Liberty Energy Q3 2024 Earning Call Summary

Management Comments

1. Historical and Forecast Frac Levels

• Historical Performance: In Q3 2024, Liberty set a company record for hours pumped, driven by efficiencies and utilization of the digiPrime fleet.

• Forecast: Expect a low double-digit percentage reduction in Q4 2024 activity due to soft year-end demand and E&P operators' hesitation to ramp up completions.

• 2025 Outlook: Frac activity is anticipated to increase early in the year to support stable production targets, with a tighter supply-demand balance due to equipment attrition and idling.

2. State of the Natural Gas Market

• Recent Trends: Natural gas prices increased in recent weeks due to easing storage congestion, producer curtailments, and strong power generation demand.

• Future Expectations: Higher prices could prompt the reversal of curtailments, potentially proving recent gains to be temporary.

• LNG Developments: The commissioning of new LNG export facilities in the U.S. and Canada is expected to drive higher natural gas demand starting in 2025.

3. State of the Oil Market

• 2024 Trends: Global oil demand is expected to grow by about 1 million barrels per day (bpd), with 2025 anticipated to see a similar or higher increase.

• Supply Outlook: While oil production may surpass demand in 2025, prices are expected to remain stable, supporting North American activity.

• Q4 2024 Activity: There is elevated uncertainty due to macroeconomic factors and geopolitical dynamics, leading to hesitancy among operators.

4. Historical and Forward-Looking Rig and Frac Crew Numbers

• Current Levels: U.S. crude oil production has been relatively flat since late 2023, with horizontal rig counts stabilizing, signaling a bottoming activity level.

• Future Plans: Liberty plans to temporarily reduce its deployed frac fleet by about 5% in Q4 2024 but will reactivate fleets in 2025 based on demand.

5. New Pipeline Builds, LNG Projects, or Other Energy Infrastructure

• LNG Export Facilities: Upcoming U.S. and Canadian LNG projects are set to boost natural gas activity in 2025.

• Other Infrastructure: Liberty is expanding CNG fueling capabilities across its fleet and treating field gas in various basins.

6. New Technology

• digiPrime Fleet: Achieved record performance in Q3 2024, improving fuel efficiency and reducing emissions.

• Liberty Advanced Equipment Technologies (LAET): Delivered its first digiPrime pumps in Q3, with an in-house approach to engineering and rapid feedback incorporation from field operations.

• PropX Innovations: Includes new prop hopper with laser sand metering and damp pile delivery systems.

• Liberty Power Innovations (LPI): Expanded CNG operations and began testing slurry pipe systems for last-mile sand delivery.

7. Customer Focus and Regions

• Customer Mix: Partnerships with large, well-capitalized E&Ps benefiting from consolidation.

• Regional Focus: Active in the Permian, DJ Basin, Haynesville, and expanding into the Beetaloo Basin in Australia.

• Power Generation Services: Exploring new opportunities outside traditional oilfield applications.

Q&A Session

1. Historical and Forecast Frac Levels

• Q4 2024 Expectations: Lower activity is expected to drive a decline in Q4 revenues by low double digits, with a recovery forecasted in Q1 2025.

• 2025 Frac Market Outlook: Efficiency gains will slow, and frac intensity will increase to meet growing oil and gas demands.

2. State of the Natural Gas Market

• Current Activity: Gas-focused E&Ps are showing hesitancy due to fluctuating prices, with activity at levels insufficient to maintain flat production.

• LNG Impact: Expectations of increased demand from U.S. and Canadian LNG projects could help support gas prices and activity levels in 2025.

• Pipeline Utilization: Rising demand for CNG fueling and gas treatment services in multiple basins, with significant increases in gas volumes handled.

3. State of the Oil Market

• Pricing Pressures: Year-end pricing challenges are noted, but the current conditions are expected to bottom out soon, with an inflection in activity by mid-2025.

• Consolidation Impact: Larger operators have benefited from efficiencies, pushing smaller competitors to idle fleets or exit the market.

4. Historical and Forward-Looking Rig and Frac Crew Numbers

• Seasonal Trends: Northern basins typically slow down in Q1 due to weather, with the Permian remaining relatively unaffected.

• Flexibility in Fleet Management: Liberty has deferred fleet activations in the past and can adjust deployment depending on market conditions.

5. New Pipeline Builds, LNG Projects, or Other Energy Infrastructure

• Future Plans: New LNG projects are anticipated to provide long-term support for the natural gas market. Liberty also explores broader energy generation opportunities.

6. New Technology

• Fleet Upgrades: digiFleets and dual-fuel upgrades aim to improve operational efficiencies and reduce emissions.

• Automation Initiatives: Automation in sand handling, chemical management, and pumping processes is enhancing fleet performance.

• Machine Learning and AI: Used for logistics optimization, asset maintenance, and maximizing engine life.

7. Customer Focus and Regions

• Customer Segments: Primary customers are large E&Ps that value efficiency, quality, and safety. Discussions include possible fleet expansions for specific clients.

• Regional Expansion: Active investments in power generation and frac services in traditional U.S. basins and the new gas-rich Beetaloo Basin in Australia.