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1. Company Snapshot

1.a. Company Description

STEP Energy Services Ltd., an oilfield service company, provides integrated coiled tubing, fracturing, and wireline solutions to service the oil and gas industry in Canada and the United States.It also provides chemical laboratory solutions; fluid pumping services for coiled tubing operations and standalone projects; and nitrogen pumping solutions for coiled tubing and hydraulic fracturing operations, as well as cased hole wireline and open hole wireline services.STEP Energy Services Ltd.


was incorporated in 2011 and is headquartered in Calgary, Canada.

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1.b. Last Insights on STEP

The recent 3 months performance of STEP Energy Services Ltd. was negatively impacted by a decline in revenue and adjusted EBITDA, driven by lower activity levels in the Canadian oilfield services market. The company's Q1 2025 earnings release revealed a 14% decrease in revenue and a 21% decline in adjusted EBITDA compared to the same period last year. Additionally, STEP's operating days decreased by 12% year-over-year, further contributing to the decline in revenue and profitability.

1.c. Company Highlights

2. STEP Energy Services' Q2 2025 Earnings: A Review of Financial Performance

STEP Energy Services reported a decline in consolidated revenues to $228 million for Q2 2025, largely attributed to the typical slowdown during the spring breakup season. The company's net income was $6 million, translating to $0.08 per diluted share, which fell short of analyst estimates of $0.185 per share. Adjusted EBITDA was $35 million, representing a 15% margin, while free cash flow stood at $17 million after spending $14 million on capital expenditures. The earnings report highlights the challenges faced by the company in a volatile commodity price environment.

Publication Date: Aug -28

📋 Highlights
  • Revenue Decline:: Consolidated revenues dropped to $228 million in Q2 2025, impacted by spring breakup season.
  • Profitability Metrics:: Net income of $6 million ($0.08 per share) and adjusted EBITDA of $35 million (15% margin) reported.
  • Capital Efficiency:: Free cash flow of $17 million generated, with $14 million spent on capital expenditures.
  • Technology Growth:: Coiled tubing segment operated 21 units, with expanding adoption of Coil Plus technology.
  • Debt Reduction:: Debt load reduced to $44 million, with asset sales planned to further pay down debt by year-end.

Operational Highlights and Client Relationships

Despite the financial challenges, STEP Energy Services maintained high utilization levels and strong client relationships, with its coiled tubing segment operating 21 units throughout the quarter. The company has seen growth in the adoption of its Coil Plus technology, indicating a positive response from clients. The trial of its NGx pump, a 3,600-horsepower purpose-built pump, has been met with positive client response, and the company plans to purchase four additional NGx pumps expected to be available for commercial deployment in Q1 2026.

Outlook and Market Positioning

Looking ahead, STEP Energy Services is cautious about the remainder of 2025 due to fluctuating commodity prices and uncertainty regarding client drilling activities. However, the company is well-positioned to capture growth opportunities in the Montney and Duvernay basins, with a 30% market share in the Montney. The company's debt load has decreased to $44 million, and it expects to sell some assets held for sale by the end of the year, which will be used to pay down debt.

Valuation and Financial Metrics

With a P/E Ratio of -15.36 and an EV/EBITDA of 3.92, the market appears to be pricing in the challenges faced by the company. The Free Cash Flow Yield stands at 14.7%, indicating a relatively attractive valuation. The Net Debt / EBITDA ratio is 0.69, suggesting a manageable debt burden. Analysts estimate revenue growth of 0.8% for the next year, which may provide some support to the stock.

3. NewsRoom

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STEP Energy Services Ltd. Reports Third Quarter 2025 Results

Nov -05

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STEP Energy Services Ltd. Announces Commencement of Sending and Filing of Circular for Special Meeting of Shareholders to Approve Arrangement

Nov -04

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STEP Energy Services Ltd. Agrees to $5.50 Per Share Take Private Transaction With Funds Advised by ARC Financial Corp.

Oct -17

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STEP Energy Services Ltd. Receives Non-Binding Offer From ARC Financial Corp.

Sep -25

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ARC ENERGY FUND 8 ANNOUNCES EXECUTION OF VOTING SUPPORT AGREEMENT WITH MMCAP INTERNATIONAL INC. SPC IN CONNECTION WITH THE PROPOSED GOING-PRIVATE TRANSACTION OF STEP ENERGY SERVICES LTD.

Sep -25

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STEP Energy Services Ltd. Reports Second Quarter 2025 Results

Aug -06

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STEP Energy Services Ltd. to Announce Second Quarter 2025 Results and Host Conference Call

Jul -04

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STEP Energy Services Ltd. Announces Annual General Meeting Voting Results and Appointment of Board Chair and Lead Director

Jun -05

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (8.16%)

6. Segments

Fracturing

Expected Growth: 8.5%

STEP Energy Services Ltd.'s fracturing segment growth of 8.5% is driven by increasing demand for oil and gas, improved operational efficiency, and strategic expansion into new markets. Additionally, investments in technology and equipment upgrades have enhanced service quality, leading to higher customer satisfaction and retention.

Coiled Tubing

Expected Growth: 7.43%

STEP Energy Services Ltd.'s Coiled Tubing segment growth of 7.43% is driven by increasing demand for oil and gas production, improved operational efficiency, and strategic expansion into new markets. Additionally, the company's focus on technology advancements, cost savings initiatives, and strong customer relationships have contributed to this growth.

7. Detailed Products

Coiled Tubing

A service that uses a continuous length of steel pipe to perform a variety of operations in oil and gas wells, including drilling, completion, and intervention.

Pumping and Nitrogen Services

A service that provides pumping and nitrogen solutions to enhance oil and gas production, improve wellbore cleanout, and optimize well intervention.

Coil Tubing Drilling

A service that uses coiled tubing to drill new wells or sidetrack existing wells, reducing costs and improving drilling efficiency.

Frac and Wireline Services

A service that provides hydraulic fracturing and wireline services to optimize oil and gas production, improve wellbore cleanout, and enhance reservoir performance.

E-Line and Wireline Services

A service that provides electric line (e-line) and wireline services to optimize oil and gas production, improve wellbore cleanout, and enhance reservoir performance.

8. STEP Energy Services Ltd.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for STEP Energy Services Ltd. is medium, as there are some alternative services available in the market, but they are not highly attractive to customers.

Bargaining Power Of Customers

The bargaining power of customers for STEP Energy Services Ltd. is low, as the company has a diverse customer base and no single customer has significant bargaining power.

Bargaining Power Of Suppliers

The bargaining power of suppliers for STEP Energy Services Ltd. is medium, as the company relies on a few key suppliers for its operations, but it also has some bargaining power due to its size and scale.

Threat Of New Entrants

The threat of new entrants for STEP Energy Services Ltd. is high, as the industry is attractive and there are low barriers to entry, making it easy for new companies to enter the market.

Intensity Of Rivalry

The intensity of rivalry for STEP Energy Services Ltd. is high, as the industry is highly competitive and there are many players competing for market share.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 21.07%
Debt Cost 13.18%
Equity Weight 78.93%
Equity Cost 14.66%
WACC 14.35%
Leverage 26.69%

11. Quality Control: STEP Energy Services Ltd. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Ranger Energy Services

A-Score: 5.6/10

Value: 7.8

Growth: 6.3

Quality: 5.5

Yield: 2.0

Momentum: 7.5

Volatility: 4.3

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TerraVest

A-Score: 5.4/10

Value: 2.3

Growth: 9.3

Quality: 4.6

Yield: 1.0

Momentum: 9.0

Volatility: 6.0

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STEP Energy Services

A-Score: 5.3/10

Value: 8.4

Growth: 7.3

Quality: 3.8

Yield: 0.0

Momentum: 8.5

Volatility: 4.0

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NOW

A-Score: 5.2/10

Value: 6.4

Growth: 5.9

Quality: 6.1

Yield: 0.0

Momentum: 7.5

Volatility: 5.3

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Select Energy Services

A-Score: 4.6/10

Value: 6.6

Growth: 5.9

Quality: 4.2

Yield: 3.0

Momentum: 4.0

Volatility: 4.0

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U.S. Silica Holdings

A-Score: 4.6/10

Value: 8.0

Growth: 6.9

Quality: 5.5

Yield: 0.0

Momentum: 5.0

Volatility: 2.3

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

5.5$

Current Price

5.5$

Potential

-0.00%

Expected Cash-Flows