Thank you for standing by. This is the conference operator. Welcome to the Source Energy Services Q1 2023 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, operator. Good morning and welcome to Source Energy Services Q1 2023 conference call. My name is Scott Melbourn. I'm the CEO of Source. I'm joined today by Derren Newell, our CFO. Today, Derren and I will cover off the formal part of the call, and we 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 and the company's website last night and 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 Canadian dollars and 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. I am pleased to report that operationally and financially, Source had a strong Q1 of 2023. Robust industry activity levels, coupled with the strategic initiatives we completed in 2022, positioned Source to achieve one of the best quarters in the history of the company. The highlights for the quarter include sand sales volume of 907,000 tons, which is the highest quarterly sales volume in Source's history and a 25% increase from the Q1 of 2022. Total revenue for the quarter was CAD 163.7 million, a 69% increase from the Q1 of 2022 and the highest quarterly revenue generated since the inception of Source. The completion of a major customer contract, which positions us to have our key E&P customers under contract until late 2024. Our well site solutions set a record in Canada for the number of days the Sahara fleet was utilized in the quarter, which resulted in 94% utilization for the Canadian fleet and 73% for the U.S. fleet. We tracked the largest volume of sand in a quarter in Source's history. We realized gross margins of CAD 31.8 million and Adjusted Gross Margins of CAD 37.8 million, an increase of 118% and 86% respectively when compared to Q1 of 2022. Net income for the quarter was CAD 7.9 million, a CAD 14.5 million dollar improvement from last year's Q1 net loss of CAD 6.6 million. The improvements in revenue this quarter led Source to realize record Adjusted EBITDA of CAD 27.6 million, a 94% increase from the Q1 of last year. Free cash flow for the Q1 at CAD 12.9 million was 104% higher than the CAD 6.3 million generated for the Q1 of 2022. The increase is due to the CAD 13.4 million dollar increase in Adjusted EBITDA, reflecting the strong activity level and increased prices compared to the prior year. This was partially offset by higher cash interest paid as CAD 4.4 million of interest on the notes was paid during the quarter compared to 2022, where it was paid in kind, and an increase in payments for the lease obligations and associated interest expense, which are directly attributable to lease payments for the Peace River facility, which did not commence until April of 2022. As business performance continues to improve in 2023, we are focused on reducing debt levels and ensuring we have the appropriate amount of leverage in the business for the cyclicality of our industry. We We remain confident that we will achieve our debt reduction targets in 2023, which will position us with the correct capital structure in 2024 and beyond. With that, I will turn it over to Derren to provide a brief overview of our financial results for the quarter. Thanks, Scott. Sand revenue for the Q1 of 2023 was CAD 131.8 million, an increase of CAD 51.1 million or 63% over the Q1 of 2022. The increase was due to sand sales volumes being 25% higher than last year, combined with a 32% increase in the average realized sand price. Excluding mine gate sales, the average realized sand price increased by CAD 37.12 per metric ton compared to Q1 2022. When all sand revenue realized from mine gate sales lowered the average realized sand price in the quarter by CAD 8.03 per metric ton, it did have a very favorable impact on cost to sales and gross margins by improving production efficiencies and yields. well site solutions revenue for the Q1 of20 23 was CAD 30.6 million, an increase of 99% or CAD 15.2 million compared to the Q1 of last year. In the quarter, we trucked a record-setting amount of volume, which was 51% higher than the volumes trucked in the Q1 of last year. This resulted in an increase in trucking revenue 115%. Sahara related revenue increased 61% due to a 40% increase in days utilized across the nine-unit fleet. Sahara units operating in the U.S. generated a revenue increase of CAD 1.3 million or 255% compared to the first three months of 2022, while the Canadian fleet generated increased revenue of CAD 1.5 million or 37%. Terminal services revenue for the first three months was CAD 1.3 million, an increase of a half million compared to the Q1 of 2022. The increase was due to higher chemical elevation volumes as well as revenue generated from transloading of other non-sand materials, including condensate rail cars. Cost of sales, excluding depreciation, increased by CAD 49.3 million in Q1 compared to the Q1 of 2022. The increase was primarily driven by increased costs associated with higher sand volumes, third party sand purchases completed to complement sand production at processing facilities in Wisconsin, terminal sales mix and higher transportation costs for rail and trucking. The weaker Canadian dollar on USD denominated costs also increased costs $6.75 per metric ton compared to the same period last year. Gross margins increased by $17.2 million compared to the Q1 of 2022. Excluding gross margins from mine gate volumes, Adjusted Gross Margins were $44.87 per metric ton, compared to $28.54 per metric ton for the same period last year. On a total basis, the increase in gross margins arises from the growth in sand sales volumes, improved contract and spot market pricing, and improved gross margins from well site solutions. During the three months ended March 31, 2023, the weakening of the Canadian dollar impacted Adjusted Gross Margin by CAD 4.35 per metric ton. For the balance of 2023, we are in a naturally balanced FX position as we have converted some of our contracted customers to US dollar denominated contracts. We will continue to monitor our FX exposure and actively manage if required. Total operating with general and administrative expenses in the quarter increased CAD 3.1 million to CAD 10.1 million. Operating expenses increased by CAD 1.5 million from the Q1 of 2022 due to additional selling costs arising from higher royalty costs because of higher sand shipments from mines with royalty payments, higher variable incentive compensation programs, and higher repairs and maintenance costs incurred at the Peace River mining facility. General and administrative expenses increased CAD 1.7 million in the Q1 of 2023 compared to the same period in 2022, primarily due to higher variable incentive compensation, higher professional and legal fees incurred. Finance expense was CAD 9.3 million for the Q1 at CAD 1.4 million increase over the prior quarter. This was mainly due to higher accretion expense on the new ABL facility and an increase in outstanding lease obligations resulting from the Peace River facility added in 2022. These increases were partially offset by lower interest expense on the notes, with the Q1 2023 interest payment having been made in cash at 10.5% compared to the Q1 last year, where Source paid in kind at a rate of 12.5%. At March 31, the principal outstanding on our notes was CAD 165.1 million. Source had CAD 25.4 million drawn under its ABL facility, leaving us with CAD 25 million of available liquidity. Source's capital expenditures for the Q1 of 2023 were CAD 2.6 million, an increase of CAD 0.6 million compared to the same period last year. The increase was for expenditures for maintenance and sustaining capital, primarily related to maintenance of the Peace River facility and an increase in costs associated with overburden removal for the mining operations of CAD 0.4 million, driven by higher sand sales volumes. Growth capital expenditures were lower on a quarter-over-quarter basis due to the completion of the assessments for the drilling program of Peace River Mine and the completion of Source's ninth Sahara unit mid last year. During the Q1 of 2023, we sold excess equipment, generating proceeds of CAD 0.5 million, and management continues to assess equipment and other assets required to service our business operations to ensure optimal levels are maintained on an ongoing basis. With that, I'll turn it back to you, Scott. Thanks, Derren. As we look ahead, we believe strong industry activity levels will continue to favorably impact frac sand supply and demand fundamentals in the WCSB, which are expected to remain strong throughout 2023. The resolution of the previous well permitting issues in Northeast BC, which caused customer delays throughout 2022, will lead to an increased activity level in that region as our customers catch up on their development plans. Source believes the strong Canadian industry fundamentals, coupled with Source's leading service offering and logistics capability, will continue to support market share gains and strong financial results for the remainder of 2023 and beyond. In the longer term, Source believes the increased demand for natural gas driven by power generation facilities, increased natural gas pipeline export capabilities, and liquefied natural gas exports will drive incremental demand for Source of services in the WCSB. We continue to see increased demand from customers that are primarily focused on the development of natural gas and natural gas liquids 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 logistic services to expand its service offering and to further utilize its Western Canadian terminal network. Thank you for your time this morning. That concludes the formal portion of our call. We will now ask the operator to open the lines for questions. Thank you. We will now begin the question-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 comes from Nick Corcoran with Acumen Capital. Please go ahead. Good morning. Thanks for taking my questions. Good morning, Nick. Morning, Nick. Just a couple questions for me. The first is, just on the spot market for frac sand. Have you seen any changes in the spot prices? No. We continue to see. You know, last year we saw, you know, a rapid growth in the, in the spot market pricing. You know, that stabilized in the, in the back half of the year, and we continue to see that, the spot market at a pretty stable level. You know, generally, we haven't seen any material changes in spot market pricing. I think with commodity prices softening a bit, are there any signs that activity levels might trail off through the back half of the year? It's an excellent question, and you know, I think what we're seeing right now from our core customer group is, you know, a maybe a little bit of a movement from some drier gas plays to more liquids rich areas. We haven't really seen a material impact in activity levels or a change in activity levels. We're keeping a close eye on it. You know, things can change rapidly. Right now, as we sit today, we still feel very confident about a robust activity level going into the back half of the year. Good. The next question might be for Derren. There's a large AR build in the quarter. What was the driver of that, and what is the timing of maybe that unwinding? The driver of the AR growth was just our increased sales activity. You know, our business is very seasonal from a working capital basis. You'll see, you know, as we move out of a typically slower Q4 into a super busy Q1, you'll see a build in working capital. It'll hold generally through two, three, four, and then as we get into Q4, if activity follows the historic trend, you'll see a bit of an unwind, and then the pattern will repeat. That's helpful. One last question from me, just on your guidance. Has there been any change to your full year guidance that you previously provided? We still remain confident about the full year and so no, we wouldn't have any change to what we had previously guided. Thanks. I'll pass along. Thank you. Thanks. The next question comes from John Gibson with BMO Capital Markets. Please go ahead. Morning, guys. Congrats on the great quarter here. First off, just wondering if you can Thanks, John. Speak to how tight the proppant market is in Canada right now. Anecdotally, we've been hearing that proppant is sold out in some cases. I guess I'm wondering with incremental LNG activity coming in, you know, late 2023, early 2024, how much capacity do you have to ramp volumes further either in Wisconsin or domestically? Yeah, good question, John. I think we have a number of levers that we can pull both in Wisconsin and at Peace River to increase capacity. There's I guess levels to it. Our first level that we're always going to chase down is, you know, some small debottlenecking processes that will increase our capacity and really low or no capital projects that we can increase capacity. On a second level, there is some small capital that we can debottleneck. We mostly debottleneck our wet side of the plant. We still have dry capacity in Wisconsin and in Peace. You know, that would probably provide a little bit of a bigger step change in terms of capacity. Then, of course, the last category is, you know, a capital investment in expanding our capabilities. You know, we wouldn't be contemplating that, you know, sitting here today, because we think we've got enough ability to increase our capacity on the first two items that I talked about. You know, if the market grew dramatically, if we saw, you know, a real step change in Western Canadian frac sand demand, we would have the ability for reasonable capital expenditure to then debottleneck and the facilities and really make another step change in our ability to supply. Great. Thanks. Just last one for me. Just wondering about timing of debt repayment. We didn't see much in the quarter, obviously, with the working capital build, just wondering if you could provide some guidance around the timing of potential debt repayments this year. I mean, we're gonna be very focused on it. Suspect it will build momentum as we go through the year, now that we've gone through the working capital build. You know, we're very focused on getting it done and getting it done as soon as we can. Great. Thanks. I'll turn it back. Thanks, John The next question comes from John Bereznicki with Canaccord. Please go ahead. Hey, good morning, gentlemen. Good morning, John. Good morning, John. Hey, just in terms of the third-party sand purchases in the Q1, it sounds like it was related primarily to mesh. Is that correct? Do you envision the need to do that, kind of, going forward here as volumes grow? Yeah. John, excellent question. You know, it's something that we've always done at Source. You know, usually when we're buying third-party sand, you know, it's being completed in Wisconsin. You know, we are buying it at the mine gate from a third party, and then we're taking care of the entire logistics chain. As you mentioned, it is entirely associated with mesh size. Just given the seasonality in the business and just given the timing of some jobs, you know, we have some, you know, if we have all customers going at the same time and demanding the same product, then, you know, we will reach out and purchase third party to sort of meet those peak demand times. you know, as far as the, you know, forecast going forward in the year, you know, we do anticipate that we will continue to have those periods from time to time. We do anticipate that we will continue the third-party sand purchases, you know, through the balance of the year. The magnitude will of course fluctuate given the magnitude of activity, but they will continue for the year. Great color. Thanks. If you look at your contracted volumes right now, you know, roughly what% would have transitioned to the new price book at this point? Yeah. You know, if we look at, you know, our entire book, you know, we kinda think about, you know, kind of that 60%-70% being of volume being to our longer-term E&P customers. You know, as we think about the balance of the year and we think about coming into this year, probably at least half of that volume has now transitioned onto a renegotiated contract. You know, as we kind of carry on through the year, and we look back at it on a year-over-year basis, that should be the total magnitude on a year-over-year basis. Got it. Thanks. One last one, if I may. If you look across your entire supply chain, you know, where are you still seeing the most inflationary pressure? Kind of how do you see that playing out this year? Yeah, I think, you know, across the entire logistics chain, you know, we really have seen the inflationary pressure subside a little bit. You know, if we had to pick one area, that, you know, we may see a little more inflationary pressure, it's probably the tightest area in our supply chain right now is the trucking. You know, the trucking market has been tight and has been, you know, undersupplied at times in the market. You know, we may see some additional inflationary pressure coming out of the trucking market, but we feel we're in a good position so that that will not impact the overall gross margin that Source can achieve. But that's the one area that we, you know, we keep a keen eye on. That's the one area that we have seen the most tightness over the, over at least the past quarter, and we're projecting a little tightness for the balance of the year. Thank you very much. That's it for me. Appreciate the color. Thanks, John. Once again, if you have a question, please press star then one. The next question comes from Josef Schachter with SER. Please go ahead. Thank you very much. Good morning, Scott and Darren, congratulations on the improvement in the quarter and nice to see you getting on the recovery side. A couple questions. You mentioned about Northeast BC with a number of well locations being given to the industry. Germaine talked about a big increase that they got on their conference call. Are you seeing a material increase in order flow for that just because of the reopening of the drilling there? The second part would be, when do you see the business picking up even further, as companies, you know, part of LNG Canada, PETRONAS, Shell, start upping in, sometime in 2024, their drilling to get the volumes they need, to bring into, you know, the Coastal GasLink and into the LNG plant? Do you see kind of like a kind of a staircase of growth in the Northeast BC? Yeah. I mean, I'll start off with the first part of your question. You know, we have seen a, you know, and especially as we look at it on a, on a year-over-year basis, we have seen quite a pickup in activity in that, in that region. Looking forward, you know, we continue to see that pickup of activity in that area, you know, as customers are sort of catching up on their program that they delayed last year. The industry activity in that region, you know, continues to grow and we think, you know, it will continue to grow, you know, well beyond, you know, 2023 and into 2024. You know, in terms of your second part of your question, yeah, I think what we're gonna see is, you know, a continued growth in that region. Maybe not a step change, but continued growth in that region into 2024 and then into 2025. You know, we look to that region, you know, as being a driver of growth in the Montney, you know, certainly a driver of growth in the Western Canadian Sedimentary Basin. You know, it's one of our regions that, you know, we play well in, our network serves very well, and we think we have a competitive advantage just given the size of the fracs and the, you know, the logistics services required around all those fracs. You know, we're excited about the area, we're excited about the growth in the area, and we're excited about what LNG and LNG Canada will bring for the stability to the Western Canadian Sedimentary Basin. Okay. Next question for me is, have you given any guidance to the amount of debt repayment or debt buybacks you might be considering for the total year of 2023? We haven't given specific guidance on, you know, debt reduction. What I can, you know, I will mention, you know, the majority of our free cash flow will be focused on debt reduction. You know, that is, I think as we've mentioned a few times, our number one priority here at Source is to pay down the debt and get our capital structure in a position that will allow us to succeed in the future. The majority of our cash flow will be focused on paying down debt. Okay, one for Darren. If you do buy the debt at a discount, how does that go into your P&L? Does it turn into net income, which increases your balance sheet shareholder equity component? Yeah. If we're to buy the debt at a discount, we would realize, you know, a gain on that acquisition. You're right, Josef, it will end up in ultimately net income. Okay, super. That's it for me. Thank you very much. Thank you, Josef. 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 Source Energy Services Q1 of 2023 conference call. If you have any follow-on questions, please feel free to reach out to myself or Darren. Thanks everyone. Have a great day and a great weekend. This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.