

POSTPONEMENT OF ANNUAL GENERAL MEETING
Source also wishes to announce the postponement of its 2020 Annual Meeting of Shareholders (the “AGM”), originally scheduled for May 8, 2020, to an as-yet undetermined date. Further details of the postponed 2020 AGM will be shared as soon as they are known, and the appropriate notice will be provided.

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 aren’t produced by Source. Source has also developed Sahara, a proprietary well site 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 well site.

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”, “estimates”, “forecasts”, “intends”, “anticipates”, “believes”, “plans”, “seeks”, “projects” or variations of such words and phrases, or state 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. 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 demand for and sales volumes of sand in light of the COVID-19 pandemic; expectations regarding the price of proppants and sensitivity to changes in such prices; outlook for operations and sales volumes; expectations respecting future competitive conditions; industry activity levels; expectations regarding market share; industry conditions pertaining to the frac sand industry; expectations regarding customer relationships and counterparty risk; drilling and well completion activity in 2020; expectations regarding the impact of direct-source contracts; sand sales volumes and sand spot pricing in 2020; expectations regarding future working capital and capital expenditures; the ability to secure future funding; expectations regarding fluctuations in foreign currency; expectations regarding the severity and outcome of legal claims and proceedings; expectations regarding insurance coverage and proceeds; expectations regarding the impact of climate change; risks associated with information systems and cyber security and operational risks. Statements relating to mineral resources are deemed to be forward looking-statements, as they involve the implied assessment, based on certain estimates and assumptions, that the mineral resources described exist in the quantities predicted or estimated and that the mineral resources described might be able to be profitably produced in the future.

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 natural gas liquids prices; future global economic and financial conditions; 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 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 climate change risk; the ability of Source to retain and attract qualified management and staff in the markets in which Source operates; labour 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, unfavourable, 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; and the impact of information systems and cyber security breaches.

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.