OIH - BMO upgrades STEP to buy - sees 40%+ upside for the Canadian oil service stock

BMO analyst John Gibson upgraded STEP Energy Services (OTCPK:SNVVF) to buy as pricing for pressure pumping services inflects higher. At less than 3x 2022 EBITDA, strong utilization and improved pricing should drive ~40% upside for shares in the near term. STEP (OTCPK:SNVVF) generated ~$120m in EBITDA in 2018, when the shares traded above $10 CAD (+300%); share count is largely unchanged since that time, and BMO sees the Company generating upwards of $130m in EBITDA during 2023; debt balances are now lower than during 2018. The service sector has benefitted from strong oil price tailwinds; however, US services (OIH) have struggled with producer discipline, a point of reduced concern in the Western Canadian oil patch. Canadian upstream names provide direct leverage to higher oil prices; however, with names like Baytex (OTCPK:BTEGF), MEG (OTCPK:MEGEF), and Whitecap (OTCPK:SPGYF) up as much as 1,000% from the lows, perhaps investors will begin to focus on

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BMO upgrades STEP to buy - sees 40%+ upside for the Canadian oil service stock