CALGARY, Alberta, Nov. 08, 2017 (GLOBE NEWSWIRE) -- STEP Energy Services Ltd. (TSX:STEP) (the “Company” or “STEP”) today announces record financial and operating results for the three and nine months ended September 30, 2017. The following press release should be read in conjunction with Management’s Discussion and Analysis (“MD&A”), condensed unaudited consolidated interim financial statements and notes thereto as at and for the three and nine months ended September 30, 2017 and the MD&A and audited consolidated financial statements as at and for the year ended December 31, 2016. All of the above documents are available on STEP’s website at www.stepenergyservices.com or on SEDAR at www.sedar.com.
FINANCIAL AND OPERATING Highlights
STEP’s operations in the third quarter resulted in record quarterly revenue, Adjusted EBITDA1, and positive net earnings during the period and year to date.
1 See Non-IFRS Measures. “Adjusted EBITDA” is a financial measure not presented in accordance with IFRS and is equal to net income before finance costs, depreciation and amortization, loss (gain) on disposal of property and equipment, impairment, current and deferred income tax, share‐based compensation, transaction costs and foreign exchange (gain) loss.
The Company’s consolidated third quarter financial and operating highlights are presented below.
|FINANCIAL|| Three months ended|
|Nine months ended |
|($000s except percentages, shares and per share amounts)||2017||2016||2017||2016|
|Net income (loss) attributable to shareholders||$||28,575||$||(1,242||)||$||40,167||$||(17,341||)|
|Adjusted EBITDA (1)||$||50,043||$||4,954||$||87,621||$||968|
|Adjusted EBITDA % (1)||29||%||9||%||22||%||1||%|
|($000s except per day, days, units, and HP)|
|Total fracturing operating days (1)||472||185||1,105||252|
|Fracturing revenue per operating day||$||252,912||$||165,333||$||241,964||$||151,246|
|Fracturing capacity (HP):|
|Average active HP||176,750||100,000||151,750||66,667|
|Exit active HP||176,750||100,000||176,750||100,000|
|Total HP (2)||297,500||297,500||297,500||297,500|
|Total coiled tubing operating days (1)||1,250||699||3,022||1,757|
|Coiled tubing revenue per operating day||$||44,930||$||39,479||$||43,546||$||38,063|
|Coiled tubing capacity:|
|Average active coiled tubing units||17||11||15||10|
|Exit active coiled tubing units||18||11||18||11|
|Total coiled tubing units||18||15||18||15|
(1) An operating day is defined as any coiled tubing and fracturing work that is performed in a 24 hour period, exclusive of support equipment.
(2) Represents total owned HP, of which 176,750 HP is currently deployed and the remainder of which requires certain maintenance and refurbishment.
|BALANCE SHEET||As at September 30,||As at December 31,|
|($000s except shares and per share amounts)||2017||2016|
|Cash and cash equivalents||$||60,206||$||2,151|
|Total long-term financial liabilities||$||8.538||$||33,994|
|Weighted average shares - basic||55,408,863||42,400,845|
|Weighted average shares - diluted||56,263,910||42,400,845|
(1) See Non-IFRS Measures. “Adjusted EBITDA” is a financial measure not presented in accordance with IFRS and is equal to net income before finance costs, depreciation and amortization, loss (gain) on disposal of property and equipment, impairment, current and deferred income tax, share‐based compensation, transaction costs and foreign exchange (gain) loss.
The Canadian pressure pumping market remained undersupplied through the third quarter of 2017, driving consistent demand for our services; these conditions continue to support our equipment deployment initiatives and allow the Company to leverage fixed costs over increasing activity. Average pricing has increased approximately 15-20% since the first quarter of 2017. We believe pricing has plateaued in response to uncertainty around future capital plans and volatility of commodities supporting our clients cash flow. Cost inflation from our suppliers continues as they restore capacity and profitability in their business. Activity was marginally impacted by adverse weather conditions in Canada and Hurricane Harvey in the U.S. While there was no impact to any of our assets, infrastructure or supply chain, the weather did result in minor work deferrals in impacted areas.
As at September 30, 2017, our Canadian operations were comprised of 297,500 fracturing HP, of which a fleet of six fracturing spreads representing 176,750 HP were staffed for 24-hour operations. During the third quarter, additional deployed assets and increased client activity resulted in a significant improvement in fracturing operating days. Increased fracturing intensity and improved pricing contributed to a fracturing revenue per day in Q3 2017 of $252,912, 53% higher than Q3 2016. All of STEP’s horsepower is deployed in Canadian plays where fracturing intensity is increasing, resulting in a positive impact on revenue per operating day. We expect to deploy our seventh fracturing spread in the fourth quarter of 2017, and an eighth spread in the first quarter of 2018.
At September 30, 2017, STEP had 12 fit-for-purpose coiled tubing spreads staffed and deployed in Canada, which compares to eight staffed units at September 30, 2016. Delivery and commissioning of the thirteenth coiled tubing spread is scheduled for the fourth quarter of 2017. The additional deployed equipment and increased utilization of our coiled tubing units contributed to a 73% increase in utilized days to 885 days in Q3 2017 from 511 days in Q3 2016.
The Canadian Segment generated record quarterly Adjusted EBITDA of $45.5 million (or 29%) in the third quarter of 2017 and $79.2 million (or 22%) year-to-date.
At the end of the third quarter, STEP had six active coiled tubing spreads in the U.S., the latest of which was deployed in mid-September, providing coiled tubing services to an expanding client list in the Permian and Eagle Ford basins in Texas and the Haynesville shale in Louisiana. STEP plans to take delivery of its seventh U.S. coiled tubing spread in the fourth quarter of 2017 and its eighth in the first quarter of 2018. Improved demand, additional deployed units, and continued growth in STEP’s client base contributed to increased coil tubing operating days to 365 days in Q3 2017 from 188 days in Q3 2016.
The U.S. Segment generated Adjusted EBITDA of $4.6 million (or 28%) in the third quarter of 2017 and $8.4 million (or 22%) year-to-date.
STEP expects the fourth quarter of 2017 to remain active, with normal accommodations for weather delays and holidays. Bookings into 2018 are supportive of an active first quarter and we have visibility to activity extending into the second quarter of 2018. We are mindful of commodity price volatility and the corresponding impact to our client’s cash flow and hence will monitor and adjust our equipment deployment plans according to these market indicators. Management believes we have reached pricing thresholds due to the current commodity price environment. The tightening supply chain, which includes major components, select proppants, and chemicals have resulted in cost inflation which we expect will continue through 2018. Management will continue to look for opportunities to offset inflationary pressure. Competition for skilled personnel, particularly field professionals, continues to moderate the pace of equipment deployment across the energy services industry. We anticipate that high utilization and growing fracturing intensity will result in increased maintenance costs.
STEP has expanded its 2017 capital program by $15 million, bringing the revised capital program to $115 million. The increase pertains primarily to higher maintenance capital due to stronger utilization, consolidation of our operating base infrastructure, and the deployment of additional pumping equipment for our U.S. coiled tubing operations. Upon completion of the 2017 program, we will have a fleet of 20 coiled tubing spreads (including seven in the U.S.) and seven fracturing spreads representing approximately 209,000 horsepower deployed (with an additional 88,500 horsepower in our fleet available for future deployment). Our eighth U.S. coiled tubing spread and eighth fracturing spread are planned for delivery in the first quarter of 2018. STEP’s ability to deploy additional equipment will be influenced by access to key components, shop capacity and the availability of qualified personnel to staff equipment.
Although STEP recognizes the market may become balanced as equipment reactivations are completed, continued increases in fracturing intensity have the potential to extend undersupplied conditions through 2018.
The Board has approved a 2018 capital program of $109 million, comprised of expansion capital of $73 million, maintenance capital of $29 million, and infrastructure and related investment of $7 million. Expansion capital includes the purchase of auxiliary equipment to support our Montney and Duvernay activities, construction of fit-for-purpose equipment to target oil plays, and refurbishment and rebranding of idle fracturing assets. Upon completion of the 2018 capital program we will operate 11 fracturing spreads representing approximately 305,000 HP and 16 coiled tubing spreads in Canada, and 11 coiled tubing spreads in the U.S.
STEP believes our commitment to modern fit-for-purpose equipment differentiates us in the market place. We are continually developing and deploying technology to advance our business. Such advancements include fiber optics and e-line with our coiled tubing operations, STEP-PLEX™ diverting agents in association with recompletion activities, and field equipment automation.
Please see the discussion in the Non‐IFRS Measures section of the MD&A for the reconciliation of non‐IFRS items to IFRS measures.
This document contains certain forward‐looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "should", "believe", "plans" and similar expressions are intended to identify forward‐looking information or statements. In particular, but without limiting the foregoing, this document contains forward‐ looking information and statements pertaining to the following: commissioning and staffing of equipment; the ability to deploy additional equipment; utilization; monitoring of client capital budgets; pricing thresholds in the current commodity environment; cost inflation; maintenance costs; market conditions and industry activity levels; and the amount of capital expenditures in 2017.
The forward‐looking information and statements contained in this document reflect several material factors and expectations and assumptions of the Company including, without limitation: that the Company will continue to conduct its operations in a manner consistent with past operations; the general continuance of current or, where applicable, assumed industry conditions; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the impact of seasonal weather conditions; the Company’s ability to deploy equipment; and certain cost assumptions. 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 to be correct.
The forward‐looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon. Such information and 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 information or statements including, without limitation: changes in the demand for or supply of the Company's services; unanticipated operating results; market uncertainty; the ability to access key components and shop capacity; the ability to attract and retain qualified personnel; changes in tax or environmental laws, or other regulatory matters; changes in the development plans of third parties; increased debt levels or debt service requirements; limited, unfavourable or a lack of access to capital markets; increased costs; the impact of competitors; and reliance on industry partners.
The forward‐looking information and statements contained in this document 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.
STEP Energy Services is an oilfield service company founded in 2011 that provides fully integrated coiled tubing and fracturing solutions. Our combination of modern, fit-for-purpose fracturing and coiled tubing equipment has differentiated STEP in plays where wells are deeper, have longer laterals, and higher pressure.
Initially operating only in Canada as a specialized, deep capacity coiled tubing company, in 2015 we expanded into the U.S. and also began offering fracturing services to our Canadian clients. Currently, STEP is a fully integrated, deep capacity coiled tubing and fracturing solutions provider focused primarily in the Montney and Duvernay in Canada, and as coiled tubing services provider in the Permian and Eagle Ford in Texas and the Haynesville in Louisiana. Our U.S. business is a key differentiator for STEP, as the rate of expansion and profitability from that segment is expected to contribute meaningfully to the Company’s growth. Our continuing track record of safety, efficiency and execution drives repeat business from our blue-chip exploration and production clients.
For more information please contact:
President & Chief Executive Officer