September 14, 2022

STEP Energy Services Announces Client-Backed Tier Four Upgrade Program and Capital Spending Update. Re-Affirms Year-End 2022 Balance Sheet Target

CALGARY, Alberta, Sept. 14, 2022 (GLOBE NEWSWIRE) -- STEP Energy Services Ltd. (the “Company” or “STEP”) is pleased to announce a client-backed upgrade to our Canadian fracturing fleet as well as a capital budget and balance sheet update.

Tier Four Canadian Fracturing Fleet Upgrade Program

STEP announces that it has entered into a three-year services agreement with a leading intermediate E&P company (“Producer”) in Canada whereby STEP will refurbish 16 pumps with 2,500 horsepower (“HP”) Caterpillar Tier 4 Dynamic Gas Blending (DGB) engines at a cost of $26.8 million. The 40,000 HP upgrade has been secured by a $10 million prepayment commitment to STEP by the Producer and a three-year, first-right-of-use agreement.

Tier 4 DGB engines with dual-fuel (natural gas and diesel) technology offer up to 85% reduction in diesel fuel use, in addition to reducing nitrogen oxide and particulate matter emissions relative to diesel-powered Tier 2 engines. STEP’s experience has shown that over a 12-month period at high utilization, leading-edge Tier 4 DGB engines can save clients up to $10 million in fuel costs while adding enhanced reliability.

Pricing on the Tier 4 fracturing work is linked to commodity prices and includes cost inflation adjustment mechanisms, apportioning these risks between STEP and the Producer. This creates a formula that delivers both cost and availability certainty to the Producer, while generating returns that will be sufficient to meet STEP’s internal return thresholds. STEP anticipates refurbishments will occur at a rate of roughly two pumps per month over an eight-month period starting in October 2022 and ending in mid-Q2 2023. Given the staggered upgrade timing and the cycling in of other pumps held out for maintenance back-up, STEP does not anticipate any reductions to its effective fracturing capacity over this period. Importantly, the deployment of this technology does not represent additional capacity to a Canadian fracturing market that is viewed as roughly in balance from a supply-demand perspective.

STEP’s President and Chief Operating Officer, Steve Glanville, commented “STEP began operations in Western Canada as a technology leader committed to ESG principles. This upgrade program continues that legacy, combining all elements of STEP’s core values and uniquely aligning us with a leading E&P company. We’ve consistently said that the optimal working relationship between energy service and E&P companies is a partnership whereby both parties benefit from a close working arrangement that meets their own economic and ESG requirements. We believe that the Canadian energy industry’s ability to meaningfully participate in the world’s growing demand for energy will benefit from a model where risks and returns are shared by resource owners and key service providers. We are thrilled to put an arrangement like this in place.”

In addition to the Tier 4 DGB upgrade, STEP will retrofit certain other assets, including the upgrade of Tier 2 diesel-powered fracturing pumps to add the Company’s industry-leading Tier 2 dual-fuel kits. At the conclusion of the upgrade program, STEP will have 227,500 HP of dual-fuel capable fracturing equipment, representing approximately 46% of the Company’s total fracturing horsepower. STEP also operates 80,000 HP of Tier 4 conventional equipment in the U.S., bringing the total proportion of low emissions horsepower in STEP’s fleet to just over 60%.

Capital Spending and Balance Sheet Update

STEP’s Board of Directors has approved an increase to the Company’s 2022 capital program to $87.5 million. The increased budget reflects the Tier 4 DGB announcement as well as the cash component of the recently announced transaction of acquired coiled tubing assets in the U.S.

STEP expects a cash outlay of $75 million within calendar 2022, offset in part by the receipt of the $10 million prepayment which will be received in increments based on agreed completion milestones. The remaining balance will fall into 2023.

STEP remains on track to exit 2022 with a Net debt to Adjusted EBITDA ratio of less than 1.0x. The Company will continue to focus on debt repayment but will invest opportunistically where returns can be justified. The global community of energy investors is increasingly relying on free cash flow generation to value companies and STEP believes that this fleet upgrade combined with the recent acquisition of deep coil assets and field professionals will strengthen that free cash flow profile going forward.

Corporate Presentation

STEP has updated its Corporate Presentation in line with this announcement. The presentation can be found on the Company’s website.

Non-IFRS Measures

This press release includes terms and performance measures commonly used in the oilfield services industry that are not defined under IFRS. The terms presented are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with IFRS. These non-IFRS measures have no standardized meaning under IFRS and therefore may not be comparable to similar measures presented by other issuers. The non-IFRS measure should be read in conjunction with 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 presented because it is widely used by the investment community as it provides 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 internally to evaluate operating and segment performance, because management believes it provides better comparability between periods. “Net debt” is equal to loans and borrowings before deferred financing charges less cash and cash equivalents. Adjusted Net debt to Adjusted EBITDA ratio is a non-IFRS ratio and is calculated as Net debt divided by Adjusted EBITDA.

Reconciliations of the non-IFRS financial measure of Adjusted EBITDA to the IFRS financial measure of net income (loss), and the composition of Net debt can be found in STEP’s Management Discussion and Analysis for the second quarter 2022 dated as of June 30, 2022 (under “Non-IFRS Measures and Ratios”) which is available on SEDAR ( and incorporated herein by reference.

Forward-Looking Information & Statements and Future Oriented Financial Information and Financial Outlooks

Certain statements contained in this press release constitute “forward-looking statements” or “forward-looking information” within the meaning of applicable securities laws (collectively, “forward-looking statements”). These statements relate to the expectations of management about future events, results of operations and 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 “anticipates”, “expects”, “expected”, “opportunity”, “may”, “should”, and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. While STEP believes the expectations reflected in the forward-looking statements included in this press release are reasonable, such statements are not guarantees of future performance or outcomes and may prove to be incorrect and should not be unduly relied upon.

In particular, but without limitation, this press release contains forward-looking statements pertaining to: potential reductions to diesel fuel use (and related cost savings) using Tier 4 DGB engines, expected rate and duration of the Tier 4 DGB engine refurbishment process, anticipated effect on the Company’s effective fracturing capacity, anticipated receipt of prepayment amounts, anticipated STEP fleet capacity, and the cost to refurbish equipment.

The forward-looking information and statements contained in this press release reflect several material factors and expectations and assumptions of STEP including, without limitation: the general continuance of current or, where applicable, assumed industry conditions; the effect of inflation on the cost of goods and equipment; the ability of suppliers to complete the Tier 4 DBG upgrade process; the fulfilment of the Producer’s obligations under its contract with the Company; STEP’s ability to utilize its equipment; STEP’s ability to collect on trade and other receivables; STEP’s ability to obtain and retain qualified staff and equipment in a timely and cost effective manner; levels of deployable equipment in the marketplace; future capital expenditures to be made by STEP; future funding sources for STEP’s capital program; STEP’s future debt levels; and the availability of unused credit capacity on STEP’s credit lines. STEP believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable, but no assurance can be given that these factors, expectations and assumptions will prove correct.

This press also release contains future-oriented financial information and financial outlook information (collectively, "FOFI") about STEP’s expected cash outlay, Net debt, Adjusted EBITDA, and Net debt to Adjusted EBITDA ratio, all of which are subject to the same assumptions, risk factors, limitations, and qualifications as set forth in the above paragraphs. The actual results of operations of STEP and the resulting financial results will likely vary from the amounts set forth in this press release and such variation may be material. STEP and its management believe that the FOFI has been prepared on a reasonable basis, reflecting management's best estimates and judgments as of the date hereof; however, because this information is subjective and subject to numerous risks, it should not be relied on as necessarily indicative of future results.

The forward-looking information and FOFI contained in this press release speak only as of the date of the document, and none of STEP or its subsidiaries assumes any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws. Actual results could also differ materially from those anticipated in these forward‐looking statements and FOFI due to the risk factors set forth under the heading “Risk Factors” in STEP’s Annual Information Form for the year ended December 31, 2021 dated March 16, 2022 and under the heading “Risk Factors and Risk Management” in STEP’s Management Discussion and Analysis for the second quarter 2022 dated as of June 30, 2022.

About STEP

STEP is an energy service company providing deep capacity coiled tubing and hydraulic fracturing services to operators in North America. In Canada, STEP delivers coiled tubing and fracturing services in the Western Canadian Sedimentary Basin. In the U.S., STEP provides coiled tubing and fracturing services in the Permian Basin and Eagle Ford Shale Play in Texas along with coiled tubing services in the Bakken Shale Play in North Dakota and the Uinta-Piceance and Niobrara-DJ Basin in Utah and Colorado, respectively. STEP delivers the expertise – the people, the equipment, and the knowledge – required to improve operational efficiencies and productivity in extended reach wellbore designs. At the heart of STEP’s strategy is the company’s commitment to the execution of safe projects, its dedication to its team of field professionals and ultimately to providing oil and gas producers an Exceptional Client Experience.

For more information please contact:

Steve Glanville
President & Chief Operating OfficerKlaas Deemter
Chief Financial OfficerTelephone: 403-457-1772
Telephone: 403-457-1772


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