CALGARY, Alberta, September 14, 2022 (GLOBE NEWSWIRE) — STEP Energy Services Ltd. (“Company” or “STEP”) announced a customer-assisted Canadian fracturing facility upgrade and capital budget and balance sheet update.
Tier 4 Canadian Crusher Upgrade Program
STEP announced that it has signed a three-year service agreement with a major Canadian Intermediate E&P Company (“Producer”). With this, STEP will retrofit 16 of his pumps with his 2,500 horsepower (“HP”) Caterpillar Tier 4 Dynamic Gas Blending (DGB) engines. It cost $26.8 million. The 40,000 HP upgrade is secured by his $10 million up-front contract with the producer to his STEP, as well as a three-year first-use license agreement.
Tier 4 DGB engines with dual-fuel (natural gas and diesel) technology reduce NOx and particulate matter emissions compared to diesel-powered Tier 2 engines, as well as reduce the use of diesel fuel. up to 85% less. STEP’s experience shows that a state-of-the-art Tier 4 DGB engine can save clients up to $10 million in fuel costs while increasing reliability when maintained at high utilization rates over a 12-month period.
Pricing for Tier 4 fracturing work is linked to commodity prices and includes a cost inflation adjustment mechanism that allocates these risks between STEPs and producers. This creates a formula that provides producers with both cost and availability certainty while generating enough returns to meet STEP’s internal return thresholds. STEP expects refurbishments to occur at a rate of approximately two pumps per month over the eight months from October 2022 to mid-Q2 2023. STEP does not anticipate any reduction in effective crushing capacity during this period. Importantly, the deployment of this technology will not bring additional capacity to the Canadian crushing market, which is viewed as largely balanced from a supply and demand perspective.
STEP President and Chief Operating Officer Steve Glanville said: This upgrade program continues that legacy, combining all elements of STEP’s core values and uniquely aligning it with his industry-leading E&P company. We have consistently stated that the optimal working relationship between an energy services company and his E&P company is a partnership where both sides benefit from close working agreements that meet their respective economic and his ESG requirements. I came. We believe that the ability of Canada’s energy industry to participate meaningfully in increasing global energy demand will benefit from a model in which resource owners and key service providers share risks and rewards. We are very pleased to be able to implement such an arrangement. “
In addition to Tier 4 DGB upgrades, STEP mods certain other assets, such as a Tier 2 diesel-powered fracturing pump upgrade to add an industry-leading Tier 2 dual fuel kit. At the end of the upgrade program, STEP will have 227,500 HP of dual-fuel 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 United States, with a combined low-emission horsepower share of just over 60% in STEP’s fleet.
Capital expenditures and balance sheet updates
STEP’s board of directors has approved an increase to the company’s 2022 capital program to $87.5 million. The budget increase reflects the announcement of Tier 4 DGB and the cash component of the recently announced transaction of US-acquired coiled-tube assets.
STEP anticipates cash outlays of $75 million within calendar month 2022, partially offset by receipt of an upfront payment of $10 million, which will be received in stages based on agreed completion milestones. increase. The remaining balance will drop in 2023.
STEP is on track to exit in 2022 with a net debt to adjusted EBITDA ratio of less than 1.0x. The company will continue to focus on debt service, 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. STEP believes this fleet upgrade, combined with recent acquisitions of Deep Coil assets and field professionals, will strengthen its free cash flow profile going forward.
STEP has updated its corporate presentation to coincide with this announcement. The presentation is available on our website.
This press release contains terms and performance indicators commonly used in the oilfield services industry that are not defined in IFRS. The terms presented are intended to provide additional information and should not be considered either alone or as a substitute for performance measures prepared in accordance with IFRS. These non-IFRS measures do not have a standardized meaning under IFRS and may not be comparable to similar measures provided by other issuers. Non-IFRS measures should be read in conjunction with our quarterly and annual financial statements and accompanying notes.
“Adjusted EBITDA” is a financial measure not presented in accordance with IFRS, which includes net (loss) profit before finance costs, depreciation and amortization, loss (profit) on disposal of assets and equipment, current period and deferred income tax provisions and recoveries. , equity- and cash-settled share-based compensation, transaction costs, foreign exchange contract (gain) loss, foreign exchange (gain) loss and impairment loss. Because Adjusted EBITDA is widely used in the investment community, it shows the results produced by a company’s normal business activities before considering how the activities are financed and the taxation of the results. We use Adjusted EBITDA internally to measure operating and segment performance because management believes it enhances comparability between periods. “Net Debt” equals loans and borrowings before deferred financing costs less cash and cash equivalents. The adjusted net debt to adjusted EBITDA ratio is a non-IFRS ratio and is calculated by dividing net debt by adjusted EBITDA.
The reconciliation of the non-IFRS financial measures of Adjusted EBITDA to the IFRS financial measures of net income (loss) and the composition of net debt will be discussed and You can see it in your analysis. Available on SEDAR (www.sedar.com) (under “Non-IFRS Measures and Ratios”) and incorporated herein by reference.
Forward-Looking Information and Statements and Forward-Looking Financial Information and Outlook
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 future events, results of operations and management’s expectations regarding 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 the words “anticipate,” “expect,” “anticipate,” “opportunity,” “could,” “should,” and similar expressions identify forward-looking statements The purpose is that. These statements involve known and unknown risks, uncertainties and other factors that could cause actual results or events to differ materially from those anticipated in the forward-looking statements. Although STEP believes that the expectations reflected in the forward-looking statements contained in this press release are reasonable, such statements are not guarantees of future performance or results and could be erroneous. may turn out to be unreliable and should not be overly relied upon.
Specifically, this press release describes the potential reductions in diesel fuel usage (and associated cost savings) using Tier 4 DGB engines, the anticipated speed and duration of the retrofit process for Tier 4 DGB engines, and the anticipated future It includes, but is not limited to, forward-looking statements. Impact on our effective crushing capacity, anticipated receipt of advance payments, projected STEP fleet capacity, and equipment refurbishment costs.
The forward-looking information and statements contained in this press release reflect several important factors and expectations and assumptions of STEP. The impact of inflation on the cost of goods and equipment. Supplier’s ability to complete the Tier 4 DBG upgrade process. Fulfillment of producer obligations under contracts with us. STEP’s ability to utilize the equipment. STEP’s ability to collect trade and other receivables. STEP’s ability to acquire and retain qualified staff and equipment in a timely and cost-effective manner. The level of equipment that can be deployed in the market. future capital expenditures by STEP; future funding sources for STEP’s capital programs; STEP’s future debt level. Availability of unused credit capacity on STEP’s credit line. STEP believes that the material factors, expectations and assumptions reflected in its forward-looking information and statements are reasonable, but does not warrant that these factors, expectations and assumptions will prove correct. there is no.
This press release also includes forward-looking financial information and prospective information regarding STEP’s projected cash outflows, net debt, adjusted EBITDA, and net debt-to-adjusted EBITDA ratio (collectively, “FOFI”); They are all based on the same assumptions. , the risk factors, limitations and eligibility described in the paragraph above. STEP’s actual operating results and resulting financial results could differ from the amounts set forth in this press release, and such variations could be material. STEP and its management believe that the FOFI has been prepared on a reasonable basis and reflects management’s best estimates and judgments as of the date hereof. However, this information is subjective and subject to numerous risks and should not necessarily be relied upon as indicative of future results.
The forward-looking information and FOFI contained in this press release speaks only as of the date of the document and neither STEP nor any of its subsidiaries is making any statements to reflect new events or circumstances, except where necessary. undertakes no obligation to publicly update or revise them. in accordance with applicable law. Actual results may differ from these future results due to the risk factors described under the heading “Risk Factors” on STEP’s Annual Information Form for the year ended December 31, 2021, dated March 16, 2022. and may differ materially from those projected by FOFI. STEP Q2 2022 Management Discussions and Analysis, dated June 30, 2022, under the heading “Risk Factors and Risk Management.”
STEP is an energy services company that provides high capacity coiled tube and hydraulic fracturing services to North American operators. In Canada, STEP provides coiled tube and fracturing services in the Western Canada Sedimentary Basin. In the U.S., STEP provides coiled tubing and crushing services in Texas’ Permian Basin and Eagle Ford Shale Play, and coil tubing services in North Dakota’s Bakken Shale Play and Utah and Colorado’s Uintapissance and Niobrara DJ Basins. It offers. Respectively. STEP provides the expertise (people, equipment and knowledge) needed to improve operational efficiency and productivity in extended reach well design. At the heart of STEP’s strategy is the company’s commitment to secure project execution, dedication to its team of on-site experts, and ultimately to delivering an excellent client experience for oil and gas producers.
For more information, please contact:
President and Chief Operating Officer
Email: [email protected]
STEP Energy Services announces update of client-backed Tier 4 upgrade program and capital expenditures. Year-end 2022 balance sheet target reaffirmed, The Canadian Business Journal
Source link STEP Energy Services announces update of client-backed Tier 4 upgrade program and capital expenditures. Year-end 2022 balance sheet target reaffirmed, The Canadian Business Journal