Source Energy Services Announces New Credit Facilities and the Redemption of its Senior Secured Notes

/EIN News/ -- CALGARY, Alberta, Dec. 20, 2024 (GLOBE NEWSWIRE) -- Source Energy Services Ltd. (“Source” or the “Company”) (TSX: SHLE) is pleased to announce that it has completed a comprehensive refinancing of its credit facilities by entering into a new five year $135 million (USD) term loan (the “Term Loan”) with Silver Point Finance, LLC (“Silver Point”) and a new $40 million (CND) revolving asset-backed loan (“CIBC ABL”) facility with the Canadian Imperial Bank of Commerce (“CIBC”). Proceeds from the Term Loan will be used to redeem the outstanding 10.5% Senior Secured Notes due March 15, 2025 (the “Notes”) and repay the outstanding amounts drawn on the Company’s current asset backed loan facility.

The refinancing package provides Source with:

• a lower cost of borrowing;
• increased financial flexibility;
• enhanced liquidity, with an undrawn CIBC ABL and approximately $10.0 million of cash on the balance sheet at close;
• neutrality to its current leverage position; and
• maturities out to 2029.
  

“The new credit facilities strengthen our balance sheet and enhance our liquidity, which further positions us to execute on our long-term growth strategies, while continuing to de-lever the business,” said Derren Newell, Chief Financial Officer. “We are excited to partner with Silver Point and CIBC for the next chapter of our business and we would like to thank both FGI and the noteholders for their past commitments.”

The Term Loan agreement with Silver Point matures on December 20, 2029 and bears interest at Term SOFR plus an applicable margin. The Term Loan agreement contains covenants and principal amortization typical for this type of facility.

The CIBC ABL facility remains undrawn at close, matures on December 20, 2027, and may be drawn in Canadian or U.S. dollars. Interest rates are determined, using Prime, Base rate, CORRA or SOFR plus an applicable margin, based on average monthly amounts drawn on the facility. The borrowing base formula is applied to accounts receivable and inventory, and the facility contains covenants that are typical for this type of facility.

Source has delivered a notice of redemption (the “Redemption Notice”), effective December 19, 2024, for all of its outstanding Notes, representing an aggregate principal value of $140.5 million. As set forth in the Redemption Notice, the redemption date will be January 20, 2024 (the “Redemption Date”) and the redemption price is 100% of the principal amount of the Notes outstanding plus accrued and unpaid interest up to but excluding the Redemption Date, in accordance with the provisions of the indenture governing the Notes (the “Redemption”).

This press release does not constitute a notice of redemption of the Notes. Information concerning the terms and conditions of the Redemption is described in the Redemption Notice distributed to holders of the Notes by Computershare Trust Company, as trustee, with respect to the Notes. Beneficial holders of the Notes with any questions about the Redemption should contact their respective brokerage firm or financial institution.

A redacted copy of the Silver Point Term Loan agreement and the CIBC ABL agreement will be available on Source’s SEDAR Plus Profile at www.sedarplus.ca in accordance with National Instrument 51-102 – Continuous Disclosure Obligations as adopted by the Canadian Securities regulatory authorities.

ABOUT SOURCE ENERGY SERVICES

Source is a company that focuses on the integrated production and distribution of frac sand, as well as the distribution of other bulk completion materials not produced by Source. Source provides its customers with an end-to-end solution for frac sand supported by its Wisconsin and Peace River mines and processing facilities, its Western Canadian terminal network and its “last mile” logistics capabilities, including its trucking operations, and Sahara, a proprietary well site mobile sand storage and handling system.

Source’s full-service approach allows customers to rely on its logistics platform to increase reliability of supply and to ensure the timely delivery of frac sand and other bulk completion materials at the well site.

ABOUT SILVER POINT

Silver Point is a leading global credit investing firm founded in 2002. With a dedicated team of more than 320 employees, Silver Point oversees $37 billion in investable assets across a comprehensive credit platform that includes public and private investment strategies. Silver Point's Direct Lending business has delivered customized financing solutions to middle-market companies across a broad range of industries. It works in close partnership with borrowers, developing a thorough understanding of their businesses and addressing a wide variety of capital needs with speed and certainty. Silver Point's flexible mandate allows clients to execute on M&A activity, refinancings and growth capital, among a range of transaction types. Along with its affiliates, Silver Point's Direct Lending business manages over $15 billion in investable capital. For more information, please visit www.silverpointcapital.com.

ABOUT CIBC

CIBC is a leading North American financial institution with 14 million personal banking, business, public sector and institutional clients. Across Personal and Business Banking, Commercial Banking and Wealth Management, and Capital Markets, CIBC offers a full range of advice, solutions and services through its leading digital banking network, and locations across Canada, in the United States and around the world. Ongoing news releases and more information about CIBC can be found at https://www.cibc.com/en/about-cibc/media-centre.html.

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”, “believes”, “continues”, “focus”, “trend”, 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 unless required by applicable law. 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: the Company’s ability to use the proceeds of the Term Loan to redeem the Notes and repay the outstanding amounts drawn on the current asset backed loan facility; the Company’s ability to execute on its long-term growth strategies; the Company’s ability to de-lever its business over time; and expectations relating to the Redemption, including the terms and conditions of such Redemption and the anticipated timing thereof.

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: future oil, natural gas and liquefied natural gas 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; 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 by or 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 extreme weather patterns and natural disasters; 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, unfavorable, 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; the impact of information systems and cyber security breaches; the impact of inflation on capital expenditures; and risks and uncertainties related to pandemics such as COVID-19, including changes in energy demand.

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.

Any financial outlook and future-oriented financial information contained in this press release regarding prospective financial performance, financial position or cash flows is based on assumptions about future events, including economic conditions and proposed courses of action based on management’s assessment of the relevant information that is currently available. Projected operational information contains forward-looking information and is based on a number of material assumptions and factors, as are set out above. These projections may also be considered to contain future oriented financial information or a financial outlook. The actual results of Source’s operations for any period will likely vary from the amounts set forth in these projections and such variations may be material. Actual results will vary from projected results. Readers are cautioned that any such financial outlook and future-oriented financial information contained herein should not be used for purposes other than those for which it is disclosed herein. The forward-looking information and statements contained in this document speak only as of the date hereof and have been approved by the Company’s management as at the date hereof. The Company does not assume any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws.

FOR FURTHER INFORMATION PLEASE CONTACT:

Scott Melbourn
Chief Executive Officer
(403) 262-1312
investorrelations@sourceenergyservices.com

Derren Newell
Chief Financial Officer
(403) 262-1312
investorrelations@sourceenergyservices.com