Step Energy Services Ltd T.STEP

RBC

[retiredcf]

September 1, 2022

STEP Energy Services Ltd.
Acquires US based coiled tubing units; CEO retiring

TSX: STEP | CAD 6.45 | Outperform | Speculative Risk | Price Target CAD 11.00

Sentiment: Neutral

Our view: STEP Energy Services announced its US division acquired four high-spec ultra-deep coiled tubing units, ancillary equipment and personnel from ProPetro Holding Corp. for C$17.2MM. STEP also announced that current CEO, Regan Davis will be retiring, effective September 30, 2022.

STEP expects cash flow generated from units to pay back initial investment in 18-24 months. The coiled tubing units are among the deepest capacity in service in the US today and are relatively new. Three units are currently active and crewed in the Permian, with the fourth requiring minor upgrades prior to expected deployment in 2023. The acquisition also includes support equipment: frac pumps, twin fluid pumps, cranes, tractors and other miscellaneous equipment and inventory. The deal is funded by US$2.7MM cash, and issuance of 2.62MM shares at $5.204 (price based on 30-day VWAP ending August 31, 2022).

Regan Davis retiring, Steve Glanville assuming President & CEO role. Mr. Davis will be retiring effective September 30, 2022. He was a founding member and served as CEO since inception in 2011. Steve Glanville, current President & COO will replace Mr. Davis as President & CEO and serve as executive director on STEP's board. Rory Thompson, current President of Canadian Ops will assume the role of COO. Mr. Davis will remain in advisory capacity until year-end to assist with the transition.