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 nine months ended September 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 September 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 | Nine months ended | ||||||
| September 30, | September 30, | September 30, | September 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Consolidated revenue | $ | 227,237 | $ | 255,991 | $ | 762,981 | $ | 807,512 |
| Net income (loss) | $ | 6,782 | $ | (5,460) | $ | 36,786 | $ | 46,366 |
| Per share-basic | $ | 0.09 | $ | (0.08) | $ | 0.51 | $ | 0.65 |
| Per share-diluted | $ | 0.09 | $ | (0.08) | $ | 0.50 | $ | 0.62 |
| Adjusted EBITDA (1) | $ | 45,166 | $ | 49,369 | $ | 138,895 | $ | 162,196 |
| Adjusted EBITDA % (1) | 20% | 19% | 18% | 20% | ||||
| Free Cash Flow (1) | $ | 23,290 | $ | 28,404 | $ | 72,789 | $ | 102,347 |
| Per share-basic (1) | $ | 0.32 | $ | 0.40 | $ | 1.01 | $ | 1.43 |
| Per share-diluted (1) | $ | 0.31 | $ | 0.40 | $ | 0.98 | $ | 1.38 |
| (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) | September 30, | December 31 | ||
| 2025 | 2024 | |||
| Cash and cash equivalents | $ | 2,511 | $ | 4,362 |
| Working capital (including cash and cash equivalents) (1) | $ | 77,897 | $ | 35,355 |
| Total assets | $ | 599,981 | $ | 580,635 |
| Total long-term financial liabilities (1) | $ | 64,224 | $ | 83,394 |
| Net Debt (1) | $ | 36,302 | $ | 52,668 |
| Shares outstanding | 72,876,902 | 72,037,391 | ||
| (1) 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 | Nine months ended | ||||||
| September 30, | September 30, | September 30, | September 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Fracturing services | ||||||||
| Fracturing operating days (1)(2) | 345 | 360 | 1,144 | 1,304 | ||||
| Proppant pumped (tonnes) (3) | 524,000 | 594,000 | 1,844,700 | 2,064,000 | ||||
| Fracturing crews | 6 | 7 | 6 | 7 | ||||
| Dual fuel horsepower (“HP”), end of period | 369,550 | 367,050 | 369,550 | 367,050 | ||||
| Total HP, end of period | 478,400 | 490,000 | 478,400 | 490,000 | ||||
| Coiled tubing services | ||||||||
| Coiled tubing operating days (1) | 1,260 | 1,340 | 3,871 | 4,060 | ||||
| Active coiled tubing units, end of period | 21 | 22 | 21 | 22 | ||||
| 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 nine months ended September 30, 2025 (11 and 200 days for three and nine months ended September 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 nine months ended September 30, 2025 (21,000 and 430,000 for three and nine months ended September 30, 2024). | ||||||||
THIRD QUARTER 2025 HIGHLIGHTS
- Consolidated revenue for the three months ended September 30, 2025 of $227.2 million, was down from revenue of $256.0 million for the three months ended September 30, 2024 and in line with revenue from $228.0 million for the three months ended June 30, 2025.
- Net income for the three months ended September 30, 2025 was $6.8 million ($0.09 diluted income per share) compared to net loss of $5.5 million ($0.08 diluted loss per share) in the same period of 2024 and net income of $5.9 million ($0.08 diluted income per share) for the three months ended June 30, 2025. Included in net income for three months ended September 30, 2025 was:
- share based compensation expense of $3.7 million, compared to $1.7 million during the three months ended June 30, 2025 and $1.0 million during the three months ended September 30, 2024;
- net loss from terminated U.S. fracturing operations of $10.1 million, compared to $5.0 million during the three months ended June 30, 2025, and $26.9 million during the three months ended September 30, 2024, and;
- impairment expense of $4.6 million on assets held for sale and inventory write down of $3.0 million in operating expenses for terminated operations. This compares to an impairment expense of $12.7 million during the three months ended September 30, 2024. There was no impairment recorded during the three months ended June 30, 2025.
- For the three months ended September 30, 2025, Adjusted EBITDA was $45.2 million (20% of revenue) compared to $49.4 million (19% of revenue) in Q3 2024 and $34.8 million (15% of revenue) in Q2 2025.
- Free Cash Flow for the three months ended September 30, 2025 was $23.3 million compared to $28.4 million in Q3 2024 and $17.3 million in Q2 2025.
- During the third quarter of 2025, STEP did not repurchase any shares. For the year to date, STEP repurchased 783,200 shares at an average price of $4.32 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 $36.3 million at September 30, 2025, compared to $52.7 million at December 31, 2024 and $43.9 million at June 30, 2025.
- The Company invested $19.0 million for the three months ended September 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 September 30, 2025, of $77.9 million was $42.5 million higher than the $35.4 million as at December 31, 2024, and $0.9 million higher than the $77.0 million as at June 30, 2025. Working capital fluctuations are typical and are influenced by activity levels and timing of client receipts.
- On September 25, 2025, the Company announced the receipt of a non-binding offer (the ”Offer”) from ARC Financial Corp. (“ARC”) to acquire, through one or more funds managed by ARC, 100% of the issued and outstanding common shares in the capital of STEP not currently managed or owned, directly or indirectly, by ARC for a purchase price of $5.50 in cash per share. Funds managed by ARC currently own, directly or indirectly, or exercise control or direction over 55.22% of the issued and outstanding common shares of STEP. STEP also received from ARC copies of signed voting support agreements relating to the Offer among the limited partnerships comprising ARC Energy Fund 8 (a private equity fund advised by ARC Financial Corp.), 2659160 Alberta Ltd., and (i) MMCAP International Inc. SPC, (ii) XIB Arbitrage Master Fund and XIB International Aster Fund, by their advisor XIB Asset Management Inc., and (iii) Groundlayer Capital Inc.. Subsequent to the quarter end, STEP announced on October 17, 2025 that it entered into a definitive arrangement agreement with 2659160 Alberta Ltd. and the limited partnerships comprising ARC Energy Fund 8, following the unanimous approval of STEP’s board of directors of the arrangement agreement. Upon the successful completion of this transaction it is expected that the Company’s shares will be delisted from trading on the TSX and STEP would cease to be a reporting issuer.
THIRD QUARTER 2025 OVERVIEW
Commodity prices were volatile throughout the third quarter of 2025, with oil prices trading in a wide range and natural gas prices declining quarter over quarter. The decline in natural gas prices is due to slower than anticipated LNG uptake, muted industrial demand, and seasonal facility and pipeline maintenance. Oil prices were impacted by a combination of supply increases by members of the Organization of the Petroleum Exporting Countries (“OPEC”) and 10 non-OPEC allies such as Russia (collectively “OPEC+”), rising global inventories, and ongoing geopolitical tensions, including hostilities in the Middle East and new sanctions on Russian energy exports. Oil prices traded in a wide range from $57 to $75 (USD) per barrel, with the benchmark West Texas Intermediate (“WTI”) crude price averaging $64.97 (USD) per barrel in Q3 2025, up from $63.68 (USD) per barrel in Q2 2025. Henry Hub averaged $3.07 (USD) per MMBtu in Q3 2025, down from $3.51 (USD) per MMBtu in Q2 2025, while AECO-C Daily averaged approximately $0.61 (CAD) per Mcf in Q3 2025, down from $1.75 (CAD) per Mcf in Q2 2025.
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 525 rigs in the third quarter, down from 556 rigs in the second quarter. Canadian rig counts were up due to seasonal recovery, averaging 176 during the third quarter, compared to 127 in the spring break up affected second quarter. U.S. fracturing fleets declined in the third quarter to an average of 170, down from 192 in the second quarter of 2025.
STEP’s consolidated revenue in the third quarter was $227.2 million, in line with the $228.0 million in the second quarter of 2025 and down from with the $256.0 million recorded in the same period from the prior year. The fracturing service line had strong utilization through the quarter, with 345 operating days across six crews, pumping 524 thousand tons of sand. Coiled tubing services were also well utilized, operating 1,260 days across 21 units.
Adjusted EBITDA of $45.2 million (20% Adjusted EBITDA) was up from the $34.8 million (15% Adjusted EBITDA) in the second quarter of 2025 and down from $49.4 million (19% Adjusted EBITDA) in the same period last year.
Net income was $6.8 million in Q3 2025 ($0.09 diluted income per share), higher than the $5.9 million in Q2 2025 ($0.08 diluted income per share) and the $5.5 million net loss in Q3 2024 ($0.08 diluted loss per share). Net income included $3.7 million in share‐based compensation expense (Q2 2025 ‐ $1.7 million, Q3 2024 ‐ $1.0 million) and $1.7 million in finance costs (Q2 2025 ‐ $1.7 million, Q3 2024 ‐ $4.3 million). Included in net income were $10.1 million of expenses related to STEP’s terminated operations, including impairment expense of $4.6 million (Q2 2025 – nil, Q3 2024 – $12.7 million) and $3.0 million in operating expense related to inventory write down.
Free Cash Flow was $23.3 million in Q3 2025 ($0.31 diluted Free Cash Flow per share), sequentially higher than the $17.3 million ($0.24 diluted Free Cash Flow per share) in Q2 2025 and lower than the $28.4 million ($0.40 diluted Free Cash Flow per share) in Q3 2024. Working capital increased by $0.9 million from the second quarter of 2025, ending the quarter at $77.9 million, which is significantly higher than the $35.4 million at the end of the fourth quarter of 2024. The build in working capital is typical with the majority of the increase in the current year due to an increase in activity, resulting in higher accounts receivable, partially offset by an increase in current liabilities. Net Debt decreased to $36.3 million from $52.7 million at the close of 2024. Net Debt is now at its lowest level since Q1 of 2018 and is down over $270 million from the peak in 2018. The decrease in Net Debt combined with the slight decrease in Adjusted EBITDA from Q3 2024 resulted in a 12-month trailing Funded Debt to Adjusted Bank EBITDA of 0.35:1.00, well under the limit of 3:1 in the Company’s Credit Facilities (as defined in Capital Management – Debt below).
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 third quarter, resulting in Adjusted EBITDA from terminated operations of negative $3.6 million, which is not included in the Q3 reported Adjusted EBITDA of $45.2 million. The depressed state of the U.S. fracturing market has also reduced the value of the assets held for sale, necessitating further impairment of the remaining assets.
SIGNIFICANT EVENT
On September 25, 2025, STEP announced the receipt of a non-binding offer from ARC proposing to acquire all issued and outstanding common shares of STEP not already owned or controlled by ARC, for cash consideration of $5.50 per share. Funds managed by ARC currently own, directly or indirectly, or exercise control or direction over 55.22% of the issued and outstanding common shares of STEP. ARC subsequently entered into voting support agreements with minority shareholders representing approximately 32.11% of total shares and 71.71% of the minority shares, bringing the total ownership and support to 87.33%.
In response to the offer, STEP’s board of directors formed a special committee of independent directors (the “Special Committee”) consisting of Mr. Edward LaFehr (Chair), Mr. James Harbilas and Ms. Rachel Moore to review and consider the Offer, with Mr. Michael Kelly acting as an advisor. The Special Committee engaged Peters & Co. Limited as its financial advisor and Burnet, Duckworth & Palmer LLP as its legal advisor. Stikeman Elliott LLP is acting as legal advisor to STEP.
Following a comprehensive review, the Special Committee unanimously determined that the proposed transaction is in the best interests of the Company and recommended that the board approve the execution of a definitive arrangement agreement (the “Arrangement”). On October 17, 2025, STEP announced that it had entered into the Arrangement with ARC, which was unanimously approved by the board.
The Arrangement remains subject to the approval by the holders of Shares (the “Shareholders”), including the approval of holders of the Minority Shares, court approval and customary closing conditions. Further details regarding the Arrangement are provided in the management information circular (the “Circular”), which was sent to Shareholders on November 3, 2025, in connection with the special meeting of Shareholders (the “STEP Meeting”) to be held virtually on December 12, 2025.
Closing of the Arrangement is expected to occur on or about December 16, 2025, following the STEP Meeting and upon satisfaction of all conditions precedent, including receipt of the final order of the Court of King’s Bench of Alberta. Following completion of the Arrangement, it is expected that the Shares will be delisted from trading on the TSX and an application will be made for STEP to cease to be a reporting issuer.
MARKET OUTLOOK
The fourth quarter is expected to start strong, with high utilization anticipated for the first half of the quarter before slowing as clients wind down their annual capital programs. The seasonal holiday slowdown may start a bit earlier given the pressure on commodity prices, but STEP expects that this impact will be relatively muted based on client commentary.
Fracturing job mix is expected to remain consistent with the prior quarter, with high intensity operations focused on the Montney and Duvernay. Coiled tubing activity will see lighter utilization in the quarter as because of the slowdown in fracturing activity in Canada and the U.S. STEP’s Canadian, coiled tubing services will be impacted by the various public labour actions taking place in British Columbia, which are delaying issuance of the permits STEP requires to transport its specialized coiled tubing equipment.
STEP will focus on cost control in the quarter, while also preparing for a highly utilized first quarter in 2026. The Company experienced high utilization across much of 2025, so the equipment and field professionals will benefit from the slowdown. The fracturing schedule in Q1 2026 is almost fully booked, a reflection of STEP’s focus on securing longer term work agreements with leading producers in the basin. Coiled tubing services are expected to be similarly booked for the first quarter of 2026. Pricing for contracted fracturing work remains under pressure in response to lower commodity prices and surplus service capacity in the basin, which will likely result in margin compression relative to the same period in 2025. Coiled tubing prices have stabilized and are expected to increase in 2026 in response to the considerable cost inflation experienced in 2025.
The long-term outlook for oilfield services is very constructive. North America is expected to considerably expand its LNG export capacity through the coming decade, with Canada finally expected to participate in the growth that has driven the U.S. natural gas market with the expected addition of up to 4.5 BCF/day of capacity, complementing Canada’s first LNG project, LNG Canada, which has capacity of 2.1 BCF/day. The demand from LNG, plus the rapid demand growth coming from the power generation sector, is expected to support natural gas prices at more sustainable levels. Long term oil demand is expected to grow, although there are some near term headwinds expected in late 2025 and into 2026.
FINANCIAL REVIEW
| ($000’s except per share amounts) | Three months ended | Nine months ended | ||||||
| September 30, | September 30, | September 30, | September 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Fracturing | $ | 148,464 | $ | 175,888 | $ | 526,043 | $ | 559,972 |
| Coiled tubing | 78,773 | 80,103 | 236,938 | 247,540 | ||||
| Total revenue | 227,237 | 255,991 | 762,981 | 807,512 | ||||
| Operating expenses | 177,569 | 203,628 | 604,354 | 614,673 | ||||
| Depreciation and amortization | 17,003 | 25,866 | 57,791 | 72,489 | ||||
| Total operating expenses | 194,572 | 229,494 | 662,145 | 687,162 | ||||
| Gross profit | 32,665 | 26,497 | 100,836 | 120,350 | ||||
| Selling, general and administrative | 11,853 | 9,533 | 34,057 | 31,708 | ||||
| Depreciation and amortization | 120 | 146 | 379 | 460 | ||||
| Total selling, general and administrative | 11,973 | 9,679 | 34,436 | 32,168 | ||||
| Results from operating activities | 20,692 | 16,818 | 66,400 | 88,182 | ||||
| Finance costs | 1,688 | 4,336 | 5,398 | 10,016 | ||||
| Foreign exchange loss (gain) | 1,287 | (63) | (621) | 1,954 | ||||
| Unrealized (gain) loss on derivatives | (1,159) | 802 | (500) | (1,865) | ||||
| Gain on disposal of property and equipment | (211) | (1,218) | (1,413) | (4,382) | ||||
| Impairment of assets | 4,588 | 12,735 | 4,588 | 12,735 | ||||
| Amortization of intangible assets | 77 | 10 | 292 | 30 | ||||
| Income before income tax | 14,422 | 216 | 58,656 | 69,694 | ||||
| Income tax expense | 7,640 | 5,676 | 21,870 | 23,328 | ||||
| Net income (loss) | 6,782 | (5,460) | 36,786 | 46,366 | ||||
| Net Income (loss) per share – basic | $ | 0.09 | $ | (0.08) | $ | 0.51 | $ | 0.65 |
| Net Income (loss) per share – diluted | $ | 0.09 | $ | (0.08) | $ | 0.50 | $ | 0.62 |
| Adjusted EBITDA (1) | $ | 45,166 | $ | 49,369 | $ | 138,895 | $ | 162,196 |
| Adjusted EBITDA % (1) | 20% | 19% | 18% | 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 nine months ended September 30, 2025, revenue decreased 11% to $227.2 million and 6% to $763.0 million compared to $256.0 million and $807.5 million for the three and nine months ended September 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 seven for the same period of the prior year. Fracturing operating days for the quarter were down 4% and have decreased by 12% for the year to date. The reduction in fracturing crews and operating days is associated with the termination of U.S. fracturing operations during 2025. Fracturing revenue was down 16% for the quarter but only declined by 6% for the year to date which correlated with the decreased proppant pumped both in Canadian fracturing and as a result of the termination of the U.S fracturing operation in 2025.
Coiled tubing operating days for the quarter were down 6% and have decreased by 5% 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 units 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 | Nine months ended | ||||||
| September 30, | September 30, | September 30, | September 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Employee costs | $ | 51,381 | $ | 55,524 | $ | 169,906 | $ | 183,575 |
| Share-based compensation | 475 | 588 | 1,255 | 1,346 | ||||
| Operating expenses | 49,933 | 54,154 | 167,348 | 176,307 | ||||
| Material and inventory costs | 75,780 | 93,362 | 265,845 | 253,445 | ||||
| Operating expenses | 177,569 | 203,628 | 604,354 | 614,673 | ||||
| Depreciation and amortization | 17,003 | 25,866 | 57,791 | 72,489 | ||||
| Total operating expenses | $ | 194,572 | $ | 229,494 | $ | 662,145 | $ | 687,162 |
Employee costs and general operating expenses decreased compared to the prior year for both the quarter and year to date primarily due to the wind down of U.S. fracturing operations.
Material and inventory costs for the year to date increased significantly compared to the prior year as changes in sand mix, increases in STEP supplied sand and currency fluctuations increased the cost of materials. Material inventory costs for the quarter to date decreased compared to the prior year quarter primarily because of a decrease in STEP supplied proppant in Canadian operations.
Selling, general and administrative expenses
The following table provides a summary of selling, general and administrative expenses:
| ($000’s) | Three months ended | Nine months ended | ||||||
| September 30, | September 30, | September 30, | September 30, | |||||
| 2025 | 2024 | 2025 | 2024 | |||||
| Employee costs | $ | 6,077 | $ | 6,003 | $ | 20,594 | $ | 19,895 |
| Share-based compensation | 3,230 | 382 | 5,417 | 2,522 | ||||
| Allowance for doubtful accounts expense (recovery) | 108 | (60) | 348 | 327 | ||||
| General expenses | 2,438 | 3,208 | 7,698 | 8,964 | ||||
| Selling, general and administrative expenses | 11,853 | 9,533 | 34,057 | 31,708 | ||||
| Depreciation and amortization | 120 | 146 | 379 | 460 | ||||
| Total selling, general and administrative expenses | $ | 11,973 | $ | 9,679 | $ | 34,436 | $ | 32,168 |
Selling, general and administrative expenses increased from the prior year for both the quarter and year to date. Share-based compensation expense was significantly higher in the third quarter of 2025 compared to the same period of 2024 driven by a higher share price in Q3 2025 compared to the Q3 2024. For both the quarter and 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.
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