Source Energy Services Ltd (SCEYF) Q2 2024 Earnings Call Highlights: Record Sand Volumes and ...

GuruFocus News
4 min read

In This Article:

  • Sand Volumes: 921,000 metric tonnes, a record for the company.

  • Sand Revenue: $141.1 million, an increase of $38.1 million from Q2 2023.

  • Total Revenue: $176.4 million, a $49.4 million increase from Q2 2023.

  • Gross Margin: $32.6 million, a 31% increase from Q2 2023.

  • Adjusted Gross Margin: $42.1 million, a 40% increase from Q2 2023.

  • Net Income: $4.7 million.

  • Adjusted EBITDA: $30.8 million, a $10.4 million improvement from Q2 2023.

  • Free Cash Flow: $13.5 million, an increase of $5.7 million from Q2 2023.

  • Debt: $153.9 million with a net debt of $111.4 million.

  • Working Capital Surplus: $42.5 million.

  • Last Mile Logistics Volumes: Increased by 26% compared to Q2 2023.

  • Wellsite Revenues: $35.4 million, a 47% increase from Q2 2023.

  • Terminal Services Revenue: $0.9 million, an increase of $0.1 million from Q2 2023.

Release Date: August 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Source Energy Services Ltd (SCEYF) achieved record sand volumes and total revenues for the second consecutive quarter.

  • The company successfully reduced its outstanding senior secured notes and ABL balance, lowering net debt to $111.4 million.

  • A new partnership with Trican to develop a terminal in Taylor, British Columbia, is expected to support LNG-driven growth without impacting balance sheet goals.

  • The last mile logistics group delivered record sand volumes, contributing positively to overall margins.

  • Free cash flow for the second quarter increased to $13.5 million, a significant improvement from the previous year.

Negative Points

  • The company faces current liabilities due to the maturity of ABL facility and senior secured notes within a year.

  • Higher capital expenditures were noted due to lower sales proceeds from excess equipment and terminal expansions.

  • Operating general expenses increased by $2.3 million, driven by higher royalty costs and insurance expenses.

  • The weaker Canadian dollar increased costs by $1.97 compared to the same period last year.

  • There is potential for increased competition in Northeast BC, with other companies rumored to be opening terminals in the area.

Q & A Highlights

Q: Can you explain how the last mile logistics part of your business impacts overall margins? A: The last mile logistics encompasses the journey from our terminals to the wellsite, including wellsite services. It positively impacts margins based on activity levels and distance from terminals to wellsites. In Q1, longer distances and higher Sahara fleet utilization increased margins by $1-$2. This quarter saw a slightly lower impact, but it remains a crucial part of our business, providing a competitive advantage and positively affecting overall gross margins. - Scott Melbourn, CEO

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