STEP Energy Services Announces Full 2024 Capital Budget and Provides Fourth Quarter Operational Update and First Quarter Outlook

CALGARY, Alberta, Dec. 13, 2023 (GLOBE NEWSWIRE) -- STEP Energy Services Ltd. (TSX:STEP) (STEP) is reporting continued improvement in its balance sheet, an update on its 2024 capital budget, and is providing an operational update.

Balance Sheet and 2024 Capital Budget

We are pleased to announce that Net debt¹ at the close of Q4 2023 is expected to meet STEP’s year-end corporate target of less than $100 million, continuing the deleveraging trend that has seen debt come down from $310 million in 2018. Deleveraging has been a strategic priority for STEP and a means to return value to shareholders – the first phase of STEP’s shareholder return strategy. STEP intends to continue to reduce leverage into 2024.

STEP is also announcing its full-year 2024 capital budget of $119.8 million, an increase from the preliminary capital budget of $60 million announced on November 1, 2023. The full-year budget includes $69.8 million of optimization capital and $50 million of sustaining capital. The $59.8 million of additional optimization capital will facilitate a number of growth initiatives for STEP including expansion of its Tier 4 dual fuel strategy that will add a second fleet in Canada and the first fleet in U.S. by the second quarter of 2024, investing in additional Canadian sand and logistics infrastructure and providing capital to reactivate additional deep coiled tubing units in Canada and the U.S. to meet expected 2024 demand.

Operational Update and Outlook

Fracturing activity across major North American oil and gas regions slowed in Q4 2023 as operators prioritize capital discipline over adding capital to their 2023 budgets.

STEP’s Canadian fracturing operations experienced lower utilization in Q4 relative to Q3 as clients across the basin exhausted their 2023 budgets and did not bring capital forward from 2024. STEP’s Q4 U.S. fracturing results will be negatively affected by the cancellation of remaining work scope for one fracturing crew following the acquisition of STEP’s long-time client as well as the deferral of work from December into the first quarter for another crew. Coiled tubing activity in both Canada and the U.S. will also experience lower utilization in the fourth quarter relative to the third quarter due to seasonal slowdown.

STEP will use the down time in the fourth quarter to prepare for a highly utilized first quarter in Canada and the U.S. Fracturing and coiled tubing crews are expected to begin mobilizing in late December in anticipation of operations beginning in the early days of January.

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 STEP’s quarterly financial statements and annual financial statements and the accompanying notes thereto.

“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.

A table representing the composition of the non-IFRS financial measure of Net debt can be found in STEP’s Management Discussion and Analysis for the third quarter of 2023 dated as of September 30, 2023 (under “Non-IFRS Measures and Ratios”) which is available on SEDAR+ () and incorporated herein by reference.

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 STEP’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”, “intends”, “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: anticipated Net debt levels, STEP’s intent to continue to reduce leverage, anticipated spending, expected Q4 2024 fracturing results, expected coiled tubing activity, and expected mobilization dates.

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; 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 2023 and 2024 revenues 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 expected Net debt at end of Q4 2023 is based on STEP’s internally generated monthly financial statements for the month of November 2023 and the assumption that these internally generated monthly financial statements will not differ materially from the third 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.

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 Canada and the U.S. Our Canadian services are focused in the Western Canadian Sedimentary Basin (“WCSB”), while in the U.S., our fracturing and coiled tubing services are focused in the Permian and Eagle Ford in Texas, the Uinta-Piceance and Niobrara-DJ basins in Colorado and the Bakken 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.

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¹ Net debt is a non-IFRS financial measure, which is not defined and does not have a standardized meaning under IFRS. See “Non-IFRS Measures” below.