STEP Energy Services: Q4 TAKE THREE

In Q4, STEP Energy’s performance lagged in the US while Canada maintained its resilience. Natural gas and LNG products are set to drive its performance in 2025 and beyond. However, weather-related challenges can derail its short-term performance. The US market will also likely recover, but persistent challenges associated with completion activity can slow down the process. Despite that, the company improved its share of dual-fuel frac spreads in 2024.

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Stable Outlook But Some Challenges Remain: In 2025 and 2026, STEP Energy's (SNVVF) management believes in a recovery in Canada following higher demand for natural gas, LNG, and natural gas liquid (or NGL). Its utilization in fracturing and coiled tubing is expected to be “robust.” Pricing, however, can remain relatively weak. Given the nature of spring break and weather issues, the management finds 2H 2025 activities “difficult to project with certainty.”

In the US, it has reactivated a unit in early 2025 that was idled in Q4 as the company views 2H 2025 with “cautious optimism” following the completion of several large LNG products. However, STEP estimates that the conditions remain “challenging, and activity remains below 2024 levels.” Demand for STEP’s coiled tubing technology continues to increase. Read more about STEP in our recent article here .

Operating Metrics Reflected US Weakness In Q4 : Year-over-year, STEP's revenues decreased by 2% in Canada but took a steep downturn (55% down) in the US in Q4 2024. The fall in the US was for three consecutive quarters. As a result, its adjusted EBITDA margin turned negative in the US. The decline in drilling activity and a slowdown in coiled tubing and fracturing activity primarily affected its Q4 results in the U.S. At the same time, STEP’s focus on energy operators with larger-scale programs helped it maintain stability in Canada.

In Q4 2024, STEP’s fracturing operating days marginally decelerated in Canada, while it nearly crashed (88% down) in the US compared to a year ago. Its dual-fuel horsepower increased by 23% in Q4 2024, despite the industry slowdown in fracking. Nearly 78% of its total HHP is dual-fuel capable, up from 62% a year ago. The company’s active hydraulic fracturing spread count declined by one in the US in Q4.

Free Cash Flow Fell : STEP's cash flow declined (15% down) in FY2024 compared to a year ago, while its free cash flow decreased by 21% during this period. Its debt-to-equity improved to 0.15x as of December 31, 2024, from 0.24x at the beginning of the year. In early 2025, it renewed its share repurchase authorization and now plans to retire 3.6 million shares, or 5% of the outstanding shares.

Thanks for reading the STEP Take Three, designed to give you three critical takeaways from STEP's earnings report. Soon, we will present a second update on STEP earnings, highlighting its current strategy, news, and notes we extracted from our deeper dive.

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