Thank you for standing by. This is the conference operator. Welcome to the Source Energy Services Second Quarter 2022 Results Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Scott Melbourn, CEO. Mr. Melbourn, please proceed. Thank you. Good morning and welcome to Source Energy Services Second Quarter 2022 Conference Call. My name is Scott Melbourn, and I'm the CEO of Source. I'm joined today by Derren Newell, our CFO. Today, I'll cover off the formal part of the call, and Derren and I will be available to answer any questions you may have. Before I get started, I would like to refer everyone to the financial statements and the MD&A that were posted to SEDAR on the company's website last night, and to 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 CAD, metric tons, and we will refer to adjusted gross margin and adjusted EBITDA, 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. For the first time since 2018, the second quarter of 2022 was stronger than the first quarter of the year, and it showed significant improvements over the prior year's second quarter as commodity prices remained strong. Total sales volume for the quarter was 800,000 tons, of which 997,000 tons were mine gate sales. WCSB basin sales benefited from the new Peace River facility, which contributed about 3% of the total volume sold. We expect sales from this facility will increase as we complete the plant turnaround. Compared to the second quarter of 2021, total sales volume improved by 44%. We realized adjusted EBITDA of CAD 14.8 million for the second quarter, a 43% increase from the second quarter of 2021, excluding the impact of a CAD 2.6 million loan forgiveness from the Paycheck Protection Program we received in the second quarter of 2021. We reported a net income of CAD 4.2 million for the second quarter of 2022. Sand revenue in the quarter was CAD 93.5 million, an increase of 61% over the second quarter of 2021. Compared to the second quarter last year, the increase in sand revenue was due to a 44% increase in overall sand volumes and an 18% increase in average realized sand price, excluding the impact of mine gate sales. Strong activity levels from non-contracted customers during the quarter drove an 887% increase in spot sales volumes on a quarter-over-quarter basis. It is during times of higher industry activity like we were experiencing in 2022 or challenging operating environments that Source's logistics capabilities from the mine to the well site set us apart from other suppliers in the WCSB. Source is uniquely set up to handle the delivery of high volumes of sand in a short period of time. From our production facilities through our in-basin storage facility and logistics operations, our past investments in our unique storage and distribution infrastructure continues to provide Source a distinct competitive advantage. Well site revenue was CAD 16.5 million for the second quarter, an increase of 17% or CAD 2.4 million compared to the second quarter of 2021. During the quarter, well site solutions revenue was higher as an impact of the longer hauls from the terminals to the well site was slightly offset by lower volumes trucked to the well site. The lower volumes trucked during the quarter was due to higher volumes from spot sales at the terminal versus full-service sales. Compared to the same period last year, Sahara-related revenue increased 26% on a quarter-over-quarter basis, and the Sahara units were 69% utilized, an 8% increase in days utilized across the 8-unit fleet. In June, the ninth unit was added to the fleet in the U.S. and began working for a customer during the third quarter. During the quarter, we added a new global E&P customer for our Sahara units in Canada and a new customer in the U.S.. We continue to see strong interest in Sahara units for both Canada and the U.S. Cost of sales in the second quarter were impacted by higher costs for transportation and freight due to increased fuel prices, a tight trucking market, the increased cost of third-party sand purchases, and the impact of a weakening Canadian dollar on our U.S.-denominated costs. These costs, along with higher labor costs and no Canada Emergency Wage Subsidy or CEWS receipts, were partially offset by Source's continued focus on streamlining production. Improved production efficiencies mitigated cost pricing pressure realized during the quarter. Excluding gross margin from mine gate sales, adjusted gross margin per ton was CAD 28.84, which was favorably impacted by improved pricing. Compared to the second quarter last year, adjusted gross margin for the second quarter of 2022 did not benefit from the proceeds from the CEWS program, a stronger Canadian dollar and certain production credits. If these one-time items were excluded from the second quarter of 2021, the second quarter of 2022 adjusted gross margin per ton has increased by 14%. For the three months ending June 30, 2022, adjusted gross margin per ton decreased by 3% compared to the first quarter of 2022 due to an 11% increase in sales to contracted customers in the second quarter. While all customers have faced price increases, contracted customers' increases have been smaller than spot customers. As these contracts expire, they will be renegotiated at current market prices. For the second quarter of 2022, total operating and general and administrative expenses increased by CAD 1.1 million compared to the same period last year. Operating expenses increased CAD 800,000 in 2022, primarily due to increased royalty costs as well as higher insurance expense. An improvement in activity level and no proceeds received from the CEWS program in the current quarter resulted in higher compensation expense. However, this increase was more than offset by lower variable incentive compensation expense compared to the same period last year. For the second quarter of this year, G&A expenses increased by CAD 300,000 from the prior year due to higher professional fees and the collection of a bad debt in the prior year. Now turning to the balance sheet. On June 30, 2022, the principal balance outstanding on our notes was CAD 163.5 million, and the balance outstanding on our term loan facility was CAD 10.5 million. Source had CAD 28.9 million drawn under its ABL facility. The ABL facility was also being used to support CAD 10.1 million of letters of credit, leaving CAD 11.8 million of available liquidity. As industry activity increases and business performance improves, Source will be very focused on reducing debt levels and ensure we have a capital structure that permits efficient operation of the business and can withstand the peaks and valleys of our industry. Source's capital expenditures for the second quarter were CAD 4.1 million, an increase of CAD 2.8 million compared to the same period last year. The increase in expenditures were primarily related to costs associated with maintenance activities at Peace River and overburden removal from mining operations. Growth capital expenditures for the quarter were related to permitting additional lands at the Peace River mine. Offsetting these expenditures were the sale of some excess pieces of heavy equipment which netted the proceeds of CAD 1.2 million in the quarter. As we look to the full year of 2022, we expect net capital expenditures to be approximately CAD 10 million to CAD 13 million, with the year-over-year increase driven by overburden expenditures in Wisconsin and Peace River maintenance capital. To offset these expenditures, we expect additional proceeds from the sale of excess land and equipment in Q3 and in Q4. Now, as we look ahead, growing demand for oil and natural gas globally, coupled with an underinvestment in supply over the past few years, has resulted in higher crude oil and natural gas prices. This operating environment is expected to result in expanded drilling and completion programs in 2022 and beyond. With the increased activity levels across North America, the frac sand supply and demand fundamentals have been and are expected to remain tight for the foreseeable future. These fundamentals, coupled with Source's leading service offering and logistics capabilities, have translated into pricing gains early in 2022, a trend that is expected to continue for the balance of the year. We also expect that the impact of the ongoing permitting issues in BC will be resolved, and that activity that has been postponed in that area will proceed. When the backlog of activity in Northeast BC is coupled with the already strong industry fundamentals, there is an expectation of improved business performance for Source throughout 2022 and into 2023. In the longer term, Source believes the increased demand for natural gas driven by the conversion of coal-fired power generation facilities, increased natural gas pipeline export capabilities, and LNG exports will drive incremental demand for Source's services in the WCSB. Source continues to see increasing demand from customers that are primarily focused on the development of natural gas properties in the Montney, the Duvernay, and the Deep Basin. This trend is consistent with our view that natural gas will be an important transitional fuel that's critical for the success in a movement to a less carbon-intensive world. In support of the move to a less carbon-intensive world, Source has begun focusing on exploring opportunities which transition from traditional fossil fuels to less carbon-intensive energy solutions. As a pathway to diversifying our business and to participate in the decarbonization of the economy, Source is advancing the opportunities in our own operations as well as new service offerings at the well site and at our terminals. Source also continues to focus on increasing its involvement in logistics services for additional oil field services and other industries. To diversify our revenue and further utilize the Western Canadian terminal network. Over the longer term, it is anticipated these opportunities will be a meaningful part of Source's business. Thank you for your time this morning. That concludes the formal part of our call. We'll now ask the operator to open the lines for questions. Thank you. We will now begin the question and answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question is from John Gibson with BMO Capital Markets. Please go ahead. Good morning, guys, and then congrats on the strong quarter here. First is can you give a sense of what the delta is between spot pricing compared to some of the legacy contracts you have in place with customers? Morning, John, and thanks. To give you a sense, probably on average, you know, it's about 10%- 15% between the sort of legacy contracts and what we're seeing in the spot market right now. We've got a little bit of a gap to make up. During the quarter we did have an effort of moving contracted prices whether it was signed a long time ago or whether it was signed recently, to move that gap between the spot price delta. We have made some progress on that. I don't think the full impact of the progress that we've made on that pricing was reflected in the quarter as a number of these were negotiated throughout the quarter. We do expect the impact of the efforts to move the contracting pricing will be reflected in Q3's results. Got it. Is that, 10%-15%, is that dollars or percentage? Sorry. Sorry. That's a percentage. Following on your last question, what percentage of sales in Q2 were on those higher pricing terms versus older legacy contracted pricing? If we're looking at the back half of the year, how will the mix shift? I'll let Derren dive into some of the exact numbers. H istorically, Q2 is a quarter where we see more activity from our contracted customers and less activity from our spot. Historically, it has been, you know, much more weighted to our contracted. As I mentioned in the conference call script, we saw a massive increase in spot sales, but it's still the quarter was still weighted towards our contracted customers. We had about four contracts. It was about a 60/40 split between contracts and spot customers this year for contracts. Last year it was about 90% contracts. Okay. Got it. Appreciate that. The last for me, I'm not even sure if you can disclose, just given discussions appear to be ongoing. Wondering what a new credit agreement could look like in terms of go forward plans for your business, you know, capital spending and how it sort of changed in the last few months just based on higher demand here. Sorry, John, you just broke up. Can you ask that question again? Can you hear me now? Yeah. Just wondering how much what a new credit agreement could look like just in terms of go- forward plans for your business. I'm assuming it's changed quite a bit in the last few months, you know, not only for your business, but maybe capital spending going forward, all that sort of stuff. Anything you could disclose would be great. Yeah, and you know, I won't speak specifically about anything we have in the works right now. Generally, I'll just speak about a couple of goals that we set out with at the beginning of the year. O ne is we wanted to add additional flexibility and have additional flexibility in our credit facility. Number two, we wanted to reduce our borrowing costs. I think we're on the path, and you know we'll certainly have more to report on that in the future on additional flexibility and lowering our borrowing costs. In terms of the flexibility around capital spend, you know we don't really foresee you know massive increases in capital spend. We feel like we are well- positioned as a company in terms of our ability to serve the market and our ability to grow and service the increased demand levels without increasing our capital spend dramatically. W e've seen a delta year-over-year on our capital spend, but that's really the majority of that is just related to mine activities and overburden removal. We don't expect that to move dramatically higher than what you know we're seeing this year. I wouldn't say that, you know, as we looked at our credit facility and we looked at what we wanna do in the future, you know, a high priority was massively increasing our capital spend. O ur priorities were very focused on increasing flexibility for the business so that we can effectively manage the business. Number two, decreasing our cost of borrowing to increase our free cash flow. Really those were the priorities set out at the beginning of it. Got it. Really appreciate the color, and I'll turn it back. Thanks. Thanks, Jonathan. Once again, if you have a question, please press star then one. The next question is from Scott Morrison with Timelo Investment Management. Please go ahead. Good morning, everyone. Congratulations on the quarter. Just had a quick question on the third- party sand sales. Can you talk about what the limiting factors were that were requiring you to go to the market to buy third- party sand? Good morning, Scott. Really what we're seeing and the dynamic that we've seen kind of, evolve over the last couple of years and then is continued into this year is our sales have been very focused on one mesh size. 40/70 is absolutely in high demand in Western Canada. When we have one product being sold out of the mine, and especially given the you know, the peaks and valleys of peak days when we've got numerous jobs on the go versus valley days, there is a. From time to time, we'll have to go out to the market and purchase some sand because we just won't be able to produce enough in that very narrow mesh size out of our mine. That's really what drives the additional purchases of third-party sand. E ffectively, although it does bring down our overall gross margin, it is still incredibly free cash flow positive. We expect to continue to do that throughout the balance of the year for depending on the time of the year and depending on the demand profile. The second thing that we're doing, Scott, is we're very focused on spreading out the spectrum of mesh size that we sell out of the facility. W e feel good about 100 mesh sales and then going down to the lower 48 and some Canadian sales. You know, we're certainly working on 30/50 and some 20/40 opportunities, which spread out the spectrum of the sizes that we're selling out of the facility and effectively makes our facilities that much more efficient. Okay, that's helpful. Thank you. Just on Peace River, can you talk about where you are along the path there in terms of integration ramp- up of it? W e feel like we've now got the facility at a point where, you know, it is turned around and ready to start rolling. W e were a little slower than we initially anticipated, and that was on a number of things. And probably first and foremost was supply chain of getting parts into the facility for the turnaround. W e're probably 30 days behind or slightly longer behind where we had initially set the first start-up date. We're now running, and we are now accepting sales out of the facility for new product coming out of the facility. We're also very encouraged from the inbounds and the amount of interest and demand coming out of that facility. We're well along the way. You know, it's taken a little longer than what we had initially set out due to supply chain challenges and due to some additional challenges with the turnaround of the facility, but we feel like we're in a pretty good spot right now. That's great to hear, and that's all for me. Congratulations on the great quarter again. Thanks, Scott. Once again, if you have a question, please press star then one. Sorry. The next question is from Jason Modine with Arosa Capital Management. Please go ahead. Hi, guys. Great quarter. Nice to see some momentum coming back. The question I have. I'm sorry if you guys already went over this because I joined a little bit late here. Really with regards to the outlook on margins and, you know, what we should think about with regards to the new credit facility. I know you can't give explicit details, but like when you say conforming credit facility, what is that gonna look like? Hey, Jason, and thank you very much for the words of encouragement on the quarter. I'll maybe jump into the first part of the question and then let Derren answer the credit portion. You know, in terms of margins and where we look, you know, for the balance of the year and beyond, we've done a few things and we've moved pricing, and you know, we've moved pricing a little bit. The biggest drag right now is our contracted customers, which are dragging down our overall gross margin. We have done some work in Q2, and we expect to see the full impact of the pricing changes for our contract customers in Q3. As you can imagine it's difficult to get them all the way up to spot. A s we roll into 2023, we have a number of larger contracts rolling off, where those of course will be repriced at spot. We think we gain additional traction on our spot pricing or of course, on our contracts that roll off and on our overall gross margin. I n terms of trajectory, we expect improving gross margins in Q3 and in Q4, and then maybe a little bit of a step change as we look to 2023. Thank you. Thank you. Just to jump in on your other question. I would suggest we're as Scott alluded to earlier, trying to work with some folks to find a lending package that maintains the flexibility that we're looking for to build, run the business day to day. M ake sure we can bring down our costs. But also understand the business does have cycles to it and needs to flex up and down. Structure-wise, it probably stays in a very much ABL type structure. You know, we're early days and that's probably about as much as we're gonna talk about at this point. There are no more questions on queue. This concludes the question and answer session. I would like to turn the conference back over to Scott Melbourn for any closing remarks. Thank you everyone for joining the Source Energy Services Second Quarter 2022 Conference Call. As always, myself and Derren are available to answer any follow-on questions that you may have. Thanks, everyone. Have a great day. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a blessed day.