Thank you for standing by. This is the conference operator. Welcome to the Source Energy Services first quarter 2022 earnings 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 and zero. I would now like to turn the conference over to Scott Melbourn, CEO. Mr. Melbourn, please go ahead.
Thank you, operator. Good morning, and welcome to Source Energy Services first quarter 2022 conference call. My name is Scott Melbourn. 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 will be available to answer any questions you may have. Before I get started, I would like to refer everyone to the financial statements in the MD&A that were posted to SEDAR on 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, 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 these items just mentioned, our financial information is prepared in accordance with IFRS.
Despite strong commodity price performance during the quarter, the Western Canadian Sedimentary Basin experienced a slightly slower quarter than anticipated due to challenging weather and ongoing permitting issues in B.C. For the first quarter of 2022, Source recorded 675,000 tons in Canada, which is a slight increase when compared to the first quarter of 2021. However, the slower activity levels in Canada were offset by a robust market in the Lower 48. For the quarter, we realized 51,000 tons of mine gate sales destined for markets in the U.S., which was zero for the same period last year. For the quarter, we realized adjusted EBITDA of CAD 14.2 million, a 12% increase from the first quarter of 2021. We also reported a net loss of CAD 6.6 million for the first quarter of 2022.
Sand revenue was CAD 80.7 million, an increase of 22% over the first quarter of 2021. Compared to the first quarter last year, the increase in sand revenue was due to a 12% increase in overall sand volumes, a 13% increase in average realized sand price, excluding the impact of mine gate sales. Strong activity levels from non-contracted customers during the quarter drove a 141% increase in spot sales on a quarter-over-quarter basis. It is during times of higher activity or challenging operating environment that Source's logistics capabilities from the mine to the wellsite set us apart from other suppliers in the Western Canadian Sedimentary Basin. 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 facilities and logistics operations, our past investments in our unique storage and distribution infrastructure continue to provide Source a distinct competitive advantage. Wellsite Solutions revenue was CAD 15.4 million for the first quarter, an increase of 9% or CAD 1.3 million compared to the first quarter of 2021. During the quarter, Wellsite Solutions revenue was impacted slightly by lower volumes trucked to the wellsite 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 30% on a quarter-over-quarter basis, and the Sahara units were 72% utilized, a 15% increase in days utilized across the 8-unit fleet.
During the fourth quarter, we had 4 additional customers operating Sahara units compared to the first quarter last year, and we deployed Source's first-ever high-capacity drive over on a Sahara unit. Sahara Nine was completed early in 2022 and was deployed in the U.S. for a contract with a large E&P customer commencing in the second quarter. We continue to see strengthening interest in Sahara units from both Canada and the U.S. Cost of sales in the first quarter were impacted by higher costs for transportation and freight due to increased fuel prices, a tight trucking market, and terminal mix changes when compared to the same period last year. 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. As improved production efficiencies mitigated cost pressures, pricing pressure realized during the quarter.
Excluding gross margins from mine gate sales, Adjusted Gross Margin per ton was CAD 28.54, which was favorably impacted by improved spot market pricing and continued production efficiencies. Compared to the first quarter last year, adjusted gross margin for the first quarter of 2022 did not benefit from the proceeds from the CEWS program, a favorable property tax adjustment or higher deferred terminal revenue. If these one-time adjustments were excluded from the first quarter of 2021, the first quarter of 2022 adjusted gross margin per ton has increased 6.5% compared to the prior year. For the three months ending March 31, 2022, adjusted gross margin per ton increased 80% compared to the fourth quarter of 2021.
For the first quarter of 2022, total operating and general administration expense increased by CAD 500,000 when compared to the same period last year. Operating expenses increased CAD 600,000 in 2022, primarily due to increased royalty costs and higher insurance expense. An improved activity level realized and no proceeds received from 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 of last year. For the first quarter of this year, G&A expense decreased by CAD 100,000 from the prior year due to lower variable incentive compensation expense. Now, turning to the balance sheet.
On March 31, 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 after we made the CAD 7.5 million repayment on March 31. Source had CAD 24 million drawn under its ABL facility. The ABL facility was also being used to support CAD 9.8 million of letters of credit, leaving CAD 16.2 million of available liquidity. As industry activity increases and business performance improves, Source will be very focused on reducing its debt levels to ensure we have a capital structure that can withstand the peaks and valleys of our industry. Source's capital expenditures for the first quarter were CAD 2 million, an increase of CAD 700,000 when compared to the same period last year.
The increase in expenditures for maintenance and sand and sustaining capital are primarily related to costs associated with overburden removal for mining operations and Sahara unit configurations. While capital expenditures for the quarter were related to permitting at the Peace River mine, as well as completion of Source's ninth Sahara unit. As we look at the full year of 2022, we expect capital expenditures to be approximately CAD 10-12 million, with the year-over-year increase driven by overburden expenditures in Wisconsin and Peace River required to keep up with the forecasted increase in demand. As we've previously announced, after the quarter end, we closed a transaction with Canadian Silica Industries Inc. to assume operation of their Peace River frac sand facility, which for Source adds 400,000 metric tons of domestic frac sand production capability, broadening our offering to our customer.
It consolidates CSI's production facility with Source's adjacent 3,600 acres of mineral resource exploration rights in Peace River, which will result in production efficiencies and extended life of the contiguous reserve, provides Source access to domestic sand production that is geographically closest to the Montney and not rail dependent, generates significant financial upside with minimal capital costs and balance sheet impacts while incorporating a flexible lease structure. 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 prices 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 delayed activity in Q1 will result in busier subsequent quarters during the year, which, when coupled with the industry fundamentals, will result in a continuation of improved business performance for Source throughout 2022. 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 an increased demand for Source's services in the Western Canadian Sedimentary Basin.
Source continues to see increased demand from our customers that are primarily focused on the development of natural gas properties in the Montney, Duvernay, and the Deep Basin. This trend is consistent with our view that natural gas will be an important transition fuel that is critical for the success of the movement to a less carbon-intensive world. In support of the move to a less carbon-intensive world, Source has began 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 opportunities in its own operations as well as new service offerings at the well sites or at our terminals.
Source also continues to focus on increasing its involvement in the provision of logistics services for other items needed at the well site in response to customers' requests to expand its service offering and further utilize its existing Western Canadian terminals to provide additional services. Over the longer term, we anticipate these opportunities will be a meaningful part of Source's business. 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-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. Once again, if you have a question, please press star then one. The first question comes from Paul Tepsich with High Rock Capital Management Inc. Please go ahead.
Good morning. Congratulations on a good quarter and a bit of a turnaround for your business. Maybe a question for Derren. I might have missed part of the call, and I think you mentioned debt reduction, you're focused on it. Could you remind us, A, the excess cash flow sweep on your existing bonds, what that is, and B, would you look at buying bonds back in the open market with new cash flow?
In terms of the excess cash flow sweep, at the end of the year, we have a formula that's laid out in the trust indenture. We go through and calculate what's available from a free cash perspective. At that point, deduct CAD 10 million off and are required to spend half of what remains. That I think is a reasonable possibility may occur in the year. In terms of part two, Paul, you know, as we discussed, yes, we're interested in acquiring bonds when we've got liquidity in the proper spot within this.
Okay, great. Thank you, Derren.
Yeah. Sure.
As there are no further questions from the phone lines, this does conclude 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 conference call, and thank you for your interest in Source. If you have any additional questions, please feel free to reach out to Derren or myself. Thank you, and have a great day.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.