STEP Energy Services — Investor Presentation (December 2022)
29 slides from STEP Energy Services's investor presentation, December 2022
Slide 1: STEP Energy Services Investor Presentation
December 2022 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 The forward-looking statements and FOFI included in this presentation are expressly qualified by the foregoing cautionary investors may require. Readers are e
Slide 3: Safety Trust Execution
Founded Safety 2011 Trust Shares Outstanding* Execution 71.6 Million Market Cap* Possibilities $415 Million Average Daily Volume 209,000 Number of Employees 1,384 Active Fleets 8 Frac + 19 Coil *Based on Market Close on November 30, 2022
Slide 4: North American Operations
North American Operations Montney Deep Basin Duvernay Viking Active: Q4-22 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: Creating Shareholder Value
Creating Shareholder Value 5
Slide 6: North American Fracturing Supply and Demand
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 7: Utilization and Pricing
UTILIZATION HIGH: PRICING RECOVERING STEP FRAC FLEET UTILIZATION ADJUSTED EBITDA MARGINS* 35% 80% 30% 70% 25% 60% 20% 15% 50% 10% 40% 5% 0% 30% -5% STEP entered U.S. fracturing market in Q2-18 U.S. margin in 2020 reflects permanent repositioning 20% of equipment from Oklahoma to Texas during COVID -
Slide 8: Financial Performance
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 9: Q3 Results: Strong Top Line, Expanding Mid-Line
Q3 RESULTS: STRONG TOP LINE, EXPANDING MID-LINE Q3-22 REVENUE IN CONTEXT Q3-22 ADJ EBITDA MARGINS GROWING 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 are non-IFR
Slide 10: 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 11: 2022 Leverage Target Achieved One Quarter Early
2022 LEVERAGE TARGET ACHIEVED ONE QUARTER EARLY 300 ~$160mm reduction of debt from onset Achieved in Q3-22 250 Net Debt ($ 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 and Ratios in the Compan
Slide 12: 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 2022 Actuals released. ** Free Cash Flow Yield (FactSet) is a non-IFRS measure and is not defined
Slide 13: Return on Equity Approaching 20%
ROE TRENDING TO A HEALTHY LEVEL Q3-22 TTM ROE YIELD 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 2022 Actuals. ** STEP’s measure above is an Adjusted ROE which is a Non-IFRS measure as it includes an adju
Slide 14: Enterprise Value to EBITDA Multiple the Lowest in Segment
VALUATION PROVIDES COMPELLING UPSIDE POTENTIAL Q3-22 TTM ENTERPRISE VALUE/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 2022 Actuals released. ** Enterprise Value/Adjusted
Slide 15: STEP's Disciplined Capital Spending Approach
STEP’S Disciplined Capital Spending Approach 15
Slide 16: Capital Spending Has Supported a Well-Maintained Fleet
CUMULATIVE CAPEX 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 reported Company GAA
Slide 17: Tier 4 Upgrade in Process
TIER 4 UPGRADE IN PROCESS UNIQUE PARTNERING MODEL WITH CLIENT • Upgrading 16 pumps with 2,500 horsepower (HP) Caterpillar Tier 4 Dynamic Gas Blending (DGB) engines • Producer obtains upgraded equipment and 3-year services agreement with $10 million (CAD) pre- payment • Pricing is linked to commodity
Slide 18: 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 will be powered by Tier 4 Cat engines with DGB technology Tier 2 Dual-Fuel o Cat DGB engines displace diesel wi
Slide 19: U.S. Coiled Tubing Acquisition
U.S. COILED TUBING ACQUISTION SOLIDIFYING THE DEEPEST FLEET IN NORTH AMERICA • STEP acquired 4 high-spec, ultra-deep capacity coiled tubing units and ancillary equipment for $17.2 million (CAD) • Two units were active in the Permian in Q3-22; STEP anticipates the third will be online in Q4 and the f
Slide 20: Coiled Tubing Market Growth
COILED TUBING MARKET GROWTH DEEP CAPACITY COILED TUBING SERVICES • Largest Deep Capacity Service Provider in North America o STEP has 33 deep-capacity coiled tubing units in Canada and the U.S. • Expanding Market Capacity o Market for coiled tubing services is tightening rapidly in Canada and the U.
Slide 21: Near and Mid-Term Gas Macro: Eyes On The Prize
Near and Mid-Term Gas Macro: Eyes On The Prize 21
Slide 22: 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 23: 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 • 63% of the prospe
Slide 24: 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 25: Summary: How STEP Is Creating Shareholder Value
North American fracturing market is tight into 2023 • Limited available equipment and 12+ month newbuild timelines Summary • Utilization high: pricing recovering Q3 – Another record Adjusted EBITDA quarter and Diluted EPS of $0.43 Canada/US diversity propelling results higher How STEP is Financial m
Slide 26: Investor Relations Contact
587-349-5672 investor_relations@step-es.com www.stepenergyservices.com
Slide 27: LNG Appendix
LNG Appendix 27
Slide 28: 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 29: 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
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