CALGARY, Alberta--(BUSINESS WIRE)--STEP Energy Services Ltd. (the "Company" or "STEP") (TSX: STEP) is pleased to announce its financial and operating results for the three and nine months ended September 30, 2024. The following press release should be read in conjunction with the management's discussion and analysis ("MD&A") and the unaudited condensed consolidated financial interim statements and notes thereto as at September 30, 2024 (the "Financial Statements"). Readers should also refer to the "Forward-looking information & statements" legal advisory and the section regarding "Non-IFRS Measures and Ratios" at the end of this press release. All financial amounts and measures are expressed in Canadian dollars unless otherwise indicated. Additional information about STEP is available on the SEDAR+ website at www.sedarplus.ca, including the Company's Annual Information Form for the year ended December 31, 2023 dated March 11, 2024 (the "AIF").
CONSOLIDATED HIGHLIGHTS
FINANCIAL REVIEW
($000s except percentages and per share amounts) | Three months ended | Nine months ended | ||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
Consolidated revenue | $ | 255,991 | $ | 255,235 | $ | 807,512 | $ | 750,676 | ||||
Net income (loss) | $ | (5,460 | ) | $ | 20,734 | $ | 46,366 | $ | 55,663 | |||
Per share-basic | $ | (0.08 | ) | $ | 0.29 | $ | 0.65 | $ | 0.77 | |||
Per share-diluted | $ | (0.08 | ) | $ | 0.28 | $ | 0.62 | $ | 0.74 | |||
Adjusted EBITDA (1) | $ | 43,800 | $ | 52,286 | $ | 164,999 | $ | 145,142 | ||||
Adjusted EBITDA % (1) | 17% | 21% | 20% | 19% | ||||||||
Free Cash Flow (1) | $ | 28,404 | $ | 37,121 | $ | 102,347 | $ | 87,269 | ||||
Per share-basic | $ | 0.40 | $ | 0.51 | $ | 1.43 | $ | 1.21 | ||||
Per share-diluted | $ | 0.40 | $ | 0.49 | $ | 1.38 | $ | 1.17 | ||||
(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, crews, horsepower and units) | Three months ended | Nine months ended | ||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
Fracturing services | ||||||||||||
Fracturing operating days (2) | 360 | 407 | 1,304 | 1,273 | ||||||||
Proppant pumped (tonnes) | 594,000 | 589,000 | 2,064,000 | 1,693,000 | ||||||||
Fracturing crews | 7 | 8 | 7 | 8 | ||||||||
Dual fuel horsepower ("HP"), ended | 367,050 | 205,250 | 367,050 | 205,250 | ||||||||
Total HP, ended | 490,000 | 478,750 | 490,000 | 478,750 | ||||||||
Coiled tubing services | ||||||||||||
Coiled tubing operating days (2) | 1,340 | 1,311 | 4,060 | 3,713 | ||||||||
Active coiled tubing units, ended | 22 | 21 | 22 | 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) | September 30, | December 31, | ||||
2024 | 2023 | |||||
Cash and cash equivalents | $ | 1,482 | $ | 1,785 | ||
Working Capital (including cash and cash equivalents) (1) | $ | 60,643 | $ | 42,104 | ||
Total assets | $ | 665,361 | $ | 606,519 | ||
Total long-term financial liabilities (1) | $ | 89,536 | $ | 118,970 | ||
Net Debt (1) | $ | 60,725 | $ | 87,844 | ||
Shares outstanding | 71,728,384 | 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. | ||||||
THIRD QUARTER 2024 HIGHLIGHTS
- Consolidated revenue for the three months ended September 30, 2024 of $256.0 million, in line with revenue of $255.2 million for the three months ended September 30, 2023 and an increase of 11% from $231.4 million for the three months ended June 30, 2024.
- Net loss for the three months ended September 30, 2024 of $5.5 million ($0.08 loss per diluted share) compared to net income of $20.7 million ($0.28 per diluted share) in the same period of 2023 and $10.5 million ($0.14 per diluted share) for the three months ended June 30, 2024. Included in net income for three months ended September 30, 2024 was:
- share based compensation expense of $1.0 million, compared to $4.0 million in the same period of the prior year, and;
- impairment expense of $12.7 million compared to nil in the same period of the prior year. The impairment was taken on real estate and legacy Tier 1 and Tier 2 diesel engine powered fracturing pumps and associated ancillary fracturing equipment held in the U.S. fracturing cash generating unit.
- For the three months ended September 30, 2024, Adjusted EBITDA was $43.8 million (17% of revenue) compared to $52.3 million (21% of revenue) in Q3 2023 and $41.7 million (18% of revenue) in Q2 2024.
- Free Cash Flow for the three months ended September 30, 2024 was $28.4 million compared to $37.1 million in Q3 2023 and $20.5 million in Q2 2024.
- 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 $60.7 million at September 30, 2024, compared to $87.8 million at December 31, 2023 and $75.8 million at June 30, 2024. STEP has reduced Net Debt by $245 million from peak levels in 2018.
- The Company invested $17.7 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. At September 30, 2024, 75% of the Tier 2 and Tier 4 engines in STEP's fracturing fleet have been transitioned to dual fuel technology.
- Working Capital as at September 30, 2024 of $60.6 million was $18.5 million higher than the $42.1 million at December 31, 2023 and lower by $4.0 million compared to the $64.6 million as at June 30, 2024. Working capital fluctuations are typical and are influenced by activity levels and timing of client receipts.
- Subsequent to September 30, 2024, the Company entered into a definitive agreement with its major shareholder (ARC Energy Fund 8) and 2659160 Alberta Ltd. pursuant to which 2659160 Alberta Ltd. would acquire, via plan of arrangement, all the issued and outstanding common shares of STEP not already owned, directly or indirectly, by ARC Energy Fund 6 and ARC Energy Fund 8, and after which it is expected that the Company's shares will be delisted from trading on the TSX and STEP would cease to be a reporting issuer. Refer to the subsequent event note below for more details.
THIRD QUARTER 2024 OVERVIEW
Benchmark natural gas prices in the third quarter showed continued weakness, with the average benchmark U.S. Henry Hub and Canadian AECO natural gas prices declining from the second quarter. Henry Hub averaged $2.23/MMBtu in Q3, down from $2.31/MMBtu in Q2 (USD), while AECO averaged $0.70/Mcf in Q3, down from $1.20/Mcf in Q2 (CAD). The AECO price was the lowest quarterly average price in 20 years, and while the impact of this is muted for many Canadian gas producers as they rely more heavily on the associated natural gas liquids production which is tied more closely to the price of oil, the pricing weakness prompted some operators to shut in production, primarily in the dry gas regions, and to defer completion activities into Q4 or into 2025. Oil prices declined as well, with the benchmark West Texas Intermediate ("WTI") crude price retreating to $75.27/barrel, down from $80.64/barrel (USD) in Q2.
Oilfield service levels are primarily reflected in publicly reported drilling rig counts and estimates made by analysts on fracturing crews. Land based drilling rigs in the U.S. continued to slide, retreating to an average of 565 rigs in the third quarter, down from 583 in the second quarter. Canadian rig counts averaged 207 during the third quarter, up from 120 in the second quarter but in line with the seasonal recovery that is typical in this quarter. Primary Vision, an independent energy research and business intelligence company, reported that U.S. fracturing fleets declined in the third quarter to an average of 233, down from 253 in the second quarter.
STEP's Canadian geographic region generated quarterly revenue of $210.7 million and Adjusted EBITDA of $49.4 million. STEP's reputation in the Canadian market as a technical leader and focus on strong client alignment continue to drive the success of these operations. Activity during the third quarter benefited from longer term client commitments that STEP has secured. Revenue during the third quarter for the fracturing operations increased compared to the prior year as activity levels and operating efficiencies continue to improve, driving an increase in both operating days and proppant volumes. STEP continues to increase its proppant throughput with 570 thousand tonnes pumped during the quarter and 1,630 thousand tonnes pumped for the year to date, compared to 310 thousand tonnes and 910 thousand tonnes, respectively, in the comparable periods of the prior year. STEP's focus on working with clients with larger scale programs has been a key contribution to the improvements within STEP's coiled tubing operations, with operating days increasing against comparable periods of the prior year as well.
STEP's U.S. geographic region generated quarterly revenue of $45.3 million and an Adjusted EBITDA loss of $1.4 million, a decline sequentially and year over year. The U.S. coiled tubing business remains resilient but was also impacted by an increasingly competitive spot market resulting in a slight decline in activity sequentially, although year over year activity remains higher. Pricing pressures have continued within the coiled tubing operations, however, alignment with some of the largest operators in each basin continues to be a positive factor for this service line. The tight market conditions resulted in STEP scaling back to 12 active coiled tubing units in the third quarter, but STEP will continue to look for opportunities to reactivate units when market conditions warrant. Challenging market conditions and client consolidation continued to impact STEP's U.S. fracturing operations resulting in significantly fewer operating days in the period compared to the prior year. One fleet was active in the quarter, with work at the beginning and end of the quarter. The work was completed to STEP's high standard and exceeded client expectations, but continual pricing pressure from competitors meant that the contracts were not extended. STEP carried additional costs in the fracturing service line during the quarter to maintain optionality and preserve value as it evaluated different scenarios for the future of the service line.
STEP's consolidated revenue in the third quarter was $256.0 million, in line with the same period last year, but Adjusted EBITDA of $43.8 million (17% Adjusted EBITDA margin) was down from $52.3 million (21% Adjusted EBITDA margin) in the same period last year. The margin compression is the result of the ongoing pricing pressures in the U.S. and Canada stemming from the low natural gas prices and the cumulative effect of several years of high inflation increasing the Company's cost profile.
Net loss was $5.5 million in Q3 2024 ($0.08 diluted loss per share), sequentially lower than the $20.7 million in Q2 2024 ($0.28 diluted earnings per share) and the $15.3 million in Q2 2023 ($0.21 diluted earnings per share). Net loss included $1.0 million in share-based compensation expense (Q2 2024 - $2.1 million, Q3 2023 - $4.0 million expense), $4.3 million in finance costs (Q2 2024 - $2.8 million, Q3 2023 - $2.9 million) and $12.7 million in impairment expense (Q2 2024 - $nil, Q3 2023 - $nil). The impairment was taken on real estate and legacy Tier 1 and Tier 2 diesel engine powered fracturing pumps and associated ancillary fracturing equipment held in the U.S. fracturing cash generating unit.
Free Cash Flow was $28.4 million in Q3 2024 ($0.40 diluted Free Cash Flow per share), sequentially higher than the $20.5 million in Q2 2024 and lower than the $37.1 million in Q3 2023. STEP continues to generate positive Free Cash Flow enabling the Company to continue to upgrade its asset base as well as deliver on its shareholder return framework. STEP invested $21.3 million into capital expenditures during Q3 2024 to further transition its asset base to next generation technology and meet client demands for solutions that reduce both costs and emissions. Phase one of STEP's shareholder return framework is the focus on deleveraging the balance sheet. Net Debt decreased to $60.7 million at the close of Q3 2024 from $75.8 million at close of Q2 2024. Net Debt is now $245 million lower than peak levels in 2018. The reduction in Net Debt and improvement in Adjusted EBITDA resulted in a 12-month trailing Funded Debt to Adjusted Bank EBITDA of 0.43:1.00, well under the limit of 3.00:1 in the Company's Credit Facilities (as defined in Capital Management - Debt below). Phase two of STEP's shareholder return framework was the initiation of a normal course issuer bid ("NCIB") in late 2023. As at September 30, 2024, 1,921,734 shares had been repurchased to date under the NCIB program at a weighted average price of $4.16 per share.
SUBSEQUENT EVENT
On November 3, 2024, STEP and 2659160 Alberta Ltd. (the "Purchaser"), and ARC Energy Fund 8 (as defined in the Accounting Policies and Estimates, Related Parties, section below) entered into a definitive arrangement agreement (the "Agreement") pursuant to which the Purchaser will acquire all of the issued and outstanding common shares of STEP (each, a "Share") not already owned, controlled or directed, directly or indirectly, by ARC Energy Fund 6 (as defined in the Accounting Policies and Estimates, Related Parties, section below), the Purchaser, ARC Energy Fund 8, or any other person controlled or managed, directly or indirectly by ARC Financial Corp. (such persons, together with ARC Energy Fund 6 and ARC Energy Fund 8, the "ARC Funds"). Under the terms of the Agreement, the Purchaser will acquire all the Shares that the ARC Funds do not currently own, control or direct, directly or indirectly (the "Minority Shares") for cash consideration of $5.00 per Share. The transaction will be effected by way of an arrangement under the Business Corporations Act (Alberta) (the "Arrangement").
The Arrangement, which has been unanimously approved by STEP's board of directors entitled to vote thereon, will be subject to the approval of the holders of Shares (the "Shareholders") including the approval of holders of the Minority Shares, court approval and customary closing conditions. Following completion of the Arrangement, it is expected that the Shares will be delisted from trading on the TSX and an application will be made for STEP to cease to be a reporting issuer.
Further details regarding the Arrangement will be contained in a management information circular (the "Circular") to be sent to Shareholders in connection the special meeting of Shareholders to be called and held to approve the Arrangement (the "STEP Meeting"). The Circular is expected to be mailed on or about November 27, 2024, and the STEP Meeting is expected to be held on December 19, 2024.
Closing of the Arrangement is expected to occur on or about December 23, 2024, following the STEP Meeting and upon satisfaction of all conditions precedent, including receipt of the final order of the Court of King's Bench of Alberta.
MARKET OUTLOOK
Continued pressure on commodity prices is expected to result in sequential and year over year decrease in fourth quarter activity, which will exacerbate the typical slowdown related to wind down of client capital programs in the fourth quarter, which is expected to result in a decline in revenue, adjusted EBITDA and net profit. STEP will manage expenses through this period, while also preparing for a Q1 in 2025 that is anticipated to be highly utilized.
The long-term outlook for oilfield services is very constructive. North America is expected to double its LNG export capacity by 2028, with Canada finally expected to participate in the growth that has driven the U.S. natural gas market. U.S. gas prices are expected to strengthen into 2025 in part due to the increase in LNG capacity coming from Golden Pass, Plaquemines and Corpus Christi Stage 3. LNG Canada is expected to start shipping meaningful volumes in 2025, which will draw down storage volumes and contribute to a strengthening of natural gas prices in Canada.
Canada
Canadian fourth quarter activity levels are expected to show a sequential decline as client budget exhaustion and seasonal holiday activity begins to slow activity in the basin. Weak commodity prices and tight capital discipline are expected to further discourage producers from pulling work forward from Q1 2025 into Q4 2024.
Fracturing job mix is expected to see a higher mix of smaller jobs, resulting in less efficient activity levels through the quarter. Coiled tubing activity will see spotty utilization in the quarter as a result of the slowdown in fracturing activity. STEP will focus on cost control in the quarter, while also preparing for a highly utilized first quarter in 2025.
The first quarter 2025 fracturing schedule is almost fully booked, a reflection of STEP's focus on securing longer term work agreements with leading producers in the basin. Coiled tubing services are similarly booked for the first quarter of 2025. Pricing for contracted fracturing and coiled tubing work in the first quarter has come under pressure in response to lower commodity prices and increased service capacity in the basin, which will likely result in margin compression relative to the same period in 2024.
United States
Competitive pressures are expected to continue through the fourth quarter as the market continues to struggle with equipment oversupply and weak client demand. STEP's coiled tubing service line will likely see utilization taper as the quarter plays out, with the impact particularly felt in the highly competitive southern operating districts. STEP has one fracturing fleet active in the fourth quarter, with only intermittent utilization expected.
Activity levels for coiled tubing are expected to increase into the first quarter of 2025 as client budgets are reset. Pricing for coiled tubing operations have been shielded from much of the intense pressure seen in the fracturing market, but some margin compression is expected. Fracturing continues to be challenged by the extremely competitive market conditions and although some relief is expected in the first quarter as client budgets are reset, this service line is not expected to make a meaningful contribution to U.S. revenue. Management continues to evaluate all options for the fracturing service line, including those that leverage STEP's geographic footprint and its ability to transfer assets where economic returns are most favourable.
Consolidated
STEP's focus for the balance of 2024 and into 2025 is on generation of Free Cash Flow while continuing to reduce balance sheet leverage and 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.
CANADIAN FINANCIAL AND OPERATIONS REVIEW
STEP has a fleet of 16 coiled 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 Alberta and northeast British Columbia. STEP deploys or idles coiled tubing units and fracturing horsepower as dictated by the market's ability to support targeted utilization and economic returns.
($000's except per day, days, units, proppant pumped and HP) | Three months ended | Nine months ended | ||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||
2024 | 2023 | 2024 | 2023 | |||||||||
Revenue: | ||||||||||||
Fracturing | $ | 172,980 | $ | 127,415 | $ | 496,225 | $ | 378,784 | ||||
Coiled tubing | 37,675 | 30,241 | 116,485 | 89,224 | ||||||||
210,655 | 157,656 | 612,710 | 468,008 | |||||||||
Expenses | 172,834 | 125,414 | 486,335 | 375,512 | ||||||||
Results from operating activities | $ | 37,821 | $ | 32,242 | $ | 126,375 | $ | 92,496 | ||||
Adjusted EBITDA (1) | $ | 49,414 | $ | 41,235 | $ | 158,203 | $ | 119,401 | ||||
Adjusted EBITDA % (1) | 23% | 26% | 26% | 26% | ||||||||
Sales mix (% of segment revenue) | ||||||||||||
Fracturing | 82% | 81% | 81% | 81% | ||||||||
Coiled tubing | 18% | 19% | 19% | 19% | ||||||||
Fracturing services | ||||||||||||
Number of fracturing operating days (2) | 349 | 250 | 1,104 | 771 | ||||||||
Proppant pumped (tonnes) | 573,000 | 308,000 | 1,634,000 | 914,000 | ||||||||
Fracturing crews | 6 | 5 | 6 | 5 | ||||||||
Coiled tubing services | ||||||||||||
Number of coiled tubing operating days (2) | 549 | 448 | 1,691 | 1,368 | ||||||||
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. | ||||||||||||
(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. | ||||||||||||
THIRD QUARTER 2024 COMPARED TO THIRD QUARTER 2023
Revenue for the three months ended September 30, 2024 was $210.7 million compared to $157.7 million for the same period of the prior year. STEP's fracturing operations continue to benefit from its alignment with clients that have large multi-well pads that provide consistent utilization throughout much of the year. These dedicated programs are complemented by smaller work programs creating a diverse client mix and improving overall utilization for the fracturing service line. Operating days and proppant volumes continued to increase compared to the prior year with operating days increasing by 40% and proppant volumes increasing by 86%. The Canadian coiled tubing operations also continued to improve compared to the prior year with operating days increasing by 23% to 549 operating days in the period from 448 operating days in the same period in 2023. Client alignment has been a key driver for the improvements for these operations through the long-term contracts secured with key clients in the highly utilized Montney basin.
Adjusted EBITDA for the third quarter of 2024 was $49.4 million (23% of revenue) versus $41.2 million (26% of revenue) in the third quarter of 2023. The increase in Adjusted EBITDA is a reflection of the overall increase in activity during the period however there has been some erosion in margins due to increased sand volumes and competitive pressures that limited the ability to increase rates while inflationary pressures continued to impact the cost profile.
NINE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2023
Revenue for the nine months ended September 30, 2024 was $612.7 million compared to $468.0 million for the nine months ended September 30, 2023. The positive momentum experienced through the first half of the year continued into the third quarter. Alignment with key clients and favourable weather conditions allowed for consistent activity through the first nine months of the year. Coiled tubing operating days increased to 1,691 for the first nine months of 2024 from 1,368 during the comparable period of 2023, a 24% increase. STEP's focus on modernizing its fracturing fleet, client alignment and favourable weather conditions resulted in increased operating days for the fracturing service line to 1,104 for the first nine months of 2024 from 771 during the same period of 2023, an increase of 43%. Increased utilization and higher fracturing intensity have been a significant benefit to the fracturing service line as STEP has exceeded the prior year's annual volume of proppant pumped and is up 79% compared to the same period of 2023.
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 $158.2 million (26% of revenue) for the first nine months of 2024 compared to $119.4 million (26% of revenue) in the same period of 2023.
UNITED STATES FINANCIAL AND OPERATIONS REVIEW
STEP has a fleet of 19 coiled tubing units in the Permian and Eagle Ford basins in Texas, the Bakken shale in North Dakota, and the Uinta-Piceance and Niobrara-DJ basins in Colorado while the U.S. fracturing business primarily operates in the Permian and Eagle Ford basins in Texas. The Company deploys or idles coiled tubing units and fracturing horsepower as dictated by the market's ability to support targeted utilization and economic returns.
($000's except per day, days, units, proppant pumped and HP) | Three months ended | Nine months ended | ||||||
September 30, | September 30, | September 30, | September 30, | |||||
2024 | 2023 | 2024 | 2023 | |||||
Revenue: | ||||||||
Fracturing | $ | 2,908 | $ | 47,579 | $ | 63,747 | $ | 145,544 |
Coiled tubing | 42,428 | 50,000 | 131,055 | 137,124 | ||||
45,336 | 97,579 | 194,802 | 282,668 | |||||
Expenses | 61,808 | 94,464 | 216,438 | 280,819 | ||||
Results from operating activities | $ | (16,472) | $ | 3,115 | $ | (21,636) | $ | 1,849 |
Adjusted EBITDA (1) | $ | (1,380) | $ | 15,356 | $ | 20,857 | $ | 38,504 |
Adjusted EBITDA % (1) | (3)% | 16% | 11% | 14% | ||||
Sales mix (% of segment revenue) | ||||||||
Fracturing | 6% | 49% | 33% | 51% | ||||
Coiled tubing | 94% | 51% | 67% | 49% | ||||
Fracturing services | ||||||||
Number of fracturing operating days(2) | 11 | 157 | 200 | 502 | ||||
Proppant pumped (tonnes) | 21,000 | 281,000 | 430,000 | 779,000 | ||||
Fracturing crews | 1 | 3 | 1 | 3 | ||||
Coiled tubing services | ||||||||
Number of coiled tubing operating days (2) | 791 | 863 | 2,369 | 2,345 | ||||
Active coiled tubing units, end of period | 12 | 12 | 12 | 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. | ||||||||
(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. | ||||||||
THIRD QUARTER 2024 COMPARED TO THIRD QUARTER 2023
Revenue for the three months ended September 30, 2024 was $45.3 million compared to $97.6 million for the three months ended September 30, 2023. STEP's U.S. fracturing operations continue to be impacted by market consolidation and an oversupply of assets limiting activity to just 11 operating days in the third quarter compared to 157 days in the same period in 2023. The challenging market conditions also had an impact on the U.S. coiled tubing operations as operating days fell 8% to 791 days compared to 863 days for the same period in 2023. This decline was primarily a result of a challenging spot market as STEP has been able maintain its strong relationships with key clients in each basin.
U.S. operations generated an Adjusted EBITDA loss of $1.4 million (3% of revenue) for the third quarter 2024 versus Adjusted EBITDA of $15.4 million (16% of revenue) for the third quarter 2023. The decline in profitability was largely driven by the declines experienced in the U.S. fracturing operations as coiled tubing operations continued to provide positive results during the period.
NINE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2023
Revenue for the nine months ended September 30, 2024 was $194.8 million compared to $282.7 million for the nine months ended September 30, 2023. Operating days for the U.S. coiled tubing operations were effectively flat year over year as the momentum generated during the first half of the year has flattened in recent months. The consistent utilization for the coiled tubing service line reflects the alignment with key clients in each operating basin which provides operating stability. Operating days across the Company's U.S. fracturing operations decreased to 200 in the first nine months of 2024 from 502 days during the same period of 2023 due to market consolidation and asset oversupply that has limited STEP's ability to secure consistent work.
Adjusted EBITDA of $20.9 million (11% of revenue) for the nine months ended September 30, 2024 was significantly lower than Adjusted EBITDA of $38.5 million (14% of revenue) for the nine months ended September 30, 2023 as STEP continues to navigate the current challenges in the U.S. fracturing market.
CORPORATE FINANCIAL REVIEW
The Company's corporate activities are separated from Canadian and U.S. operations. Corporate operating expenses include expenses related to asset reliability and optimization teams, as well as general and administrative costs which include costs associated with the executive team, the Board of Directors, public company costs and other activities that benefit Canadian and U.S. operating segments collectively.
($000's) | Three months ended | Nine months ended | ||||||
September 30, | September 30, | September 30, | September 30, | |||||
2024 | 2023 | 2024 | 2023 | |||||
Expenses: | ||||||||
Operating expenses | $ | 507 | $ | 490 | $ | 1,622 | $ | 1,438 |
Selling, general and administrative | 4,024 | 7,259 | 14,935 | 10,656 | ||||
Results from operating activities | $ | (4,531) | $ | (7,749) | $ | (16,557) | $ | (12,094) |
Add: | ||||||||
Depreciation | 110 | 222 | 345 | 637 | ||||
Share-based compensation expense (recovery) | 187 | 3,322 | 2,151 | (1,306) | ||||
Adjusted EBITDA (1) | $ | (4,234) | $ | (4,205) | $ | (14,061) | $ | (12,763) |
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. | ||||||||
THIRD QUARTER 2024 COMPARED TO THIRD QUARTER 2023
For the three months ended September 30, 2024, expenses from corporate activities were $4.5 million compared to expenses of $7.7 million for the same period in 2023 due to the mark to market adjustment on cash settled share-based compensation in the current period. This expense was $3.2 million lower in Q3 2024 relative to Q3 2023, as the Company's share price decreased by $0.25 from June 30, 2024 to September 30, 2024 compared to a share price increase of $0.98 during the same period of the prior year. Adjusted EBITDA of $(4.2) million for the three months ended September 30, 2024 remained in line with Adjusted EBITDA of $(4.2) million for the same period in 2023.
NINE MONTHS ENDED SEPTEMBER 30, 2024 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2023
For the nine months ended September 30, 2024 expenses from corporate activities were $16.6 million compared to $12.1 million for the same period in 2023. Cash settled share-based compensation expense was higher in the first nine months of 2024 as the share price only decreased $0.09 from December 31, 2023 to September 30, 2024 compared to a share price decrease of $1.09 during the same period of the prior year. This drove the change in the share-based compensation expense from a recovery of $1.3 million in nine months ended September 30, 2023 to a $2.1 million expense in the same period of 2024, a swing of $3.4 million. Adjusted EBITDA of $(14.1) million for the nine months ended September 30, 2024 was lower than Adjusted EBITDA of $(12.8) million for the same period of the prior year.
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 | Nine months ended | ||||||
September 30, | September 30, | September 30, | September 30, | |||||
2024 | 2023 | 2024 | 2023 | |||||
Net income (loss) | $ | (5,460) | $ | 20,734 | $ | 46,366 | $ | 55,663 |
Add (deduct): | ||||||||
Depreciation and amortization | 26,022 | 20,743 | 72,979 | 62,614 | ||||
Gain on disposal of equipment | (1,218) | (417) | (4,382) | (1,064) | ||||
Finance costs | 4,336 | 2,850 | 10,016 | 8,557 | ||||
Income tax expense | 5,676 | 6,936 | 23,328 | 18,318 | ||||
Share-based compensation - Cash settled | (360) | 2,709 | 510 | (3,713) | ||||
Share-based compensation - Equity settled | 1,330 | 1,336 | 3,358 | 4,020 | ||||
Foreign exchange (gain) loss | (63) | 1,278 | 1,954 | 2,036 | ||||
Unrealized loss on derivatives | 802 | (3,783) | (1,865) | (1,289) | ||||
Impairment of property and equipment | 12,735 | - | 12,735 | - | ||||
Adjusted EBITDA | $ | 43,800 | $ | 52,386 | $ | 164,999 | $ | 145,142 |
Adjusted EBITDA % | 17% | 21% | 20% | 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 | Nine months ended | ||||||
September 30, | September 30, | September 30, | September 30, | |||||
2024 | 2023 | 2024 | 2023 | |||||
Net cash provided by operating activities | $ | 35,956 | $ | 50,736 | $ | 114,461 | $ | 131,876 |
Add (deduct): | ||||||||
Changes in non-cash working capital from operating activities | 2,063 | (2,607) | 23,537 | (8,319) | ||||
Sustaining capital | (7,187) | (8,518) | (27,898) | (30,139) | ||||
Lease payments (net of sublease receipts) | (2,428) | (2,490) | (7,753) | (6,149) | ||||
Free Cash Flow | $ | 28,404 | $ | 37,121 | $ | 102,347 | $ | 87,269 |
"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) | September 30, | December 31, | |||
2024 | 2023 | ||||
Current assets | $ | 215,683 | $ | 154,715 | |
Current liabilities | (155,040) | (112,611) | |||
Working Capital (including cash and cash equivalents) | $ | 60,643 | $ | 42,104 | |
The following table presents the composition of the non-IFRS financial measure of Total long-term financial liabilities.
($000s) | September 30, | December 31, | |||
2024 | 2023 | ||||
Long-term loans | $ | 61,481 | $ | 86,149 | |
Long-term leases | 18,039 | 18,731 | |||
Other long-term liabilities | 10,016 | 14,090 | |||
Total long-term financial liabilities | $ | 89,536 | $ | 118,970 | |
The following table presents the composition of the non-IFRS financial measure of Net Debt.
($000s) | September 30, | December 31, | |||
2024 | 2023 | ||||
Loans and borrowings | $ | 61,481 | $ | 86,149 | |
Add back: Deferred financing costs | 391 | 1,637 | |||
Less: Cash and cash equivalents | (1,482) | (1,785) | |||
Less: CCS Derivatives liability | 335 | 1,843 | |||
Net Debt | $ | 60,725 | $ | 87,844 | |
ACCOUNTING POLICIES AND ESTIMATES
RELATED PARTIES
ARC Energy Fund 6 Canadian Limited Partnership, ARC Energy Fund 6 United States Limited Partnership, ARC Energy Fund 6 International Limited Partnership and ARC Capital 6 Limited Partnership (collectively, "ARC Energy Fund 6") and ARC Energy Fund 8 Canadian Limited Partnership, ARC Energy Fund 8 United States Limited Partnership, ARC Energy Fund 8 International Limited Partnership and ARC Capital 8 Limited Partnership (collectively, "ARC Energy Fund 8"), each a private equity fund advised by ARC Financial Corp., have been investors in the Company since 2011 and 2015, respectively.
DISCLOSURE CONTROLS AND PROCEDURES
The Company is required to comply with National Instrument 52-109 "Certification of Disclosure in Issuers' Annual and Interim Filings" ("NI 52-109"). The Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO") of STEP are responsible for establishing and maintaining disclosure controls and procedures ("DC&P") for the Company.
The Company's designed DC&P provides reasonable assurance that material information is made known to the certifying officers, and that information disclosed by the Company is done in the time period specified in securities legislation.
INTERNAL CONTROL OVER FINANCIAL REPORTING
As defined within NI 52-109, the Company's CEO and CFO are responsible for establishing and maintaining internal control over financial reporting ("ICFR"). The Company's designed ICFR provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with Generally Accepted Accounting Principles ("GAAP"). The framework behind the design of the Company's ICFR was the Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013) ("COSO").
A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system will be met, and it should not be expected that the control system will prevent all errors or fraud.
There have been no changes in the Company's existing ICFR that occurred during the period July 1 to September 30, 2024, which have materially affected or are reasonably likely to materially affect the Company's ICFR.
CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS
This Press Release is based on the Annual Financial Statements. The preparation of the Annual Financial Statements requires that certain estimates and judgments be made concerning the reported amount of revenue and expenses and the carrying values of assets and liabilities. These estimates are based on historical experience and management's judgment. The estimation of anticipated future events involves uncertainty and therefore the estimates used by management in the preparation of the Annual Financial Statements may change as events unfold, additional knowledge is acquired or the environment in which the Company operates changes. Refer to Notes 1 and 2 to the Annual Financial Statements for a description of the Company's accounting policies, impacts of changes in significant accounting policies, and practices involving the use of estimates and judgments that are critical to determining STEP's financial results.
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 new LNG facilities on export capacity and industry activity levels; anticipated Q4 2024 and 2025 utilization and activity levels, revenue, pricing, adjusted EBITDA and net profit related to the Company's services; 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 U.S. fracturing service line will have only intermittent utilization; the Company's ability to transfer assets where economic returns are most favourable; the Company's intent to invest in dual fuel capability, and target of having natural gas capabilities in 90% of its fracturing fleets by 2025; the Company's ability to test and evaluate next generation technologies; the potential for an equipment oversupply position to result in intermittent utilization and reduced margins; the effect large clients and their programs may have on the Company's activity levels; the Company's intention to invest in the development of next generation coiled tubing technologies; the effect of inflation and related cost increases; the Company's view that the NCIB is an effective means to provide value to shareholders; the impact of weather and break up on the Company's operations; the Company's ability to meet all financial commitments including interest payments over the next twelve months; the Company's plans regarding equipment; the Company's ability to manage its capital structure; expected debt repayment and Funded Debt to Adjusted Bank EBITDA ratios; expected income tax and derivative liabilities; adequacy of resources to funds operations, financial obligations and planned capital expenditures; the Company's ability to retain its existing clients; the monitoring of impairment, amount and age of balances owing, and the Company's financial assets and liabilities denominated in U.S. dollars, and exchange rates; the Company's expected compliance with covenants under its Credit Facilities and its ability to satisfy its financial commitments thereunder; statements relating to the anticipated benefits of the Arrangement; the ability to complete the Arrangement contemplated by the Agreement and the timing thereof, including the parties' ability to satisfy the conditions to consummation of the Arrangement; the receipt of the approval of holders of Shares; anticipated timing of mailing of the Circular and holding of the STEP Meeting; court approvals, and other customary closing conditions of the Arrangement.
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 and LNG export capacity 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 2025 activity levels; the suspension of programs that rotate professionals in from across the country; 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. In addition, the risks and uncertainties related to the Arrangement contemplated by the Agreement include, but are not limited to: the possibility that the Arrangement will not be completed on the terms and conditions, or on the timing, currently contemplated, and that it may not be completed at all: failure to obtain or satisfy, in a timely manner or otherwise, required Shareholder and court approvals and other conditions to the closing of the Arrangement; the risk that competing offers or acquisition proposals will be made; the negative impact that the failure to complete the Arrangement for any reason could have on the price of the Shares or on the business of STEP; the failure of ARC to satisfy the closing conditions thereunder in a timely manner or at all; ARC's failure to pay the cash consideration at closing of the Arrangement; the absence of a reverse break fee in favour of STEP; the business of STEP may experience significant disruptions, including loss of clients or employees due to Arrangement related uncertainty, industry conditions or other factors; risks relating to employee retention; the risk of regulatory changes that may materially impact the business or the operations of STEP; the risk that legal proceedings may be instituted against STEP; risks related to the diversion of management's attention from STEP's ongoing business operations while the Arrangement is pending.
Actual results could also 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 this Press Release, 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 | September 30, | December 31, | |||
Unaudited (in thousands of Canadian dollars) | 2024 | 2023 | |||
ASSETS | |||||
Current Assets | |||||
Cash and cash equivalents | $ | 1,482 | $ | 1,785 | |
Trade and other receivables | 156,708 | 96,156 | |||
Income tax receivable | 97 | - | |||
Inventory | 47,355 | 47,523 | |||
Prepaid expenses and deposits | 10,041 | 9,251 | |||
215,683 | 154,715 | ||||
Property and equipment | 418,301 | 419,751 | |||
Right-of-use assets | 27,128 | 27,857 | |||
Intangible assets | 92 | 122 | |||
Other assets | 4,157 | 4,074 | |||
$ | 665,361 | $ | 606,519 | ||
LIABILITIES AND SHAREHOLDERS' EQUITY | |||||
Current Liabilities | |||||
Trade and other payables | $ | 127,741 | $ | 91,785 | |
Current portion of lease obligations | 9,177 | 8,753 | |||
Current portion of other liabilities | 3,819 | 4,536 | |||
Income tax payable | 14,303 | 7,537 | |||
155,040 | 112,611 | ||||
Deferred tax liabilities | 18,330 | 19,390 | |||
Lease obligations | 18,039 | 18,731 | |||
Other liabilities | 10,016 | 14,090 | |||
Loans and borrowings | 61,481 | 86,149 | |||
262,906 | 250,971 | ||||
Shareholders' equity | |||||
Share capital | 447,882 | 455,679 | |||
Contributed surplus | 39,258 | 36,060 | |||
Accumulated other comprehensive income | 15,278 | 10,138 | |||
Deficit | (99,963) | (146,329) | |||
402,455 | 355,548 | ||||
$ | 665,361 | $ | 606,519 | ||
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF NET INCOME (LOSS) AND OTHER COMPREHENSIVE INCOME (LOSS)
For the three months ended
| For the nine months ended
| ||||||||
Unaudited (in thousands of Canadian dollars, except per share amounts) | 2024 | 2023 | 2024 | 2023 | |||||
Revenue | $ | 255,991 | $ |
255,235 | $ | 807,512 | $ | 750,676 | |
Operating expenses | 229,494 | 214,218 | 687,162 | 639,293 | |||||
Gross profit | 26,497 | 41,017 | 120,350 | 111,383 | |||||
Selling, general and administrative expenses | 9,679 | 13,409 | 32,168 | 29,132 | |||||
Results from operating activities | 16,818 | 27,608 | 88,182 | 82,251 | |||||
Finance costs | 4,336 | 2,850 | 10,016 | 8,557 | |||||
Foreign exchange (gain) loss | (63) | 1,278 | 1,954 | 2,036 | |||||
Unrealized (gain) loss on derivatives | 802 | (3,783) | (1,865) | (1,289) | |||||
Gain on disposal of property and equipment | (1,218) | (417) | (4,382) | (1,064) | |||||
Impairment of property and equipment | 12,735 | - | 12,735 | - | |||||
Amortization of intangible assets | 10 | 10 | 30 | 30 | |||||
Income before income tax | 216 | 27,670 | 69,694 | 73,981 | |||||
Income tax expense (recovery) | |||||||||
Current | 7,148 | 4,878 | 24,476 | 17,948 | |||||
Deferred | (1,472) | 2,058 | (1,148) | 370 | |||||
Total income tax expense | 5,676 | 6,936 | 23,328 | 18,318 | |||||
Net income (loss) | (5,460) | 20,734 | 46,366 | 55,663 | |||||
Other comprehensive income | |||||||||
Foreign currency translation gain (loss) | (2,246) | 6,039 | 5,140 | 56 | |||||
Total comprehensive income (loss) | $ | (7,706) | $ | 26,773 | $ | 51,506 | $ | 55,719 | |
Net income (loss) per share: | |||||||||
Basic | $ | (0.08) | $ | 0.29 | $ | 0.65 | $ | 0.77 | |
Diluted | $ | (0.08) | $ | 0.28 | $ | 0.62 | $ | 0.74 | |
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF CASH FLOWS
For the three months ended
| For the nine months ended
| ||||||||
Unaudited (in thousands of Canadian dollars) | 2024 | 2023 | 2024 | 2023 | |||||
Operating activities: | |||||||||
Net income (loss) | $ | (5,460) | $ | 20,734 | $ | 46,366 | $ | 55,663 | |
Adjusted for the following: | |||||||||
Depreciation and amortization | 26,022 | 20,743 | 72,979 | 62,614 | |||||
Share-based compensation expense | 970 | 4,045 | 3,868 | 307 | |||||
Unrealized foreign exchange loss | 62 | 1,041 | 1,536 | 3,413 | |||||
Unrealized (gain) loss on derivatives | 802 | (3,783) | (1,865) | (1,289) | |||||
Gain on disposal of property and equipment | (1,218) | (417) | (4,382) | (1,064) | |||||
Impairment of property and equipment | 12,735 | - | 12,735 | - | |||||
Finance costs | 4,336 | 2,850 | 10,016 | 8,557 | |||||
Income tax expense | 5,676 | 6,936 | 23,328 | 18,318 | |||||
Income taxes paid | (2,547) | (1,569) | (17,808) | (14,439) | |||||
Cash finance costs paid | (3,359) | (2,451) | (8,775) | (8,523) | |||||
Funds flow from operations | 38,019 | 48,129 | 137,998 | 123,557 | |||||
Changes in non-cash working capital from operating activities | (2,063) | 2,607 | (23,537) | 8,319 | |||||
Net cash provided by operating activities | 35,956 | 50,736 | 114,461 | 131,876 | |||||
Investing activities: | |||||||||
Purchase of property and equipment | (17,656) | (25,232) | (74,625) | (65,606) | |||||
Proceeds from disposal of equipment and vehicles | 737 | 75 | 5,169 | 2,023 | |||||
Changes in non-cash working capital from investing activities | (1,514) | 2,613 | (2,218) | (9,986) | |||||
Net cash used in investing activities | (18,433) | (22,544) | (71,674) | (73,569) | |||||
Financing activities: | |||||||||
Repayment of loans and borrowings | (16,511) | (30,236) | (27,288) | (53,302) | |||||
Repayment of obligations under finance lease | (2,446) | (2,210) | (7,791) | (6,414) | |||||
Common shares repurchased | (6) | - | (7,957) | - | |||||
Net cash used in financing activities | (18,963) | (32,446) | (43,036) | (59,716) | |||||
Impact of exchange rate changes on cash and cash equivalents | (33) | 32 | (54) | 110 | |||||
Decrease in cash and cash equivalents | (1,473) | (4,222) | (303) | (1,299) | |||||
Cash and cash equivalents, beginning of the period | 2,955 | 5,708 | 1,785 | 2,785 | |||||
Cash and cash equivalents, end of the period | $ | 1,482 | $ | 1,486 | $ | 1,482 | $ | 1,486 | |
STEP will host a conference call on Thursday, November 14, 2024 at 9:00 a.m. MT.
To listen to the webcast of the conference call, please click on the following: https://onlinexperiences.com/Launch/QReg/ShowUUID=7055639E-D5FB-48AE-B4B4-FC50E573BEA8&LangLocaleID=1033
You can also visit the Investors section of our website at www.stepenergyservices.com and click on "Reports, Presentations & Key Dates".
The conference call will be archived on STEP's website at: www.stepenergyservices.com/investors
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 services are focused on the Permian basin and our 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.
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.
Contacts
For more information please contact:
Steve Glanville
President and Chief Executive Officer
Telephone: 403-457-1772
Klaas Deemter
Chief Financial Officer
Telephone: 403-457-1772
Email: investor_relations@step-es.com
Web: www.stepenergyservices.com
