STEP Energy Services Ltd. Reports Second Quarter 2024 Results
CONSOLIDATED HIGHLIGHTS
FINANCIAL REVIEW
($000s except percentages and per share amounts) |
Three months ended |
Six months ended |
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|
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|
2024 |
|
2023 |
|
2024 |
|
2023 |
Consolidated revenue |
$ |
231,375 |
$ |
232,073 |
$ |
551,521 |
$ |
495,441 |
Net income |
$ |
10,469 |
$ |
15,273 |
$ |
51,826 |
$ |
34,929 |
Per share-basic |
$ |
0.15 |
$ |
0.21 |
$ |
0.72 |
$ |
0.49 |
Per share-diluted |
$ |
0.14 |
$ |
0.21 |
$ |
0.70 |
$ |
0.47 |
Adjusted EBITDA (1) |
$ |
41,665 |
$ |
47,404 |
$ |
121,198 |
$ |
92,756 |
Adjusted EBITDA % (1) |
|
18% |
|
20% |
|
22% |
|
19% |
Free Cash Flow (1) |
$ |
20,460 |
$ |
34,797 |
$ |
73,943 |
$ |
50,148 |
Per share-basic |
$ |
0.29 |
$ |
0.48 |
$ |
1.03 |
$ |
0.70 |
Per share-diluted |
$ |
0.28 |
$ |
0.47 |
$ |
1.00 |
$ |
0.68 |
(1) Adjusted EBITDA and Free Cash Flow are non-IFRS financial measures, Adjusted EBITDA % is a non-IFRS financial ratio. These metrics are not defined and have no standardized meaning under IFRS. See Non-IFRS Measures and Ratios. |
OPERATIONAL REVIEW
($000s except days, proppant, pumped, horsepower and units) |
Three months ended |
Six months ended |
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|
2024 |
|
2023 |
|
2024 |
|
2023 |
Fracturing services |
|
|
|
|
|
|
|
|
Fracturing operating days (2) |
|
377 |
|
394 |
|
944 |
|
866 |
Proppant pumped (tonnes) |
|
638,000 |
|
594,000 |
|
1,470,000 |
|
1,104,000 |
Fracturing crews |
|
8 |
|
8 |
|
8 |
|
8 |
Dual fuel horsepower (“HP”), ended |
|
349,800 |
|
212,500 |
|
349,800 |
|
212,500 |
Total HP, ended |
|
490,000 |
|
490,000 |
|
490,000 |
|
490,000 |
Coiled tubing services |
|
|
|
|
|
|
|
|
Coiled tubing operating days (2) |
|
1,368 |
|
1,139 |
|
2,720 |
|
2,402 |
Active coiled tubing units, ended |
|
23 |
|
21 |
|
23 |
|
21 |
Total coiled tubing units, ended |
|
35 |
|
35 |
|
35 |
|
35 |
(2) An operating day is defined as any coiled tubing or fracturing work that is performed in a 24-hour period, exclusive of support equipment. |
($000s except shares) |
|
|
|
|
|
|
2024 |
|
2023 |
Cash and cash equivalents |
$ |
2,955 |
$ |
1,785 |
Working Capital (including cash and cash equivalents) (1) |
$ |
64,584 |
$ |
42,104 |
Total assets |
$ |
673,650 |
$ |
606,519 |
Total long-term financial liabilities (1) |
$ |
106,417 |
$ |
118,970 |
Net Debt (1) |
$ |
75,812 |
$ |
87,844 |
Shares outstanding |
|
71,641,362 |
|
72,233,064 |
(1) Working Capital, Total long-term financial liabilities and Net Debt are non-IFRS financial measures. They are not defined and have no standardized meaning under IFRS. See Non-IFRS Measures and Ratios. |
SECOND QUARTER 2024 HIGHLIGHTS
-
Consolidated revenue for the three months ended
June 30, 2024 of$231.4 million , was effectively in line with revenue of$232.1 million for the three months endedJune 30, 2023 and decreased 28% from$320.1 million for the three months endedMarch 31, 2024 . -
Net income for the three months ended
June 30, 2024 of$10.5 million ($0.14 per diluted share) compared to$15.3 million ($0.21 per diluted share) in the same period of 2023 and$41.4 million ($0.55 per diluted share) for the three months endedMarch 31, 2024 . Included in net income for three months endedJune 30, 2024 was share based compensation expense of$2.1 million , compared to$1.4 million during the three months endedJune 30, 2023 . STEP has generated positive net income for nine of the last ten quarters. -
For the three months ended
June 30, 2024 , Adjusted EBITDA was$41.7 million (18% of revenue) compared to$47.4 million (20% of revenue) in Q2 2023 and$79.5 million (25% of revenue) in Q1 2024. -
Free Cash Flow for the three months ended
June 30, 2024 was$20.5 million compared to$34.8 million in Q2 2023 and$53.5 million in Q1 2024. -
STEP continued to advance its shareholder return strategy in 2024:
-
During the second quarter of 2024, the Company repurchased and cancelled 882,008 shares at an average price of
$4.08 per share under its Normal Course Issuer Bid (“NCIB”). Under the NCIB, the Company can repurchase and cancel 3.6 million shares, representing 5% of Company’s issued and outstanding shares.
-
During the second quarter of 2024, the Company repurchased and cancelled 882,008 shares at an average price of
-
STEP also made significant progress on debt reduction during the quarter while continuing to invest into the long-term sustainability of the business:
-
The Company had Net Debt of
$75.8 million atJune 30, 2024 , compared to$87.8 million atDecember 31, 2023 and$107.9 million atMarch 31, 2024 . STEP has reduced Net Debt by$235 million from peak levels in 2018. -
The Company invested
$26.4 million into sustaining and optimization capital budget expenditures. Optimization capital continues to be focused on the upgrade of fracturing fleets with the latest Tier 4 dual fuel engine technology, which displaces up to 85% of diesel with natural gas. AtJune 30, 2024 , 74% of the Tier 2 and Tier 4 engines in STEP’s fracturing fleet have been transitioned to dual fuel technology.
-
The Company had Net Debt of
-
Working Capital as at
June 30, 2024 of$64.6 million was$22.5 million higher than the$42.1 million atDecember 31, 2023 and lower by$26.3 million compared to the$90.9 million as atMarch 31, 2024 . Working capital fluctuations are typical and are influenced by activity levels and timing of client receipts.
SECOND QUARTER 2024 OVERVIEW
The second quarter of 2024 saw continued volatility in natural gas prices, although the benchmark
Oilfield service levels are primarily reflected in publicly reported drilling rig counts and estimates made by analysts on fracturing activities. Drilling rigs in the
Spring break up typically affects STEP’s northern
STEP’s Canadian geographic region generated quarterly revenue of
STEP’s
The Company generated consolidated Adjusted EBITDA of
Net income was
Free Cash Flow was
MARKET OUTLOOK
STEP anticipates that the commodity market will continue to experience some price volatility through the second half of the year, but sees a constructive backdrop forming for 2025.
The long-term outlook for oilfield services is very constructive. The structural under-investment in hydrocarbon production capacity through the last seven years has been exacerbated by geopolitical tensions, forcing governments and policy makers to confront the reality that oil and gas will be a key part of the energy mix for many years.
The third quarter is expected to deliver robust activity levels across STEP’s Canadian division. Above average precipitation levels through the second quarter have lessened concerns over drought, although there remain areas where water availability may be difficult and could slow operations. Hot and dry conditions at the start of the quarter have also raised the risk of wildfire disruptions.
Fracturing has a full schedule of work through the third quarter and early into the fourth quarter. Most of STEP’s work is focused on large multi-well pads that require significant amounts of proppant. STEP expects to exceed 2023’s total Canadian proppant volume of 1.1 million tonnes early in the third quarter, with total 2024 volumes expected to reach record levels. Pricing on proppant for these large volume programs is competitive, with per ton margins compressed relative to smaller programs.
STEP’s coiled tubing and ancillary services of fluid and nitrogen pumping are expected to continue seeing strong utilization levels throughout the third quarter and early into the fourth quarter. The Company is one of the leading service providers in the WCSB and STEP’s coiled tubing crews are valued for their technical expertise and experience in the most technically challenging wells.
The fourth quarter is increasingly being marked by a slowdown in activity as E&P companies remain disciplined in their capital spending, resulting in work programs that begin winding down mid quarter. Pressure on natural gas prices has led some E&P companies to reduce their 2024 work programs, with a more pronounced slowdown expected in Q4 as a result. STEP will use the downtime in the fourth quarter to prepare for first quarter in 2025 that is expected to be highly utilized.
STEP’s coiled tubing is expected to see steady utilization throughout the third quarter, with the northern regions continuing to run ahead of the southern regions. The growing trend towards three-mile laterals, and in some cases beyond, are constructive for STEP’s extended reach equipment and engineering expertise. Activity is expected to slow through the fourth quarter as larger clients complete their programs and spot work decreases.
The
Consolidated
STEP’s focus for the balance of 2024 and into 2025 is on generation of Free Cash Flow while continuing to invest in upgrading the Company’s asset base. The Company remains committed to having 90% of its fracturing horsepower capable of operating on natural gas by the end of 2025, displacing diesel and the associated emissions. Further investments into the development of next generation coiled tubing technologies are also anticipated.
The strong results posted year to date support the Company’s goals to reduce its balance sheet leverage and allowed STEP to expand its shareholder return framework to include a NCIB. Management believes that the current share price does not reflect the value inherent in the Company and sees the NCIB as an effective means to provide value to shareholders.
CANADIAN FINANCIAL AND OPERATIONS REVIEW
STEP has a fleet of 16coiled tubing units in the WCSB, all of which are designed to service the deepest wells in the basin. STEP’s fracturing business primarily focuses on the deeper, more technically challenging plays in
($000’s except per day, days, units, proppant pumped and HP) |
Three months ended |
Six months ended |
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2024 |
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2023 |
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|
2024 |
|
|
2023 |
|
Revenue: |
|
|
|
|
|
|
|
|
||||
Fracturing |
$ |
124,874 |
|
$ |
111,793 |
|
$ |
323,245 |
|
$ |
251,369 |
|
Coiled tubing |
|
36,112 |
|
|
24,124 |
|
|
78,810 |
|
|
58,983 |
|
|
|
160,986 |
|
|
135,917 |
|
|
402,055 |
|
|
310,352 |
|
Expenses |
|
134,333 |
|
|
111,489 |
|
|
313,501 |
|
|
250,098 |
|
Results from operating activities |
$ |
26,653 |
|
$ |
24,428 |
|
$ |
88,554 |
|
$ |
60,254 |
|
Adjusted EBITDA (1) |
$ |
36,662 |
|
$ |
33,390 |
|
$ |
108,789 |
|
$ |
78,166 |
|
Adjusted EBITDA % (1) |
|
23 |
% |
|
25 |
% |
|
27 |
% |
|
25 |
% |
Sales mix (% of segment revenue) |
|
|
|
|
|
|
|
|
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Fracturing |
|
78 |
% |
|
82 |
% |
|
80 |
% |
|
81 |
% |
Coiled tubing |
|
22 |
% |
|
18 |
% |
|
20 |
% |
|
19 |
% |
Fracturing services |
|
|
|
|
|
|
|
|
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Number of fracturing operating days (2) |
|
305 |
|
|
209 |
|
|
755 |
|
|
521 |
|
Proppant pumped (tonnes) |
|
501,000 |
|
|
310,000 |
|
|
1,061,000 |
|
|
606,000 |
|
Fracturing crews |
|
6 |
|
|
5 |
|
|
6 |
|
|
5 |
|
Coiled tubing services |
|
|
|
|
|
|
|
|
||||
Number of coiled tubing operating days (2) |
|
527 |
|
|
348 |
|
|
1,142 |
|
|
920 |
|
Active coiled tubing units, end of period |
|
10 |
|
|
9 |
|
|
10 |
|
|
9 |
|
Total coiled tubing units, end of period |
|
16 |
|
|
16 |
|
|
16 |
|
|
16 |
|
(1) Adjusted EBITDA is a non-IFRS financial measure and Adjusted EBITDA % are non-IFRS financial ratios. They are not defined and have no standardized meaning under IFRS. See Non-IFRS Measures and Ratios. |
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(2) An operating day is defined as any coiled tubing or fracturing work that is performed in a 24-hour period, exclusive of support equipment. |
SECOND QUARTER 2024 COMPARED TO SECOND QUARTER 2023
Revenue for the three months ended
Adjusted EBITDA for the second quarter of 2024 was
SIX MONTHS ENDED
Revenue for the six months ended
The increased utilization across the entire Canadian operations has resulted in a significant boost to profitability of this segment. Canadian operations generated Adjusted EBITDA of
STEP has a fleet of 19 coiled tubing units in the Permian and
($000’s except per day, days, units, proppant pumped and HP) |
Three months ended |
Six months ended |
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2024 |
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|
2023 |
|
|
2024 |
|
|
2023 |
|
Revenue: |
|
|
|
|
|
|
|
|
||||
Fracturing |
$ |
22,868 |
|
$ |
48,648 |
|
$ |
60,839 |
|
$ |
97,965 |
|
Coiled tubing |
|
47,521 |
|
|
47,508 |
|
|
88,627 |
|
|
87,124 |
|
|
|
70,389 |
|
|
96,156 |
|
|
149,466 |
|
|
185,089 |
|
Expenses |
|
77,553 |
|
|
90,299 |
|
|
154,630 |
|
|
186,355 |
|
Results from operating activities |
$ |
(7,164 |
) |
$ |
5,857 |
|
$ |
(5,164 |
) |
$ |
(1,266 |
) |
Adjusted EBITDA (1) |
$ |
9,411 |
|
$ |
18,332 |
|
$ |
22,237 |
|
$ |
23,148 |
|
Adjusted EBITDA % (1) |
|
13 |
% |
|
19 |
% |
|
15 |
% |
|
13 |
% |
Sales mix (% of segment revenue) |
|
|
|
|
|
|
|
|
||||
Fracturing |
|
32 |
% |
|
51 |
% |
|
41 |
% |
|
53 |
% |
Coiled tubing |
|
68 |
% |
|
49 |
% |
|
59 |
% |
|
47 |
% |
Fracturing services |
|
|
|
|
|
|
|
|
||||
Number of fracturing operating days(2) |
|
72 |
|
|
185 |
|
|
189 |
|
|
345 |
|
Proppant pumped (tonnes) |
|
137,000 |
|
|
284,000 |
|
|
409,000 |
|
|
498,000 |
|
Fracturing crews |
|
2 |
|
|
3 |
|
|
2 |
|
|
3 |
|
Coiled tubing services |
|
|
|
|
|
|
|
|
||||
Number of coiled tubing operating days (2) |
|
841 |
|
|
791 |
|
|
1,578 |
|
|
1,482 |
|
Active coiled tubing units, end of period |
|
13 |
|
|
12 |
|
|
13 |
|
|
12 |
|
Total coiled tubing units, end of period |
|
19 |
|
|
19 |
|
|
19 |
|
|
19 |
|
(1) Adjusted EBITDA is a non-IFRS financial measure and Adjusted EBITDA % is non-IFRS financial ratios. They are not defined and have no standardized meaning under IFRS. See Non-IFRS Measures and Ratios. |
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(2) An operating day is defined as any coiled tubing or fracturing work that is performed in a 24-hour period, exclusive of support equipment. |
SECOND QUARTER 2024 COMPARED TO SECOND QUARTER 2023
Revenue for the three months ended
SIX MONTHS ENDED
Revenue for the six months ended
Despite the challenges STEP has faced in the fracturing market, Adjusted EBITDA of
CORPORATE FINANCIAL REVIEW
The Company’s corporate activities are separated from Canadian and
($000’s) |
Three months ended |
Six months ended |
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2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Expenses: |
|
|
|
|
|
|
|
|
||||
Operating expenses |
$ |
527 |
|
$ |
463 |
|
$ |
1,115 |
|
$ |
948 |
|
Selling, general and administrative |
|
5,633 |
|
|
4,863 |
|
|
10,911 |
|
|
3,397 |
|
Results from operating activities |
$ |
(6,160 |
) |
$ |
(5,326 |
) |
$ |
(12,026 |
) |
$ |
(4,345 |
) |
Add: |
|
|
|
|
|
|
|
|
||||
Depreciation |
|
117 |
|
|
194 |
|
|
235 |
|
|
415 |
|
Share-based compensation expense (recovery) |
|
1,635 |
|
|
814 |
|
|
1,963 |
|
|
(4,628 |
) |
Adjusted EBITDA (1) |
$ |
(4,408 |
) |
$ |
(4,318 |
) |
$ |
(9,828 |
) |
$ |
(8,558 |
) |
Adjusted EBITDA % (1) |
|
(2 |
%) |
|
(2 |
%) |
|
(2 |
%) |
|
(2 |
%) |
(1) Adjusted EBITDA is a non-IFRS financial measure and Adjusted EBITDA % is a non-IFRS financial ratio. They are not defined and have no standardized meaning under IFRS. See Non-IFRS Measures and Ratios. |
SECOND QUARTER 2024 COMPARED TO SECOND QUARTER 2023
For the three months ended
SIX MONTHS ENDED
For the six months ended
NON-IFRS MEASURES AND RATIOS
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 measures 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 a non-IFRS ratio and is calculated as Adjusted EBITDA divided by revenue. Adjusted EBITDA and Adjusted EBITDA % are presented because they are widely used by the investment community as they provide an indication of the results generated by the Company’s normal course business activities prior to considering how the activities are financed and the results are taxed. The Company uses Adjusted EBITDA and Adjusted EBITDA % internally to evaluate operating and segment performance, because management believes they provide better comparability between periods. The following table presents a reconciliation of the non-IFRS financial measure of Adjusted EBITDA to the IFRS financial measure of net income.
($000s except percentages) |
Three months ended |
Six months ended |
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|
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|
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|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Net income |
$ |
10,469 |
|
$ |
15,273 |
|
$ |
51,826 |
|
$ |
34,929 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
26,289 |
|
|
21,097 |
|
|
46,957 |
|
|
41,871 |
|
Gain on disposal of equipment |
|
(2,806 |
) |
|
(374 |
) |
|
(3,164 |
) |
|
(647 |
) |
Finance costs |
|
2,771 |
|
|
2,807 |
|
|
5,680 |
|
|
5,707 |
|
Income tax expense |
|
3,869 |
|
|
5,213 |
|
|
17,652 |
|
|
11,382 |
|
Share-based compensation – Cash settled |
|
1,164 |
|
|
(4 |
) |
|
869 |
|
|
(6,422 |
) |
Share-based compensation – Equity settled |
|
893 |
|
|
1,362 |
|
|
2,028 |
|
|
2,684 |
|
Foreign exchange (gain) loss |
|
(300 |
) |
|
588 |
|
|
2,017 |
|
|
758 |
|
Unrealized loss on derivatives |
|
(684 |
) |
|
1,442 |
|
|
(2,667 |
) |
|
2,494 |
|
Adjusted EBITDA |
$ |
41,665 |
|
$ |
47,404 |
|
$ |
121,198 |
|
$ |
92,756 |
|
Adjusted EBITDA % |
|
18 |
% |
|
20 |
% |
|
22 |
% |
|
19 |
% |
“Free Cash Flow” is a financial measure not presented in accordance with IFRS and is equal to net cash provided by operating activities adjusted for changes in non-cash Working Capital from operating activities, sustaining capital expenditures, term loan principal repayments and lease payments (net of sublease receipts). The Company may deduct or include additional items in its calculation of Free Cash Flow that are unusual, non-recurring or non-operating in nature. Free Cash Flow is presented as this measure is widely used in the investment community as an indication of the level of cash flow generated by ongoing operations. Management uses Free Cash Flow to evaluate the adequacy of internally generated cash flows to manage debt levels, invest in the growth of the business or return capital to shareholders. The following table presents a reconciliation of the non-IFRS financial measure of Free Cash Flow to the IFRS financial measure of net cash provided by operating activities.
($000s) |
Three months ended |
Six months ended |
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|
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|
|
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|
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|
||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
Net cash provided by (used in) operating activities |
$ |
68,263 |
|
$ |
35,304 |
|
$ |
78,505 |
|
$ |
81,140 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
||||
Changes in non-cash working capital from operating activities |
|
(35,262 |
) |
|
8,210 |
|
|
21,474 |
|
|
(5,712 |
) |
Sustaining capital |
|
(9,590 |
) |
|
(6,919 |
) |
|
(20,711 |
) |
|
(21,621 |
) |
Lease payments (net of sublease receipts) |
|
(2,951 |
) |
|
(1,798 |
) |
|
(5,325 |
) |
|
(3,659 |
) |
Free Cash Flow |
$ |
20,460 |
|
$ |
34,797 |
|
$ |
73,943 |
|
$ |
50,148 |
|
“Working Capital”, “Total long-term financial liabilities” and “Net Debt” are financial measures not presented in accordance with IFRS. “Working Capital” is equal to total current assets less total current liabilities. “Total long-term financial liabilities” is comprised of loans and borrowings, long-term lease obligations and other liabilities. “Net Debt” is equal to loans and borrowings before deferred financing charges less cash and cash equivalents and CCS derivatives. The data presented is intended to provide additional information about items on the statement of financial position and should not be considered in isolation or as a substitute for measures prepared in accordance with IFRS.
The following table represents the composition of the non-IFRS financial measure of Working Capital (including cash and cash equivalents).
($000s) |
|
|
|
|
|
||
|
|
|
2024 |
|
|
2023 |
|
Current assets |
|
$ |
203,207 |
|
$ |
154,715 |
|
Current liabilities |
|
|
(138,623 |
) |
|
(112,611 |
) |
Working Capital (including cash and cash equivalents) |
|
$ |
64,584 |
|
$ |
42,104 |
|
The following table presents the composition of the non-IFRS financial measure of Total long-term financial liabilities.
($000s) |
|
|
|
||
|
|
|
2024 |
|
2023 |
Long-term loans |
|
$ |
77,292 |
$ |
86,149 |
Long-term leases |
|
|
17,821 |
|
18,731 |
Other long-term liabilities |
|
|
11,304 |
|
14,090 |
Total long-term financial liabilities |
|
$ |
106,417 |
$ |
118,970 |
The following table presents the composition of the non-IFRS financial measure of Net Debt.
($000s) |
|
|
|
|
|
||
|
|
|
2024 |
|
|
2023 |
|
Loans and borrowings |
|
$ |
77,292 |
|
$ |
86,149 |
|
Add back: Deferred financing costs |
|
|
1,099 |
|
|
1,637 |
|
Less: Cash and cash equivalents |
|
|
(2,955 |
) |
|
(1,785 |
) |
Less: CCS Derivatives liability |
|
|
376 |
|
|
1,843 |
|
Net Debt |
|
$ |
75,812 |
|
$ |
87,844 |
|
RISK FACTORS AND RISK MANAGEMENT
The oilfield services industry involves many risks, which may influence the ultimate success of the Company. The risks and uncertainties set out in the AIF and Annual MD&A are not the only ones the Company is facing. There are additional risks and uncertainties that the Company does not currently know about or that the Company currently considers immaterial which may also impair the Company’s business operations and can cause the price of the Common Shares to decline. Readers should review and carefully consider the disclosure provided under the heading “Risk Factors” in the AIF and “Risk Factors and Risk Management” in the Annual MD&A, both of which are available on www.sedarplus.ca, and the disclosure provided in this Press Release under the headings “Market Outlook”. In addition, global and national risks associated with inflation or economic contraction may adversely affect the Company by, among other things, reducing economic activity resulting in lower demand, and pricing, for crude oil and natural gas products, and thereby the demand and pricing for the Company’s services. Other than as supplemented in this Press Release, the Company’s risk factors, and management thereof has not changed substantially from those disclosed in the AIF and Annual MD&A.
FORWARD-LOOKING INFORMATION & STATEMENTS
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 “anticipate”, “plan”, “contemplate”, “continue”, “estimate”, “expect”, “intend”, “propose”, “might”, “may”, “will”, “shall”, “project”, “should”, “could”, “would”, “believe”, “predict”, “forecast”, “pursue”, “potential”, “objective” and “capable” 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 the Company 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: 2024 and 2025 industry conditions and outlook, including commodity pricing and demand for oil and gas; the effect of completion of the TMX project and new LNG facilities on industry activity levels and the resulting feed stock requirements; OPEC’s goal of price stability; a constructive long-term outlook for oilfield services; anticipated 2024 and 2025 utilization and activity levels and pricing for the Company’s services; the potential for drought to affect activity levels; anticipated 2024 proppant pumping volumes; the timing of completion of the Company’s tier 4 dual fuel conversions and anticipated substitution rates in the Company’s dual fuel fleets; the Company’s expectation that its
The forward-looking information and statements contained in this Press Release reflect several material factors and expectations and assumptions of the Company including, without limitation: the effect of macroeconomic factors, including global energy security concerns and levels of oil and gas inventories; market concerns regarding economic recession; levels of oil and gas production, LNG export capacity, and the effect of OPEC+ related capacity and related uncertainty on the market for the Company’s services; that the Company will continue to conduct its operations in a manner consistent with past operations; the Company will continue as a going concern; the general continuance of current or, where applicable, assumed industry conditions; pricing of the Company’s services; the Company’s ability to market successfully to current and new clients; predictability of 2024 activity levels; predictable effect of seasonal weather and break up on the Company’s operations; the Company’s ability to utilize its equipment; the Company’s ability to collect on trade and other receivables; Client demand for dual fuel fleets and emissions reduction technologies; the Company’s ability to obtain and retain qualified staff and equipment in a timely and cost effective manner; levels of deployable equipment; future capital expenditures to be made by the Company; future funding sources for the Company’s capital program; the Company’s future debt levels; the availability of unused credit capacity on the Company’s credit lines; the impact of competition on the Company; the Company’s ability to obtain financing on acceptable terms; the Company’s continued compliance with financial covenants; the amount of available equipment in the marketplace; and client activity levels and spending. The Company 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.
Actual results could differ materially from those anticipated in these forward‐looking statements due to the risk factors set forth under the heading “Risk Factors” in the AIF and under the heading Risk Factors and Risk Management in this Press Release.
Any financial outlook or future orientated financial information contained in this Press Release regarding prospective financial performance, financial position or cash flows is based on the 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, including the Company’s capital program, 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 the Company’s operations will likely vary from the amounts set forth in these projections and such variations may be material. Readers are cautioned that any such financial outlook and future oriented financial information contains 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 Press Release speak only as of the date of the document, and none of the Company 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. The reader is cautioned not to place undue reliance on forward-looking information.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF FINANCIAL POSITION
As at |
|
|
|
|
|
||
Unaudited (in thousands of Canadian dollars) |
|
|
2024 |
|
|
2023 |
|
ASSETS |
|
|
|
||||
Current Assets |
|
|
|
|
|||
Cash and cash equivalents |
|
$ |
2,955 |
|
$ |
1,785 |
|
Trade and other receivables |
|
|
145,926 |
|
|
96,156 |
|
Inventory |
|
|
50,964 |
|
|
47,523 |
|
Prepaid expenses and deposits |
|
|
3,362 |
|
|
9,251 |
|
|
|
|
203,207 |
|
|
154,715 |
|
Property and equipment |
|
|
439,026 |
|
|
419,751 |
|
Right-of-use assets |
|
|
26,981 |
|
|
27,857 |
|
Intangible assets |
|
|
102 |
|
|
122 |
|
Other assets |
|
|
4,334 |
|
|
4,074 |
|
|
|
$ |
673,650 |
|
$ |
606,519 |
|
|
|
|
|
|
|||
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
||
Current Liabilities |
|
|
|
|
|
||
Trade and other payables |
|
$ |
116,675 |
|
$ |
91,785 |
|
Current portion of lease obligations |
|
|
8,920 |
|
|
8,753 |
|
Current portion of other liabilities |
|
|
3,422 |
|
|
4,536 |
|
Income tax payable |
|
|
9,606 |
|
|
7,537 |
|
|
|
|
138,623 |
|
|
112,611 |
|
Deferred tax liabilities |
|
|
19,773 |
|
|
19,390 |
|
Lease obligations |
|
|
17,821 |
|
|
18,731 |
|
Other liabilities |
|
|
11,304 |
|
|
14,090 |
|
Loans and borrowings |
|
|
77,292 |
|
|
86,149 |
|
|
|
|
264,813 |
|
|
250,971 |
|
Shareholders' equity |
|
|
|
|
|
||
Share capital |
|
|
447,864 |
|
|
455,679 |
|
Contributed surplus |
|
|
37,952 |
|
|
36,060 |
|
Accumulated other comprehensive income |
|
|
17,524 |
|
|
10,138 |
|
Deficit |
|
|
(94,503 |
) |
|
(146,329 |
) |
|
|
|
408,837 |
|
|
355,548 |
|
|
$ |
673,650 |
$ |
606,519 |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF NET INCOME AND OTHER COMPREHENSIVE INCOME
|
|
For the three months ended
|
|
|
For the six months ended
|
|
|||||||
Unaudited
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|||||
Revenue |
|
$ |
231,375 |
|
$ |
232,073 |
|
$ |
551,521 |
|
$ |
495,441 |
|
Operating expenses |
|
|
207,061 |
|
|
196,120 |
|
|
457,668 |
|
|
425,075 |
|
Gross profit |
|
|
24,314 |
|
|
35,953 |
|
|
93,853 |
|
|
70,366 |
|
|
|
|
|
|
|
|
|
|
|||||
Selling, general and administrative expenses |
|
|
10,985 |
|
|
10,994 |
|
|
22,489 |
|
|
15,723 |
|
Results from operating activities |
|
|
13,329 |
|
|
24,959 |
|
|
71,364 |
|
|
54,643 |
|
|
|
|
|
|
|
|
|
|
|
||||
Finance costs |
|
|
2,771 |
|
|
2,807 |
|
|
5,680 |
|
|
5,707 |
|
Foreign exchange (gain) loss |
|
|
(300 |
) |
|
588 |
|
|
2,017 |
|
|
758 |
|
Unrealized (gain) loss on derivatives |
|
|
(684 |
) |
|
1,442 |
|
|
(2,667 |
) |
|
2,494 |
|
Gain on disposal of property and equipment |
|
|
(2,806 |
) |
|
(374 |
) |
|
(3,164 |
) |
|
(647 |
) |
Amortization of intangible assets |
|
|
10 |
|
|
10 |
|
|
20 |
|
|
20 |
|
Income before income tax |
|
|
14,338 |
|
|
20,486 |
|
|
69,478 |
|
|
46,311 |
|
|
|
|
|
|
|
|
|
|
|||||
Income tax expense (recovery) |
|
|
|
|
|
|
|
|
|
||||
Current |
|
|
4,438 |
|
|
4,718 |
|
|
17,328 |
|
|
13,070 |
|
Deferred |
|
|
(569 |
) |
|
495 |
|
|
324 |
|
|
(1,688 |
) |
Total income tax expense |
|
|
3,869 |
|
|
5,213 |
|
|
17,652 |
|
|
11,382 |
|
Net income |
|
|
10,469 |
|
|
15,273 |
|
|
51,826 |
|
|
34,929 |
|
|
|
|
|
|
|
|
|
|
|||||
Other comprehensive income |
|
|
|
|
|
|
|
|
|
||||
Foreign currency translation gain (loss) |
|
|
2,366 |
|
|
(4,742 |
) |
|
7,386 |
|
|
(5,982 |
) |
Total comprehensive income |
|
$ |
12,835 |
|
$ |
10,531 |
|
$ |
59,212 |
|
$ |
28,947 |
|
Net income per share: |
|
|
|
|
|
|
|
|
|
||||
Basic |
|
$ |
0.15 |
|
$ |
0.21 |
|
$ |
0.72 |
|
$ |
0.49 |
|
Diluted |
|
$ |
0.14 |
|
$ |
0.21 |
|
$ |
0.70 |
|
$ |
0.47 |
|
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
|
|
For the three months ended
|
|
For the six months ended
|
|
||||||||
Unaudited
|
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
|
|
|
|
|
|
|
|
|
|||||
Operating activities: |
|
|
|
|
|
|
|
|
|
||||
Net income |
|
$ |
10,469 |
|
$ |
15,273 |
|
$ |
51,826 |
|
$ |
34,929 |
|
Adjusted for the following: |
|
|
|
|
|
|
|
|
|
||||
Depreciation and amortization |
|
|
26,289 |
|
|
21,097 |
|
|
46,957 |
|
|
41,871 |
|
Share-based compensation expense (recovery) |
|
|
2,058 |
|
|
1,358 |
|
|
2,898 |
|
|
(3,738 |
) |
Unrealized foreign exchange (gain) loss |
|
|
(731 |
) |
|
2,258 |
|
|
1,474 |
|
|
2,372 |
|
Unrealized (gain) loss on derivatives |
|
|
(684 |
) |
|
1,442 |
|
|
(2,667 |
) |
|
2,494 |
|
Gain on disposal of property and equipment |
|
|
(2,806 |
) |
|
(374 |
) |
|
(3,164 |
) |
|
(647 |
) |
Finance costs |
|
|
2,771 |
|
|
2,807 |
|
|
5,680 |
|
|
5,707 |
|
Income tax expense |
|
|
3,869 |
|
|
5,213 |
|
|
17,652 |
|
|
11,382 |
|
Income taxes paid |
|
|
(5,844 |
) |
|
(3,020 |
) |
|
(15,261 |
) |
|
(12,870 |
) |
Cash finance costs paid |
|
|
(2,390 |
) |
|
(2,540 |
) |
|
(5,416 |
) |
|
(6,072 |
) |
Funds flow from operations |
|
|
33,001 |
|
|
43,514 |
|
|
99,979 |
|
|
75,428 |
|
Changes in non-cash working capital from operating activities |
|
|
35,262 |
|
|
(8,210 |
) |
|
(21,474 |
) |
|
5,712 |
|
Net cash provided by operating activities |
|
|
68,263 |
|
|
35,304 |
|
|
78,505 |
|
|
81,140 |
|
|
|
|
|
|
|
|
|
|
|||||
Investing activities: |
|
|
|
|
|
|
|
|
|
||||
Purchase of property and equipment |
|
|
(26,434 |
) |
|
(14,382 |
) |
|
(56,969 |
) |
|
(40,374 |
) |
Proceeds from disposal of equipment and vehicles |
|
|
4,420 |
|
|
1,622 |
|
|
4,432 |
|
|
1,948 |
|
Changes in non-cash working capital from investing activities |
|
|
(7,471 |
) |
|
(3,295 |
) |
|
(704 |
) |
|
(12,599 |
) |
Net cash used in investing activities |
|
|
(29,485 |
) |
|
(16,055 |
) |
|
(53,241 |
) |
|
(51,025 |
) |
|
|
|
|
|
|
|
|
|
|||||
Financing activities: |
|
|
|
|
|
|
|
|
|
||||
Repayment of loans and borrowings |
|
|
(36,547 |
) |
|
(12,540 |
) |
|
(10,777 |
) |
|
(23,066 |
) |
Repayment of obligations under finance lease |
|
|
(2,963 |
) |
|
(2,205 |
) |
|
(5,345 |
) |
|
(4,204 |
) |
Common shares repurchased |
|
|
(3,669 |
) |
|
- |
|
|
(7,951 |
) |
|
- |
|
Net cash used in financing activities |
|
|
(43,179 |
) |
|
(14,745 |
) |
|
(24,073 |
) |
|
(27,270 |
) |
|
|
|
|
|
|
|
|
|
|||||
Impact of exchange rate changes on cash and cash equivalents |
|
|
(71 |
) |
|
(33 |
) |
|
(21 |
) |
|
78 |
|
|
|
|
|
|
|
|
|
|
|||||
Increase (decrease) in cash and cash equivalents |
|
|
(4,472 |
) |
|
4,471 |
|
|
1,170 |
|
|
2,923 |
|
Cash and cash equivalents, beginning of the period |
|
|
7,427 |
|
|
1,237 |
|
|
1,785 |
|
|
2,785 |
|
Cash and cash equivalents, end of the period |
$ |
2,955 |
|
$ |
5,708 |
|
$ |
2,955 |
|
$ |
5,708 |
|
ABOUT STEP
STEP is an energy services company that provides coiled tubing, fluid and nitrogen pumping and hydraulic fracturing 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 its experienced technical office and field professionals are committed to providing innovative, reliable and cost-effective solutions to its 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 (“E&P”) companies in
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.
STEP will host a conference call on
To listen to the webcast of the conference call, please click on the following: https://onlinexperiences.com/scripts/Server.nxp?LASCmd=AI:4;F:QS!10100&ShowUUID=85503E2A-B26D-4E41-A3AA-CEBADD132530&LangLocaleID=1033
You can also visit the Investors section of our website at www.stepenergyservices.com and click on “Reports, Presentations & Key Dates”.
To participate in the Q&A session, please call the conference call operator at: 1-800-717-1738 (toll free) 15 minutes prior to the call’s start time and ask for “STEP Energy Services Second Quarter Earnings Results Conference Call”.
The conference call will be archived on STEP’s website at www.stepenergyservices.com/investors
View source version on businesswire.com: https://www.businesswire.com/news/home/20240806275960/en/
For more information please contact:
President and Chief Executive Officer
Telephone: 403-457-1772
Chief Financial Officer
Telephone: 403-457-1772
Email: investor_relations@step-es.com
Web: www.stepenergyservices.com
Source: