Step Energy Q4 2024 presentation: Revenue drops amid cautious 2025 outlook

Introduction & Market Context

Step Energy Services (TSX:STEP), a North American oilfield service company with a market capitalization of $6 billion, presented its fourth quarter and full-year 2024 results on May 22, 2025, revealing significant challenges in the final quarter despite modest annual growth. The company faces a complex market environment characterized by regional disparities between Canadian and U.S. operations, with technological innovation serving as a bright spot amid financial pressures.

The energy services sector continues to navigate volatile commodity prices and shifting capital expenditure patterns among exploration and production companies. Step Energy’s performance reflects these broader industry trends, with the company’s stock showing strong momentum over the past year despite recent headwinds.

Quarterly Performance Highlights

Step Energy reported a substantial revenue decline in the fourth quarter of 2024, with revenue dropping to $147 million from $256 million in the previous quarter, representing a 43% sequential decrease. This significant downturn came despite the company achieving a slight increase in full-year revenue, which rose to $955 million from $946 million in 2023.

The fourth quarter results were particularly challenging on the profitability front. Step Energy posted a net loss of $45 million ($0.23 per share) for Q4, while adjusted EBITDA fell to just $4 million, representing a slim 3% margin. These quarterly figures contrasted sharply with the company’s full-year performance, which included:

• Full Year Adjusted EBITDA: $169 million (18% margin)
• Full Year Net Income: $2 million ($0.02 per diluted share)

The stark difference between quarterly and annual results highlights the cyclical nature of the energy services industry and the particular challenges faced in the final months of 2024.

Strategic Initiatives

Despite financial headwinds, Step Energy continues to advance its technological capabilities and operational efficiency. CEO Steve Glanville highlighted the company’s participation in a trial for a 100% natural gas-powered fracturing pump, demonstrating Step Energy’s commitment to innovation and potentially reduced environmental impact.

The company has also made notable progress in its debt reduction strategy. CFO Klaus Deem emphasized that Step Energy has decreased its debt by over $250 million since 2018, strengthening the balance sheet despite market volatility. This focus on financial discipline positions the company to better weather industry cycles and potentially capitalize on strategic opportunities.

Step Energy also reported achievements in its coiled tubing operations, setting new performance records that could enhance service delivery and operational efficiency. The company’s dual fuel fracturing capacity represents another area of technological advancement that may provide competitive advantages in certain markets.

Forward-Looking Statements

Looking ahead to 2025, Step Energy management expressed cautious optimism about the North American energy market, with notable regional differences in their outlook. The company anticipates increased activity in Canada, while expressing more reserved expectations for the U.S. market, particularly in the second half of the year.

Several factors could influence Step Energy’s performance in the coming year:

1. The completion of the LNG Canada project, which may impact regional demand patterns

2. Upcoming Canadian elections and potential changes in U.S.-Canada relations

3. Exchange rate fluctuations that could affect margins

4. Potential tariff impacts on costs and pricing strategies

Management indicated plans for continued debt reduction, with analysts inquiring about the possibility of reducing debt to approximately $40 million. The company is also exploring equipment consolidation opportunities to optimize its asset base in response to market conditions.

While Step Energy faces near-term challenges, particularly in the U.S. market, the company’s technological advances and debt reduction efforts may provide a foundation for improved performance if market conditions stabilize. Investors will be watching closely to see if the company can translate its cautious optimism for the Canadian market into tangible financial improvements in 2025.

Full presentation:

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