STEP Energy Services — Investor Presentation (October 2022)
26 slides from STEP Energy Services's investor presentation, October 2022
Slide 1: STEP Energy Services Investor Presentation
October 2022 Corporate Update STEP ENERGY SERVICES Investor Presentation
Slide 2: Disclaimer
DISCLAIMER The information contained in this presentation does not purport to be all-inclusive or to contain all information that prospective or revise any forward-looking statements or FOFI except as required by applicable securities laws. investors may require. Readers are encouraged to conduct th
Slide 3: Safety Trust Execution
Founded Safety 2011 Trust Shares Outstanding* Execution 71.4 Million Market Cap* Possibilities $375 Million Average Daily Volume 283,000 Number of Employees 1,372 Active Fleets 8 Frac + 19 Coil *Based on Market Close on October 6, 2022
Slide 4: North American Operations
North American Operations Montney Deep Basin Duvernay Viking Active: Q3-22 Fracturing Coiled Tubing Calgary Consolidated Asset Base – in Q4-22: Canada 5 spreads 8 units Bakken U.S. 3 spreads 11 units Fracturing (HHP) Coiled Tubing TOTAL: 490,000* 33 units** Powder River Basin Niobrara Uinta-Piceance
Slide 5: Tier 4 Upgrade Announcement: A Partnering Model
Tier 4 Upgrade Announcement: A Partnering Model 5
Slide 6: Tier 4 Announcement
TIER 4 ANNOUNCEMENT SUMMARY • Upgrading 16 pumps with 2,500 horsepower (HP) Caterpillar Tier 4 Dynamic Gas Blending (DGB) engines • Agreement is with a leading intermediate E&P company (“Producer”) in Western Canada • Producer obtains upgraded equipment and 3-year services agreement with CAD $10 mil
Slide 7: Tier 4 and Dual-Fuel Update
TIER 4 AND DUAL-FUEL UPDATE PRESSURE PUMPING FLEET (HP)* A LOOK AT THE FLEET BY MID-Q2 2023 • Tier 4 Dynamic Gas Blending (DGB) Engines (42,500 HP) o 20% of STEP’s Canadian fracturing fleets will be powered by Tier 4 Cat Tier 2 engines with DGB technology Dual-Fuel 38% o Cat DGB engines displace die
Slide 8: U.S. Deep Coil Tubing Acquisition: Expanded Operations in the Permian
U.S. Deep Coil Tubing Acquisition: Expanded Operations in the Permian 8
Slide 9: U.S. Coiled Tubing Acquisition
U.S. COILED TUBING ACQUISTION SOLIDIFYING THE DEEPEST FLEET IN NORTH AMERICA • STEP has acquired 4 high-spec, ultra-deep capacity coiled tubing units and ancillary equipment for $17.2 million (CAD) • Three units have been active with leading E&P companies in the Permian Basin • The fourth unit will
Slide 10: U.S. Coiled Tubing Acquisition: Equipment and Economics
U.S. COILED TUBING ACQUISTION • Equipment and Personnel o All four coiled tubing units manufactured in the last four years o Units are capable of carrying 30,000 foot coiled tubing strings required for the growing ultra-deep 3+ mile lateral length market o Strong leadership and operational personnel
Slide 11: Creating Shareholder Value
Creating Shareholder Value 11
Slide 12: North American Market Is Tight
NORTH AMERICAN MARKET IS TIGHT Canadian Frac Industry Supply vs Demand U.S. Frac Industry Supply vs Demand 30,000,000 3,000,000 2,500,000 25,000,000 2,000,000 20,000,000 1,500,000 15,000,000 1,000,000 10,000,000 500,000 5,000,000 0 0 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E 2023E 2013 2014
Slide 13: Utilization High: Pricing Recovering
UTILIZATION HIGH: PRICING RECOVERING STEP FRAC FLEET UTILIZATION ADJUSTED EBITDA MARGINS* 30% 90% 25% 80% 20% 70% 15% 60% 10% 50% 5% 40% 0% 30% -5% *STEP entered U.S. fracturing market in Q2-18 *U.S. margin in 2020 reflects basin-to-basin 20% equipment move during COVID -10% 2017 2018 2019 2020 2021
Slide 14: Strategic Client Alignment in Both Major Markets
STRATEGIC CLIENT ALIGNMENT IN BOTH MAJOR MARKETS Canada/U.S. Revenue Canada - Top 10 U.S. - Top 10 Customer Combined - Top 10 Split Customer Split Split Customer Split 63% 37% 20% 43% 42% 80% 57% 58% Canada US Private Public Private Public Private Public Source: STEP (June 2022 YTD) STEP IS WELL POS
Slide 15: Free Cash Flow Yield the Best in Class
FREE CASH FLOW YIELD THE BEST IN CLASS Q2-22 TTM FCF Yield vs North American Pressure Pumpers 20% 15% 10% 5% 0% -5% STEP Company A Company B Company C Company D Company F Company E *Based on Q2 2022 Actuals released ** Free Cash Flow Yield (FactSet) is a non-IFRS measure and is not defined and has n
Slide 16: Leverage Targets in Sight - Debt Reduction Progress
LEVERAGE TARGETS IN SIGHT - DEBT REDUCTION PROGRESS 300 ~$160mm Reduction from onset of debt 250 Net Debt ($ millions) 200 150 100 50 - Initial Q4-18 Q4-19 Q4-20 Q4-21 Q4-22C* *Projections based on analyst consensus Adjusted EBITDA on June 21, 2022 ** Net Debt and Adjusted EBITDA are non-IFRS financ
Slide 17: Valuation Provides Compelling Upside Potential
VALUATION PROVIDES COMPELLING UPSIDE POTENTIAL Q2-22 TTM Enterprise Value/Adjusted EBITDA vs North American Pressure Pumpers 10.0x 9.0x 8.0x 7.0x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x Company B Company D Company F Company A Company C STEP Company E *Based on Q2 2022 Actuals released ** Enterprise Value
Slide 18: Near and Mid-Term Gas Macro: Eyes On The Prize
Near and Mid-Term Gas Macro: Eyes On The Prize 18
Slide 19: The Canadian LNG Story
OUTLOOK: CANADIAN LNG – THE FRACTURING OPPORTUNITY Source: BMO Capital Markets (June 9, 2022) Source: Peters & Co. Limited (June 10, 2022) THE CANADIAN LNG STORY • LNG Canada offers a natural gas growth driver with 2024/2025 trains I/II start-up; drilling and well fracturing to begin in earnest in 2
Slide 20: The U.S. LNG Story
OUTLOOK: U.S. LNG – THE FRACTURING OPPORTUNITY Source: US Energy Information Administration, September 6, 2022 THE U.S. LNG STORY • U.S. LNG has been one of the top growth stories in all of global energy • Another 40% growth in natural gas export capacity is under construction for 2024/2025 start-up
Slide 21: Second Quarter Results: A Record By Most Metrics
Second Quarter Results: A Record By Most Metrics 21
Slide 22: Financial Performance
FINANCIAL PERFORMANCE CO NSO LIDATED HIGHLIGHTS ($000s except percentages) Three months Three months Q2-2022 IN REVIEW ended June 30, ended March 31, 2022 2022 Consolidated revenue $ 273,000 $ 219,539 • Q2-22 strengthened further from Q1-22 levels: Net (loss) income $ 38,064 $ 9,173 o Strongest Reve
Slide 23: Q2 Results: Beating Q1 Is Rare in Canadian Pressure Pumping
Q2 RESULTS: BEATING Q1 IS RARE IN CANADIAN PRESSURE PUMPING Q2-22 VS Q1-22 REVENUE Q2-22 VS Q1-22 ADJ EBITDA MARGINS 300 60 $273mm 20% Margin 250 50 $219.5mm 200 40 17% Margin $millions $millions 150 30 100 20 50 10 - - Q1 Q2 Q1 Q2 *Adjusted EBITDA and Adjusted EBITDA margin are non-IFRS financial m
Slide 24: Six-Month Performance Shows Margin Torque
SIX-MONTH PERFORMANCE SHOWS MARGIN TORQUE CONSOLIDATED REVENUE ADJUSTED EBITDA 800 25.0% 130 120 700 22.5% 110 6-Month, Yr/Yr 6-Month, Yr/Yr 600 100 20.0% 90 500 80 $millions 17.5% $millions 70 400 15.0% 60 300 50 12.5% 40 200 30 100 10.0% 20 10 - 7.5% - 2017 2018 2019 2020 2021 2021-H1 2022-H1 2017
Slide 25: Summary: How STEP Is Creating Shareholder Value
Tier 4 DGB fracturing upgrade announcement is unique in the industry Will look at tuck-in acquisitions when they are accretive Summary North American fracturing market is tight • Limited available equipment and 12+ month newbuild timelines • Utilization high: pricing recovering STEP is well-position
Slide 26: Investor Relations Contact
587-349-5672 investor_relations@step-es.com www.stepenergyservices.com
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