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Step Energy (TSE:STEP)
:STEP
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STEP Energy Services
(TSX:STEP)
64Neutral
Positive Factors
Debt Reduction
Large client receipts near the end of Q4 helped reduce net debt to $52.7 million, down from $60.7 million in Q3/24.
Free Cash Flow
STEP generated free cash flow of $28 million in the quarter and has now reduced net debt to a very comfortable level.
Negative Factors
Pricing Pressure
Canadian pressure pumpers face pricing pressure due to increased fleet migration into the WCSB during Q4/24.
US Market Oversupply
The U.S. market faces oversupply issues which keeps the analyst on the sidelines for now.
STEP Energy Services (STEP) vs. S&P 500 (SPY)
Market Cap
C$317.80M
Dividend YieldN/A
Average Volume (3M)22.03K
Price to Earnings (P/E)169.6
Beta (1Y)1.47
Revenue Growth0.98%
EPS Growth-96.29%
CountryCA
Employees1,251
SectorEnergy
Sector Strength85
IndustryOil & Gas Equipment & Services
Share Statistics
EPS (TTM)0.03
Shares Outstanding72,063,370
10 Day Avg. Volume16,120
30 Day Avg. Volume22,027
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)0.32
Price to Cash Flow (P/CF)2.40
P/FCF Ratio6.20
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$5.17Price Target Upside17.23% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering3
STEP Energy Services Business Overview & Revenue Model
Company DescriptionSTEP Energy Services (STEP) is a leading energy services company that provides specialized coiled tubing, fluid and nitrogen pumping, and hydraulic fracturing solutions to oil and gas exploration and production companies. Operating primarily in North America, STEP is known for its commitment to safety, efficiency, and innovative technology, offering a range of services designed to improve well performance and reduce operational costs for its clients.
How the Company Makes MoneySTEP Energy Services generates revenue through the provision of its specialized energy services to oil and gas companies. Key revenue streams include fees for coiled tubing operations, fluid and nitrogen pumping services, and hydraulic fracturing solutions. The company often enters into service contracts with exploration and production companies, with pricing based on the scope and complexity of the services provided. Additionally, STEP may benefit from strategic partnerships and collaborations that enhance its service offerings and expand its market reach, contributing to its overall earnings.
STEP Energy Services Financial Statement Overview
Summary
STEP Energy Services has shown a commendable recovery in its financial metrics. The income statement improvements indicate better cost management and profitability, though margins remain thin. The balance sheet reflects reduced leverage and stronger equity, while cash flow metrics highlight robust liquidity and effective cash management. Despite these improvements, caution is advised due to historically low ROE and thin margins.Income Statement
STEP Energy Services has shown a significant recovery in its income statement metrics over recent years. The gross profit margin improved from negative figures in 2020 to approximately 11.5% in 2024, indicating better cost management. The net profit margin increased from a substantial loss in 2020 to a marginal profit in 2024, reflecting improved profitability. Revenue growth rate from 2019 to 2024 showed fluctuations, with a notable dip in 2023 but a recovery in 2024. Despite this, the EBIT and EBITDA margins have consistently improved, suggesting enhanced operational efficiency. Overall, the income statement shows positive trends but remains moderate due to thin net margins.72
Positive
Balance Sheet
The balance sheet of STEP Energy Services shows a gradual improvement in financial stability. The debt-to-equity ratio has decreased from 0.79 in 2019 to 0.23 in 2024, indicating reduced financial leverage and improved risk profile. The return on equity remains low due to thin net income, though it marks a recovery from previous losses. The equity ratio improved from 47.1% in 2019 to 63.8% in 2024, reflecting a stronger equity position. While the company has made strides in strengthening its balance sheet, the low ROE and past high leverage suggest caution.68
Positive
Cash Flow
STEP Energy Services exhibits strong cash flow management. The operating cash flow to net income ratio is robust, indicating effective conversion of profits into cash. Free cash flow has shown positive growth over the years, despite some fluctuations. The positive free cash flow to net income ratio demonstrates the company's ability to generate cash beyond its net earnings. Additionally, the reduction in capital expenditure supports improved free cash flow, enhancing financial flexibility. Overall, the cash flow metrics indicate strong liquidity and cash management capabilities.75
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 954.97M | 945.72M | 989.02M | 536.31M | 368.94M | Gross Profit |
| 110.19M | 116.14M | 147.59M | 17.76M | -33.41M | EBIT |
| 66.47M | 77.84M | 90.26M | -19.97M | -63.40M | EBITDA |
| 128.46M | 163.31M | 221.38M | 54.55M | -41.74M | Net Income Common Stockholders |
| 1.76M | 50.42M | 94.78M | -28.13M | -119.36M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 4.36M | 1.78M | 2.79M | 3.70M | 1.27M | Total Assets |
| 580.63M | 606.52M | 682.53M | 483.85M | 479.86M | Total Debt |
| 84.47M | 113.63M | 162.98M | 205.33M | 220.35M | Net Debt |
| 80.11M | 111.85M | 160.19M | 201.63M | 219.08M | Total Liabilities |
| 210.11M | 250.97M | 376.50M | 306.41M | 275.28M | Stockholders Equity |
| 370.53M | 355.55M | 306.03M | 177.44M | 204.58M |
| Cash Flow | Free Cash Flow | |||
| 51.72M | 66.43M | 39.62M | 21.60M | 28.98M | Operating Cash Flow |
| 146.06M | 171.61M | 122.60M | 58.85M | 46.80M | Investing Cash Flow |
| -92.57M | -108.98M | -66.44M | -30.71M | -16.55M | Financing Cash Flow |
| -50.98M | -63.90M | -57.77M | -25.67M | -36.50M |
STEP Energy Services Technical Analysis
Positive
4.41
Price Trends
4.37
Positive
4.59
Negative
4.29
Positive
Market Momentum
>-0.01
Negative
54.31
Neutral
76.67
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:STEP, the sentiment is Positive. The current price of 4.41 is above the 20-day moving average (MA) of 4.26, above the 50-day MA of 4.37, and above the 200-day MA of 4.29, indicating a bullish trend. The MACD of >-0.01 indicates Negative momentum. The RSI at 54.31 is Neutral, neither overbought nor oversold. The STOCH value of 76.67 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:STEP.
STEP Energy Services Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
78 Outperform | C$870.28M | 8.43 | 21.89% | 4.08% | 0.84% | -1.74% | |
70 Outperform | C$1.70B | 9.18 | 26.23% | 1.67% | 8.79% | 31.76% | |
66 Neutral | $884.46M | 8.29 | 6.90% | ― | -1.83% | -62.53% | |
64 Neutral | C$317.80M | 169.62 | 0.49% | ― | 0.98% | -96.29% | |
58 Neutral | $9.08B | 5.25 | -7.99% | 7.51% | 0.47% | -64.07% | |
53 Neutral | C$421.67M | 14.37 | -1.55% | ― | -6.00% | -150.20% | |
48 Neutral | C$76.49M | ― | -2.44% | ― | -4.44% | 0.75% |
* Energy Sector Average
Performance Comparison
TSE:STEP
STEP Energy Services
4.41
0.70
18.87%
TSE:CEU
CES Energy Solutions
7.40
2.66
56.15%
TSE:PD
Precision Drilling
66.90
-25.15
-27.32%
TSE:TCW
Trican Well Service
4.66
0.70
17.77%
TSE:ESI
Ensign Energy Services
2.33
-0.26
-10.04%
TSE:WRG
Western Energy Services
2.22
-0.53
-19.27%
STEP Energy Services Earnings Call Summary
Earnings Call Date: Mar 12, 2025 | % Change Since: 8.35% | Next Earnings Date: May 7, 2025
Earnings Call Sentiment Neutral
The earnings call presents a mixed picture. 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.Highlights
Record Canadian Revenue
Full year revenue for 2024 in the Canadian geographic region was $723 million, significantly up from $580 million in 2023, marking it as a record year.
Debt Reduction Achievement
STEP ended the quarter with net debt of $53 million, down from $88 million at the end of 2023, and significantly reduced from $142 million at the end of 2022.
Successful Technology Initiatives
STEP acquired proprietary technology behind the STEP-conneCT tool, enhancing real-time decision-making during operations, and expanded its ultra-deep coiled tubing capabilities with Coil+ technology.
Operational Efficiency in Canada
STEP's North American pressure pumping business pumped a record 2.3 million tons of proppant, an 8% increase from 2023, with a 64% year-over-year increase in Canada alone.
Lowlights
Significant Revenue Drop in Q4
Q4 revenue was $147 million, down from $256 million in Q3, with a net loss of $45 million compared to a $5.5 million net loss in the prior quarter.
Impairment and Wind-Down of U.S. Operations
A $23.9 million non-cash impairment was recorded due to the wind down of the U.S. fracturing service line as STEP struggled to compete with larger competitors.
Challenges with Depressed Commodity Prices
Depressed commodity prices in 2024 led to clients curtailing capital spend early, exacerbating the Q4 slowdown.
Pricing and Margin Pressures
Service pricing in Canada is lower than Q1 2024 levels, with margin compression due to the weakening Canadian dollar and increased input costs.
Company Guidance
In the fourth quarter of fiscal year 2024, STEP Energy Services reported consolidated revenue of $147 million, a decrease from $256 million in Q3. The adjusted EBITDA for Q4 was $4 million, representing a 3% margin, down from $44 million or a 17% margin in the previous quarter. This decline was attributed to clients curtailing their capital spend due to depressed commodity prices in 2024, leading to a net loss of $45 million or $0.23 per share for the quarter, compared to a net loss of $5.5 million or $0.08 per share in Q3. For the full year, the company achieved consolidated revenue of $955 million, up from $946 million in 2023, with adjusted EBITDA of $169 million or an 18% margin, slightly up from $164 million or a 17% margin in the prior year. The Canadian segment reported Q4 revenue of $110 million with an adjusted EBITDA of $11 million or 10%, while the U.S. region had Q4 revenues of $37 million and an adjusted EBITDA loss of $3 million. The company also reported a full-year net income of $2 million or $0.02 per diluted share, down from $50 million or $0.67 per diluted share in 2023, and ended the quarter with a net debt of $53 million, down from $88 million at the end of 2023.STEP Energy Services Corporate Events
Business Operations and StrategyFinancial Disclosures
STEP Energy Services Reports 2024 Financial Results Amid Revenue Decline
Negative
Mar 12, 2025
STEP Energy Services Ltd. reported its financial results for the fourth quarter and full year of 2024, showing a decline in revenue and net income compared to previous years. Despite the challenges, the company maintained a stable operational performance with significant proppant pumped and consistent coiled tubing services, indicating resilience in its service capabilities.
Financial Disclosures
STEP Energy Services to Announce Q4 and Year-End 2024 Results
Neutral
Feb 6, 2025
STEP Energy Services Ltd. will release its fourth quarter and year-end 2024 financial results on March 11, 2025, followed by a conference call on March 12 to discuss the results and the 2025 outlook. This announcement provides stakeholders with an opportunity to gain insights into the company’s performance and strategic direction in the current market landscape.
STEP Energy Services Initiates Share Buyback Program to Enhance Shareholder Value
Jan 7, 2025
STEP Energy Services Ltd. has announced approval from the Toronto Stock Exchange to initiate a normal course issuer bid (NCIB), allowing the company to repurchase up to 3,601,082 common shares, which is 5% of its total outstanding shares. This move is aimed at leveraging the current market condition where the company’s stock price is perceived to be undervalued, thus presenting an opportunity to increase shareholder value. The NCIB will commence on January 9, 2025, and will include an automatic securities purchase plan to facilitate share purchases during blackout periods. The company had previously repurchased and canceled 1,921,734 shares under a similar program, indicating a continued commitment to optimizing its capital structure.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.