News Releases

CALGARY, Alberta, May 06, 2020 (GLOBE NEWSWIRE) -- STEP Energy Services Ltd. (the “Company” or “STEP”) is announcing that its filing of interim financial statements for the three months ended March 31, 2020 (the “Q1 Financial Statements”) and related management’s discussion and analysis (“MD&A”) will be postponed. STEP is also providing a further update on actions taken in response to the COVID-19 pandemic and current market and industry conditions. The following press release should be read in conjunction with the MD&A and audited consolidated financial statements as at and for the year ended December 31, 2019, and STEP’s annual information form dated March 11, 2020 (“AIF”). The above documents are available on STEP’s website at www.stepenergyservices.com or on SEDAR at www.sedar.com.

RELEASE OF FINANCIAL STATEMENTS & MD&A
Due to the ongoing COVID-19 pandemic, STEP is relying upon the exemption provided by the Alberta Securities Commission in ASC Blanket Order 51-517 Temporary Exemption from Certain Corporate Finance Requirements (the "Blanket Order"), and other similar relief provided by the Canadian Securities Administrators to postpone the release of its Q1 Financial Statements and MD&A. The Blanket Order provides issuers with up to an additional 45 days to file interim financial statements and MD&A, provided that the issuer complies with the requirements of the Blanket Order. STEP’s reliance on the Blanket Order means STEP’s filing deadline is June 29, 2020. However, STEP currently anticipates its Q1 Financial Statements and MD&A will be released prior to the start of trading on the Toronto Stock Exchange on May 21, 2020.

Until filing and announcement of the Q1 Financial Statements and accompanying MD&A, STEP’s management and other insiders will be subject to a trading black-out that reflects the intent of Section 9 of National Policy 11-207 (Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions). Other than as disclosed below or in previous releases by STEP, there have been no material business developments since the date of the Company's audited financial statements for the three months and year ended December 31, 2019 (filed on March 12, 2020).

Q1 2020 BUSINESS UPDATE
The following provides an update on operations and results from operations for STEP for the first quarter of 2020. Activity and operating results for the quarter largely met our expectations with staffed equipment being highly utilized in both Canada and the US. Canadian operations fielded six fracturing crews and 10 coiled tubing units while US operations deployed three fracturing crews and nine coiled tubing units during the quarter. Deployed units were highly utilized with some deferral of work programs experienced later in the quarter due to the uncertainty arising from the COVID-19 pandemic.

Revenue from the quarter is expected to range between $190 million to $195 million while anticipated EBITDA margins for the quarter from continuing operations, excluding severance and the effect of allowance for doubtful accounts (“AFDA”), are expected to range between 14% and 15%. As a result of the adjustments made to the business that have been previously reported, the Company expects the Q1 2020 operating results to include $1.9 million of severance costs. As well the Company anticipates that due to the increased business uncertainty arising from the pandemic and current commodity price weakness, it will be increasing its AFDA at the end of Q1, 2020.

International Financial Reporting Standards require companies to perform an assessment of the carrying value of cash generating units containing non-financial assets when there are significant indicators of potential impairment. The Company  believes that COVID-19, the oil price war among certain OPEC+ members and the dramatic reduction in oil prices are indicators that an impairment assessment needs to be undertaken. Given the decline in industry activity and our revised outlook, an impairment charge during Q1 2020 is likely. The magnitude of the charge will not be known until further work is done in conjunction with the preparation of our Q1 results.

INDUSTRY CONDITIONS & OUTLOOK
STEP continues to respond to the rapidly deteriorating business conditions brought about by the combined impact of COVID-19 and the oil price war among certain OPEC+ members. These global events have caused a material decline in commodity prices and, despite recent product cut promises from OPEC+, are resulting in significant reductions in planned spending by STEP’s clients.

As predicted in our earlier update, the effect of these global events on client spending is reducing demand for our services. STEP continues to be in contact with our clients to monitor current and expected future work projects, and as such STEP is aware of significant capital expenditure budget reductions in the oil and gas production industry. As at the end of Q1, 2020, STEP was onside with the financial covenants contained within its syndicated debt facility. However, with the uncertainty arising from the pandemic and recent weakness in commodity prices, Management’s forecasts for the remainder of 2020 indicate a potential breach of certain covenants within the facility.  Management forecasts may change materially as the impact of COVID-19 and OPEC+ supply pressures are better understood.  However, Management has commenced discussions with its syndicate leads to identify strategies to address any breach of covenants should they occur.

FORWARD-LOOKING INFORMATION & STATEMENTS
Certain statements contained in this release constitute “forward-looking statements” or “forward-looking information” within the meaning of applicable securities laws (collectively, “forward-looking statements”). These statements relate to the expectations of management about future events, results of operations and STEP’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 any of the words “anticipate”, “plan”, “contemplate”, “continue”, “estimate”, “expect”, “intend”, “propose”, “might”, “may”, “will”, “shall”, “project”, “should”, “could”, “would”, “believe”, “predict”, “forecast”, “pursue”, “potential”, “objective” and “capable” and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements. While STEP believes the expectations reflected in the forward-looking statements included in this release are reasonable, such statements are not guarantees of future performance or outcomes and may prove to be incorrect and should not be unduly relied upon.

In particular, but without limitation, this release contains forward-looking statements pertaining to: industry conditions and outlook; including supply and demand for oilfield services and industry activity levels; OPEC+ production levels and compliance with anticipated production cuts, related market uncertainty, and its effect on commodity prices; the Company’s monitoring of industry demand, client capital budgets and market conditions; the effect of the COVID-19 outbreak, OPEC+ related market uncertainty, and commodity pricing on client work programs and activity in 2020; the Company’s anticipated business strategies and activity levels; the Company’s ability to retain existing clients and attract new business; the Company’s capital spending and fixed costs in 2020; and the Company’s expected compliance with financial covenants under its credit facilities.

The forward-looking information and statements contained in this release reflect several material factors and expectations and assumptions of the Company including, without limitation: the Company will continue to conduct its operations in a manner consistent with past operations; the general continuance of current or, where applicable, assumed industry conditions; pricing of the Company’s services; the Company’s ability to market successfully to current and new clients; the Company’s ability to utilize its equipment; the Company’s ability to collect on trade and other receivables; the Company’s ability to obtain qualified staff and equipment in a timely and cost effective manner; levels of deployable equipment; expected revenue; the need for impairment testing and likelihood of impairment charges; future capital expenditures to be made by the Company; future funding sources for the Company’s capital program; the Company’s future debt levels; the impact of competition on the Company; the Company’s ability to obtain financing on acceptable terms; the amount of available equipment in the marketplace; and client activity levels. The Company believes the material factors, expectations and assumptions reflected in the forward-looking information and statements are reasonable but no assurance can be given that these factors, expectations and assumptions will prove correct.

Actual results could differ materially from those anticipated in these forward-looking statements due to the risk factors set forth below and elsewhere in this release: volatility of the oil and natural gas industry; the Company’s ability to manage the effect of the COVID-19 pandemic on its operations; competition in the oilfield services industry; restrictions on access to capital; reliance on suppliers of raw materials, diesel fuel and component parts; reliance on equipment suppliers and fabricators; direct and indirect exposure to volatile credit markets; fluctuations in currency exchange rates; merger and acquisition activity among the Company’s clients; federal and provincial legislative and regulatory initiatives could result in increased costs and additional operating restrictions or delays; health, safety and environment laws and regulations may require the Company to make substantial expenditures or cause it to incur substantial liabilities; loss of a significant client could cause the Company’s revenue to decline substantially; negative cash flows from operating activities; third party credit risk; hazards inherent in the oilfield services industry which may not be covered to the full extent by the Company’s insurance policies; difficulty in retaining, replacing or adding personnel; seasonal volatility due to adverse weather conditions; reliance on a few key employees; legal proceedings involving the Company; failure to maintain the Company’s safety standards and record; failure to continuously improve operating equipment and proprietary fluid chemistries; and the risk factors set forth under the heading “Risk Factors” in the AIF.

Any financial outlook or future orientated financial information contained in this release regarding prospective financial performance, financial position or cash flows is based on the assumptions about future events, including economic conditions and proposed courses of action based on management’s assessment of the relevant information that is currently available.
Projected operational information, including the Company’s capital program, contains forward looking information and is based on a number of material assumptions and factors, as are set out above. These projections may also be considered to contain future oriented financial information or a financial outlook. The actual results of the Company’s operations will likely vary from the amounts set forth in these projections and such variations may be material. Readers are cautioned that any such financial outlook and future oriented financial information contains herein should not be used for purposes other than those for which it is disclosed herein.

The forward-looking information and statements contained in this release speak  only  as of  the  date  of  the document,  and none of the Company or its subsidiaries assumes any obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable laws. The reader is cautioned not to place undue reliance on forward-looking information.

ABOUT STEP
STEP is an oilfield service company that provides stand-alone and fully integrated fracturing, coiled tubing and wireline solutions. Our combination of modern equipment along with our commitment to safety and quality execution has differentiated STEP in plays where wells are deeper, have longer laterals and higher pressures.

Founded in 2011 as a specialized deep capacity coiled tubing company, STEP now provides an integrated solution for deep capacity coiled tubing services and fracturing to exploration and production (“E&P”) companies in Canada and the U.S. Our Canadian integrated services are focused in the Western Canadian Sedimentary Basin (“WCSB”), while in the U.S., our fracturing and coiled tubing services are focused in the Permian and Eagle Ford in Texas and the Bakken in North Dakota.

Our four core values; Safety, Trust, Execution and Possibilities inspire our team of professionals to provide differentiated levels of service, with a goal of flawless execution and an unwavering focus on safety.

For more information please contact:

Regan Davis
President & Chief Executive Officer
Telephone: 403-457-1772    

Michael Kelly
Executive Vice President & Chief Financial Officer
Telephone: 403-457-1772                                                    

Email: investor_relations@step-es.com
Web: www.stepenergyservices.com