STEP Energy Services Ltd. (the “Company” or “STEP”) is pleased to
announce its financial and operating results for the three months
ended March 31, 2023. The following press release should be read in
conjunction with the management’s discussion and analysis
(“MD&A”) and unaudited condensed consolidated interim financial
statements and notes thereto as at March 31, 2023 (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.sedar.com,
including the Company’s Annual Information Form for the year ended
December 31, 2022 dated March 1, 2023 (the “AIF”).
CONSOLIDATED HIGHLIGHTS
FINANCIAL REVIEW
($000s except percentages and per share amounts) |
Three months ended |
March 31, |
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Consolidated revenue |
$ |
263,368 |
|
$ |
219,539 |
|
Net income |
$ |
19,656 |
|
$ |
9,173 |
|
Per share-basic |
$ |
0.27 |
|
$ |
0.14 |
|
Per share-diluted |
$ |
0.26 |
|
$ |
0.13 |
|
Adjusted EBITDA (1) |
$ |
45,352 |
|
$ |
36,990 |
|
Adjusted EBITDA % (1) |
|
17 |
% |
|
17 |
% |
Free Cash Flow (1) |
|
17,070 |
|
|
16,172 |
|
(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, horsepower and units) |
Three months ended |
March 31, |
March 31, |
|
|
2023 |
|
2022 |
Fracturing services |
|
|
|
|
Fracturing operating days (2) |
|
473 |
|
615 |
Proppant pumped (tonnes) |
|
510,000 |
|
601,000 |
Active horsepower (“HP”), ended (3) |
|
380,000 |
|
380,000 |
Total HP, ended |
|
490,000 |
|
490,000 |
Coiled tubing services |
|
|
|
|
Coiled tubing operating days (2) |
|
1,263 |
|
1,075 |
Active coiled tubing units, ended |
|
21 |
|
16 |
Total coiled tubing units, ended |
|
35 |
|
29 |
(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.(3) Active horsepower denotes units
active on client work sites. An additional 20-25% of this amount is
required to accommodate equipment maintenance cycles.
($000s except shares) |
|
March 31 |
December 31, |
|
|
2023 |
|
2022 |
Cash and cash equivalents |
$ |
1,237 |
$ |
2,785 |
Working capital (including cash and cash equivalents) (1) |
$ |
64,665 |
$ |
66,580 |
Total assets |
$ |
642,200 |
$ |
682,532 |
Total long-term financial liabilities (1) |
$ |
152,215 |
$ |
168,746 |
Net debt (1) |
$ |
133,042 |
$ |
142,224 |
Shares outstanding |
|
71,617,464 |
|
71,589,626 |
(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.
FIRST QUARTER 2023
HIGHLIGHTS
- Consolidated
revenue for the three months ended March 31, 2023 of $263.4
million, increased 20% from $219.5 million as at three months ended
March 31, 2022 and increased 5% from $251.4 million as at three
months ended December 31, 2022.
- Generated net
income for the three months ended March 31, 2023 of $19.7 million,
or $0.26 per diluted share, compared to $9.2 million, or a $0.13
per diluted share in the same period of 2022 and $16.7 million or a
$0.23 per diluted share for the three months ended December 31,
2022. Included in income for three months ended March 31, 2023, was
a share based compensation recovery of $5.1 million, compared to an
expense of $4.4 million during the three months ended December 31,
2022.
- For the three
months ended March 31, 2023, Adjusted EBITDA was $45.4 million or
17% of revenue compared to $36.9 million or 17% of revenue in Q1
2022 and $48.6 million or 19% in Q4 2022.
- Free Cash Flow
for the three months ended March 31, 2023 was $17.1 million
compared to $16.2 million in Q1 2022 and $22.4 million in Q4
2022.
- STEP made
significant progress on debt reduction while also investing into
the long-term sustainability of the business.
- The Company had
Net debt of $133.0 million at March 31, 2023, compared to $142.2
million at December 31, 2022.
- The Company
invested $26.6 million into its capital equipment, including $6.3
million into the Company’s first Tier 4 dual fuel fleet conversion
that was started in Q4 2022. The Company had eight Tier 4 dual fuel
units in the field at the end of Q1, providing diesel substitution
rates of up to 85%.
FIRST QUARTER 2023 OVERVIEW The
first quarter of 2023 was among STEP’s best quarters. Revenue of
$263.4 million and Adjusted EBITDA of $45.4 million were the
Company’s best first quarter results, driven by strong performance
in coiled tubing and Canadian fracturing. Effective January 1,
2023, Adjusted EBITDA reflects the expensing of fracturing fluid
ends in Canada, which added $2.8 million in expense to the quarter.
Fluid ends have a useful life that is based on an expected number
of pumping hours, which is now being realized in a period less than
12 months as daily pumping hours and equipment utilization
increases. These results showed significant year over year
improvement and were flat sequentially.
Commodity price volatility was a factor in
industry activity levels, particularly for natural gas weighted
producers. Natural gas prices, as measured by the U.S. benchmark
Henry Hub, retreated from Q4 2022 levels, averaging $2.65 / mmBTU
in Q1 2023, down 53% sequentially and going as low as $1.93. West
Texas Intermediate (WTI), the benchmark U.S. oil price, saw less
volatility, with the Q1 average of $76.12 down 7.8% sequentially,
although prices dipped below $70/barrel late in the quarter.
Despite the commodity price volatility, the rig count in Canada
rose by 34, or 18%, from Q4 2022. The rig count in the oil rich
Permian basin, home of STEP’s three U.S. fracturing crews, is up 3
rigs from 353 rigs at the year end, in contrast to the broader U.S.
market which has dropped 31 rigs from Q4 20221.
The first quarter saw constructive news for long
term energy investments. The B.C. government and the Blueberry
River First Nation (BRFN) agreed on a framework for resource
development, which has already led to increased licencing activity
in the Montney. The Montney is a critical source of natural gas for
LNG Canada and Woodfibre LNG, which are on track for start up in
2025 and 2027 respectively. The Cedar LNG facility also received
approval from the B.C. and federal governments, with the final
investment decision (“FID”) expected later this year. These three
facilities are anticipated to export 2.8 bcf/day of clean, safe and
secure Canadian natural gas. In the U.S., the resumption of exports
from the Freeport LNG facility immediately put a floor under
natural gas prices and two additional projects (Plaquemines LNG and
Port Arthur LNG) also reached a positive FID. These facilities are
expected to add 3.1 bcf/day of LNG capacity to the U.S. export LNG
market if they are completed in 2027 as forecasted.
STEP’s fracturing activity in the quarter was
mixed, with strong Canadian results offset by lower U.S. results.
The Canadian fracturing service line produced its best top line
revenue in the Company’s history, generating $138.0 million on
296,000 tonnes of proppant pumped. Q1 2023 activity in the U.S.
fracturing service line was heavily impacted by shifting client
schedules related to drilling issues and commodity price pressures.
Coiled tubing operating days set a new quarterly record, with the
service line operating nine units in Canada and eleven units in the
U.S.
Net income was $19.7 million in Q1 2023 ($0.26
diluted earnings per share), sequentially higher than the $16.7
million in Q4 ($0.23 diluted earnings per share) and the $9.2
million in Q1 2022 ($0.13 diluted earnings per share). Net income
included $2.9 million in finance costs (Q4 2022 ‐ $3.0 million, Q1
2022 ‐ $3.3 million) and a recovery of $5.3 million in share‐based
compensation (Q4 2022 ‐ $4.4 million expense, Q1 2022 ‐ $5.5
million expense).
Free Cash Flow was $17.1 million in Q1 2023,
sequentially lower than the $22.4 million in Q4 2022 but higher
than the $16.2 million in Q1 2022. Free Cash Flow was negatively
impacted by a $4.2 million payment made to a foreign tax authority
in connection with an ongoing tax dispute. It is of the view of the
Company that this tax claim is without merit. The Free Cash Flow
enabled STEP to reduce net debt to $133.0 million at the close of
Q1 2023 from $142.4 million at close of Q4 2022. This debt
reduction was accomplished while investing $26 million into capital
expenditures during Q1 2023. STEP has now reduced debt by nearly
$180 million from peak levels in 2018. The reduction in debt and
improvement in Adjusted EBITDA meant that the Company had a
12-month trailing Funded Debt to Adjusted Bank EBITDA of 0.70:1.00,
well under the limit of 3.00:1 in the Company’s Credit Facilities
(as defined in Capital Management – Debt below).
1 Baker Hughes North America Rotary Rig Count,
May 5, 2023
MARKET OUTLOOK The announcement
by the OPEC+ group of oil producing nations in early April to
voluntarily reduce production provided support to commodity markets
that were rattled by concerns over the stability of the global
banking system and global recession fears. West Texas Intermediate
oil prices have stabilized above $70 barrel to start the second
quarter, providing greater certainty for oil and liquids producers.
Natural gas prices are anticipated to remain soft through the
shoulder season, but the futures prices show a steady strengthening
through the latter half of 2023. The long-term outlook for oilfield
services is very constructive. The structural under-investment in
hydrocarbon production capacity through the last seven years has
been exacerbated by geopolitical tensions, forcing governments and
policy makers to confront the realty that oil and gas will be a key
part of the energy mix for many years. STEP is proud to work in
Canada and the U.S., countries that have the natural resources, the
regulatory frameworks, and the technical expertise to deliver safe
and affordable energy to the world.
Canada Canadian activity levels
have been strong to date in Q2 2023, as warm, dry weather
conditions in April allowed for the spillover work from Q1 to be
completed. These conditions have also led to extreme wildfire risk
in STEP’s operating areas, which may have some impact on client
work programs. STEP has an emergency response plan in place to
protect Company personnel and property and does not anticipate any
harm to its operations.
Spring break up is having less of an impact than
it traditionally has in Canada as clients recognize the value of
working in the second quarter. As activity and service intensity in
the WCSB continues to increase, the second quarter is increasingly
seen by clients and service providers as an opportunity to load
level capital spending and activity. The intense pace of the first
quarter, often accompanied by extreme weather conditions, typically
moderates in the second quarter, reducing operating costs and the
strain on the service infrastructure.
Pricing is anticipated to remain stable through
the second quarter and the remainder of the year. Inflationary
pressures have largely eased, although lingering supply chain
constraints can still produce unusual delays, particularly for
equipment maintenance related items.
The Company’s first Tier 4 dual fuel fleet
modernization is expected to be completed by the close of the
second quarter. The performance of the Tier 4 equipped units
already in the field has been exemplary, with diesel substitution
rates consistently above 80%, relative to a Tier 2 diesel engine.
These high substitution rates bring immediate cost and emission
reduction benefits to STEP’s clients, as well as providing higher
profitability to STEP.
The second half of the year is anticipated to
remain highly utilized for fracturing and coiled tubing, with much
of the calendar already booked with client commitments. The low
natural gas prices have led to some primarily dry gas focused work
being delayed into the later part of the year, although the impact
has been relatively modest to date. Many gas producers have a high
liquids content, which is more closely aligned with WTI pricing,
insulating them from the most severe impacts of the low natural gas
prices.
United StatesSTEP’s fracturing
activity levels in the U.S. have returned to typical levels in the
second quarter, recovering from the client delays that dominated
the first quarter. The downtime in Q1 allowed for more robust
preventative maintenance and some optimization to be completed on
the idle fleets, which has been rewarded with very high pumping
efficiencies across STEP’s three fracturing fleets in the second
quarter. Coiled tubing activity continues to remain strong into the
second quarter, with demand outpacing supply in some regions.
Following a volatile period in Q1 where
fracturing pricing temporarily came under pressure from
undisciplined competitors, pricing in the second quarter has
recovered and is expected to hold into the back half of the year.
Pricing for coiled tubing services has been stable and is expected
to stay in line for the balance of the year.
Second half visibility in the U.S. region
continues to improve. The rig count in the Permian, home of STEP’s
three fracturing crews, has steadily increased following the OPEC+
announcement, reflecting increased confidence by E&Ps that oil
prices are expected to stay stable in the near term. STEP’s three
fracturing crews are well placed in this market and are expected to
see steady utilization through the balance of the year. Weak
natural gas prices may limit opportunity for growth in the U.S.
fracturing market, deferring STEP’s plan to field a fourth fleet
until market conditions improve. Demand for STEP’s industry leading
coiled tubing services is expected to remain strong.
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 has 282,500 fracturing HP of which
approximately 132,500 HP has dual-fuel capability. 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 |
|
March 31, |
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Revenue: |
|
|
|
|
Fracturing |
$ |
139,576 |
|
$ |
119,014 |
|
Coiled tubing |
|
34,859 |
|
|
27,798 |
|
|
|
174,435 |
|
|
146,812 |
|
Expenses |
|
138,609 |
|
|
124,689 |
|
Results from operating activities |
$ |
35,826 |
|
$ |
22,123 |
|
Adjusted EBITDA (1) |
$ |
44,776 |
|
$ |
31,867 |
|
Adjusted EBITDA % (1) |
|
26 |
% |
|
22 |
% |
Sales mix (% of segment revenue) |
|
|
|
|
Fracturing |
|
80 |
% |
|
81 |
% |
Coiled tubing |
|
20 |
% |
|
19 |
% |
Fracturing services |
|
|
|
|
Number of fracturing operating days (2) |
|
312 |
|
|
395 |
|
Proppant pumped (tonnes) |
|
296,000 |
|
|
323,000 |
|
Stages completed |
|
4,360 |
|
|
4,761 |
|
Horsepower (“HP”) |
|
|
|
|
Active pumping HP, end of period |
|
215,000 |
|
|
215,000 |
|
Total pumping HP, end of period (3) |
|
282,500 |
|
|
282,500 |
|
Coiled tubing services |
|
|
|
|
Number of coiled tubing operating days (2) |
|
572 |
|
|
561 |
|
Active coiled tubing units, end of period |
|
9 |
|
|
8 |
|
Total coiled tubing units, end of period |
|
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. (3) Active horsepower
denotes units active on client work sites. An additional 20-25% of
this amount is required to accommodate equipment maintenance
cycles.
FIRST QUARTER 2023 COMPARED TO FIRST
QUARTER 2022
Revenue for the three months ended March 31,
2023 was $174.4 million compared to $146.8 million for the same
period of the prior year. Favourable weather conditions and proper
client alignment resulted in steady utilization in both service
lines. Fracturing revenue set records for the quarter with four
large fracturing crews operating primarily in the gas and
condensate rich areas of Montney while the smaller low-pressure
crew was active in the oil rich Cardium and Viking formations.
Proppant pricing was higher quarter over quarter resulting in
increased revenue per operating day, however this was offset by the
number of fracturing operating days which decreased to 312 for Q1
of 2023 from 395 during the same period of 2022. Coil tubing
revenue benefited from cold weather extending into March allowing
for a longer operating cycle and saw operating days increase to 572
for Q1 2023 from 561 during the comparable period of 2022.
Adjusted EBITDA for the first quarter of 2023
was $44.8 million (26% of revenue) versus $31.9 million (22% of
revenue) in the first quarter of 2022. The year over year
improvement in results is a reflection of the improved industry
conditions, which provided STEP the opportunity to increase pricing
for its services.
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. The U.S. fracturing business has 207,500 fracturing HP,
of which 80,000 HP is Tier 4 diesel and 50,250 HP has direct
injection dual-fuel capabilities. 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 |
|
March 31, |
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Revenue: |
|
|
|
|
Fracturing |
$ |
49,317 |
|
$ |
49,667 |
|
Coiled tubing |
|
39,616 |
|
|
23,060 |
|
|
|
88,933 |
|
|
72,727 |
|
Expenses |
|
96,056 |
|
|
71,031 |
|
Results from operating activities |
$ |
(7,123 |
) |
$ |
1,696 |
|
Adjusted EBITDA (1) |
$ |
4,816 |
|
$ |
9,822 |
|
Adjusted EBITDA % (1) |
|
5 |
% |
|
14 |
% |
Sales mix (% of segment revenue) |
|
|
|
|
Fracturing |
|
55 |
% |
|
68 |
% |
Coiled tubing |
|
45 |
% |
|
32 |
% |
Fracturing services |
|
|
|
|
Number of fracturing operating days(2) |
|
161 |
|
|
220 |
|
Proppant pumped (tonnes) |
|
214,000 |
|
|
278,000 |
|
Stages completed |
|
1,001 |
|
|
1,122 |
|
Horsepower (“HP”) |
|
|
|
|
Active pumping HP, end of period |
|
165,000 |
|
|
165,000 |
|
Total pumping HP, end of period (3) |
|
207,500 |
|
|
207,500 |
|
Coiled tubing services |
|
|
|
|
Number of coiled tubing operating days (2) |
|
691 |
|
|
514 |
|
Active coiled tubing units, end of period |
|
12 |
|
|
8 |
|
Total coiled tubing units, end of period |
|
19 |
|
|
13 |
|
(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. (3) Active horsepower
denotes units active on client work sites. An additional 15-20% of
this amount is required to accommodate equipment maintenance
cycles.
FIRST QUARTER 2023 COMPARED TO FIRST
QUARTER 2022
Revenue for the three months ended March 31,
2023 was $88.9 million compared to $72.7 million at March 31, 2022.
The 22% increase over the $72.7 million of revenue generated for
the same period in 2022 was the result of higher operating days for
coiled tubing services. The additional units acquired last year
enabled STEP to deploy more fleets and benefit from the improved
macro-economic environment and overall oilfield activity
levels.
U.S. fracturing was impacted by shifting client
schedules related to drilling delays resulting in a year-over-year
decrease in operating days along with a decrease in proppant pumped
for the first quarter of 2023. A more robust preventative
maintenance program was completed on the idle fleets during Q1
which resulted in higher operating costs despite the lower activity
levels.
U.S. operations generated Adjusted EBITDA of
$4.8 million (5% of revenue) for first quarter 2023 versus $9.8
million (14% of revenue) in the first quarter of 2022. Lower
operating days and higher operating costs were the primary factors
in the year over year change in financial results.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 |
|
March 31, |
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Expenses: |
|
|
|
|
Operating expenses |
|
485 |
|
|
571 |
|
Selling, general and administrative |
|
(1,466 |
) |
|
8,722 |
|
Results from operating activities |
$ |
981 |
|
$ |
(9,293 |
) |
Add: |
|
|
|
|
Depreciation |
|
221 |
|
|
138 |
|
Share-based compensation |
|
(5,442 |
) |
|
4,457 |
|
Adjusted EBITDA (1) |
$ |
(4,240 |
) |
$ |
(4,698 |
) |
Adjusted EBITDA % (1) |
|
(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.
FIRST QUARTER 2023 COMPARED TO FIRST
QUARTER 2022
For the three months ended March 31, 2023, STEP
had a recovery from corporate activities of $1.0 million compared
to expenses of $9.3 million for the same period in 2022 due to the
mark to market adjustment on cash settled share-based compensation
in the current period. This expense was $9.9 million lower in Q1
2023 relative to Q1 2022, as the Company’s share price decreased by
$1.97 from December 31, 2022 to March 31, 2023 compared to a share
price increase of $1.19 during 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 |
|
March 31, |
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Net income |
$ |
19,656 |
|
$ |
9,173 |
|
Add (deduct): |
|
|
|
|
Depreciation and amortization |
|
20,774 |
|
|
17,072 |
|
Gain on disposal of equipment |
|
(273 |
) |
|
(818 |
) |
Finance costs |
|
2,900 |
|
|
3,317 |
|
Income tax expense |
|
6,169 |
|
|
2,560 |
|
Share-based compensation – Cash settled |
|
(6,418 |
) |
|
5,166 |
|
Share-based compensation – Equity settled |
|
1,322 |
|
|
340 |
|
Foreign exchange loss |
|
170 |
|
|
180 |
|
Unrealized loss on derivatives |
|
1,052 |
|
|
- |
|
Adjusted EBITDA |
$ |
45,352 |
|
$ |
36,990 |
|
Adjusted EBITDA % |
|
17 |
% |
|
17 |
% |
“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 |
|
March 31, |
|
March 31, |
|
|
|
2023 |
|
|
2022 |
|
Net cash provided by (used in) operating activities |
$ |
45,836 |
|
$ |
(16,843 |
) |
Add (deduct): |
|
|
|
|
Changes in non-cash Working Capital from operating activities |
|
(12,203 |
) |
|
50,805 |
|
Sustaining capital |
|
(14,702 |
) |
|
(8,911 |
) |
Term loan principal repayments |
|
- |
|
|
(6,988 |
) |
Lease payments (net of sublease receipts) |
|
(1,861 |
) |
|
(1,891 |
) |
Free Cash Flow |
$ |
17,070 |
|
$ |
16,172 |
|
“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) |
|
March 31, |
|
December 31, |
|
|
|
|
2023 |
|
|
2022 |
|
Current assets |
|
$ |
213,106 |
|
$ |
256,361 |
|
Current liabilities |
|
|
(148,441 |
) |
|
(189,781 |
) |
Working Capital (including cash and cash equivalents) |
|
$ |
64,665 |
|
$ |
66,580 |
|
The following table presents the composition of
the non-IFRS financial measure of Total long-term financial
liabilities.
($000s) |
|
March 31, |
December 31, |
|
|
|
2023 |
|
2022 |
Long-term loans |
|
$ |
130,577 |
$ |
140,794 |
Long-term leases |
|
|
12,225 |
|
13,860 |
Other long-term liabilities |
|
|
9,413 |
|
14,092 |
Total long-term financial liabilities |
|
$ |
152,215 |
$ |
168,746 |
The following table presents the composition of
the non-IFRS financial measure of Net debt.
($000s) |
|
March 31, |
|
December 31, |
|
|
|
|
2023 |
|
|
2022 |
|
Loans and borrowings |
|
$ |
130,577 |
|
$ |
140,794 |
|
Add back: Deferred financing costs |
|
|
2,450 |
|
|
2,704 |
|
Less: Cash and cash equivalents |
|
|
(1,237 |
) |
|
(2,785 |
) |
Less: CCS Derivatives liability |
|
|
1,252 |
|
|
1,511 |
|
Net debt |
|
$ |
133,042 |
|
$ |
142,224 |
|
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.sedar.com, 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:
2023 industry conditions and outlook, including the effect of
Russia related sanctions and OPEC+ supply limitations, recovery in
demand for oil and gas, industry production discipline, and other
macroeconomic factors the effect of new LNG facilities as well as
the resumption of U.S. LNG exports; OPEC+’s production as it
relates to oil prices; anticipated 2023 utilization levels,
commodity prices, and pricing for the Company’s services; recession
risk, including its effect on oil prices; the deferral of the
Company’s plans to field a fourth fracturing fleet in the U.S.;
timing of completion of the Company’s tier 4 DBG fracturing fleet
and anticipated substitution rates in the Company’s dual fuel
fleets; the effect of resumed industrial activity on Blueberry
River First Nation territorial lands; the effect of
under-investment in hydrocarbon production; supply and demand for
the Company’s and its competitors’ services, including the ability
for the industry to respond to demand increases; the effect of
inflation and related cost increases; expected pricing for the
Company’s services; the impact of weather and break up on the
Company’s operations; the competitive labour market; the potential
for commodity price volatility; the effect of changes in work scope
on expected margins; the Company’s ability to meet all financial
commitments including interest payments over the next twelve
months; the Company’s plans regarding additional 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; supply chain constraints impact on
new-build and refurbishment timelines; and the Company’s expected
compliance with covenants under its Credit Facilities and its
ability to satisfy its financial commitments thereunder.
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 the effect of OPEC or OPEC+ related capacity and
related uncertainty 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; 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; 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.
Actual results could 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 and the Annual MD&A.
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 the
document, 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 |
|
March 31, |
|
December 31, |
|
Unaudited (in thousands of Canadian dollars) |
|
|
2023 |
|
|
2022 |
|
ASSETS |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,237 |
|
$ |
2,785 |
|
Trade and other receivables |
|
|
157,056 |
|
|
199,004 |
|
Income tax receivable |
|
|
- |
|
|
137 |
|
Inventory |
|
|
49,078 |
|
|
46,410 |
|
Prepaid expenses and deposits |
|
|
5,735 |
|
|
8,025 |
|
|
|
|
213,106 |
|
|
256,361 |
|
Property and equipment |
|
|
403,111 |
|
|
402,482 |
|
Right-of-use assets |
|
|
21,607 |
|
|
23,528 |
|
Intangible assets |
|
|
151 |
|
|
161 |
|
Other assets |
|
|
4,225 |
|
|
- |
|
|
|
$ |
642,200 |
|
$ |
682,532 |
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS' EQUITY |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Trade and other payables |
|
$ |
125,353 |
|
$ |
165,869 |
|
Current portion of lease obligations |
|
|
8,436 |
|
|
8,326 |
|
Current portion of other liabilities |
|
|
7,093 |
|
|
6,526 |
|
Income tax payable |
|
|
7,559 |
|
|
9,060 |
|
|
|
|
148,441 |
|
|
189,781 |
|
Deferred tax liabilities |
|
|
15,773 |
|
|
17,972 |
|
Lease obligations |
|
|
12,225 |
|
|
13,860 |
|
Other liabilities |
|
|
9,413 |
|
|
14,092 |
|
Loans and borrowings |
|
|
130,577 |
|
|
140,794 |
|
|
|
|
316,429 |
|
|
376,499 |
|
Shareholders' equity |
|
|
|
|
|
Share capital |
|
|
453,756 |
|
|
453,702 |
|
Contributed surplus |
|
|
34,111 |
|
|
32,843 |
|
Accumulated other comprehensive income |
|
|
14,996 |
|
|
16,236 |
|
Deficit |
|
|
(177,092 |
) |
|
(196,748 |
) |
|
|
|
325,771 |
|
|
306,033 |
|
|
|
$ |
642,200 |
|
$ |
682,532 |
|
CONDENSED CONSOLIDATED INTERM STATEMENTS OF NET
INCOME AND OTHER COMPREHENSIVE INCOME
|
|
|
For the three months ended March 31, |
Unaudited(in thousands of Canadian dollars, except per share
amounts) |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
Revenue |
|
$ |
263,368 |
|
$ |
219,539 |
|
Operating expenses |
|
|
228,955 |
|
|
190,063 |
|
Gross profit |
|
|
34,413 |
|
|
29,476 |
|
|
|
|
|
|
|
Selling, general and administrative expenses |
|
|
4,729 |
|
|
14,950 |
|
Results from operating activities |
|
|
29,684 |
|
|
14,526 |
|
|
|
|
|
|
|
Finance costs |
|
|
2,900 |
|
|
3,317 |
|
Foreign exchange loss |
|
|
170 |
|
|
180 |
|
Unrealized loss on derivatives |
|
|
1,052 |
|
|
- |
|
Gain on disposal of property and equipment |
|
|
(273 |
) |
|
(818 |
) |
Amortization of intangible assets |
|
|
10 |
|
|
114 |
|
Income before income tax |
|
|
25,825 |
|
|
11,733 |
|
|
|
|
|
|
|
Income tax expense (recovery) |
|
|
|
|
|
Current |
|
|
8,352 |
|
|
- |
|
Deferred |
|
|
(2,183 |
) |
|
2,560 |
|
|
|
|
6,169 |
|
|
2,560 |
|
Net income |
|
|
19,656 |
|
|
9,173 |
|
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
|
Foreign currency translation loss |
|
|
(1,240 |
) |
|
(1,844 |
) |
Total comprehensive income |
|
$ |
18,416 |
|
$ |
7,329 |
|
Income per share: |
|
|
|
|
|
Basic |
|
$ |
0.27 |
|
$ |
0.14 |
|
Diluted |
|
$ |
0.26 |
|
$ |
0.13 |
|
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
CASH FLOWS
|
|
For the three months ended March 31, |
Unaudited (in thousands of Canadian dollars) |
|
|
2023 |
|
|
2022 |
|
|
|
|
|
|
|
Operating activities: |
|
|
|
|
|
Net income |
|
$ |
19,656 |
|
$ |
9,173 |
|
Adjusted for the following: |
|
|
|
|
|
Depreciation and amortization |
|
|
20,774 |
|
|
17,071 |
|
Share-based compensation (recovery) |
|
|
(5,096 |
) |
|
5,506 |
|
Unrealized foreign exchange loss |
|
|
114 |
|
|
290 |
|
Unrealized loss on derivatives |
|
|
1,052 |
|
|
- |
|
Gain on disposal of property and equipment |
|
|
(273 |
) |
|
(818 |
) |
Finance costs |
|
|
2,900 |
|
|
3,317 |
|
Income tax expense |
|
|
6,169 |
|
|
2,560 |
|
Income taxes paid |
|
|
(9,850 |
) |
|
- |
|
Cash finance costs paid |
|
|
(1,813 |
) |
|
(3,137 |
) |
Changes in non-cash working capital from operating activities |
|
|
12,203 |
|
|
(50,805 |
) |
Net cash provided by (used in) operating activities |
|
|
45,836 |
|
|
(16,843 |
) |
|
|
|
|
|
|
Investing activities: |
|
|
|
|
|
Purchase of property and equipment |
|
|
(25,992 |
) |
|
(11,714 |
) |
Proceeds from disposal of equipment and vehicles |
|
|
326 |
|
|
401 |
|
Changes in non-cash working capital from investing activities |
|
|
(9,304 |
) |
|
2,572 |
|
Net cash used in investing activities |
|
|
(34,970 |
) |
|
(8,741 |
) |
|
|
|
|
|
|
Financing activities: |
|
|
|
|
|
(Repayment) draws of loans and borrowings |
|
|
(10,526 |
) |
|
30,600 |
|
Repayment of obligations under finance lease |
|
|
(1,999 |
) |
|
(2,035 |
) |
Net cash provided by (used) in financing activities |
|
|
(12,525 |
) |
|
28,565 |
|
|
|
|
|
|
|
Impact of exchange rate changes on cash |
|
|
111 |
|
|
(42 |
) |
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents |
|
|
(1,548 |
) |
|
2,939 |
|
Cash and cash equivalents, beginning of period |
|
|
2,785 |
|
|
3,698 |
|
Cash and cash equivalents, end of period |
|
$ |
1,237 |
|
$ |
6,637 |
|
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.
For more information please
contact:
Steve GlanvillePresident and Chief Executive Officer |
|
Klaas DeemterChief Financial Officer |
|
|
Telephone: 403-457-1772 |
|
Telephone: 403-457-1772 |
|
|
Email: investor_relations@step-es.com Web:
www.stepenergyservices.com
STEP will host a conference call on Thursday,
May 11, 2023 at 9:00 a.m. MT to discuss the results for the First
Quarter of 2023.
To listen to the webcast of the conference call,
please click on the following URL:
https://viavid.webcasts.com/starthere.jsp?ei=1606160&tp_key=00bd569906.
You can also visit the Investors section of our
website at www.stepenergyservices.com and click on “Reports,
Presentations & Key Dates”.
To participate in the Q&A session, please
call the conference call operator at: 1-888-886-7786 (toll free) 15
minutes prior to the call’s start time and ask for “STEP Energy
Services First Quarter and 2023 Earnings Results Conference
Call”.
The conference call will be archived on STEP’s
website at www.stepenergyservices.com/investors.
STEP Energy Services (TSX:STEP)
과거 데이터 주식 차트
부터 10월(10) 2024 으로 11월(11) 2024
STEP Energy Services (TSX:STEP)
과거 데이터 주식 차트
부터 11월(11) 2023 으로 11월(11) 2024