STEP Energy Services (STEP) rose 27% on an upgraded $5.50/share bid from ARC Financial, after its previous $5 bid fell through. At nearly 3.5x NTM EBITDA, the deal values STEP well above the range public markets are willing to pay…

… and it isn’t all that surprising, given the weak oil price environment that’s driven M&A activity historically. STEP management has pointed to the impact cheap barrels have had on both client activity and margins…

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This has further constrained demand in an oversupplied market. In response, we are seeing service prices come down, which places additional pressure on already compressed margins.

Stephen Glanville (CEO) - STEP Q2’25 call

… which has shown up in the financials.

I called out STEP as one of two future targets after Trican’s $230M acquisition on a thesis that remains the same today: energy services names need to get bigger or get bought to weather the storm. The other one? Calfrac (CFW) - still public…

… but there’s sharks in the water! Let’s see.

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