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STEP Energy Services reports wage, job, spending cuts with lower Q1 earnings

STEP Energy Services Ltd. is reporting job cuts, wage rollbacks, a reduction of manned equipment and reduced capital spending as it adjusts to lower oilfield activity during the COVID-19 pandemic.

The Calgary-based company says adjusted earnings before interest, taxes, depreciation and amortization fell by 12 per cent to $22.8 million in the three months ended March 31, despite a 10 per cent increase in consolidated revenue to $194 million.

It attributes the decrease to a $2.5 million provision for bad debt and $1.9 million in severance for unspecified workforce reductions in mid-March in reaction to an oilfield slowdown in Canada and the United States.

Despite a recent rise in U.S. benchmark oil prices to above US$30 per barrel, STEP says it has further reduced its 2020 capital program to $15.5 million, down from $24 million previously and its initial plan of $47 million.

It repeated its warning of a potential breach of its debt-to-adjusted-earnings bank agreements within the next two quarters that could enable a demand for immediate repayment of all amounts due, adding it is seeking relief from its lenders.

It reported a first-quarter net loss of $52.2 million, compared with a net loss of $600,000 for the same period in 2019, mainly due to $58.8 million in non-cash impairment charges against its Canadian well-fracturing assets.

Analysts had expected a net loss of $2.56 million, according to financial markets data firm Refinitiv.