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CALGARY, Alberta, May 12, 2017 (GLOBE NEWSWIRE) -- STEP Energy Services Ltd. (the “Company” or “STEP”) (TSE:STEP) today announces its financial and operating results for the three months ended March 31, 2017. The following press release should be read in conjunction with the Management’s Discussion and Analysis (MD&A), condensed unaudited consolidated interim financial statements and notes thereto as at and for the three months ended March 31, 2017 and the MD&A and audited consolidated financial statements as at and for the year ended December 31, 2016. All of the above documents are available on STEP’s website at www.stepenergyservices.com and on SEDAR at www.sedar.com.

FINANCIAL REVIEW & HIGHLIGHTS

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FIRST QUARTER HIGHLIGHTS

STEP realized increased utilization across its entire fleet in the first quarter of 2017 compared to the first and fourth quarters of 2016. Strong demand and improved pricing combined with additional U.S. coiled tubing and Canadian fracturing capacity enabled the Company to achieve record quarterly revenue in the three months ended March 31, 2017.

• Quarterly revenue of $118.0 million was a 328% increase from the first quarter of 2016 and an 84% increase from the fourth quarter of 2016.
  
  
• Adjusted EBITDA of $21.1 million (or 18%), was an improvement of $21.5 million compared to an Adjusted EBITDA loss incurred in the same period in 2016, and an improvement of $15.8 million compared to fourth quarter 2016 Adjusted EBITDA.
  
  
• Net income of $9.0 million was an improvement of $17.6 million and $11.6 million compared to a net loss of $8.6 million and $2.6 million in the first and fourth quarters of 2016, respectively. Net income for the quarter includes $0.8 million of transaction costs related to the initial public offering (“IPO”).
  
  
• Two additional fracturing spreads were deployed during the quarter resulting in average active HP of 133,500 HP compared to 50,000 HP in the first quarter of 2016. At quarter-end, STEP had 145,000 active HP.
  
  
• In the first quarter of 2017, STEP’s Canadian operating segment generated revenue of $109.8 million, a 342% increase compared to the first quarter of 2016. The U.S. operating segment generated first quarter 2017 revenue of $8.2 million, a 197% increase compared to the first quarter of 2016.

Overview of Canadian Operations

The Canadian operating segment provides fracturing and coiled tubing services to oil and natural gas companies operating in the Western Canadian Sedimentary Basin. During the first quarter of 2017, STEP deployed two additional fracturing spreads representing 45,000 HP. At March 31, 2017, STEP’s Canadian operations had 10 of its 12 coiled tubing spreads staffed and active and operated five fracturing spreads representing 145,000 HP.

Overview of United States Operations

The U.S. operating segment provides coiled tubing services in the Permian and Eagle Ford basins in Texas and the Haynesville basin in Louisiana. The expanded fleet enabled the Company to meet increased demand, improve utilization and diversify its client base in the first quarter of 2017 compared to the same period in 2016. At March 31, 2017, STEP’s U.S. operations had four active coiled tubing spreads.

Significant Events

On March 10, 2017, the Company amended its credit facilities with an agreement involving a syndicate of lenders. The new facilities consist of a $10.0 million committed operating line and a $90.0 million committed revolving facility, expandable with a $25.0 million accordion upon request of the Company, and subject to lender approval. Total drawings on the credit facility were $32.0 million at March 31, 2017. STEP also had a positive cash balance of $8.9 million. As at March 31, 2017, STEP had an asset base of $392.5 million, an increase from $335.1 million at December 31, 2016.

Subsequent to the end of the quarter, STEP completed an IPO raising gross proceeds of $100 million. The proceeds were used to repay indebtedness and position the Company to execute on its capital program.

INDUSTRY CONDITIONS AND OUTLOOK

Increased North American drilling activity, and relative strength in crude oil prices through the fourth quarter of 2016 and the start of 2017, led to improved demand for the Company’s services in the first quarter of 2017. Additionally, the current undersupply of fracturing equipment has resulted in some drilling and completion programs being deferred into the second quarter of 2017. The increase in demand for services has allowed the Company to increase pricing. The increase in industry activity has also led to some inflation in input costs, including personnel, chemicals, hauling, proppant, and coiled tubing strings.

Client discussions are supportive of robust activity levels for the balance of the year. In Canada, the strong demand currently being experienced is a positive indication that the market continues to be undersupplied. The ability for the industry to deploy additional equipment will be dependent on key component and fabrication capacity and the availability of qualified personnel to staff equipment. The Company has visibility to strong utilization of its active fracturing fleet through the balance of the year, however seasonal limitations including road bans and weather-related delays are expected to impact utilization. In the U.S., management continues to be pleased with the growth potential and profitability of STEP’s coiled tubing operation and expects to see demand for ongoing equipment deployment in these markets.

Management continues to monitor uncertainty driven by recent volatility in crude oil prices and will continually assess near term demand for its services. STEP intends to monitor client capital budgets closely to direct the pace of equipment deployment and capitalization.

CAPITAL PROGRAM

The 2017 capital expenditures as disclosed in the Prospectus of $102 million included $84 million related to the 2017 capital program, $9 million of 2016 carry-forward capital, and $9 million of deposits that would be required for equipment deliveries in the first quarter of 2018.

Given the positive outlook provided above, the board of directors approved an increase to the 2017 capital program of $16 million bringing the Company’s 2017 program to $100 million (plus the 2016 carry-forward capital of $9 million). The additional capital will enable the Company to commit to delivery, should market conditions warrant, of one additional coiled tubing spread for the U.S. operation (estimated first quarter 2018 delivery), one additional fracturing spread in Canada (estimated first quarter 2018 delivery), plus support equipment to reduce reliance on third party transportation.

The aggregate 2017 capital program is comprised of one new coiled tubing spread in Canada, five fracturing spreads (including two deployed in the first quarter of 2017) representing 125,000 HP, four new coiled tubing spreads in the U.S., and maintenance and support equipment.  In addition, the Company plans on re-staffing two idle masted coiled tubing units in Canada in the second half of 2017. Once complete, the Company will have the following capacity:

• 13 coiled tubing spreads in Canada (all of which are anticipated to be deployed by year-end)
  
  
• Eight fracturing spreads in Canada representing approximately 225,000 HP (of which seven spreads representing approximately 210,000 HP are anticipated to be deployed by year-end), and
  
  
• Eight coiled tubing spreads in the U.S. (of which seven are anticipated to be deployed by year-end).

The amount and pace of capital expenditures may change based on, among other things, market conditions and client capital spending plans.

NON-IFRS MEASURES

Please see the discussion in the Non-IFRS Measures section of the MD&A for the reconciliation of non-IFRS items to IFRS measures.

FORWARD-LOOKING STATEMENTS

This document contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "should", "believe", "plans" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this document contains forward-looking information and statements pertaining to the following: commissioning and staffing of equipment in the second half of 2017; the ability to deploy additional equipment; utilization; monitoring of client capital budgets; and the amount of capital expenditures in 2017.

The forward-looking information and statements contained in this document reflect several material factors and expectations and assumptions of the Company including, without limitation: that 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; the continuance of existing (and in certain circumstances, the implementation of proposed) tax, royalty and regulatory regimes; the impact of seasonal weather conditions; and certain cost assumptions. 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 to be correct.

The forward-looking information and statements included in this document are not guarantees of future performance and should not be unduly relied upon. Such information and 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 information or statements including, without limitation: changes in the demand for or supply of the Company's services; unanticipated operating results; changes in tax or environmental laws, or other regulatory matters; changes in the development plans of third parties; increased debt levels or debt service requirements; limited, unfavourable or a lack of access to capital markets; increased costs; the impact of competitors; reliance on industry partners; attracting and retaining skilled personnel and certain other risks detailed in the Prospectus (including, without limitation, those risks identified in this document).

The forward-looking information and statements contained in this document 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.

CONTACT: For more information please contact:

Regan Davis
President & Chief Executive Officer
(403) 457‐1772