Step Energy Services (STEP) Q3 2024 earnings summary

Executive summary

• Q3 2024 consolidated revenues reached CAD 256 million, flat year-over-year and up from CAD 231 million in Q2; net loss of CAD 5.5 million due to a CAD 12.7 million impairment in U.S. assets.

• Adjusted EBITDA was CAD 44 million (17% margin), down from CAD 52 million (21% margin) in Q3 2023; Free Cash Flow was CAD 28 million.

• Net debt at quarter-end was CAD 61 million, down from CAD 76 million in Q2 and $245 million from 2018 peak.

• Announced a take-private transaction by ARC Financial at $5.00/share, with shareholder vote scheduled for December 19, 2024 and closing expected by year-end.

• Working capital at quarter-end was CAD 61 million.

Financial highlights

• Canadian segment Q3 revenue rose to CAD 211 million from CAD 158 million in Q3 2023; adjusted EBITDA increased to CAD 49 million.

• U.S. segment Q3 revenue dropped to CAD 45 million from CAD 98 million in Q3 2023; adjusted EBITDA loss of CAD 1 million.

• Free cash flow was CAD 28 million, down from CAD 37 million in Q3 2023 but up from CAD 21 million in Q2 2024.

• Cash and cash equivalents at quarter-end were CAD 1.5 million; total assets CAD 665 million.

• Q3 included CAD 1 million share-based compensation and a CAD 12.7 million impairment on U.S. fracturing assets.

Outlook and guidance

• Q4 expected to see a slowdown in both Canadian and U.S. operations due to seasonal and commodity price pressures.

• High utilization anticipated in Q1 2025 for Canadian fracturing and coiled tubing, with most capacity already booked.

• Persistent pricing pressures and margin compression expected to continue into H1 2025, with improvement in H2 as LNG capacity increases.

• U.S. fracturing service line not expected to contribute meaningfully in coming quarters; management evaluating options.

• Focus remains on free cash flow generation, deleveraging, and asset upgrades, targeting 90% dual-fuel fracturing horsepower by end of 2025.