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STEP Energy Services Ltd. is mulling an initial public offering this year to capitalize on a turnaround in the oil services sector as crude prices rise

STEP Energy Services Ltd. is mulling an initial public offering this year to capitalize on a turnaround in the oil services sector as crude prices rise.

STEP, owned by Calgary private equity firm ARC Financial Corp., bought the Canadian hydraulic fracturing, coiled tubing and well-cementing business from financially troubled Sanjel Corp. after that company was broken up under court supervision last year.

The company is seeking to raise roughly $200-million, people familiar with the matter said. The offering is co-led by CIBC World Markets and Raymond James Ltd.

STEP said it would use the proceeds for debt repayment and to accelerate growth, though it said the size and price of the offering would depend on market conditions. There is no guarantee it will go ahead.

It comes as oil producers begin to loosen their purse strings after more than two years of austerity, brightening prospects for companies like STEP that specialize in hydraulic fracturing and other services.

That segment of the business had been hit especially hard as oil producers slashed budgets and new drilling ground to halt. Activity has picked up, however, since crude prices have rebounded above $50 (U.S.) a barrel.

The number of active rigs in the United States this week topped 700, up 92 per cent from levels in May 2016, according to Barclays PLC, which cited data from service company Baker Hughes. In Canada, the number of active rigs is up 60 per cent from this time last year, the bank said.

STEP plans to spend nearly $150-million (Canadian) on capital expansions through 2018, according to its prospectus.

The company reported a net loss of $17.3-million in the first nine months of 2016 on consolidated revenue of $105-million. That compares to a loss of $1.9-million over the same period in 2015 on revenue of $80.2-million.

With a file from Andrew Willis

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