Step Energy ((TSE:STEP)) has held its Q2 earnings call. Read on for the main highlights of the call.
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STEP Energy’s recent earnings call painted a mixed picture for investors, highlighting both technological progress and financial hurdles. While the introduction of NGx technology and increased operational efficiency were celebrated, these advancements were tempered by declining revenue, EBITDA, and net income, alongside the cessation of U.S. fracturing operations and broader market uncertainties.
Debt Reduction
STEP Energy Services made significant strides in reducing its net debt, bringing it down to $44 million from approximately $85 million in the previous quarter. This reduction is a positive step towards strengthening the company’s financial position amidst challenging market conditions.
Introduction of NGx Technology
One of the highlights of the earnings call was the successful trial of STEP’s NGx technology, Canada’s first fully natural gas-powered fracturing engine. The positive reception has led the company to plan the purchase of four additional NGx pumps for commercial deployment in the first quarter of 2026, showcasing STEP’s commitment to innovation and sustainability.
Operational Efficiency in Coiled Tubing
STEP’s North American coiled tubing segment demonstrated operational efficiency, with 21 units in operation and growing adoption of the Coil Plus technology for extended lateral mills. The company is nearing its 100th well in the U.S. and is set to execute its first program for a Canadian client, indicating robust growth in this segment.
Proppant Tariff Relief
The announcement of tariff relief for proppant imports was a positive development for STEP, achieved through collaboration with industry peers and advocacy efforts. This relief is expected to benefit the company by reducing costs and enhancing competitiveness.
Market Position in Montney
STEP holds a significant market share of approximately 30% in the Montney region. The company anticipates further growth driven by the deployment of NGx pumps, which could bolster its market position and drive future revenues.
Revenue and EBITDA Decline
The earnings call revealed a decline in Q2 consolidated revenues to $228 million from $308 million in the previous quarter, with adjusted EBITDA dropping to $35 million from $59 million. These declines highlight the financial challenges STEP is facing amid market uncertainties.
Net Income Decrease
STEP reported a decrease in net income to $6 million, or $0.08 per diluted share, compared to $24 million, or $0.33 per diluted share, in the prior quarter. This decline underscores the financial pressures impacting the company’s profitability.
Impact of Terminated U.S. Fracturing Operations
The termination of U.S. fracturing operations had a notable impact, with no revenue generated and a net loss of $5 million included in the Q2 2025 net income. This decision reflects the strategic adjustments STEP is making in response to market conditions.
Market Challenges and Pricing Pressure
Fluctuating commodity prices and reduced service prices are creating uncertainty and additional pressure on already compressed margins. These market challenges are a significant concern for STEP as it navigates the current economic landscape.
Forward-Looking Guidance
During the earnings call, STEP Energy Services provided guidance that reflects both challenges and opportunities. The company expects sequential revenue to be flat to down for the remainder of 2025, primarily due to a shift from STEP-supplied sand to client-supplied sand. Despite these challenges, STEP remains cautiously optimistic, focusing on cost management and operational efficiency while investing in promising technologies like the NGx pump.
In summary, STEP Energy’s earnings call highlighted a blend of technological advancements and financial challenges. While the company is making strides in innovation and operational efficiency, it faces significant financial pressures and market uncertainties. Investors will be closely watching how STEP navigates these challenges and leverages its technological advancements to drive future growth.