STEP Energy Services — Investor Presentation (January 2023)
31 slides from STEP Energy Services's investor presentation, January 2023
Slide 1: STEP Energy Services Investor Presentation
January 2023 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 investors may prepared on a reasonable basis, reflecting management's best estimates and judgments as of the date hereof; however, because this require. Reade
Slide 3: Safety Trust Execution
Founded Safety 2011 Trust Shares Outstanding* Execution 71.6 Million Market Cap* Possibilities $400 Million Average Daily Volume 196,000 Number of Employees 1,400 Active Fleets 8 Frac + 20 Coil *Based on Market Close on January 16, 2023
Slide 4: North American Operations
North American Operations Montney Deep Basin Duvernay Viking Active: Q1-23 Fracturing Coiled Tubing Calgary Consolidated Asset Base – in Q1-23: Canada 5 spreads 9 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: Fracturing Market Dynamics
Fracturing Market Dynamics 5
Slide 6: North American Market Is Tight
NORTH AMERICAN MARKET IS TIGHT CANADIAN FRAC INDUSTRY SUPPLY VS DEMAND U.S. FRAC INDUSTRY SUPPLY VS DEMAND 2.5 25.0 87% 80% 85% 2.0 20.0 75% Limited HHP Supply UTILIZATION UTILIZATION HHP (MM) Limited HHP Supply 83% HHP (MM) 1.5 15.0 70% 81% 1.0 10.0 65% 79% 0.5 60% 5.0 77% 0.0 55% 0.0 75% 2020 2021
Slide 7: U.S. Shale Well Productivity Is Rolling Over
U.S. SHALE WELL PRODUCTIVITY IS ROLLING OVER SHALE OIL RIG PRODUCTIVITY YR/YR CHANGE IN WELL PRODUCTIVITY BY PLAY (@20:1/FT) Source: BMO Capital Markets (Dec 13, 2022) U.S. SHALE WELL PRODUCTIVITY IS ROLLING OVER • Key U.S. shale plays including the Delaware and Midland (i.e. Permian) are showing si
Slide 8: Canada Is a Growth Market
CANADA IS A GROWTH MARKET 2023E CDN OIL AND GAS PRODUCTION OUTLOOK (mboe/d) 2023E CDN OFS TOTAL FREE CASH FLOW Source: Rystad EnergyGasMarket Cube Source: BMO Capital Markets (Dec 13, 2022) CANADA IS GROWING ITS PRODUCTION • After a two-year respite, Canada has surpassed 2019 oil and gas production
Slide 9: January 2023 Corporate Update
January 2023 Corporate Update 9
Slide 10: January 2023 Corporate Update
JANUARY 2023 CORPORATE UPDATE • Q4-22 closes a year that was the best in STEP’s history • Record revenues and Adjusted EBITDA • Net debt is expected to end the year in the $140-$145 million range • Net debt paydown of nearly $170 million since 2018 • Funded Debt to Adjusted Bank EBITDA ratio now les
Slide 11: 2022 Leverage Target Achieved One Quarter Early
2022 LEVERAGE TARGET ACHIEVED ONE QUARTER EARLY Year-End Net Debt of $140-145 million 300 ~$170mm reduction of Net debt since 2018 250 Net debt ($ millions) 200 150 100 50 - Initial Q4-18 Q4-19 Q4-20 Q4-21 Q4-22C* * Net debt and Adjusted EBITDA are non-IFRS financial measures. See Non-IFRS Measures
Slide 12: STEP's Disciplined Capital Spending Approach
STEP’S Disciplined Capital Spending Approach 12
Slide 13: January 2023 Capital Update
JANUARY 2023 CAPITAL UPDATE INCREASE TO PRELIMINARY BUDGET • STEP continues its capital spending discipline, releasing an updated capital spending plan for 2023 following the announcement of the initial 2023 sustaining capital budget of $55 million announced in late Q4-22 • 2023 budget was increased
Slide 14: Capital Spending Has Supported a Well-Maintained Fleet
CUMULATIVE CAPITAL EXPENDITURES VS DEPRECIATION - % OF REVENUES YEARS 2016 TO 2022-9M 25% 20% 15% 10% 5% 0% Company C Company A STEP Company F Company B Company E Company D Deprec % of Revs 15.6% 13.4% 12.5% 12.3% 12.0% 9.2% 8.8% Capex % of Revs 7.5% 9.9% 12.2% 6.8% 11.1% 20.7% 12.1% *Based on Compa
Slide 15: Tier 4 Upgrade in Process
TIER 4 UPGRADE IN PROCESS UNIQUE PARTNERING MODEL WITH CLIENT • STEP announced in Q3-22 that it reached an agreement with a client to upgrade 16 pumps with 2,500 horsepower (HP) Caterpillar Tier 4 Dynamic Gas Blending (DGB) engines • Client obtains upgraded equipment and 3-year services agreement wi
Slide 16: Tier 4 and Dual-Fuel Update
TIER 4 AND DUAL-FUEL UPDATE PRESSURE PUMPING FLEET (HP)* A LOOK AT THE FLEET BY MID Q2-23 • Tier 4 Dynamic Gas Blending (DGB) Engines (42,500 HP) o 20% of STEP’s Canadian fracturing fleets is expected to be powered by Tier 4 Cat engines with DGB technology Tier 2 Dual-Fuel o Cat DGB engines displace
Slide 17: Coiled Tubing Market Growth
COILED TUBING MARKET GROWTH DEEP CAPACITY COILED TUBING FLEET • Largest Deep Capacity Service Provider in North America o STEP has 33 deep-capacity coiled tubing units in Canada and the U.S., including 4 ultra deep units with 30,000’ reach to service 3-mile laterals • Expanding Market Capacity o Mar
Slide 18: Creating Shareholder Value
Creating Shareholder Value 18
Slide 19: Nine-Month Performance Shows Margin Torque
NINE-MONTH PERFORMANCE SHOWS MARGIN TORQUE CONSOLIDATED REVENUE ADJUSTED EBITDA WITH CORPORATE EXPENSES ALLOCATED 9-Month Yr/Yr 9-Month Yr/Yr 800 25.0% 160 700 22.5% 140 600 120 20.0% 500 100 17.5% $millions $millions 400 80 15.0% 300 60 12.5% 200 40 100 10.0% 20 - 7.5% - 2017 2018 2019 2020 2021 20
Slide 20: Free Cash Flow Yield the Best in Class
FREE CASH FLOW YIELD THE BEST IN CLASS Q3-22 TTM FCF YIELD VS NORTH AMERICAN PRESSURE PUMPERS 25% 20% 15% 10% 5% 0% -5% -10% STEP Company A Company F Company B Company C Company D Company E *Based on Q3-22 Actuals released. ** Free Cash Flow Yield (FactSet) is a non-IFRS measure and is not defined a
Slide 21: Return on Equity Approaching 20%
ROE TRENDING TO A HEALTHY LEVEL Q3-22 TTM ROE VS NORTH AMERICAN PRESSURE PUMPERS 45% 35% 25% 15% 5% -5% -15% Company A Company B STEP Company D Company C Company E Company F *Based on Q3-22 Actuals. ** STEP’s measure above is an Adjusted ROE which is a Non-IFRS measure as it includes an adjustment f
Slide 22: Enterprise Value to EBITDA Multiple the Lowest in Segment
VALUATION PROVIDES COMPELLING UPSIDE POTENTIAL Q3-22 TTM ENTERPRISE VALUE TO ADJUSTED EBITDA VS NORTH AMERICAN PRESSURE PUMPERS 8.0x 7.0x 6.0x 5.0x 4.0x 3.0x 2.0x 1.0x 0.0x Company B Company C Company D Company F Company A Company E STEP *Based on Q3-22 Actuals released. ** Enterprise Value to Adjus
Slide 23: Near and Mid-Term Gas Macro: Eyes On The Prize
Near and Mid-Term Gas Macro: Eyes On The Prize 23
Slide 24: LNG Markets Face Structural Supply Deficit
OUTLOOK: LNG MARKETS FACE STRUCTURAL SUPPLY DEFICIT GLOBAL LNG DEMAND AND SANCTIONED PRODUCTION (MILLION TONS PER ANNUM) Note: Considers 20 Mt of sanctioned capacity from Plaquemines; only 13.3 Mtpa has been formally sanctioned, but we expect the rest to be sanctioned imminently. Source: Rystad Ener
Slide 25: US and Canadian LNG Capacity by Project
OUTLOOK: US AND CANADIAN LNG CAPACITY BY PROJECT NORTH AMERICAN LNG CAPACITY VS LNG PRODUCTION OUTLOOK (MILLION TONS PER ANNUM) Source: Rystad EnergyGasMarket Cube LNG MARKETS FACE STRUCTURAL SUPPLY DEFICIT • U.S. LNG has been one of the top growth stories in all of global energy • 56% of incrementa
Slide 26: Canadian LNG Is Well Situated for Asian Demand
OUTLOOK: CANADIAN LNG – UNIQUE OPPORTUNITY TO SERVE ASIAN MARKETS BRITISH COLUMBIA LNG EXPORT PROJECTS BY STATUS AND CAPACITY LONG-TERM LNG SHIPPING COST ESTIMATES FROM NA TO TOKYO BAY (MILLION TONNES PER ANNUM): (REAL 2022)*: BRITISH COLUMBIA LNG EXPORT PROJECTS BY STATUS AND CAPACITY (MILLION TONN
Slide 27: Summary: How STEP Is Creating Shareholder Value
North American fracturing market is tight into 2023 Q4-22 – Closed a record year in Revenue and Adjusted EBITDA Summary • Canada/U.S. diversity propelled the year • Continued progress lowering Net debt • Canadian activity lower on E&P budget exhaustion and cold weather Q1-23 – Strong outlook heading
Slide 28: Investor Relations Contact
587-349-5672 investor_relations@step-es.com www.stepenergyservices.com
Slide 29: Appendix: Third Quarter 2022 Financial Performance in Review
Appendix Third Quarter 2022 Financial Performance in Review 29
Slide 30: Financial Performance: Q3-2022 in Review
FINANCIAL PERFORMANCE CONSOLIDATED HIGHLIGHTS ($000s except percentages) Three months Three months Q3-2022 IN REVIEW ended September 30, 2022 ended June 30, 2022 Consolidated revenue $ 245,085 $ 273,000 • Q3-22 produced STEP’s highest-ever Adjusted EBITDA: Net (loss) income $ 30,852 $ 38,064 A dj us
Slide 31: Q3-2022 Results: Strong Top Line, Expanding Mid-Line
Q3-2022 RESULTS: STRONG TOP LINE, EXPANDING MID-LINE Q3-22 REVENUE IN CONTEXT ADJUSTED EBITDA MARGINS STRENGTHENING 300 60 24% Margin $273mm 20% Margin $245mm 250 50 $219.5mm 200 40 17% Margin $millions $millions 150 30 100 20 50 10 - - Q1 Q2 Q3 Q1 Q2 Q3 *Adjusted EBITDA and Adjusted EBITDA margin a
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