Step Energy ((TSE:STEP)) has held its Q4 earnings call. Read on for the main highlights of the call.
The latest earnings call from Step Energy paints a mixed picture for the company. While there are significant achievements in Canadian operations, technology advancements, and debt reduction, these are counterbalanced by revenue declines, operational shutdowns in the U.S., and pricing pressures. The sentiment leans towards a cautious outlook with optimism in certain areas, but significant challenges remain.
Record Canadian Revenue
Step Energy’s Canadian operations have reached new heights, with full-year revenue for 2024 hitting $723 million, up from $580 million in 2023. This marks a record year for the company in this geographic region, showcasing the strength and growth potential of its Canadian market.
Debt Reduction Achievement
The company has made significant strides in reducing its debt, ending the quarter with a net debt of $53 million, down from $88 million at the end of 2023. This is a substantial decrease from $142 million at the end of 2022, reflecting the company’s commitment to improving its financial health.
Successful Technology Initiatives
Step Energy has successfully acquired proprietary technology behind the STEP-conneCT tool, which enhances real-time decision-making during operations. Additionally, the company has expanded its ultra-deep coiled tubing capabilities with the Coil+ technology, positioning itself at the forefront of technological advancements in the industry.
Operational Efficiency in Canada
The company’s North American pressure pumping business achieved a record by pumping 2.3 million tons of proppant, an 8% increase from 2023. Notably, there was a 64% year-over-year increase in Canada, highlighting the operational efficiencies and growth in this region.
Significant Revenue Drop in Q4
Despite the successes, Step Energy faced a significant revenue drop in Q4, with revenues falling to $147 million from $256 million in Q3. The company reported a net loss of $45 million compared to a $5.5 million net loss in the prior quarter, indicating challenges in maintaining revenue momentum.
Impairment and Wind-Down of U.S. Operations
The company recorded a $23.9 million non-cash impairment due to the wind down of its U.S. fracturing service line. This decision was made as Step Energy struggled to compete with larger competitors in the U.S. market.
Challenges with Depressed Commodity Prices
Depressed commodity prices in 2024 led clients to curtail their capital spending early, exacerbating the Q4 slowdown. This has been a significant challenge for Step Energy, impacting its overall financial performance.
Pricing and Margin Pressures
Service pricing in Canada has been lower than Q1 2024 levels, with margin compression resulting from the weakening Canadian dollar and increased input costs. These factors have put additional pressure on the company’s profitability.
Forward-Looking Guidance
Looking ahead, Step Energy reported consolidated revenue of $147 million in Q4, down from $256 million in Q3. The adjusted EBITDA for Q4 was $4 million, representing a 3% margin, a decline from $44 million or a 17% margin in the previous quarter. The company achieved a full-year consolidated revenue of $955 million, slightly up from $946 million in 2023. Despite the challenges, Step Energy ended the quarter with a net debt of $53 million, down from $88 million at the end of 2023, indicating a positive step towards financial stability.
In conclusion, Step Energy’s earnings call reflects a cautious optimism amid significant challenges. While the company has made impressive strides in Canadian operations and technology advancements, it faces hurdles in the form of revenue declines and operational challenges in the U.S. The forward-looking guidance suggests a focus on maintaining financial health and navigating the pressures of the current market environment.