STEP Energy Services Announces First Quarter Operational and Financial Update
Press Releases

STEP Energy Services Announces First Quarter Operational and Financial Update

CALGARY, Alberta, April 10, 2023 (GLOBE NEWSWIRE) — STEP Energy Services Ltd. (the “Company” or “STEP”) is providing a first quarter 2023 operational and financial update as well as reporting continued improvement in its balance sheet.

Operational Update


STEP’s Canadian operations had a robust first quarter 2023 in both fracturing and coiled tubing, leading to its best quarterly revenue performance. Favourable weather conditions and client alignment resulted in solid utilization in both service lines. STEP’s four large fracturing crews operated primarily in the gas and condensate rich areas of the Montney while its smaller low-pressure crew was active in the oil rich Cardium and Viking formations, driving record fracturing revenue for the quarter. The extended cold weather into late March provided a longer operating cycle for STEP’s nine coiled tubing units, with the service line recognizing its best top line performance since the third quarter of 2018. In line with the strong operating performance, Canada is expected to produce strong Adjusted EBITDA for the quarter.

Effective January 1, 2023, STEP started to record fracturing fluid ends as maintenance expense rather than sustaining capital. This change in accounting estimate was made after a detailed analysis of the useful life for these components. Canadian operations is expected to recognize between $2.5-3.0 million for fluid end expense in the first quarter, which includes an approximately $1.0 million expense to reflect the change in useful life.

United States

STEP’s U.S. operations saw mixed results in the first quarter. Coiled tubing continued its trend of sequential quarterly increases, leading to record top line performance, with strong demand from leading public E&Ps across all basins for STEP’s industry leading coiled tubing capabilities. As disclosed in STEP’s 2022 fourth quarter public release, STEP’s U.S. fracturing service line was negatively impacted by shifting client schedules related to drilling delays and commodity price pressures. With these changes coming at the start of the year, STEP was unable to secure sufficient spot work for the crews, resulting in lower revenues relative to the fourth quarter of 2022. Additional sustaining capital and maintenance expense was deployed to improve efficiencies and reliability of the equipment, but the fracturing service line downtime will negatively impact the U.S.’s Adjusted EBITDA margins.

Consolidated Results for the First Quarter

Aggregating the performance of STEP’s four service lines, first quarter 2023 revenue is expected to range between $260 million and $265 million and Adjusted EBITDA is expected to range between $43-$48 million, which includes an expense of approximately $2.5-$3.0 million for fluid end expenses. This compares to the approximately $37.0 million of Adjusted EBITDA reported in Q1 2022 and the $48.6 million in Q4 2022, neither of which recognized Canadian fluid ends in maintenance expense. Notwithstanding the sequential decline in Adjusted EBITDA, first quarter 2023 results are expected to rank as one of the Company’s strongest.



STEP has aligned itself with a Canadian client base that recognizes the advantages of operating in the second quarter and expects to see good utilization for its fracturing service line through much of the quarter, particularly for the larger crews. STEP’s smaller fracturing crew is more susceptible to road bans due to the typical spring break up conditions in the areas in which it operates, which may limit activity for this crew in the second quarter of 2023. Coiled tubing is also more likely to be impacted by spring break up conditions, which could result in a moderating of utilization in that service line in the second quarter of 2023.

Visibility into the second half of the year is solid, with steady utilization anticipated across the Company’s core client group in both service lines.

United States

The U.S. is expected to see higher utilization for the fracturing service line in the second quarter. The recent strengthening of WTI oil prices above $80 will likely provide support to activity but the ongoing weakness in the natural gas price will remain a limiting factor in the U.S. and as a result STEP has deferred its plan to expand to four fracturing crews until market conditions can support additional capacity. Coiled tubing is expected to remain steady, with some impact from spring break up conditions expected in the northern districts.

Utilization on STEP’s fracturing and coiled tubing fleets is expected to remain steady into the second half of the year.

Balance Sheet and Capital Budget Update

Net debt1 at the close of Q1 2023 is expected to be between $130 and $135 million, continuing the deleveraging trend that has seen debt come down from $310 million in 2018. Debt reduction has been an important priority for the Company and a means to return value to shareholders.

STEP will continue to monitor the allocation of free cash flow to capital, ensuring that the spend is in line with expectations for 2023. The priority will be on continuing the Company’s Tier 4 dual fuel upgrade program, with completion of the first fleet expected before the end of the second quarter 2023. Eight of the sixteen pumps are already in the field, consistently providing diesel substitution rates of up to 85% for our client.

The change in accounting for fluid ends will remove approximately $4.2 million from the 2023 sustaining capital budget. These expenditures will now be accounted for in maintenance expense, so STEP expects no change to its free cash flow as a result of this change in accounting treatment.

1 Net debt is a non-IFRS financial measure that is not defined and has not standardized meaning under IFRS. See Non-IFRS Measures. Estimated March 31, 2023 results are preliminary and have not been audited or reviewed by the Company’s auditors. See Forward-Looking Information & Statements, Future Oriented Financial Information and Financial Outlooks.

CEO’s Comments

STEP’s President and CEO, Steve Glanville, commented “The first quarter of 2023 continued to show the strength of our story. We’ve had disciplined growth through M&A; sustained investment in our people and equipment; and strategic geographic diversification in the busiest North American operating areas, all of which produced among the best return on equity in our peer group in 2022.”

"Pressure pumping is a project-based business that is influenced by many different factors, which we saw in the U.S. in the first quarter. Client delays happen occasionally, but the market is typically dynamic enough that work can be backfilled. In this case, we saw a steep drop in frac activity in the Permian from January to February. This was seen in statistics from Rystad Energy, which showed a drop in fracturing jobs started between January to February of nearly 20%. Despite that, three of our four service lines had great results, which we’re very proud of. We’re seeing the U.S. market firm up and expect that our fracturing service line will contribute more meaningfully for the rest of the year.”


This press release includes terms and performance measures commonly used in the oilfield services industry that are not defined under IFRS. The terms presented are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS measures have no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The non-IFRS measure should be read in conjunction with the Company’s quarterly financial statements and annual financial statements and the accompanying notes thereto.

“Adjusted EBITDA” is a financial measure not presented in accordance with IFRS and is equal to net (loss) income before finance costs, depreciation and amortization, (gain) loss on disposal of property and equipment, current and deferred income tax provisions, and recoveries, equity and cash-settled share-based compensation, transaction costs, foreign exchange forward contract (gain) loss, foreign exchange (gain) loss, and impairment losses. Adjusted EBITDA is presented because it is widely used by the investment community as it provides an indication of the results generated by the Company’s normal course of business activities prior to considering how the activities are financed and the results are taxed. The Company uses Adjusted EBITDA internally to evaluate operating and segment performance because management believes it provides better comparability between periods.

Reconciliations of the non-IFRS financial measure of Adjusted EBITDA to the IFRS financial measure of net income (loss) can be found in STEP’s Management Discussion and Analysis for the fourth quarter of 2022 dated as of March 1, 2023 (under “Non-IFRS Measures and Ratios”) which is available on SEDAR (www.sedar.com) and incorporated herein by reference.

“Net debt” is equal to loans and borrowings before deferred financing charges less cash and cash equivalents and CCS derivatives. Net debt is presented to provide additional information about items on the statement of financial position. The Company’s Net debt for the first quarter of 2023 is forward-looking in nature. The following table presents the equivalent historical composition of the Company’s Net debt as at December 31, 2022, which composition is not anticipated to differ significantly from the composition of the Company’s Net debt as at March 31, 2023, other than a reduction in loans and borrowings:

As at December 31,        
($000s)     2022     2021     2020  
Loans and borrowings   $ 140,794   $ 189,957   $ 207,630  
Add back: Deferred financing costs   2,704     626     2,371  
Less: Cash and cash equivalents     (2,785 )   (3,698 )   (1,266 )
Less: CCS Derivatives Asset     1,511          
Net debt   $ 142,224   $ 186,885   $ 208,735  


Certain statements contained in this press release constitute “forward-looking statements” or “forward-looking information” within the meaning of applicable securities laws (collectively, “forward-looking statements”). These statements relate to the expectations of management about future events, results of operations and the Company’s future performance (both operational and financial) and business prospects. All statements other than statements of historical fact are forward-looking statements. The use of any of the words “expects”, “expected”, “guidance”, “opportunity”, “may”, “project”, “should”, and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. While STEP believes the expectations reflected in the forward-looking statements included in this press release are reasonable, such statements are not guarantees of future performance or outcomes and may prove to be incorrect and should not be unduly relied upon.

In particular, but without limitation, this press release contains forward-looking statements pertaining to: activity levels and utilization of the Company’s services, the effect of oil prices on utilization, first-quarter 2023 financial results including projected revenue and Adjusted EBITDA, activity levels in 2023, anticipated STEP fleet capacity, the effect of spring break up conditions on utilization and activity, expected timing of the Company’s Tier 4 dual fuel upgrade program, future debt levels, STEP’s ability to return value to shareholders through debt retirement, and expected improvements to balance sheet fundamentals.

The forward-looking information and statements contained in this press release reflect several material factors and expectations and assumptions of STEP including, without limitation: the general continuance of current or, where applicable, assumed industry conditions; client activity levels and spending; the effect of inflation on the cost of goods and equipment; pricing of STEP’s services; predictable effect of seasonal weather on STEP’s operations; expected Tier IV dual fuel substitution rates; STEP’s ability to market successfully to current and new clients; the effect of competition on STEP; STEP’s ability to utilize its equipment; STEP’s ability to collect on trade and other receivables; STEP’s ability to obtain and retain qualified staff and equipment in a timely and cost-effective manner; levels of deployable equipment in the marketplace; future capital expenditures to be made by STEP; future funding sources for STEP’s capital program; STEP’s future debt levels; the availability of unused credit capacity on STEP’s credit lines. STEP believes the material factors, expectations, and assumptions reflected in the forward-looking information and statements are reasonable, but no assurance can be given that these factors, expectations, and assumptions will prove correct.

This press release also contains future-oriented financial information and financial outlook information (collectively, "FOFI") about STEP’s expected first-quarter 2023 revenues and Adjusted EBITDA, leverage, and Net debt levels, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. In addition, the estimated Net debt at March 31, 2023 is based on the Company’s internally generated monthly financial statements for the month of March 2023 and the assumption that these internally generated monthly financial statements will not differ materially from the first quarter 2023 financial statements. The actual results of operations of STEP and the resulting financial results and Net debt will likely vary from the amounts set forth in this press release and such variation may be material. STEP and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management’s best estimates and judgments as of the date hereof; however, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily indicative of future results.

The forward-looking information and FOFI contained in this press release speak only as of the date of the document, and none of STEP or its subsidiaries assumes any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws. Actual results could also differ materially from those anticipated in these forward‐looking statements and FOFI due to the risk factors set forth under the heading “Risk Factors” in STEP’s Annual Information Form for the year ended December 31, 2022, dated March 1, 2023.


STEP is an energy services company that provides hydraulic fracturing, fluid and nitrogen pumping, and coiled tubing solutions. Our combination of modern equipment along with our commitment to safety and quality execution has differentiated STEP in plays where wells are deeper, have longer laterals, and higher pressures. STEP has a high-performance, safety-focused culture, and our experienced technical office and field professionals are committed to providing innovative, reliable, and cost-effective solutions to our clients.

Founded in 2011 as a specialized deep capacity coiled tubing company, STEP has grown into a North American service provider delivering completion and stimulation services to exploration and production companies in Canada and the U.S. Our Canadian services are focused in the Western Canadian Sedimentary Basin, while in the U.S., our fracturing and coiled tubing services are focused in the Permian and Eagle Ford basins in Texas, the Uinta-Piceance and Niobrara-DJ basins in Colorado and the Bakken basin in North Dakota.

Our four core values; Safety, Trust, Execution, and Possibilities inspire our team of professionals to provide differentiated levels of service, with a goal of flawless execution and an unwavering focus on safety.

For more information please contact:

Steve Glanville
President and Chief Executive Officer
  Klaas Deemter
Chief Financial Officer
Telephone: 403-457-1772

Web: www.stepenergyservices.com

  Telephone: 587-390-0761


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