Valve has been tight-lipped about the possibility of a new Source engine, never explicitly denying one but implying last year that it prefers to simply update its old engine. Apparently all it took to spill the beans was a nice party, because company president Gabe Newell let out some juicy tidbits when fans paid him a birthday visit.
The group of fans from 4chan.org's /v/ board paid a visit to Valve and posted a video of the event on YouTube (via Joystiq). Newell took some questions, and one fan asked if Valve is working on a new Source engine. His reply is muddied by some audio problems, but the answer seems clear enough.
"We've been working on new engine stuff for a while," Newell said. "We've just been waiting for a game to roll it out with." Just to make sure the response had no room for doubt, a follow-up asked if it's an entirely new engine rather than just an extension to Source, and Newell confirmed with a simple "yeah." He also mentioned a sequel to Ricochet.
In August, fans discovered what seemed to be Source 2 files hidden in the Source Filmmaker. These included references to the current engine as distinguished between "Source 2," along with Source 2 tool icons.