Mr. Steve Glanville reports

STEP ENERGY SERVICES LTD. REPORTS SECOND QUARTER 2023 RESULTS

Step Energy Services Ltd. has released its financial and operating results for the three months ended June 30, 2023. The following press release should be read in conjunction with the management's discussion and analysis and unaudited condensed consolidated interim financial statements and notes thereto as at June 30, 2023. Additional information about Step Energy, including the company's annual information form for the year ended Dec. 31, 2022, dated March 1, 2023, is available on the SEDAR+ website.

Second quarter 2023 highlights:

• Consolidated revenue for the three months ended June 30, 2023, of $232.1-million, decreased 15 per cent from $273.0-million as at the three months ended June 30, 2022, and decreased 12 per cent from $263.4-million as at the three months ended March 31, 2023.
• Net income for the three months ended June 30, 2023, of $15.3-million (21 cents per diluted share) compared with $38.1-million (54 cents per diluted share) in the same period of 2022 and $19.7-million (26 cents per diluted share) for the three months ended March 31, 2023. Included in income for the three months ended June 30, 2023, was share-based compensation expense of $1.4-million, compared with a recovery of $5.1-million during the three months ended March 31, 2022. Net income for the same period of 2022 included an impairment reversal of $32.7-million.
• For the three months ended June 30, 2023, adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $47.4-million or 20 per cent of revenue compared with $55.3-million or 20 per cent of revenue in Q2 2022 and $45.4-million or 17 per cent in first quarter 2023.
• Free cash flow for the three months ended June 30, 2023, was $34.8-million compared with $33.2-million in Q2 2022 and $17.1-million in Q1 2023.
• Step Energy made significant progress on debt reduction during the quarter while also investing into the long-term sustainability of the business:
  • The company had net debt of $115.8-million at June 30, 2023, compared with $142.2-million at Dec. 31, 2022. Step Energy has reduced net debt by nearly $200-million from peak levels in 2018.
  • The company invested $14.4-million into sustaining and optimization capital equipment, completing the company's first Tier 4 dual-fuel fleet conversion that was started in fourth quarter 2022. The company had 16 Tier 4 dual-fuel units in the field at the end of Q2, providing diesel substitution rates of up to 85 per cent.
• Step Energy's Canadian fracturing division placed 5,196 metric tonnes in less than a 24-hour period for a leading Canadian exploration and production client, setting a new daily proppant pumping record for Step Energy.

Market outlook

Step Energy anticipates that commodity markets will continue to remain unsettled through the third quarter before strengthening into the fourth quarter and into 2024. Near-term concerns over a potential recession have weighed on commodity prices, but steps taken to constrain supply are expected to begin a tightening cycle that will be positive for commodities.

OPEC (Organization of the Petroleum Exporting Countries) pro-actively responded to concerns regarding weakened oil demand by lowering production quotas, which will be constructive for supply-demand balances. The International Energy Agency reiterated in its June, 2023, oil market report its expectation that world crude demand will grow by 2.4 million barrels per day in 2023 to a record global demand of 102.3 million barrels per day. The IEA forecasts that total supply is expected to grow to 101.3 million barrels per day, leaving a shortfall that is expected to reverse the trend of growing oil inventories and provide support for oil prices.

U.S. natural gas prices are beginning to respond to the decline in natural-gas-directed drilling activity, which is expected to slow the growth in U.S. natural gas storage levels. The decline in rig count, coupled with a resumption of exports from the Freeport liquefied natural gas facility and high power demand to start the U.S. summer season, is expected to be constructive for natural gas prices for the balance of the year. Pricing for natural gas liquids continues to remain strong, providing support for Canadian gas producers.

The long-term outlook for oil field services is very constructive. The structural underinvestment in hydrocarbon production capacity through the last seven years has been exacerbated by geopolitical tensions, forcing governments and policy-makers to confront the realty that oil and gas will be a key part of the energy mix for many years. Step Energy is proud to work in Canada and the United States, countries that have the natural resources, the regulatory frameworks, and the technical expertise to deliver safe and affordable energy to the world.

Step Energy's focus for the balance of 2023 and into 2024 is on generation of free cash flow while continuing to invest in emission-reducing technologies on its asset base, including the recently deployed Tier 4 dual-fuel engines in its Canadian fracturing fleet. The strong results posted year to date support the company's goals to reduce its balance sheet leverage and make disciplined investments that support Step Energy's goal of building a resilient company and creating shareholder value.

About Step Energy Services Ltd.

Step Energy is an energy service company that provides coiled tubing, fluid and nitrogen pumping, and hydraulic fracturing solutions. Its combination of modern equipment along with its commitment to safety and quality execution has differentiated Step Energy in plays where wells are deeper, and have longer laterals and higher pressures. Step Energy has a high performance, safety-focused culture, and its experienced technical office and field professionals are committed to providing innovative, reliable and cost-effective solutions to its clients.

Founded in 2011 as a specialized deep-capacity coiled tubing company, Step Energy has grown into a North American service provider delivering completion and stimulation services to exploration and production companies in Canada and the U.S. Its Canadian services are focused in the Western Canadian sedimentary basin while in the U.S., its fracturing and coiled tubing services are focused in the Permian and Eagle Ford in Texas, the Uinta-Piceance and Niobrara-DJ basins in Colorado, and the Bakken in North Dakota.

Its four core values -- safety, trust, execution and possibilities -- inspire its team of professionals to provide differentiated levels of service, with a goal of flawless execution and an unwavering focus on safety.

Step Energy will host a conference call on Thursday, Aug. 3, 2023, at 9 a.m. MT, to discuss the results for the second quarter of 2023.

A webcast of the conference call will be available. Visit the investors section of the company's website, and click on reports, presentations and key dates.

To participate in the question-and-answer session, please call the conference call operator at 1-888-886-7786 (toll-free) 15 minutes prior to the call's start time and ask for "Step Energy Services first quarter and 2023 earnings results conference call."

The conference call will be archived on Step Energy's website.

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