CALGARY, Alberta–(BUSINESS WIRE)–STEP Energy Services Ltd. (the “Company” or “STEP”) (TSX: STEP) is pleased to announce its financial and operating results for the three and six months ended June 30, 2025. The following Press Release should be read in conjunction with the management’s discussion and analysis (“MD&A”) and the unaudited condensed consolidated financial statements and notes thereto as at June 30, 2025 (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.sedarplus.ca, including the Company’s Annual Information Form for the year ended December 31, 2024 dated March 11, 2025 (the “AIF”).
CONSOLIDATED HIGHLIGHTS
FINANCIAL REVIEW
| ($000s except percentages and per share amounts) | Three months ended | Six months ended | ||||||
| June 30, | June 30, | June 30, | June 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Consolidated revenue | $ | 228,003 | $ | 231,375 | $ | 535,744 | $ | 551,521 |
| Net income | $ | 5,853 | $ | 10,469 | $ | 30,004 | $ | 51,826 |
| Per share-basic | $ | 0.08 | $ | 0.15 | $ | 0.42 | $ | 0.72 |
| Per share-diluted | $ | 0.08 | $ | 0.14 | $ | 0.41 | $ | 0.70 |
| Adjusted EBITDA (1) | $ | 34,769 | $ | 41,692 | $ | 93,729 | $ | 112,827 |
| Adjusted EBITDA % (1) | 15% | 18% | 17% | 20% | ||||
| Free Cash Flow (1) | $ | 17,327 | $ | 20,460 | $ | 49,499 | $ | 73,943 |
| Per share-basic (1) | $ | 0.24 | $ | 0.29 | $ | 0.69 | $ | 1.03 |
| Per share-diluted (1) | $ | 0.24 | $ | 0.28 | $ | 0.67 | $ | 1.00 |
| (1) Adjusted EBITDA, Free Cash Flow, Free Cash Flow per share-basic and Free Cash Flow per share-diluted 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. | ||||||||
| ($000s except shares) | June 30, | December 31 | ||
| 2025 | 2024 | |||
| Cash and cash equivalents | $ | 3,230 | $ | 4,362 |
| Working capital (including cash and cash equivalents) (2) | $ | 76,992 | $ | 35,355 |
| Total assets | $ | 613,516 | $ | 580,635 |
| Total long-term financial liabilities (2) | $ | 69,713 | $ | 83,394 |
| Net Debt (2) | $ | 43,912 | $ | 52,668 |
| Shares outstanding | 72,873,113 | 72,037,391 | ||
| (2) 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. | ||||
OPERATIONAL REVIEW
| ($000s except days, proppant, pumped, horsepower and units) | Three months ended | Six months ended | ||||||
| June 30, | June 30, | June 30, | June 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Fracturing services | ||||||||
| Fracturing operating days (1)(2) | 312 | 377 | 799 | 944 | ||||
| Proppant pumped (tonnes) (3) | 533,000 | 638,000 | 1,319,000 | 1,470,000 | ||||
| Fracturing crews | 6 | 8 | 6 | 8 | ||||
| Dual fuel horsepower (“HP”), end of period | 369,550 | 349,800 | 369,550 | 349,800 | ||||
| Total HP, end of period | 478,400 | 490,000 | 478,400 | 490,000 | ||||
| Coiled tubing services | ||||||||
| Coiled tubing operating days (1) | 1,227 | 1,368 | 2,611 | 2,720 | ||||
| Active coiled tubing units, end of period | 21 | 23 | 21 | 23 | ||||
| Total coiled tubing units, end of period | 35 | 35 | 35 | 35 | ||||
| (1) An operating day is defined as any coiled tubing or fracturing work that is performed in a 24-hour period, exclusive of support equipment. | ||||||||
| (2) Includes operational results from terminated operations of the U.S. fracturing cash generating unit (“CGU”) of nil and 54 days for the three and six months ended June 30, 2025 (72 and 189 days for three and six months ended June 30, 2024). | ||||||||
| (3) Includes proppant pumped (tonnes) from terminated operations of the U.S. fracturing cash generating unit (“CGU”) of nil and 155,330 for the three and six months ended June 30, 2025 (137,000 and 409,000 for three and six months ended June 30, 2024). | ||||||||
SECOND QUARTER 2025 HIGHLIGHTS
- Consolidated revenue for the three months ended June 30, 2025 of $228.0 million, was in line with revenue of $231.4 million for the three months ended June 30, 2024 and down 26% from $307.7 million for the three months ended March 31, 2025, which is typically the busiest quarter for the Company and the industry.
- Net income for the three months ended June 30, 2025 was $5.9 million ($0.08 per diluted share) compared to $10.5 million ($0.14 per diluted share) in the same period of 2024 and $24.2 million ($0.33 per diluted share) for the three months ended March 31, 2025. Included in net income for three months ended June 30, 2025 was share based compensation expense of $1.7 million, compared to $1.3 million during the three months ended March 31, 2025 and $2.1 million during the three months ended June 30, 2024.
- For the three months ended June 30, 2025, Adjusted EBITDA was $34.8 million (15% of revenue) compared to $41.7 million (18% of revenue) in Q2 2024 and $59.0 million (19% of revenue) in Q1 2025.
- Free Cash Flow for the three months ended June 30, 2025 was $17.3 million compared to $20.5 million in Q2 2024 and $32.2 million in Q1 2025.
- During the second quarter of 2025, STEP repurchased and cancelled 166,100 shares at an average price of $3.90 per share under its Normal Course Issuer Bid (“NCIB”).
- STEP continues to strengthen its balance sheet while investing into the long-term sustainability of the business:
- The Company had Net Debt of $43.9 million at June 30, 2025, compared to $52.7 million at December 31, 2024 and $84.7 million at March 31, 2025.
- The Company invested $13.5 million for the three months ended June 30, 2025 into sustaining and optimization capital budget expenditures, ensuring that the fleet maintains a high level of operational readiness while also selectively investing into technology to further STEP’s strategy of displacing diesel with natural gas.
- Working Capital as at June 30, 2025 of $77.0 million was $41.6 million higher than the $35.4 million at December 31, 2024 and $26.5 million lower than the $103.5 million as at March 31, 2025. Working capital fluctuations are typical and are influenced by activity levels and timing of client receipts.
SECOND QUARTER 2025 OVERVIEW
Commodity prices were volatile throughout the second quarter of 2025, with both oil and natural gas prices down approximately 10% quarter over quarter. The decline in gas prices is partially attributable to the shoulder season, when the reduced demand from winter heating has yet to be replaced by power demand for summer cooling. In addition to the ongoing turmoil created by the U.S. tariffs, oil prices were also impacted by the supply announcements from the Organization of the Petroleum Exporting Countries (“OPEC”) and allied non-OPEC nations (“OPEC+”) and the eruption of open hostilities between Israel and Iran. Oil prices traded in a wide range from $57 to $75 (USD) per barrel, with the benchmark West Texas Intermediate (“WTI”) crude price averaging $63.72 (USD) per barrel in Q2 2025, down from $71.42 (USD) per barrel in Q1 2025. Henry Hub averaged $3.52 (USD) per million cubic feet (“Mcf”) in Q2 2025, down from $3.87 (USD) per Mcf in Q1 2025, while AECO-C Daily averaged $1.75 (CAD) per Mcf in Q2 2025, down from $2.12 (CAD) per Mcf in Q1 2025. Natural gas prices typically benefit from the winter heating season, with colder weather driving higher demand.
Oilfield service levels are primarily reflected in drilling rig counts publicly reported by Baker Hughes and estimates made by Primary Vision for fracturing crews in the U.S. Land based drilling rigs in the U.S. averaged 556 rigs in the second quarter, down from 572 rigs in the first quarter. Canadian rig counts were down due to spring break up, averaging 127 during the second quarter, compared to 214 in the first quarter, which is typically the busiest drilling season in Canada. U.S. fracturing fleets declined in the second quarter to an average of 192, down from 202 in the first quarter of 2025.
STEP’s consolidated revenue in the second quarter was $228.0 million, down from $307.7 million in the first quarter of 2025 and in line with the $231.4 million recorded in the same period from the prior year despite the termination of the U.S. fracturing business. Despite the spring break up conditions, the fracturing service line had good utilization through the quarter, with 312 operating days across six crews, pumping 533 thousand tons of sand. Coiled tubing services were also well utilized, operating 1,227 days across 21 units.
Adjusted EBITDA of $34.8 million (15% Adjusted EBITDA %) was down from the $59.0 million (19% Adjusted EBITDA %) in the first quarter of 2025 and down from $41.7 million (18% Adjusted EBITDA %) in the same period last year. The Company’s margins continue to be impacted by the cumulative effect of several years of high inflation which increase the cost profile, oversupply of fracturing capacity in the market causing pricing pressure, and increased sand volumes which are generally at lower margins.
Net income was $5.9 million in Q2 2025 ($0.08 diluted income per share), lower than the $24.2 million in Q1 2025 ($0.33 diluted income per share) and the $10.5 million net income in Q2 2024 ($0.14 diluted income per share). Net income included $1.7 million in share‐based compensation expense (Q1 2025 ‐ $1.3 million, Q2 2024 ‐ $2.1 million expense) and $1.7 million in finance costs (Q1 2025 ‐ $2.0 million, Q2 2024 ‐ $2.8 million).
Free Cash Flow was $17.3 million in Q2 2025 ($0.24 diluted Free Cash Flow per share), sequentially lower than the $32.2 million ($0.43 diluted Free Cash Flow per share) in Q1 2025 and lower than the $20.5 million ($0.28 diluted Free Cash Flow per share) in Q2 2024. While working capital decreased by $26.5 million from the first quarter of 2025 to land at $77.0 million at the end of the second quarter, this was still significantly higher than the $35.4 million at the end of the fourth quarter of 2024. While the build in working capital is typical for the first half of the year, which follows a slower Q4 that realizes a sizable working capital recovery, the increase in the current year was inflated by the inclusion of $11.4 million in assets held for sale reclassified from property and equipment related to the terminated U.S. fracturing operations. Net Debt decreased to $43.9 million from $52.7 million at the close of 2024. The decrease in Net Debt and improvement in Adjusted EBITDA resulted in a 12-month trailing Funded Debt to Adjusted Bank EBITDA of 0.42:1.00, well under the limit of 3.00:1 in the Company’s Credit Facilities (as defined in Capital Management – Debt below). The Company continued its Normal Course Issuer Bid in the second quarter and acquired 166,100 shares at a weighted average price of $3.90 per share in the quarter.
Late in the first quarter of 2025, management committed to a plan to terminate the Company’s U.S. fracturing operations. Active operations were terminated and equipment has been marshalled to STEP’s yards for sale or transfer to Canada. Certain costs associated with legacy fracturing operations and decommissioning were incurred in the second quarter, resulting in Adjusted EBITDA from terminated operations of negative $2.9 million, which is not included in the Q2 reported Adjusted EBITDA of $34.8 million. These costs are expected to reduce to more modest levels for the balance of the year.
Market Outlook
The initial uncertainty stemming from the decisions made by the U.S. administration has lessened as markets discover that the tactical nature of these decisions means that they are likely to change through the course of negotiations. Similarly, the geopolitical tensions created by the conflict in the Middle East have also eased as the primary actors have backed away from deeper confrontation. Commodity prices continue to look for direction, drifting sideways until a clear catalyst for growth or recession becomes apparent.
North American gas prices are shifting from the shoulder season in Q2 to the more pronounced summer power demand season, although high storage levels will limit upside to price until the anticipated draw from new LNG offtake facilities begins to be felt in the markets. Canada’s first shipment of liquified natural gas (“LNG”) departed the LNG Canada facility on June 30, 2025, marking the successful start of operations for Canada’s first large scale LNG export facility. The multiyear outlook for natural gas continues to show promise, with approximately 10 billion cubic feet (“BCF”) per day of demand from additional LNG facilities in Canada and the U.S. expected by 2030, in addition to the demand for more power generation.
Oil prices have retreated from the second quarter spikes back to the mid $60s (USD) per barrel. Demand has remained relatively resilient, absorbing the additional OPEC+ supply that has been added to the market this year. Global crude oil and related product inventory levels are near the bottom of their five-year range, providing some buffer in the event that demand from the summer driving season isn’t enough to consume supply. Oil demand is expected to grow modestly, but catalysts for increased oil production in North America are limited, given the global market dynamics.
STEP’s revenue is largely driven by natural gas and natural gas liquids (“NGLs”), which should shield STEP’s schedule from the worst of the commodity price volatility. However, if the volatility continues and commodity prices weaken it is likely that clients could defer work into later quarters or trim their core capital programs. STEP maintains close contact with its clients and will adjust its operations if activity slows.
The third quarter fracturing schedule is expected to see a modest uptick in activity, although more client supplied sand, along with shifting client schedules and competitive pressures will likely result in flat to down sequential revenue. Margins on work with client supplied sand are typically higher relative to margins on work with STEP supplied sand, given the high volumes of sand pumped by many STEP clients. Offsetting this higher margin work is inflation on input costs, driven in many instances by the escalating tariff actions taken by governments around the world. The remission of tariffs on proppant imported from the U.S. provides some relief, but the ongoing tariffs on many products entering the U.S. and Canada are resulting in cost inflation that can be difficult to pass through to clients. STEP’s trial of the NGx, Canada’s first 100% natural gas powered fracturing pump is expected to see steady utilization as clients respond positively to the increased diesel displacement that this pump offers.
Coiled tubing activity is expected to stay relatively steady across all regions, with a slight increase in activity relative to the second quarter. Increased market penetration with STEP’s Coil+ split string technology is expected to offset the lower industry demand associated with a slowing rig count. Similar to fracturing, tariffs continue to impact the industry, particularly on the cost of coiled tubing strings, which is tariffed when it enters the U.S. as raw steel and then again when it enters Canada and is tariffed by the Canadian government. STEP has submitted a request for remission of the Canadian tariffs and is optimistic that it will be successful given the recent reversal of tariffs on proppant entering Canada.
Expectations for the fourth quarter remain modest. This quarter is typically characterized by slower activity as clients exhaust their annual capital budgets, resulting in margin compression for service providers as increased competition and lower fixed cost leverage weigh on results. The slower than expected ramp in demand coming from newly commissioned LNG facilities in Canada and the U.S. is limiting drawdown of natural gas inventories and is not expected to create sufficient market incentive for producers to add to their capital budgets for the year. Further clarity on this is likely to be forthcoming late in the third quarter or early in the fourth quarter.
Views on 2026 are beginning to clarify, with activity in the first quarter expected to be in line with the first quarter of 2025. Activity levels through the year will likely be affected by the ramp in production at LNG Canada, which will process approximately 2 BCF per day when fully operational.
On balance, pricing is largely in line with what was expected in 2025. Increased oilfield service capacity and limited producer growth has put downward pressure on margins relative to 2024. Cost control remains a focus for STEP as it navigates the current economic uncertainty.
Free Cash Flow will be committed towards additional fleet investments required for sustaining and optimization needs, as well as additional debt repayment. The increase in STEP’s share price and the cautious outlook meant that the NCIB was used only sparingly in the second quarter. The Company will retain the flexibility to engage opportunistically on the NCIB if conditions change.
FINANCIAL REVIEW
| ($000’s except per share amounts) | Three months ended | Six months ended | ||||||
| June 30, | June 30, | June 30, | June 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Fracturing | $ | 153,480 | $ | 147,742 | $ | 377,579 | $ | 384,084 |
| Coiled tubing | 74,523 | 83,633 | 158,165 | 167,437 | ||||
| Total revenue | 228,003 | 231,375 | 535,744 | 551,521 | ||||
| Operating expenses | 187,431 | 180,936 | 426,785 | 411,045 | ||||
| Depreciation and amortization | 20,169 | 26,125 | 40,788 | 46,623 | ||||
| Total operating expenses | 207,600 | 207,061 | 467,573 | 457,668 | ||||
| Gross profit | 20,403 | 24,314 | 68,171 | 93,853 | ||||
| Selling, general and administrative | 10,418 | 10,831 | 22,204 | 22,175 | ||||
| Depreciation and amortization | 122 | 154 | 259 | 314 | ||||
| Total selling, general and administrative | 10,540 | 10,985 | 22,463 | 22,489 | ||||
| Results from operating activities | 9,863 | 13,329 | 45,708 | 71,364 | ||||
| Finance costs | 1,732 | 2,771 | 3,710 | 5,680 | ||||
| Foreign exchange (gain) loss | (2,310) | (300) | (1,908) | 2,017 | ||||
| Unrealized loss (gain) on derivatives | 685 | (684) | 659 | (2,667) | ||||
| Gain on disposal of property and equipment | (468) | (2,806) | (1,202) | (3,164) | ||||
| Amortization of intangible assets | 77 | 10 | 215 | 20 | ||||
| Income before income tax | 10,147 | 14,338 | 44,234 | 69,478 | ||||
| Income tax expense | 4,294 | 3,869 | 14,230 | 17,652 | ||||
| Net income | 5,853 | 10,469 | 30,004 | 51,826 | ||||
| Net Income per share – basic | $ | 0.08 | $ | 0.15 | $ | 0.42 | $ | 0.72 |
| Net Income per share – diluted | $ | 0.08 | $ | 0.14 | $ | 0.41 | $ | 0.70 |
| Adjusted EBITDA (1) | $ | 34,769 | $ | 41,692 | $ | 93,729 | $ | 112,827 |
| Adjusted EBITDA % (1) | 15% | 18% | 17% | 20% | ||||
| (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. | ||||||||
Revenue
For the three and six months ended June 30, 2025, revenue decreased 1% to $228.0 million and 3% to $535.7 million compared to $231.4 million and $551.5 million for the three and six months ended June 30, 2024.
Alignment with large scale operators continues to provide a strong baseline of utilization for fracturing and coiled tubing operations in both the quarter and for the year to date. STEP operated six fracturing crews during the quarter, down from eight for the same period of the prior year. Fracturing operating days for the quarter were down 17% and have decreased by 15% for the year to date. The reduction in fracturing crews and operating days is all associated with the termination of U.S. fracturing operations during 2025. Despite the declines in operating days and active fleets, fracturing revenue was up 4% for the quarter and only declined by 2% for the year to date reflecting the increased proppant pumped for the Canadian Frac CGU as a result of higher pumping intensity.
STEP deactivated one coiled tubing spread during the quarter bringing the total active spreads back down to 21 which is down two spreads from the prior year. Coiled tubing operating days for the quarter were down 10% and have decreased by 4% for the year to date. New technology offerings and strategic client alignment in all operating basins have allowed the Company to maintain utilization levels per active spread despite the decrease in activity in the market as whole.
Operating expenses
Operating expenses includes employee costs, direct operating expenses such as repairs, transportation and facility costs, material and inventory costs, depreciation of equipment and share-based compensation for operational employees. The following table provides a summary of operating expenses:
| ($000’s) | Three months ended | Six months ended | ||||||
| June 30, | June 30, | June 30, | June 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Employee costs | $ | 54,543 | $ | 60,224 | $ | 118,525 | $ | 128,051 |
| Share-based compensation | 326 | 306 | 780 | 758 | ||||
| Operating expenses | 53,115 | 56,133 | 117,415 | 122,153 | ||||
| Material and inventory costs | 79,447 | 64,273 | 190,065 | 160,083 | ||||
| Operating expenses | 187,431 | 180,936 | 426,785 | 411,045 | ||||
| Depreciation and amortization | 20,169 | 26,125 | 40,788 | 46,623 | ||||
| Total operating expenses | $ | 207,600 | $ | 207,061 | $ | 467,573 | $ | 457,668 |
Employee costs and general operating expenses decreased slightly compared to the prior year for both the quarter and year to date as the wind down of U.S. fracturing operations was partially offset by inflationary impacts.
Material and inventory costs increased significantly compared to the prior year for both the quarter and year to date as changes in sand mix, increases in STEP supplied sand and currency fluctuations increased the cost of materials.
Selling, general and administrative expenses
The following table provides a summary of selling, general and administrative expenses:
| ($000’s) | Three months ended | Six months ended | ||||||
| June 30, | June 30, | June 30, | June 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Employee costs | $ | 6,592 | $ | 6,172 | $ | 14,517 | $ | 13,892 |
| Share-based compensation | 1,352 | 1,752 | 2,187 | 2,140 | ||||
| Allowance for doubtful accounts expense | (166) | (134) | 240 | 387 | ||||
| General and organizational expenses | 2,640 | 3,041 | 5,260 | 5,756 | ||||
| Selling, general and administrative expenses | 10,418 | 10,831 | 22,204 | 22,175 | ||||
| Depreciation and amortization | 122 | 154 | 259 | 314 | ||||
| Total selling, general and administrative expenses | $ | 10,540 | $ | 10,985 | $ | 22,463 | $ | 22,489 |
Selling, general and administrative expenses were in line with the prior year for both the quarter and year to date. Share-based compensation expense was slightly lower in the second quarter of 2025 compared to the same period of 2024 as the share price was lower, however this was largely offset by higher employee costs. For the year to date, the higher employee costs in 2025 compared to the prior year have been largely offset by reduced general expenses.
Terminated Operations
Results from consolidated operations include the results from the terminated operations presented below. In the first quarter of 2025, the U.S. fracturing CGU was subject to changes in business conditions that materially impacted its expected economic performance. As a result, STEP decided to exit this market and terminated all further work related to these operations. The results of the terminated operations are as follows:
| ($000’s) | Three months ended | Six months ended | ||||||
| June 30, | June 30, | June 30, | June 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Revenues | $ | – | $ | 22,868 | $ | 13,650 | $ | 60,839 |
| Operating expenses | 2,925 | 21,664 | 16,053 | 49,538 | ||||
| Selling, general and administrative | 12 | 1,231 | 1,604 | 2,930 | ||||
| Depreciation and amortization | 2,351 | 11,966 | 5,842 | 18,528 | ||||
| Share based compensation (recovery) expense | (88) | 55 | (258) | 154 | ||||
| Other recoveries | (224) | (1,641) | (582) | (1,590) | ||||
| Expenses | $ | 4,976 | $ | 33,275 | $ | 22,659 | $ | 69,560 |
| Loss from terminated U.S. fracturing operations | (4,976) | (10,407) | (9,009) | (8,721) | ||||
| Income tax recoveries from terminated U.S. fracturing operations | – | (1,568) | – | (1,100) | ||||
| Net loss from terminated U.S fracturing operations, net of taxes | $ | (4,976) | $ | (8,839) | $ | (9,009) | $ | (7,621) |
| ($000’s) | Three months ended | Six months ended | ||||||
| June 30, | June 30, | June 30, | June 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| U.S. Fracturing services terminated operations | ||||||||
| Fracturing operating days (1) | – | 72 | 54 | 189 | ||||
| Proppant pumped (tonnes) | – | 137,000 | 155,330 | 409,000 | ||||
| Fracturing crews | – | 2 | – | 2 | ||||
| (1) An operating day is defined as any coiled tubing or fracturing work that is performed in a 24-hour period, exclusive of support equipment. | ||||||||
Contacts
For more information please contact:
Steve Glanville
President and Chief Executive Officer
Telephone: 403-457-1772
Klaas Deemter
Chief Financial Officer
Telephone: 403-457-1772
Email: investor relations@step-es.com
Web: www.stepenergyservices.com