Step Energy ((TSE:STEP)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The recent earnings call from Step Energy presented a balanced mix of optimism and caution. On the positive side, the company reported a significant revenue increase and improved EBITDA, alongside innovative advancements in natural gas operations. However, challenges such as the termination of U.S. operations, increased net debt, and geopolitical tensions were highlighted as potential risks to future performance.
Significant Revenue Increase
Step Energy’s Q1 consolidated revenues soared to CAD308 million, a substantial jump from the previous quarter’s CAD148 million. This impressive growth is attributed to the reset of client capital budgets, marking a strong start to the year.
Improved Adjusted EBITDA
The company reported an adjusted EBITDA of CAD59 million for the first quarter, reflecting a 19% margin. This is a notable improvement from the prior quarter’s CAD8 million or a 5% margin, showcasing enhanced operational efficiency.
Net Income Recovery
Step Energy achieved a net income of CAD24 million or CAD0.33 per diluted share in Q1, a significant recovery from a loss of CAD45 million or negative CAD0.62 per diluted share in the previous quarter.
Strong Operational Achievements
The company’s North American operations delivered excellent results, with 22 units running throughout the quarter. Significant milestones were achieved in coiled-tubing and fracturing operations, underscoring operational strength.
Innovation in Natural Gas Operations
Step Energy introduced Canada’s first 100% natural gas reciprocating engine, the NGx, which achieved diesel displacement rates of up to 90% during initial field trials, marking a significant innovation in their operations.
Termination of U.S. Fracturing Division
The company decided to terminate its U.S. fracturing division, leading to an internal leadership reorganization and a strategic move to consolidate into one operating segment.
Free Cash Flow Decline
Free cash flow for the quarter was CAD32 million, down from CAD53 million in the same quarter last year, indicating a year-over-year decline.
Increased Net Debt
Step Energy ended the quarter with net debt of CAD85 million, a rise from approximately CAD53 million in the previous quarter, primarily due to a CAD68.2 million increase in working capital.
Potential Impact of Geopolitical Tensions
Geopolitical tensions and retaliatory tariffs by the Canadian government are anticipated to exert additional pressure on operating costs and margins, posing a challenge for the company.
Forward-Looking Guidance
Looking ahead, Step Energy provided detailed guidance for 2025, forecasting stable activity levels despite potential impacts from geopolitical tensions, commodity price fluctuations, and Canadian government tariffs. The company remains focused on maintaining its operational achievements and deploying advanced technologies like the NGx pump to enhance efficiency.
In conclusion, Step Energy’s earnings call reflected a cautiously optimistic outlook. While the company has demonstrated strong revenue growth and operational advancements, challenges such as increased debt and geopolitical risks remain. Investors will be keenly watching how these factors influence the company’s future performance.