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
Effective
STEP’s
Consolidated Results for the First Quarter
Aggregating the performance of STEP’s four service lines, first quarter 2023 revenue is expected to range between
Outlook
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.
The
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
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
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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
CEO’s Comments
STEP’s President and CEO,
"Pressure pumping is a project-based business that is influenced by many different factors, which we saw in the
NON-IFRS MEASURES
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
“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
As at | ||||||||||
($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 |
FORWARD-LOOKING INFORMATION & STATEMENTS AND FUTURE-ORIENTED FINANCIAL INFORMATION AND FINANCIAL OUTLOOKS
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
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
ABOUT STEP
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
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:
President and Chief Executive Officer | Chief Financial Officer | |
Telephone: 403-457-1772 Web: www.stepenergyservices.com | Telephone: 587-390-0761 |
Source:
2023 GlobeNewswire, Inc., source