Step Energy Services Ltd T.STEP

Alternate Symbol(s): SNVVF

Energy Oil & Gas Equipment & Services

STEP Energy Services Ltd. is a Canada-based energy services company. The Company is engaged in providing coiled tubing, fluid and nitrogen pumping and hydraulic fracturing solutions. The Company’s segments include Canadian Operations and the United States Operations segments. It delivers completion and stimulation services to exploration and production (E&P) companies in Canada and the United States. The Company’s Canadian services are focused on the Western Canadian Sedimentary Basin (WCSB), while in the United States, its fracturing services are focused on the Permian basin and its coiled tubing services are focused on the Permian and Eagle Ford in Texas, the Uinta-Piceance, and Niobrara-DJ basins in Colorado and the Bakken in North Dakota.

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Step Energy Services Ltd

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Post by retiredcfon May 11, 2023 10:08am

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Post# 35442938

RBC

May 10, 2023

STEP Energy Services Ltd. 1Q23 - In-line with pre-release

TSX: STEP | CAD 3.20 | Sector Perform | Price Target CAD 6.00

Sentiment: Neutral

Our view: We have a neutral first impression of STEP’s 1Q23 results as adj. EBITDA of $45MM was in-line with its April 10 pre- release. Key focus items for the conference call @ 11am ET on May 11 are: 1) Level and direction of US pressure pumping pricing, 2) Status of Tier IV Dual Fuel fleet upgrade and contract pricing, 3) Demand for natural gas fracturing work in Northeast BC and the rest of the WCSB.

• Adj. EBITDA pre-released. Revenue of $263MM and adj. EBITDA of $45MM both hit the mid-point of its pre-released range of $260-265MM and $43-48MM, respectively. Net debt of $133MM was also in-line with its $130-135MM (RBC $132.4MM) guidance. Adj. EPS of $0.26 was $0.03 above our estimate, largely on lower depreciation expense.

• Canada results were strong, while USA was impacted by client delays. Canada recorded adj. EBITDA of $45MM (RBC $38MM). Key variances were higher fracturing revenue per day and lower operating days which drove stronger margins. US recorded adj. EBITDA of $5MM (RBC $11MM). Revenue was in-line, though 5.4% EBITDA margins underperformed our 13% estimate on lower opex absorption and additional repair/maintenance activity.

• Expecting steady utilization in 2H23. In Canada, STEP expects equipment to remain highly utilized through 2H while pricing is expected to remain stable through the remainder of the year. In the US, pricing has recovered from 1Q23 levels and should be stable through 2H23. Utilization continues to improve for 2H23.