STEP Energy Services Ltd.: Navigating Market Challenges and Preparing for Growth

STEP Energy Services Ltd. (TSX: STEP) has recently announced its 2025 capital budget and provided an operational and financial update, highlighting the company's strategic approach to navigating market challenges and positioning itself for long-term growth. With a focus on optimization and sustainability, STEP is investing in its natural gas strategy, sand logistics capabilities, and asset refurbishments, while also managing expenses and preparing for a strong start to the new year.

The company's 2025 capital budget totals $78.9 million, with $46.7 million allocated to optimization capital and $32.2 million to sustaining capital. The optimization capital will facilitate the trialing of the first fully natural gas-powered hydraulic fracturing pump in Canada, the electrification of certain assets, and the expansion of sand logistics capabilities. These strategic investments will not only reduce STEP's carbon footprint but also enhance operational efficiency and reduce costs, bolstering its competitive position in the long run.

STEP's 2025 capital budget is a decrease from the $91.2 million capital budget for 2024, reflecting the company's focus on optimizing its operations and maintaining a strong financial position. The significant progress made in deleveraging through this period has enabled STEP to act on its Normal Course Issuer Bid in 2024, returning a further $8 million in value to shareholders.

The slowdown in fracturing activity across major North American oil and gas regions has led to a significant decrease in STEP's fourth quarter utilization. Canadian operations are expected to see much softer utilization on a sequential and year-over-year basis, with activity shifting to lower intensity operations that generate lower returns. U.S. fracturing operations continue to be challenged by weak operating conditions, with only one fracturing crew active early in the quarter. However, STEP's U.S. coiled tubing operations have remained resilient, introducing new technology and increasing market share.

Despite the weaker fourth quarter performance, STEP's Canadian geographic region is expected to post its best ever annual revenue and Adjusted EBITDA performance. The company has managed expenses carefully in the fourth quarter while also using the downtime to prepare the equipment for a resumption of high-intensity operations in Q1. Canadian and U.S. fracturing and coiled tubing crews are expected to begin mobilizing in late December in anticipation of operations beginning in the early days of January.

STEP's strategic investments in optimization capital, coupled with its proactive approach to managing expenses and preparing for high-intensity operations, position the company well for long-term growth. By focusing on sustainability, operational efficiency, and cost reduction, STEP is poised to navigate market challenges and capitalize on opportunities as they arise.



In conclusion, STEP Energy Services Ltd. has demonstrated a strategic and proactive approach to navigating market challenges and positioning itself for long-term growth. With a focus on optimization capital, sustainability, and operational efficiency, the company is well-equipped to capitalize on opportunities and deliver value to shareholders. As the energy sector continues to evolve, STEP's strategic investments and commitment to long-term growth will be crucial in driving its success.