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Source Energy Services Ltd (TSE:SHLE)
TSX:SHLE
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Source Energy Services Ltd
(TSX:SHLE)
72Outperform
Positive Factors
Financial Performance
SHLE has delivered significant returns to shareholders, with the company's stock rising more than 600% since 2022.
Market Position
SHLE occupies a dominant position in the WCSB proppant market, showcasing a new level of stability.
Negative Factors
Analyst Recommendation
Analyst is downgrading SHLE shares to Market Perform from Outperform in conjunction with the commodity price update.
Market Outlook
Expectations for slowing WCSB proppant growth into 2025 suggest that better options may lie elsewhere in the smallcap OFS sector.
Target Price
Target price for SHLE is lowered to $14 from $20, reflecting updated commodity price and EBITDA estimates.
Source Energy Services Ltd (SHLE) vs. S&P 500 (SPY)
Market Cap
C$106.74M
Dividend YieldN/A
Average Volume (3M)34.94K
Price to Earnings (P/E)11.2
Beta (1Y)1.22
Revenue Growth18.29%
EPS Growth-94.32%
CountryCA
Employees512
SectorEnergy
Sector Strength61
IndustryOil & Gas Equipment & Services
Share Statistics
EPS (TTM)0.70
Shares Outstanding13,545,055
10 Day Avg. Volume27,205
30 Day Avg. Volume34,938
Financial Highlights & Ratios
PEG Ratio0.00013
Price to Book (P/B)N/A
Price to Sales (P/S)0.21
Price to Cash Flow (P/CF)1.90
P/FCF Ratio2.10
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$12.00Price Target Upside52.28% Upside
Rating ConsensusHold
Number of Analyst Covering1
Source Energy Services Ltd Business Overview & Revenue Model
Company DescriptionSource Energy Services Ltd (SHLE) is a leading provider of frac sand and logistical services to the oil and gas industry in North America. The company operates in the energy sector and specializes in offering high-quality sand solutions that are critical for hydraulic fracturing operations. Source Energy Services is known for its integrated approach, which includes mining, processing, rail transport, and last-mile logistics solutions, ensuring seamless delivery of frac sand to exploration and production companies.
How the Company Makes MoneySource Energy Services Ltd generates revenue primarily through the sale of frac sand, which is used in hydraulic fracturing to extract oil and gas. The company operates a network of processing facilities and rail terminals that enable efficient transportation and distribution of its products to key oil and gas basins across North America. Revenue streams include direct sales of frac sand to exploration and production companies and logistics services that facilitate the delivery of sand from mines to well sites. The company's earnings are significantly influenced by factors such as the level of drilling activity in the oil and gas industry, demand for frac sand, and its ability to provide timely and reliable logistical solutions. Strategic partnerships with rail and transportation companies also play a crucial role in enhancing its service offerings and expanding its market reach.
Source Energy Services Ltd Financial Statement Overview
Summary
Source Energy Services Ltd demonstrates strong financial health with robust revenue growth and positive cash flow trends. Despite a decline in net profit margin due to increased expenses, the company's efficient cost management and stable balance sheet provide a solid foundation.Income Statement
The company has shown strong revenue growth over the years, particularly with a substantial increase in total revenue from 2023 to 2024. The gross profit margin is healthy, reflecting efficient cost management relative to revenue. However, the net profit margin has decreased due to lower net income in 2024 compared to 2023, indicating potential challenges in controlling expenses or increased competition affecting profitability.78
Positive
Balance Sheet
Source Energy Services Ltd has a moderate debt-to-equity ratio, which suggests a balanced approach to leveraging. The equity ratio indicates a stable financial structure, though it is slightly lower than ideal levels. The return on equity has decreased as net income declined, which could signal decreased effectiveness in using shareholder equity to generate profits.72
Positive
Cash Flow
The cash flow statement shows a positive trend in free cash flow, with significant growth in 2024 compared to previous years. The company maintains a strong operating cash flow to net income ratio, indicating efficient cash management and a solid ability to convert income into cash. However, fluctuations in capital expenditures suggest potential variability in future cash flow stability.80
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 673.95M | 569.75M | 415.91M | 319.86M | 249.88M | Gross Profit |
| 127.34M | 97.30M | 58.15M | 39.33M | 24.66M | EBIT |
| 65.29M | 53.65M | 17.48M | 3.66M | -9.94M | EBITDA |
| 102.69M | 223.89M | 55.76M | 36.89M | -78.38M | Net Income Common Stockholders |
| 9.51M | 167.34M | -2.93M | -56.11M | -185.47M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 32.72M | 0.00 | -68.42M | -38.44M | -42.33M | Total Assets |
| 598.22M | 482.83M | 326.90M | 266.03M | 266.26M | Total Debt |
| 274.87M | 221.78M | 244.94M | 221.47M | 189.61M | Net Debt |
| 242.15M | 221.78M | 313.36M | 259.90M | 231.94M | Total Liabilities |
| 408.35M | 313.70M | 321.24M | 259.50M | 233.57M | Stockholders Equity |
| 189.87M | 169.13M | 5.66M | 6.53M | 32.69M |
| Cash Flow | Free Cash Flow | |||
| 51.06M | 28.98M | 65.01M | 7.49M | 35.69M | Operating Cash Flow |
| 94.39M | 51.09M | 80.17M | 14.01M | 39.37M | Investing Cash Flow |
| -27.06M | -13.20M | -13.90M | -6.00M | -4.96M | Financing Cash Flow |
| -34.61M | -67.04M | -66.28M | -8.01M | -34.41M |
Source Energy Services Ltd Technical Analysis
Negative
7.88
Price Trends
11.52
Negative
13.82
Negative
13.08
Negative
Market Momentum
-0.45
Negative
39.82
Neutral
46.11
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SHLE, the sentiment is Negative. The current price of 7.88 is below the 20-day moving average (MA) of 9.70, below the 50-day MA of 11.52, and below the 200-day MA of 13.08, indicating a bearish trend. The MACD of -0.45 indicates Negative momentum. The RSI at 39.82 is Neutral, neither overbought nor oversold. The STOCH value of 46.11 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:SHLE.
Source Energy Services Ltd Peers Comparison
Overall Rating
UnderperformOutperform
Sector (57)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | $772.33M | 7.48 | 21.89% | 4.63% | 0.84% | -1.74% | |
72 Outperform | C$106.74M | 11.23 | 5.30% | ― | 18.29% | -94.32% | |
68 Neutral | $1.71B | 11.48 | 14.86% | 9.76% | -1.62% | 12.60% | |
66 Neutral | $767.39M | 7.19 | 6.90% | ― | -1.83% | -62.53% | |
66 Neutral | $10.41M | 0.36 | 2.07% | 24.72% | -28.63% | ― | |
57 Neutral | $7.70B | 4.18 | -3.52% | 8.32% | 0.35% | -64.68% | |
53 Neutral | C$362.75M | 14.37 | -1.55% | ― | -6.00% | -150.20% |
* Energy Sector Average
Performance Comparison
TSE:SHLE
Source Energy Services Ltd
7.88
-6.17
-43.91%
TSE:PD
Precision Drilling
56.24
-47.67
-45.88%
TSE:HWO
High Arctic Energy Services
0.82
-1.46
-63.97%
TSE:TCW
Trican Well Service
4.10
-0.12
-2.77%
TSE:FRU
Freehold Royalties
11.33
-2.13
-15.82%
TSE:ESI
Ensign Energy Services
1.97
-0.74
-27.31%
Source Energy Services Ltd Earnings Call Summary
Earnings Call Date: Feb 27, 2025 | % Change Since: -36.45% | Next Earnings Date: May 1, 2025
Earnings Call Sentiment Positive
The earnings call painted a positive picture with record-setting performance in sand volumes and revenue. Despite challenges like a weaker Canadian dollar and increased costs, the company demonstrated strong growth in revenue, EBITDA, and free cash flow, alongside successful expansions in logistics capabilities.Highlights
Record Sand Volumes and Revenue
The quarter saw record sand volumes of 964,000 metric tonnes and sand revenue of $142.2 million, marking a $40 million increase from Q3 2023.
Significant Revenue and EBITDA Growth
Total revenue increased by $54.8 million from Q3 last year to $183.1 million. Adjusted EBITDA was $35.3 million, representing a 55% improvement from the same period in 2023.
Successful Expansion of Logistics Capabilities
Source Energy acquired sand trucking assets from the PVT Group, enhancing its last-mile logistics offering. The acquisition included 9 sand trucks, bringing the total fleet size to 37 trucks.
Strong Free Cash Flow
Free cash flow for the third quarter was $20.1 million, an increase of $12.7 million compared to last year. Year-to-date free cash flow is $49.1 million, $21 million ahead of the first 9 months of 2023.
Improved Financial Position
Net income was $10.2 million. The company has made significant progress on refinancing with a senior secured note balance of $140.5 million and a net working capital surplus of $57.6 million.
Lowlights
Impact of Weaker Canadian Dollar
The weaker Canadian dollar increased costs by $2.08 per metric tonne compared to last year, impacting the adjusted gross margin.
Higher Operating and Sales Costs
Cost of sales, excluding depreciation, increased by $45.9 million due to higher sales volumes, logistics volume, rail costs, and Sahara-related costs.
Challenges in Forex Management
The foreign exchange impact reduced adjusted gross margin by $0.92 per metric tonne as U.S. denominated costs outweighed the positive impact on U.S. denominated revenue.
Company Guidance
In the Source Energy Services Third Quarter 2024 earnings call, the company reported substantial metrics highlighting a period of record-breaking performance. Sand volumes reached 964,000 metric tonnes, driving sand revenue to an all-time high of $142.2 million, which is a $40 million increase from Q3 2023. Total revenue for the quarter was $183.1 million, marking a $54.8 million rise year-over-year. The adjusted gross margin was reported at $43.3 million, reflecting a 41% increase, while adjusted EBITDA saw a 55% improvement, reaching $35.3 million. Additionally, free cash flow surged to $20.1 million, $12.7 million more than the previous year, primarily due to better operating results and lower financing expenses. These financial strides were paired with strategic enhancements in logistics capabilities, including the acquisition of sand trucking assets and expansion of terminal infrastructure, positioning Source for continued growth in the Western Canadian Sedimentary Basin.Source Energy Services Ltd Corporate Events
Private Placements and FinancingM&A TransactionsBusiness Operations and StrategyFinancial Disclosures
Source Energy Services Reports Strong 2024 Financial Results and Strategic Expansions
Positive
Feb 27, 2025
Source Energy Services Ltd. reported a successful financial year in 2024 with significant increases in sand sales volumes and revenue, achieving a total revenue of $674 million, a 16% rise from the previous year. The company improved its liquidity through refinancing and expanded its operations with new partnerships and acquisitions, enhancing its market position and operational capabilities.
Financial Disclosures
Source Energy Services to Announce Q4 2024 Financial Results
Neutral
Feb 12, 2025
Source Energy Services will release its fourth-quarter financial results for 2024 after the Toronto Stock Exchange closes on February 26, 2025, with a conference call scheduled the following morning. This announcement highlights Source’s commitment to transparency and engagement with stakeholders, potentially impacting investor confidence and market positioning.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.