SHLE:CC - Source Energy Services Reports Q4 2022 and Year End Results

(TheNewswire)

Calgary, AB - TheNewswire - March 8, 2023 - Source Energy Services Ltd. (TSX:SHLE) (“ Source ” or the “ Company ”) is pleased to announce itsfinancial results for the three and twelvemonths ended December 31, 2022 .

2022 PERFORMANCE HIGHLIGHTS

Key highlights for the year endedDecember 31, 2022 , included thefollowing:

• realized Adjusted EBITDA (1) of $61.5million , a 59% increase from 2021;

• reported a net loss of $8.8million , a $15.6million improvement from 2021;

• realized sand sales volumes of 2,845,600 MT and total revenue of $415.9 million , a 15% and 30% increase, respectively, from 2021;

• recorded utilization of 75% for the Canadian Saharafleet and 74% for the US Sahara fleet for the year;

• closed a transaction with Canadian Silica Industries(“CSI”) to assume operation of CSI’s Peace River frac sandfacility, complementing Source’s Northern White proppant resources;

• closed a transaction for a new $75.4 million (US$55.0million) credit facility;

• lowered borrowing costs by 200 basis points bycommencing cash interest payments for the senior secured notes andfurther improved borrowing costs due to lower effective interest rateson the new credit facility;

• reduced amounts outstanding for the credit facilitiesby $9.8 million at December 31, 2022 compared to prior year;

• renewed one major customer contract at the end of theyear and a second major contract in early 2023; and

• realized gross margin of $58.1million and Adjusted Gross Margin (1) of $79.0million , increases of 48% and 31% , respectively, when compared to2021.

Note :

1. Adjusted Gross Margin (including on a per MT basis) andAdjusted EBITDA are not defined under IFRS, refer to ‘Non-IFRSMeasures’ below for reconciliations to measures recognized by IFRS.For additional information, please refer to Source’s MDA availableonline at www.sedar.com.

RESULTS OVERVIEW

Notes :

1. One MT is approximately equal to 1.102 short tons.

2. The average Canadian to United States (“US”) dollarexchange rate for the three and twelve months ended December 31, 2022,was $0.7365 and 0.7686, respectively (2021 - $0.7935 and 0.7978,respectively).

3. Adjusted EBITDA and Adjusted Gross Margin (including ona per MT basis) are not defined under IFRS, refer to ‘Non-IFRSMeasures’ below for reconciliations to measures recognized by IFRS.For additional information, please refer to Source’s MDA availableonline at www.sedar.com.

2022 RESULTS

Western Canadian Sedimentary Basin (“WCSB”)completion activity levels remained strong throughout the year whichdrove improved sand sales volumes and increased pricing in the spotmarket for sand, as supply and demand dynamics rebalanced during theyear. Source achieved a $96.1million or 30% increase in total revenue compared to 2021, driven by highersand sales volumes, higher average realized sand pricing and improvedwellsite solutions revenue.

Cost of sales, excluding depreciation, increased forthe year due to higher sand sales volumes and higher costs fortransportation and freight, due to increased prices for fuel, comparedto last year. Source incurred additional costs for third party sandpurchases, procured to ensure no customer supply interruptionsresulting from increased customer demand, relative to 2021. These costincreases were partly mitigated by improved sales distribution acrossmesh sizes resulting in improved yields. Cost of sales was alsoimpacted by a weakening Canadian dollar on US denominated costsrelative to last year; however, this was offset by gains realized onforeign currency forward contracts settled during the year.

For the year ended December 31,2022 , gross margin increased by $18.8 million , attributed to highersand sales volumes and improved pricing. Excluding gross margin frommine gate volumes, Adjusted Gross Margin was $29.80 per MT, compared to $24.33 per MT in 2021, favorablyimpacted by improved customer and spot market pricing, despite highercosts for transportation and freight due to increased fuel costscompared to last year. Higher volumes of mine gate sales, relative tolast year, contributed further reductions to cost of sales and furtherbenefited gross margin for 2022. The weakening of the Canadian dollarnegatively impacted Adjusted Gross Margin; however, this impact waslargely offset by the settlement of foreign currency forward contractsin the third quarter.

Operating expenses increased on a year-over-year basis,primarily attributed to increased repairs and maintenance costs,including expenditures required to bring the new Peace River facilityonline, and an increase in royalty payments, directly related tohigher activity levels. In 2021, general and administrative expensebenefited from proceeds of the Canada Emergency Wage Subsidy(“CEWS”) program and the reversal of a provision for bad debtexpense. Adjusted EBITDA was $61.5million for 2022, a reflection of the strongsand sales volumes and sand sales pricing realized.

New Senior Credit Facility

On October 14, 2022, the Company closed a new revolvingasset backed senior credit facility (the “ABL”) with a syndicatecomprised of FGI Worldwide LLC and CIT Northbridge Credit, as advisedby CIT Asset Management LLC, providing access to funding ofapproximately $75.4 million (US$55.0 million). The ABL provides Sourcewith a lower cost of borrowing and less restrictive covenants.

Upon closing of the ABL, Source repaid all outstandingdraws on the former ABL facility and senior secured term loan(collectively, the “Credit Facility”). The Company also enteredinto a supplemental indenture that governs the Notes which permittedSource to execute the ABL facility in exchange for a one percentconsent fee to the noteholders which was paid in kind on closing. Foradditional information, including the financial covenants of the ABLfacility, refer to ‘Long-term Debt’ within Source’s MD&A,available online at www.sedar.com .

Liquidity and Capital Resources

Note :

(1)        Adjusted EBITDA and Free Cash Flow arenot defined under IFRS, refer to ‘Non-IFRS Measures’ below. Thereconciliation to the comparable IFRS measure can be found in thetable below.

Source generated Free Cash Flow of $3.9 million for the year endedDecember 31, 2022, compared to $11.0million generated for 2021. The decrease isattributed to higher financing expense paid, as interest incurred forthe Notes in 2021 was paid in kind, compared to $12.9 million of cashinterest payments recognized for the Notes through 2022. Higherinterest expense incurred for the ABL facility, reflecting higheraverage draws outstanding and an increase in the variable interestrates for the facility, as well as incremental costs incurred for theclosing of the ABL facility, also contributed to the reduction in FreeCash Flow. An increase in capital expenditures for the year, largelydue to maintenance work performed at the Peace River facility andincreased overburden removal costs, as well as $1.5 million inincremental interest expense for lease obligations, largely due tolease payments related to the Peace River facility, furthercontributed to the reduction. The increase in cash outflows werepartially offset by a $22.9 million improvement in Adjusted EBITDA, reflecting strong volumesand increased average sand prices, compared to the prior year.

During the fourth quarter of 2022, Free Cash Flow wasimpacted by an increase in financing expense paid, attributed to thepayment of two quarterly interest payments during the period, for atotal of $8.7 million, compared to the same period last year wheninterest incurred for the Notes was paid in kind. Source was notpermitted to make the August 15, 2022 quarterly interest payment forthe Notes until after the closing of the ABL facility, which occurredin October, 2022. Source realized an increase in capital expendituresand interest expense for lease payments during the quarter, as notedabove, compared to the fourth quarter of 2021.

Source’s capital expenditures for the fourth quarter of 2022 were $4.2 million , an increaseof $2.2 million comparedto the same period last year. The increase in expenditures formaintenance and sustaining capital was primarily related to the PeaceRiver facility maintenance, and a $1.9million increase in costs associated withoverburden removal for mining operations, as continued strong sandsales volumes are expected. Growth capital expenditures were lower, ona quarter-over-quarter basis, due to the completion of Source’sninth Sahara unit in the fourth quarter of last year.

For the year ended December 31, 2022, capitalexpenditures increased by $8.3million compared to 2021, driven by expendituresfor the Peace River facility and increased overburden removal, asnoted above. During 2022, Source sold excess production equipment,generating proceeds of $1.5 million . Management continues to assess equipment and other assetsrequired to service Source’s operations to ensure optimal levels aremaintained on an on-going basis.

Q4 2022 RESULTS

Source sold sand volumes of 566,130 MT for the three months ended December 31, 2022 ,generating sand revenue of $70.3million , an increase of $15.3million or 28% from the fourth quarter of 2021 . The increase was primarily due toa 33% increase in averagerealized sand price ( $35.08 per MT, excluding mine gate sales). During the fourthquarter, revenue from mine gate sales lowered the average realizedsand price by $14.87 perMT; however, the impact of mine gate sales on average realized sandpricing was more than offset by the pricing increases for spot andcontract customers. The sale of lower-value mine gate sales has afavorable impact on production costs, creating efficiencies whichresult in increased production yields. The increased sand revenuereflects meaningful pricing gains realized for both spot customers andcontracted customers, relative to the fourthquarter of last year, as certain contractsreflect pricing increases implemented late in 2022.

For the three months endedDecember 31, 2022 , wellsite solutions revenuewas $16.2 million , an increase of $4.3 million or 36% compared to the same period in2021. During the quarter, trucking volumes were lower compared to the fourth quarter of 2021, impacted by certaincustomer job and permitting delays. Despite the lower volumes, lastmile trucking solutions generated a 32% increase in revenue over thesame quarter last year, favorably impacted by longer trips fromterminal to the wellsite and increased pricing realized.Sahara-related revenue increased 44% on a quarter-over-quarter basis, due to a 35% increase in days utilized acrossthe nine-unit fleet. Sahara units operating in the US achievedutilization of 85%, with recently added customers operating in NewMexico and Montana.

For the fourth quarter of 2022, terminal servicesrevenue was $1.0 million ,an increase of $0.3 million compared tolast year. The increase during the fourthquarter was primarily due to higher chemicalelevation volumes, as well as revenue generated from the transloadingof other non-sand materials, reflecting the commencement of anagreement to transload condensate rail cars through the first quarterof 2023.  A reduction in sand elevation volumes for the quarter,compared to the same period last year, partially offset theseincreases.

Cost of sales, excluding depreciation, increased by $12.4 million for the fourth quarter of 2022 compared to thesame period in 2021 .Higher sand sales volumes realized impacted cost of sales, as well asof higher costs for transportation and freight. In the fourth quarterof 2022, increased amounts of  third party sand were purchased, andincremental fuel surcharges were incurred on these purchases,unfavorably impacting cost of sales, excluding depreciation. Theseincreases were partially offset by a reduction in production costs,attributed to warmer weather experienced during the fourth quarter,which contributed to increased production efficiencies. Last year,cost of sales was favorably impacted by proceeds received from theCEWS program totaling $0.1 million for the fourth quarter of 2021. Significant components of cost of sales aredenominated in US dollars, including sand processing and rail freight,and are therefore subject to exchange rate fluctuations. During the fourth quarter of 2022 , a weakening of the Canadian dollar on USdollar denominated components of cost of sales contributed an increaseof $6.38 per MT to cost ofsales, compared to the same period last year.

Gross margin increased by $6.4million for the quarter. Excluding gross marginfrom mine gate volumes, Adjusted Gross Margin for the fourth quarter was $30.15 per MT, favorably impacted byimproved customer and spot market pricing, as well as certainproduction adjustments to offset increasing costs for fuel. Theseimprovements more than offset higher costs for transportation andfreight due to higher fuel costs, compared to the fourth quarter of 2021 . Excluding the impact of theweakening Canadian dollar during the threemonths ended December 31, 2022 , and the benefitof proceeds from the CEWS program during the fourth quarter of 2021 , Adjusted Gross Margin (excludingmargin from mine gate volumes) increased by $14.65, or 94%, comparedto the same period last year. The weakening of the Canadian dollarnegatively impacted Adjusted Gross Margin by approximately $3.29 per MT.

For the fourthquarter of 2022 , total operating and general andadministrative expense increased $2.9million , compared to the same period in 2021 . During the three months ended December 31, 2022 , operating expense increased by $2.2million from the same period last year. Theincrease is primarily due to increased people costs as a result ofhigher compensation expense, including variable incentivecompensation, as well as higher repairs and maintenance for Source’srail car fleet which resulted in increased equipment costs compared toprior year. Royalty costs incurred grew as a result of higher sandshipments from mines that require royalty payments and, combined withincreased insurance expense, led to increased selling andadministrative costs compared to the same period last year. Generaland administrative expense increased $0.7 million in the fourth quarter of 2022 compared to the same quarter in 2021 , primarily due toincreased people costs as a result of higher compensation expense,including higher variable incentive compensation in the currentquarter. Higher selling and administrative costs were incurred duringthe quarter as a result of increased professional fees compared tolast year.

ESG UPDATE

Source is committed to operating in a sustainablemanner and works closely with its stakeholders to go above and beyondcurrent regulatory requirements through initiatives such as voluntarygreenhouse gas emissions reduction programs, as well as Source’sproduction water recycling program. During 2022, Source reduced itsgreenhouse gas emissions rate by 2.4% compared to the previous year,and 23.4% compared to the base year. Source’s water recyclingprogram reduces the reliance on local well water and in 2022 Sourcerecycled over four hundred million litres of water, ensuring Sourceremained far below its permitted well water allowance. Source hasreclaimed just under fourteen acres of land adjacent to its Wisconsinprocessing facilities, part of Source’s continued effort to returnthe land to a thriving vegetative state. In 2022, Source purchasedwetland credits to ensure any wetlands impacted by future mineexpansion initiatives would be protected.

As an active member of its community, Source supportsinitiatives that align with its corporate values, support thecharitable efforts of our employees and are located close to itsoperations. Source supports community needs in the areas of Arts andCulture, Education, Environment, Health and Wellness and Sports andRecreation through financial donations and employee volunteer hours.

For more information, Source’s most recent ESG reportis available at www.sourceenergyservices.com .

BUSINESS OUTLOOK

Strong industry activity continues to favorably impactfrac sand supply and demand fundamentals which are expected to remainstrong through 2023. Previous well permitting issues in thenortheastern British Columbia region, which caused customer delays inlate 2021 and through 2022, have now been resolved and are expected tobring increased activity to the region again as exploration andproduction (“E&P”) companies catch up on their developmentplans. Source has renewed customer contracts with terms and conditionsreflective of the current operating environment. Source believes thesefundamentals, coupled with Source’s leading service offerings andlogistics capabilities required for larger volumes of sand per well,as well as Source’s terminal network footprint, would supportfurther improved gross margins in 2023.

In the longer-term, Source believes the increaseddemand for natural gas, driven by power generation facilities,increased natural gas pipeline export capabilities and liquefiednatural gas exports will drive incremental demand for Source’sservices in the WCSB. Source continues to see increased demand fromcustomers that are primarily focused on the development of natural gasproperties in the Montney, Duvernay and Deep Basin. This trend isconsistent with Source’s view that natural gas will be an importanttransitional fuel that is critical for the successful movement to aless carbon intensive world.

UPDATED NI 43-101 TECHNICAL REPORTS FOR THE MINERALPROJECTS IN WISCONSIN, UNITED STATES

Source is pleased to announce that it has filed withthe applicable Canadian securities regulatory authorities updatedNational Instrument 43-101 – Standards of Disclosure for MineralProjects (“NI 43-101”) technical reports for each of its threemineral projects in Wisconsin, United States (collectively, the“Technical Reports”).

The Technical Reports have each been prepared with aneffective date of December 31, 2022 and were updated as part of anannual assessment that accounts for conventional mining depletion ofthe mineral resources and include updated production records. Theupdated resources do not represent a 100% or greater change in thetotal mineral resources.

Mineral resources are not mineral reserves and do nothave demonstrated economic viability. There is no guarantee that allor any part of the mineral resource will be converted into a mineralreserve. Source has not based its production decisions and ongoingmine production on mineral reserve estimates, preliminary economicassessments, prefeasibility studies or feasibility studies. As aresult, there may be an increased uncertainty of achieving anyparticular level of recovery of minerals or the cost of such recoveryand historically projects without any mineral reserves have increaseduncertainty and risk of failure.

Further details with respect to the scientific andtechnical information contained in this press release are available inthe Technical Reports, which are available under the Company’s SEDARprofile at www.sedar.com .

FOURTH QUARTER CONFERENCE CALL

A conference call to discuss Source’s fourth quarter financial results hasbeen scheduled for 7:30 am MST (9:30 am ET) on Thursday, March 9,2023.

Interested analysts, investors and mediarepresentatives are invited to register to participate in the call.Once you are registered, a dial-in number and passcode will beprovided 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 Q 4 2022 Results Call

The call will be recorded and available for playbackapproximately 2 hours after the meeting end time, until April 9, 2023,using the following dial-in:

Playback Number                 PlaybackPasscode

Toll-Free: 1-800-319-6413                9671

ABOUT SOURCE ENERGY SERVICES

Source is a company that focuses on the integratedproduction and distribution of frac sand, as well as the distributionof other bulk completion materials not produced by Source. Sourceprovides its customers with an end-to-end solution for frac sandsupported by its Wisconsin and Peace River mines and processingfacilities, its Western Canadian terminal network, its “last mile”logistics capabilities and Sahara, a proprietary wellsite mobile sandstorage and handling system.

Source’s full-service approach allows customers torely on its logistics platform to increase reliability of supply andto ensure the timely delivery of frac sand and other bulk completionmaterials at the wellsite.

IMPORTANT INFORMATION

These results should be read in conjunction with eachof Source’s audited consolidated financial statements for the years ended December 31, 2022 and2021 , together with the accompanying notes (the“Financial Statements”) and its corresponding MD&A for suchperiods. The Financial Statements and MD&A and other informationrelating to Source, including the Annual Information Form (“AIF”),are available under the Company’s SEDAR profile at www.sedar.com . The Financial Statements and comparative statements havebeen prepared in accordance with International Financial ReportingStandards (“IFRS”) as issued by the International AccountingStandards Board. Unless otherwise stated, all amounts are expressed inCanadian dollars.

NON-IFRS MEASURES

In this press release Source has used the terms FreeCash Flow, Adjusted Gross Margin and Adjusted EBITDA, including perMT, which do not have standardized meanings prescribed by IFRS andSource’s method of calculating these measures may differ from themethod used by other entities and, accordingly, they may not becomparable to similar measures presented by other companies. Thesefinancial measures should not be considered as an alternative to, ormore meaningful than, net income (loss) and gross margin,respectively, which represent the most directly comparable measures offinancial performance as determined in accordance with IFRS.

Reconciliation of Adjusted EBITDA and Free Cash Flow toNet Loss

Note :

1. Includes expenses related to the incident at the FoxCreek terminal facility and one-time retirement payments.

Reconciliation of Gross Margin to Adjusted GrossMargin

For additional information regarding non-IFRS measures,including their use to management and investors, their composition anddiscussion of changes to either their composition or label, if any,please refer to the ‘Non-IFRS Measures’ section of the MD&A,which is available online at www.sedar.com and through Source’s website at www.sourceenergyservices.com .

FORWARD-LOOKING STATEMENTS

Certain statements contained in this press releaseconstitute forward-looking statements relating to, without limitation,expectations, intentions, plans and beliefs, including information asto the future events, results of operations and Source’s futureperformance (both operational and financial) and business prospects.In certain cases, forward-looking statements can be identified by theuse of words such as “expects”, “believes”, “continues”,“focus”, “trends”, “anticipates” or variations of suchwords and phrases, or state that certain actions, events or results“may” or “will” be taken, occur or be achieved. Suchforward-looking statements reflect Source’s beliefs, estimates andopinions regarding its future growth, results of operations, futureperformance (both operational and financial), and business prospectsand opportunities at the time such statements are made, and Sourceundertakes no obligation to update forward-looking statements if thesebeliefs, estimates and opinions or circumstances should change unlessrequired by applicable law. Forward-looking statements are necessarilybased upon a number of estimates and assumptions made by Source thatare inherently subject to significant business, economic, competitive,political and social uncertainties and contingencies. Forward-lookingstatements are not guarantees of future performance. In particular,this press release contains forward-looking statements pertaining, butnot limited, to: our expectation that strong sand sales volumes willcontinue; our continued assessment of equipment and other assetsrequired to service our operations; anticipated high activity levelsin the first quarter of 2023; Source’s efforts to return the land ofa thriving vegetative state; our expectation that frac sand supply anddemand fundamentals will remain strong through 2023; our expectationthat the resolution of permitting issues in northeastern BritishColumbia will bring increased activity to the region; our beliefsrespecting improved gross margins in 2023; increased demand fornatural gas, increased natural gas pipeline export capabilities andliquefied natural gas exports will drive incremental demand forSource’s services in the WCSB; continued increase in demand fromcustomers primarily focused on the development of natural gasproperties in Montney, Duvernay and Deep Basin; the Company’s viewthat natural gas is an important transitional fuel for the successfulmovement to a less carbon intensive world; expectations respectingfuture conditions; and profitability.

By their nature, forward-looking statements involvenumerous current assumptions, known and unknown risks, uncertaintiesand other factors which may cause the actual results, performance orachievements of Source to differ materially from those anticipated bySource and described in the forward-looking statements.

With respect to the forward-looking statementscontained in this press release  assumptions have been maderegarding, among other things: proppant market prices; future oil,natural gas and liquefied natural gas prices; future global economicand financial conditions; future commodity prices, demand for oil andgas and the product mix of such demand; levels of activity in the oiland gas industry in the areas in which Source operates; the continuedavailability of timely and safe transportation for Source’sproducts, including without limitation, Source’s rail car fleet andthe accessibility of additional transportation by rail and truck; themaintenance of Source’s key customers and the financial strength ofits key customers; the maintenance of Source’s significant contractsor their replacement with new contracts on substantially similar termsand that contractual counterparties will comply with currentcontractual terms; operating costs; that the regulatory environment inwhich Source operates will be maintained in the manner currentlyanticipated by Source; future exchange and interest rates; geologicaland engineering estimates in respect of Source’s resources; therecoverability of Source’s resources; the accuracy and veracity ofinformation and projections sourced from third parties respecting,among other things, future industry conditions and product demand;demand for horizontal drilling and hydraulic fracturing and themaintenance of current techniques and procedures, particularly withrespect to the use of proppants; Source’s ability to obtainqualified staff and equipment in a timely andcost-efficient manner; the regulatory framework governing royalties,taxes and environmental matters in the jurisdictions in which Sourceconducts its business and any other jurisdictions in which Source mayconduct its business in the future; future capital expenditures to bemade by Source; future sources of funding for Source’s capitalprogram; Source’s future debt levels; the impact of competition onSource; and Source’s ability to obtain financing on acceptableterms.

A number of factors, risks and uncertainties couldcause results to differ materially from those anticipated anddescribed herein including, among others: the effects of competitionand pricing pressures; risks inherent in key customer dependence;effects of fluctuations in the price of proppants; risks related toindebtedness and liquidity, including Source’s leverage, restrictivecovenants in Source’s debt instruments and Source’s capitalrequirements; risks related to interest rate fluctuations and foreignexchange rate fluctuations; changes in general economic, financial,market and business conditions in the markets in which Sourceoperates; changes in the technologies used to drill for and produceoil and natural gas; Source’s ability to obtain, maintain and renewrequired permits, licenses and approvals from regulatory authorities;the stringent requirements of and potential changes to applicablelegislation, regulations and standards; the ability of Source tocomply with unexpected costs of government regulations; liabilitiesresulting from Source’s operations; the results of litigation orregulatory proceedings that may be brought against Source; the abilityof Source to successfully bid on new contracts and the loss ofsignificant contracts; uninsured and underinsured losses; risksrelated to the transportation of Source’s products, includingpotential rail line interruptions or a reduction in rail caravailability; the geographic and customer concentration of Source; theimpact of climate change risk; the ability of Source to retain andattract qualified management and staff in the markets in which Sourceoperates; labor disputes and work stoppages and risks related toemployee health and safety; general risks associated with the oil andnatural gas industry, loss of markets, consumer and business spendingand borrowing trends; limited, unfavorable, or a lack of access tocapital markets; uncertainties inherent in estimating quantities ofmineral resources; sand processing problems; implementation ofrecently issued accounting standards; the use and suitability ofSource’s accounting estimates and judgments; the impact ofinformation systems and cyber security breaches; and risks anduncertainties related to COVID-19 or its variants, including changesin energy demand.

Although Source has attempted to identify importantfactors that could cause actual actions, events or results to differmaterially from those described in the forward-looking statements,there may be other factors that cause actions, events or results notto be as anticipated, estimated or intended. There can be no assurancethat forward-looking statements will materialize or prove to beaccurate, as actual results and future events could differ materiallyfrom those anticipated in such statements. The forward-lookingstatements contained in this press release are expressly qualified by this cautionarystatement. Readers should not place undue reliance on forward-lookingstatements. These statements speak only as of the date ofthis press release. Exceptas may be required by law, Source expressly disclaims any intention orobligation to revise or update any forward-looking statements orinformation whether as a result of new information, future events orotherwise.

Any financial outlook and future-oriented financialinformation contained in this press release regarding prospective financial performance,financial position or cash flows is based on assumptions about futureevents, including economic conditions and proposed courses of actionbased on management’s assessment of the relevant information that iscurrently available. Projected operational information containsforward-looking information and is based on a number of materialassumptions and factors, as are set out above. These projections mayalso be considered to contain future oriented financial information ora financial outlook. The actual results of Source’s operations forany period will likely vary from the amounts set forth in theseprojections and such variations may be material. Actual results willvary from projected results. Readers are cautioned that any suchfinancial outlook and future-oriented financial information containedherein should not be used for purposes other than those for which itis disclosed herein. The forward-looking information and statementscontained in this document speak only as of the date hereof and havebeen approved by the Company’s management as at the date hereof. TheCompany does not assume any obligation to publicly update or revisethem to reflect new events or circumstances, except as may be requiredpursuant to applicable laws.

FOR FURTHER INFORMATION PLEASE CONTACT:

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