LBRT - NYSE

Welcome to the Liberty Energy Earnings Conference call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Anjali Voria, Director of Investor Relations. Please go ahead.

Thank you, Wyatt. Good morning, and welcome to the Liberty Energy fourth quarter and full year 2024 earnings conference call. Joining us on the call are Ron Gusek, incoming Chief Executive Officer; and Michael Stock, Chief Financial Officer. Before we begin, I would like to remind all participants that some of our comments today may include forward looking statements reflecting the company's views about future prospects, revenues, expenses or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share and cash return on invested capital are not a substitute for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA, net income to adjusted net income, and adjusted net income per diluted share and the calculation of adjusted pretax return on capital employed and cash return on invested capital, as discussed on this call are available on our Investor Relations website. I will now turn the call over to Ron.

Good morning, everyone, and thank you for joining us to discuss our full year and fourth quarter 2024 operational and financial results. Liberty delivered strong leadership in technological innovation and executional excellence in 2024. Solid financial performance and several operational records were achieved even as industry activity softened through the year. We concluded the year with revenue of $4.3 billion, net income of $316 million and adjusted EBITDA of $922 million. Full year return of capital employed was 17% and our 2024 cash return on capital invested of 21% exceeded the 13-year S&P average. We executed on our fleet transition initiatives, cost optimization efforts using AI-enhanced digital systems and expansion of our natural gas fueling and delivery capacity to optimal scale. We are relentlessly focused on long-term value creation, balancing compelling growth opportunities with return of capital to shareholders. Since July 2022, we have distributed $550 million to shareholders through the retirement of 15% of shares outstanding and quarterly cash dividends. We have built strong partnerships and investments across the energy corridor, in geothermal, nuclear, battery, power, generation technologies and the Australian Beetaloo basin assets. Today, we have an undeniable opportunity to leverage our knowledge, experience and expertise in energy systems to meet a rise in power demand in North America. As we embark on an extraordinary new chapter for our company, our founder, Chris Wright, is similarly charting a new path as the U.S. Secretary of Energy, on behalf of the Liberty family, I'd like to extend a heartfelt congratulations to my dear friend of over 20 years for his visionary leadership and significant contribution to Liberty and the broader energy sector. Entering 2025, we have two key strategic priorities: continued technology innovation and leadership in completion services and significant expansion of our burgeoning power generation services business. As the preeminent completion service provider, the innovation cycle in software, equipment and design is driving long-term margin enhancement, improvement in capital efficiency and lower emissions. Our technology team has led advances in design and development of the latest engine technologies for completion services applications. Yesterday, we announced the latest iteration of development for our digiPrime platform with the industry's first natural gas variable speed, large displacement engine with Cummins, a partner of ours since the founding of our firm. This engine enhances our already industry-leading digiFleet offering by combined high fuel efficiency with the ability to manage transient load and precision rate control, unrivaled in the industry. We have built an integrated ecosystem of software that seamlessly brings together our digiTechnologies with advanced cloud-based software for our pump control systems, power generation, demand management and logistics platform and on site fuel management software systems. This ecosystem reduces the total cost of delivery, improving our returns, lowering the cost to bring a barrel of oil to the surface for our customers. We are also excited to celebrate the incredible operational feat achieved by one of our digiPrime fleets. In 2024, this Liberty fleet set a single crew company record of 7,143 hours pumped in a year, averaging nearly 600 hours per month. This equates to approximately 96% of available hours of the year under normal dedicated fleet utilization. As we look ahead, Liberty has an historic opportunity to deliver differentiated power services and solutions to meet growing energy demand. During 2024, we put into motion our distributed energy business that provides a compelling alternative to traditional generation and transmission. Harmful energy policy, high regulatory barriers and decades of underinvestment in grid infrastructure have increased the fragility of the grid and hindered the ability to respond quickly to growing demand. The rising demand for electrons from the proliferation of data centers, onshoring of manufacturing activity, expansion in mining operations and industrial electrification provides a supportive backdrop to expand our power generation business outside the oilfield. We are uniquely positioned to rapidly deploy distributed modular power solutions with low emission, scalable power infrastructure tailored to meet specific project demands. Liberty brings together a distinctive set of strength that put us in an advantaged position to grow a successful power business. Since 2011, we have deployed almost $5 billion in capital to build a high returns completion business which now operates and maintains more than 3,000 pieces of rotating heavy equipment in remote harsh environments across North America. We have a foundational culture that attracts and retains great people all of whom strive to deliver at the highest level. Our service delivery is augmented by extensive engineering expertise in engine technologies, mobile power plant assembly and asset operation in the rigors of the oilfield, ensuring thoughtful power generation asset selection and easing future deployment in other applications. We also have critical supply chain relationships built over our history that enhance the innovation cycle and ensure timely access to key components. We have our operations platform across the United States and Canada, including equipment packaging capabilities to ensure we can fabricate, deliver and support each installation. Together, these strengths enabled us to build a distributed power business with durability and longevity over the coming years. We are growing our partnerships in the areas of critical technology and infrastructure development to ensure we can provide a coordinated solution that addresses all aspects of a power generation application, reliability expectations, load variability, gas supply quality, emissions requirements and cooling needs, amongst other considerations, demand strong engineering support paired with a range of technology offerings. We will provide an infrastructure delivery mechanism for electrons that fits the specific application. In the near term, we are getting merchant power, data centers, commercial EV charging stations and micro grids for resource extraction applications. We have already successfully deployed 130 megawatts, probably for digiFleet applications. By the end of 2026, we expect to take delivery of, and deploy, an incremental 400 megawatts of power generation with the initial deployments commencing late this year. Frac markets reached a trough at the end of 2024 after progressive quarterly declines in industry activity since early 2023, early signs of an inflection in completions activity have now emerged from 2024 lows. Oil producers, which comprise the vast majority of frac activity are working to simply maintain production and are returning to anticipated activity levels after the year-end slowdown. Improving natural gas fundaments are encouraging. For the full year, industry-wide lateral footage completed is expected to be approximately flat with 2024. The slowing pace of activity in late 2024 resulted in near-term price pressure to start 2025. And most notably impacting conventional fleets. The fundamental outlook for next-generation higher-quality fleets remain strong as operators continue to demand technologies that provide significant emissions reductions, fuel savings and operational efficiency advantages. The growing complexities of E&P demands and the continued drive for efficiency gains necessitate continued investment in technology and partnerships with high-quality serve companies. Liberty is well positioned to meet this demand. Fleet idling, attrition and cannibalization of aging equipment likely accelerate in the next two years as a large swath of Tier 2 equipment reaches end of life. Concurrently, fleet sizes continue to expand to meet increased horsepower requirements for higher-intensity fracs. These two dynamics imply the supply and demand balance in horsepower is tighter than industry frac fleet counts infer. An improvement in frac activity through the year could support better pricing dynamics. Global oil markets reflect ongoing uncertainties in geopolitics, Chinese economic growth, OPEC+ production plans and a change in the domestic political climate, but the resulting commodity price fluctuation has not yet led to a meaningful change in E&P activity plans. Natural gas demand is supported by LNG export capacity expansion and a large projected multiyear increase in North American power consumption. Power demand is rising at the fastest pace since the start of the century as accelerating demand from data centers is converging with the reshoring of manufacturing activity and projected increases from mining, electrification and other commercial and industrial applications. This pace of growth requires power infrastructure solutions that can be adapted to the dynamic needs of individual customers. Liberty is well positioned to meet this demand with a modular solution that offers reliability, redundancy and the ability to accelerate deployment time lines and scale alongside growing load requirements. Entering 2025, we are excited to lead the industry with innovative and durable technologies that will drive our continued success in the years ahead. We are investing to build truly differential competitive advantages, both in the completions arena and in our new power business to generate significant value for our customers and our shareholders. We expect our investments today will lead to strong returns in the coming years. In the first quarter, we anticipate a modest sequential increase in revenue and adjusted EBITDA. For the full year, within the completion services business, we expect solid free cash flow generation as capital expenditures moderate even as pricing headwinds impact profitability. As we embark on the next chapter of Liberty story, we will also significantly grow our investment in power infrastructure to take advantage of a generational opportunity in power demand growth. With that, I'd like to turn the call over to Michael Stock, our CFO, to discuss our financial results and outlook.

Good morning, everyone. We are pleased to achieve solid financial results with strong returns and free cash flow, which has allowed us to deliver a healthy return of capital to shareholders while reinvesting in our long-term initiatives. While markets are continuously evolving, the way we manage our investment remains the same. Growing our competitive advantage, generating strong cash returns and maintaining a fortress balance sheet while delivering strong returns to shareholders through cycles. We're at an exciting time in Liberty's journey, as we accelerate growth in our power business and advanced technology innovation in the completions business. The North American completions industry is reaching maturation and required completions activity to meet E&P production goals. Our growth opportunity in completions is now defined leading-edge engineering technology innovation driving organic market share gains and margin enhancement by leveraging digital systems and vertical integration. We are continually pushing beyond our prior achievements and will lead the industry regards of where we are in the cycle. In power, we now have an unprecedented opportunity here to build a differential business. Just as we did in completions 13 years ago, a business that has delivered an average CROCI of 24% over its history. We are building a power business with significant competitive advantages driven by the unique people and culture of Liberty designed to deliver strong cash returns on organic technology and equipment investments in the years ahead. During the next two years, you will see us execute on a variety of power generation installations, including merchant power generation, commercial and industrial projects, including data centers and distributed microgrid generation for the energy and mining sectors. We have a strong pipeline of opportunities that provide significantly more demand for Liberty Power that we will be able to supply in the next two years. We're designing our power business with a diverse array of end markets, which we believe will be inherently less cyclical and have a lower risk profile than our historic frac business. We are targeting a long-term CROCI in the high teen percentage rate. We are building an enduring business for the decades to come. We are focused on bringing together great technology and partners and investing in advantaged assets that provide sustainable long-term advantages. We aim to be the partner of choice for the delivery of power. For the full year, revenue was $4.3 billion compared to $4.7 billion in 2023, representing a 9% decline. Net income totaled $316 million and adjusted net income was $277 million and excludes $39 million of tax-affected unrealized gains on investments. Fully diluted net income per share was $1.87 and adjusted net income per diluted share was $1.64. Full year adjusted EBITDA was $922 million compared to $1.2 billion in the prior year. In the fourth quarter of 2024, revenue was $944 million, representing a sequential decline of 17% driven by market headwinds, larger-than-expected exhaustion and a partial quarter impact of two fewer fleets deployed. Fourth quarter net income of $52 million compared to $74 million in the prior quarter. Adjusted net income of $70 million compared to $76 million in the prior quarter and excludes $35 million of tax-affected unrealized gain on investments. Fully diluted net income per share was $0.31 compared to $0.44 in the prior quarter and adjusted net income per diluted share was $0.10 compared to $0.45 in the prior quarter. Fourth quarter adjusted EBIT was $156 million, compared to $248 million in the prior quarter. General and administrative expenses totaled $56 million in the fourth quarter, a large mine for the third quarter and included noncash stock-based compensation of $7 million. Other income items in total included $33 million for the quarter, inclusive of the aforementioned $45 million of unrealized gains on investments, interest expense of $8 million and a $3 million loss related to tax receivables agreements. Fourth quarter tax expense was $6 million, approximately $0.10 of pretax income. Cash taxes were a $5 million source of cash as a result of the collection of a prior period over payment, while we expect tax expense rate in 2025 to be approximately 22% of pretax income and cash taxes to be 1% to 2% higher than that than our effective book tax rate. We ended the year with a cash balance of $20 million and net debt of $171 million. Net debt increased by $67 million from the prior year. In 2024, cash flows were used to fund capital expenditures, $127 million in share buybacks and $48 million in cash dividends. Total liquidity at the end of the year, including availability of the credit facility was $135 million. Net capital expenditures were $188 million in the fourth quarter and $627 million for the full year, which included investments in digiFleet, LPI gas compression and delivery infrastructure, wet sand technology, capitalized maintenance spending and other projects. Our 2024 results showcase our ability to deliver a robust return of capital program while investing in high-return projects to expand at a competitive advantage. Over 2.5 years ago, we reinstated a return of capital program post pandemic. Since then, we have now distributed over $0.5 billion to shareholders through our share buybacks and cash dividends. We are committed to shareholder returns and in the fourth quarter, we repurchased $28 million or approximately 1% of our shares outstanding and increased our dividend by 14% to $0.08 share. We now have $294 million remaining on a buyback authorization. As Ron shared earlier, we expect a modest sequential uptick in the first quarter for revenue and adjusted EBITDA. For the full year, we anticipate adjusted EBITDA will be in the $700 million to $750 million range, as headwinds from the late 2024 service pricing impact offset favorable fleet mix and optimization efforts. As the year progresses, we believe the opportunity for price improvement could materialize as frac activity improves through the year. Our completions capital expenditures moderated in 2025 to approximately $450 million including $175 million in maintenance capital expenditures and the remaining related to the replacement cycle of four to five digiFleets as we retire legacy completion equipment. Our pace of next-generation deployment moderates to these levels versus the accelerated investment in the early part of the cycle. Within our power business, we expect to take delivery of approximately 150 megawatts of power generation by the end of 2025 and another 250 megawatts by the end of 2026. our 2025 capital expenditure, power generation and related ancillary equipment are expected to be approximately $200 million. Together, total capital expenditures will be approximately $650 million in 2025. We have significant flexibility in adjusting our capital spending to meet incremental demand. We are focusing on investing for the long-term competitive advantages and are excited for the coming years as we lean into the growth an expansion of a truly differentiated power business and in reinforcing continued leadership in our completions business. I will now turn it back to the operator for Q&A, after which, Ron will have closing comments at the end of the call.

[Operator Instructions] And our first question will come from Stephen Gengaro with Stifel. Please go ahead.

Thanks. Good morning, everybody.

Good morning.

Two things for me. First, on the frac pricing side, can you talk a little bit about when you - Michael gave some sort of commentary on '25 EBITDA expectations. Can you talk about kind of in rough terms where you're seeing frac pricing right now relative to maybe 12 months ago?

Yes. Certainly, Stephen. Obviously, frac pricing has softened a little bit over the last year as well. As we've said already, we saw a peak in the market probably mid- to late 2022. And we've had a slow and steady trend downwards from that point in time. And we certainly felt that headed into the RFP season, for 2025. And so we're off there a little. Exactly levels vary depending on the technology you're talking about. So the older Tier 2 assets probably most impacted by that. We've seen very good resiliency in the pricing, for next-generation assets even as we head into 2025. So the digi platform holding up very, very well from a margin standpoint.

Yes, I'll just add a little color to that. I mean this very much feels like the trough coming in, it was a very soft Q4. So therefore, it was a sort of a soft repricing environment already sort of, feeling a little bit more sort of positive, as we've sort of turned the corner into the beginning of the year. So it feels like we're kind of at the trough of the cycle, but I mean, history will prove.

Great. One thing about that one, Steve, I just want to kind of point out that by the looks of it, the average profitability per fleet at the moment, the trough of this cycle looks to be about sort of the midpoint, or a little bit higher than the midpoint of the last cycle. So as we've sort of talked about before, the completions business is getting better. There's less providers, there is less excess equipment, the movements in the cycle are less violent. So it's very, very - we think it's proving to be very, very positive.

Great. And then my other question, exactly sure how to ask us. But when we think about the power gen business and we think about the power needs for frac, how does either the E&P or you think about the arbitrage, between using the power outside of the oil patch where maybe people are less price sensitive versus power new fleets, which - you have to do to run fracs, where the pricing might be lower? Or how do you balance that sort of price arc.

Interesting question, Stephen. But of course, we got into the power generation for a very specific reason. As we deploy assets into frac, we always want to have as much control over the key variables that play into the success of frac operations as we can. That includes vertical integration and supply chain, manufacturing of key components for a while. We were in the wellhead business, because that was holding up frac operations. We were very intentional about our decision to get into supply and power, for the frac business, to support our digi deployment. And that was for a couple of reasons. Number one, we want to be able to deliver efficiency at the levels our customers have come to know and expect from Liberty. And that happens by virtue of having control over, all of those aspects of the business, including the fuel supply for that. So LPI CNG molecule delivery, and the power generation assets themselves. And that remains an important priority for us today. Digi is a key piece of our puzzle out there. It's working hard for some of our great partners in the Permian Basin and in the digi. And so, we have power generation attached to that, with the goal of ensuring the levels of service they've come to expect, from Liberty over the long-term, and we're not going to waver from that.

Yes. So I mean, also, I'd just remind you, we have a sort of a two-pronged view of how we do the natural gas, the movement to natural gas for frac, right. We have our digiFrac fleets, which are pure electric, where we have electric generation into a PDU unit that can also be integrated into the grid. And then we have our digiPrime units, which are more - have a lower average per capital cost, and a slightly more efficient on the fuel usage that a direct drive, right? So we have a balance of assets there. And so therefore, when we look at that, it sort of allows us to have sort of a very, very good focus on purely sort of driving next-generation technologies. And that's example by our new Cummins announcement, for use of frac. And then also having that flexibility that, when we have - our mobile power generation for frac. When it is the grid arrives for the customers that need that, and some of those units may be free. They adjust it easily, be rolled into a data commissioning project for a data center, for sort of mobile power for that. So again, electrons are sort of able to be used in multiple areas, and this is a very, very sort of like flexible set of products, and modular products that we build.

Okay, great. Thank you, gentlemen.

Our next question will come from Arun Jayaram with JPMorgan. Please go ahead.

Good morning, Ron and Michael. Gentlemen, I was wondering if you could help us think about, or frame the returns opportunities from deploying mobile power generation, understanding that you're still in the process of deploying more of capacity outside of the oil and gas industry. But how should we think about paybacks and investments, and returns relative to your frac business?

Yes. Good question, Arun. So as we've kind of outlined, we have a multipronged approach to deploying our power generation outside of oil and gas. We've identified a number of areas that, we think we can deliver differentiated service in. And so, those include a merchant power opportunity. That includes, we announced a partnership with DC Grid around EV charging. Data centers will, of course, be a part of our puzzle along with some other commercial and industrial applications. And then, of course, some work inside of resource extraction oil and gas, and remote mining as well. Now each of those has a bit of a different outlook, and a little bit different duration, let's say, on the contract term that we would have with them. And we'll think about the returns profile, for each of those in accordance with that. So for example, if we are going to provide long-term firm power for a data center, and we have a 20-year PPA to go along with that, we would accept a different returns profile in that environment, than we might in a shorter-term bridge power environment, where we could be looking at a contract or maybe two years or so. And so, as we progress the conversations for each of these opportunities we have in the pipeline, that's really the consideration. We're going to have some stuff that's going to be in that maybe two to six, seven, eight year range. We're going to have some stuff that's going to be in the 15 to 20-plus year range, and we'll balance the return profiles of each of those accordingly. But as Michael said in his prepared remarks, we're targeting average across that business a return profile that has - that is, somewhere in the mid to high-teens, across that entire portfolio.

Great.

I think to counter on that one, Arun, is yes, by balancing those different return profiles, as Ron said, we still plan to significantly exceed the average of the S&P 500, which is, of course, and with a lot less cyclical business, than the completion has been over the last 12 years.

Understood. I wanted to follow-up on the release with Cummins, on the new variable speed natural gas-powered engine. Ron, is there any IP that Liberty has as part of this? And also, just wanted to get your thoughts as you deploy this capacity in 2025, what are some of the financial benefits to Liberty. You mentioned lower fuel costs, obviously, that will accrue to the customer. But from a - is it lower maintenance CapEx? How do we think about, the impact from this in terms of your OpEx, or anything like that relative to the current digiFleets that you have out there?

Yes. So from an IP standpoint, we do have some IP on the digi platform that is an important piece of our puzzle. In this case, the IP around the specific engine, would be Cummins IP. And so, we leave that to them. But we do have an arrangement, with them as the launch partner of this that has us in an advantaged position, for the deployment of that engine over the coming years. As far as what that means out in the field, the great thing about moving to a natural gas engine, while there are a number of positives around it. Of course, you mentioned the fuel, that doesn't - first of all, that doesn't all accrue to the customer. Part of our mechanism for recouping the capital investment in these assets, is to keep some portion of those fuel savings. The opportunity for the conversation with the customer is around that meaningful change from running a fleet on diesel, to running a fleet on natural gas, and a path that allows us to earn a return on that additional invested capital, without meaningfully changing the price to the customer around their completions. And then, if you think about the advantages that, that also brings to us that could accrue in terms of the cost of operating. Natural gas engines have a significantly longer time, between overhaul as compared to a diesel engine. So in the Liberty world, we see overhaul time, it's maybe 20,000 to 25,000 hours on a diesel engine. We haven't got to a major overhaul, on a gas engine in our fleet yet today, but we expect that number to be north of 60,000 hours, and potentially approaching 80,000 hours. So it's going to be two to three-x time, between major overhauls on those engines. Even the basic maintenance costs when we talk about fundamental month-over-month maintenance, those costs are lower than they are for a diesel engine. And so, we will see those advantages as well, as this becomes a larger and larger piece of our fleet. The variable speed engine means that ultimately, we can deploy a complete digiPrime fleet to the field. We talked about it originally with the constant speed engine as digiPrime providing baseload capacity compared with either Tier 4 digiP or digiFrac, the electric offering. We now have the ability to put a digiPrime fleet out in the field. As digiPrime from start to finish, allows us to manage both the baseload horsepower plus those rate transients and fine-tuning that we need on a given location.

Thanks, Ron.

Of course.

And our next question will come from Ati Modak with Goldman Sachs. Please go ahead.

Hi, good morning team. I was just wondering for the early deployments you noted for later this year, how should we think about the end market and contract duration? And is there a target mix, between the markets that you identified that, you'd like to have by year-end next year?

So as we work through that deployment starting later this year, we're targeting a, I'll say, for now, a relatively even spread amongst the areas we've identified. So merchant power, commercial and industrial, and the data center applications. It may not be exactly 33, 33, 33, but roughly in that area. And as we think about the business going forward, that's important for us, to have multiple legs on the stool. Ensures a balanced business for us, with a good cross-section of contract portfolio. The earliest applications for us, probably come on the merchant power and EV charging side of things. I think that will be the first place that we'll have assets deployed. And then, a little bit longer for the data centers. Michael, do you have something you want to add there?

Great. Yes. And I think, obviously, the resource extraction of micro-grids, also will be sort of some of the early hitters. But yes, I think Ron's right. I mean ultimately, sort of our deployments will probably move towards some of the larger - when you get to the larger megawatt size, some of the larger data center applications. But and again, I think through sort of the early part - through the '26 numbers, if you're thinking about the third, a third and a third. And thinking of that in terms sort of a kind of a third long-term, a third bridge and a third merchant. So you've got a balance there, a balance of contract terms, a balance of risk profiles and a balance of long-term cash flows.

Got it. That's helpful. And then you mentioned CapEx needs for the power business. So if you can talk about the return of capital expectations, and impacts around that CapEx need for this year? And would it make sense to add any debt to the balance sheet, to fund this growth?

Yes. So when you look at our - when you sort of back into the numbers, right, we can fund this - we fund this growth. The sort of – initial, or this an initial amount of CapEx on the power business organically. We can also support sort of an organic set of buybacks and our dividend, of course, but this is a very fast-changing market. We have a significant sort of opportunity pipeline. And we're always making sure that we continue with a fortress balance sheet, and sort of investing early in the cycle, for these great opportunities. So it is a fast-changing market, and we will announce things as they come along.

Got it, thank you.

Next question will come from Scott Gruber with Citigroup. Please go ahead.

Yes, good morning. Power obviously, an exciting opportunity. But we have seen several others enter the power space. Can you provide some more color on how you're thinking about, kind of outcompeting the others in the space? Obviously, as we think about kind of what you guys have built in frac, which is competitive, but you guys have built a load around enhancing your frac equipment, and providing analytics, et cetera. How do you think about competing on the power side? Is the equipment offering going to be any different? Or is it really outcompeting on the service side?

Yes. Scott, I think you make a good point by looking at what we've done in the frac business. Like if you buy a frac from Liberty, you're not just buying a frac. People told us you're getting into a commodity business. And of course, nothing could be further from the truth. Yes, you get a - you ultimately get a frac out on location. But you get a frac underpinned, by industry-leading technology by world-class supply chain. By a strong engineering team, by unrivaled service fundamentals, all executed by a team that has probably been together for years given our industry-leading turnover, rate in the organization. And so you bring all of those things together, and that has ultimately led to us being the number one frac provider ranked year-over-year in Kimberlite surveys. And so, I don't view the power business any differently than that. Yes, we're going to sell electrons to a data center, or to the grid or to an E&P customer. But that offering is going to be underpinned by strengthen service delivery, by a strong supply chain, by a leading team of technology folks that ensures, when you choose an asset, a power generation asset to put in the field, that we put the best possible asset out there that builds in longevity durability to the business. You have to be very, very thoughtful about these things. It is not a level playing field by any stretch of the imagination. If you think about playing in the merchant power space, for example, bringing the right asset to the table there, is critical in terms of amount of deployment time, capacity factor ultimately for that in maximizing the spark spread, the price between natural gas, and the price of an electron. I think we've proven ourselves very thoughtful in all of these areas when it comes to frac. And our ability to deliver at a level that exceeds anybody else in the space, it will be no different in the power generation space. We are bringing to the table, I think, a platform that is unrivaled, by certainly anybody else who has talked about entering the space, or is entering the space today. And so, I think you'll see that play out in our results, over the coming years.

Yes. I think - we'll talk about the solution, right? We have a modular solution within the last year, building the design engineering for it, to be able to execute these in blocks, right? We have sort of a modular skid mounted 10 to 12-megawatt blocks that come with a skid-mounted transformation, controls and breakers. So it allows you to basically, and assemble these in a factory, move them to a site, put the trenching, put the grounding in, and then erect that power plant very, very quickly. Those blocks can be put together, 10 of those into a 100-megawatt, 120-megawatt unit. We also have 25-megawatt blocks using the larger 4.5 to 5-megawatt reciprocating engines. The same thermal efficiency as our baseline, which is, again, you've got to remember, these reciprocating engines are certainly efficient, as the combined cycle plants were built before 2010, right. They're significantly more thermally efficient than pico turbines. The other part that we're going to do, we will be using packaged turbines in specific applications, where the power, the footprint needs to be small, or in areas for resource extraction. If you think of the oil and gas area, where we're using some field gas, and we have some gas quality that, is not necessarily the best for reciprocating engines. So we have sort of the standard blocks that allows us to come to market very, very quickly, reduce EPC costs. And the key thing, the electrification of everything at the moment is going to be the fact that there is a significant, significant lack of trade people across the country, right? So going modular, building a factory, significantly reduces the amount of electricians that you need, the amount of people that you need on site, to put these power plants together in a cost-effective way, for the final delivered electron.

I appreciate all that color. I did want to dig into the merchant power opportunity. Just curious, is that a situation where you would dedicate some equipment to maybe try to capture the elevated spark spread, like in Texas during the summer, kind of while you're waiting for a longer-term opportunity? Or is that an opportunity where the equipment gets dedicated to merchant power on a go-forward basis? Just trying to understand that opportunity, and how you guys think about it?

Yes, we'll be coming out and talking about that in more detail probably in the next conference call, and give you some area around that. But there is a great long-term opportunity. For areas where we've got significant transmission issues, for a serious amount of time where you've got great load from, right? So helping certain numbers of the areas, whether it be, ERCOT or PJM in modeling that in areas where they need their power. So that's really where it's going to be like. But yes, we also can have the ability to integrate our - when we think about it as bridge, to back up and wheeling power onto the grid to improve returns, right? So you're going to have assets that over the 30-year life or 20-odd year life. it's going to be the - the return profile is going to morph and the return profile is going to be used for different things, right. You can provide bridge power for a data center. When the group gets there, it could impact - and negates the need for the excess diesel backup power, but you've already got a grid interconnection. You could take advantage of the spark spread at different times to improve your return profile, right? So there's going to be a lot of different contracting, sort of terms for different parts of the power business. That's very, very exciting and very, very interesting.

Scott, I would just add that from a grid congestion standpoint, grid instability standpoint, that problem is only getting worse today. We know how to fix that, of course, in this country. But the ability to address that challenge is something that takes a meaningful amount of time. First of all, it's going to take some change in policy, the ability to actually get infrastructure constructed. But even beyond that, there is a significant time component to that. And so, we view that as an opportunity that's got some real durability to it. And in fact, I think it's probably a growing opportunity as far out as we can see today.

I appreciate all the color. I'll turn it back. Thank you.

Our next question will come from Marc Bianchi with TD Cowen. Please go ahead.

Yes, thank you. Congratulations, Ron. Yes, I was curious on the 400 megawatts, how much of that at this point, is under some kind of binding commitment with the customer?

Yes. 400 megawatts is all in the supply chain, that's what order and those binding commitments, are in negotiation at the moment for two-thirds of it. The last part of the 2026 is still in what I consider, sort of that midpoint of the pipeline.

Okay. And when should we hear more about that. Would you anticipate over the next few months that, we sort of hear about kind of the entirety of the 400? Or it would be a time line to set some expectations for people?

To be honest, Marc, we'll give you more color every time something comes along in the quarter. But as in the freight business, we don't discuss our customers very detailed, right? We are focused on building a business, right? We have a 12-year track record, investing $5 million worth of equipment and delivering a 23% cash return on cash invested over that period of time, right. We are building a long-term, I would say, generational business here, right. And so, we will have significant amounts. But to be honest, the size of the business we're building is not going to be - if our customers wish to announce we are where we are providing power for them, we are happy to accommodate that. But as with the prep business, you don't see us announcing one, two dedicated fleets with large E&P operators, right? We deliver strong returns in our business by managing it properly. We don't sort of make - have a tenancy to talk in detail, about those customer relationships. We will give you contract terms - we'll give you guidance, and we will give you returns profiles.

Okay. Great. Thanks Michael. One other - with the EBITDA outlook for the year, and the CapEx, it would appear that - I heard you on solid free cash flow for completions, but maybe overall for total company free cash flows in the ballpark of breakeven. I don't know if you - if that's sort of the right read on that. But in that context, how should we...?

It's positive - breakeven.

It's positive. Okay. So how should we be thinking about the share repurchase in that context, if you have. Should we be thinking about excess free cash, kind of goes towards the repurchase? Or would you be looking to borrow a little bit, to do some more repurchase?

We look at our share repurchases, as opportunistic depending on where the share price is, right? We are investing in the long-term in our power business, and that's going to change, sort of over the course of the year and we look at that. Generally, we are not borrowing cash, to fund the share repurchase, but we drive strong free cash flow in our free cash flow generating business. If we borrowed money, it would be, because we had some large opportunities in the power sector on top of 400 megawatts that, we were actually providing the financing for, right? That's the way we think about it, right? When you look at our business, we have a business that is strongly free cash flowing. And if we think our share price is undervalued at that point. We will do opportunistic share prices. We're not really borrowing to fund a ship, to fund a share buyback. That's what's funding it. If we're ever borrowing money, we're borrowing money to fund growth. So that's the way we think about running the business.

Yes, very helpful. Thanks so much. I'll turn it back.

Thanks, Marc.

Question will come from Saurabh Pant with Bank of America. Please go ahead.

Hi, good morning, Ron and Mike.

Good morning.

Ron and Mike, maybe I want to follow-up a little bit on Marc's question on contracts, right? And again, I don't want to stop at two years, because I know you're building the power business for the long-term. So when you have discussions with the customers Ron or Mike, what kind of contract duration are you looking at? How long our customers willing to sign up for power need, if you can give some color on that that would be helpful?

Yes. I mean those vary depending on the end use application. At the very short end of things, you're talking about a scenario where we might be providing bridge power to a data center, for example. That might be two or three years before the grid gets there. At which point in time, there then becomes a conversation around, do the assets remain there in a backup application, is there an opportunity to be generating power, and selling that back to the grid. But think about that as the short end of things. And then on the long end, a 20-plus year power purchase agreement is entirely possible. If we are going to be the firm power provider for a data center, there is absolutely a willingness out there to sign a 20-year agreement to do so. And then, we'll think about our returns profile, as we said, commensurate with the term of that deal, and what that looks like from a utilization standpoint for the asset.

Okay. Fantastic. No, that's helpful. And then, Ron, maybe one quick one. I know this has been discussed in the past, but now that you are actually ordering equipment 400-megawatt. Maybe let's revisit the topic of nat gas resets or turbines, especially all these applications. You're talking about merchant power, EV charging, data centers. Can you talk about the relative merits and demerits of one, versus the other? And how would you think about that in your portfolio, of power offerings?

Yes, I'm glad you asked the question, Saurabh. That's an important point, and one we like to make sure is well understood. We chose natural recip engines for our power generation for a number of reasons. Modularity is a key piece of the puzzle, being able to adapt to changing load profiles, depending on the situation we're deploying assets into that allows us to be very, very capitally efficient, as we think about each opportunity that we're looking at. Natural gas recip engines are incredibly efficient, when it comes to the use of fuel. And without getting too far into the weeds, I'm an engineer, I like to nerd out on stuff like this. But if you think about a natural gas recip engine, it turns 44% of the available energy in a unit of fuel into useful work, in this case, electricity. If you take a gas turbine and put it in the same application, it turns. It varies a little bit on the size of the turbine, but I'm going to say roughly a third of the available energy in a unit of fuel into useful work. And so, if you think about that comparison, it means that we're going to burn a third less fuel, to accomplish the same outcome when compared to a gas turbine. And if you're thinking about building durability, longevity into a business like this. Ensuring your ability to be competitive, whether it's for - in supplying electrons to a data center or providing electricity onto the grid, maximizing that efficiency, maximizing the spread between the cost of your fuel, and the power that you're able to sell is critical, to being competitive in that space. And so for us, that's why spark ignition, gas recip engines make the most sense. Now there are a couple of things where a turbine offers compelling consideration. And Michael alluded to those already in his comments. First of all, they have a little bit more flexibility when it comes to the input fuel source. So a natural gas recip engine likes a very consistent fuel source that's primarily methane. No problem if you're on a distributed gas system. If you're going to be out in the field and you have a rich gas supply that is going to be better tolerated by a turbine. And so that would be a place where a turbine would probably shine. The other place that there really is a difference is power density. If you're talking about a very, very large application hundreds and hundreds and hundreds of megawatts, you're going to be able to accomplish that in a smaller footprint with a turbine than you could with gas recip engines. So power density, fuel flexibility, probably the two considerations that you would lean towards a turbine. But if you're truly looking at - if you have a good stable gas supply and you're looking towards longevity, durability, competitiveness in the space, that's where we think gas recip really shines, and why we've leaned towards that.

Perfect. No, that's fantastic color on. We can keep going on this discussion. But let me stop there and turn it back. Thank you.

All right. Thank you.

The next question will come from Dan Kutz with Morgan Stanley. Please go ahead.

Hi, thanks. Good morning.

Good morning, Dan.

And congrats, Ron, and congrats to Chris as well on the new roles. I guess just a couple of housekeeping questions on the power business. I was wondering if you could share kind of the useful life, of the power gen units. I know it's kind of early stages, but just wondering if you have a viewer expectation on the useful life, and also kind of the associated maintenance costs or maintenance cycle for the...?

So if you think about these gas engines, as I said, we haven't got one to even get to a major overhaul yet. But based on the guidance we have from our partners on the manufacturing side, whether that be Cummins, Caterpillar, Rolls Royce, MTU or Jenbacher, you're talking about time between major overhaul. So when we actually take that engine out of service, and carry it write down to the bones and rebuild it, of 80,000 hours. That's probably approaching 10 years at 24/7, 365 operation, maybe nine years in change, if I'm doing the math right in my head. But it's a long, long time, and that's just for a major overhaul. We will overhaul a diesel engine, at least once and it's life with us maybe two or three times. And so, if we think about that for these power generation assets, you're talking about a lifespan that's measured in decades and decades.

Awesome. That's really helpful. And then I guess, just pulling on a comment in the prepared remarks, and from the press release about your view that the footage drilled for the total U.S. year-over-year will be roughly flat. Is the read on that, that your view is that Liberty's horsepower demand will be roughly flattish year-over-year, which I guess you could have potentially - some offsetting increased efficiencies, but also increased intensity, i.e. higher increased horsepower per fleet. And yes, just wondering if you could unpack that comment, and the implications for your view on Liberty horsepower demand in 2025? Thank you.

Yes. Dan, I think you're thinking about that exactly right. Of course, if we talk about flat lateral footage that offers the same opportunity, for work that has to be done in the field. As you saw last year, we continue to find ways to get a little more efficient year-on-year-on-year. And so on one hand, what you'll probably see is headline fleet count come down a little bit, to accomplish the same amount of work. But the counter to that to exactly the point you made is the intensity of that work. A good part of that efficiency is being driven by a move to simul-frac and trimul-frac operations. And that requires only what we call a single fleet on location, but ultimately, a fleet that has a lot more horsepower attached to it. And so you have those two puts and takes that really trade off against one another. And so I think as we think about it from the Liberty standpoint, the horsepower that we're going to have out working, is actually going to be relatively flat, which leads to this point around the idea that market could tighten sooner than you might perceive just from looking at headline fleet count. That's the number that gets published all the time, and you see it come down a little bit. But I don't think that provides a clear picture, as to how quickly the market really could tighten, given the draw on incremental horsepower inside of each additional fleet. That could be something we see play out later this year, particularly if there's a bit of a rebound in gas activity.

Awesome. Appreciate all the color. I'll turn it back.

Our next question will come from Waqar Syed with ATB Capital Markets. Please go ahead.

Thank you for taking my question. So Ron, I'm going to follow-up on this. The fracing business side. I think you still have that business. So just - on the TIL side, like we hear a lot that some of the E&Ps have driven completed wells that have not been connected to line as yet. Do you have a sense of how large that inventory is, and as company start to maybe grow production? Like how long will it that? Whether it take to exhaust that before they go into going after the DUCs?

Waqar, I don't know that I have an exact answer to your question. Certainly, those TILs exist out there. And with strengthened gas prices and a strengthened forward strip, I think you're going to start to see some of that come online. I'd say probably, I don't think we have a great outlook on exactly, how long that will take them to play out. There's probably some variables that come into that. We probably need to wait till the shoulder season, when we get a good sense of exactly. How many heating days we ended up with this winter, what that does to storage levels, and that will probably play into that decision for them. But I think there's a reasonable possibility, we could see a response in rig count by the second half of this year. And then headed through the tail end of the year, and into 2026. So that's probably as best of guess as I could give you today.

Okay. Great. And then just going back to the power business, if I may. Do you see that opportunity for you mostly, in what regions? Like do you see that in Rockies as well? There are some data centers and other things we built in North Dakota. There is some excess gas there. Obviously, Permian area is a big opportunity. So where do you see regionally that opportunity play out?

Yes. Obviously, there's a range of opportunities across the country. And I expect that as we grow the foundation of this business, we will step into a number of those. As I highlighted, maybe as one of the advantages we bring to the table, our footprint across North America, gives us the ability to support installations in a wide range of places. The DJ Basin would be an example for that. And so, we'll look at all of those as they come in. Early days, I think you're going to see primary deployments in Texas. That's where a lot of that demand is coming from initially, but Michael mentioned the East Coast. I think we definitely see some opportunity out there. And then we'll start to layer on additional locations after that. But as with everything we do, we're going to approach the business thoughtfully, at a good cadence and make sure that we can provide, the level of service Liberty has come to be known for. And that means not jumping on to a pile of widespread opportunities and losing the focus that we like to maintain.

Great. Well, thank you very much. Really appreciate the answers, and good luck.

Thanks, Waqar.

Our next question will come from Tom Curran with Seaport Research. Please go ahead.

Good morning, guys. Ron. Let me echo everyone else. Kudos on officially taking a helm here in your first call, CEO.

Thanks very much, Tom.

Yes, you bet. How are you positioned at this point for LPI supply chain, specifically, as it relates to the gas recips, gensets, the passage turbines, and any other key assets you'll need to provide as part of your partnership with DC Grid?

Yes. I would say incredibly well positioned. One of the things, we pride ourselves on as an organization, is not only being the provider of choice to our customers, but being the purchaser of choice to our suppliers. So we have worked very, very hard over the entire history of Liberty, to be a great partner to our suppliers. We own a meaningful amount of our success as an organization to their support. And so that partnership, whether it's with Caterpillar, with Rolls Royce, MTU with Cummins. Those are long-time partnerships that we have built, and grown over the history of Liberty, and we will carry on now into the power generation business. And so that offers us a real opportunity as maybe one of their largest partners in the oilfield services side, to carry that over to power generation. And so for us to line up this 400 megawatts of capacity that we're going to deploy over the coming year. Is something that is very, very manageable for us. And as Michael said, is already in the queue. And I would say that I'm very comfortable we could expand on that if we chose to going-forward. We have those strong partnerships, and I think we're going to get a lot of support from the supply chain standpoint in terms of being able to deliver an incredibly timely fashion relative to others.

Thanks. Earlier in the call, Ron, you did allude to the fact that historically, Liberty hasn't hesitated to vertically integrate an offering in order, to solve for a pain point, or to see an opportunity to innovate and improve on it somehow. Are there any aspects of LPIs existing, or expected asset fleet that might bring in-house and have LAET manufacturer?

Well, I think at this point in time, probably literally to say, for sure, we'll lean on our packaging engineering design and packaging capabilities. So I expect that we will own the engineering controls design, all of that stuff from bottom up, for not only the generation capacity, but also balance of plant that will be inside the Liberty world. We will lean on the LAET team in El Reno, to help with timely packaging to ensure that we can meet short time frames that, we're being asked about. So we're going to leverage some of those things, vertical integration capabilities that we already have in-house. And as we begin to identify other opportunities that make sense that are well aligned with our strengths and capabilities, as you said, we wouldn't hesitate to step into those. But I wouldn't name any today outside of where we're really focused.

And then just shifting to the labor side for LPI. How the labor intensity differ from the services side? And are there any unique considerations when it comes to recruitment and training, for the type of crews you're going to need for LPI?

Obviously, that side of the business is going to be significantly less labor intensive than frac is. Our oilfield services operation, we deploy a meaningful number of people out into the field, to support each and every one of our frac fleets out there. This business on the power side, is going to be a lot less people heavy, for not only the design packaging and construction, but even the support over the long-term. From recruitment standpoint, that's not something I ever worry about at Liberty. We have such a strong name in the industry today. Our ability to attract people to the Liberty family, is has always been something we've prided ourselves on. We have a far more resumes in the people to choose from than, we've had opportunities to offer employment. And I don't view that as any different in this case. We've started to add that expertise to our family of Liberty already, given our power generation in the frac business. So we have medium voltage electricians, and whatnot on staff. So we're starting to build that expertise in frac, and we'll have to leverage as we begin to expand, into the power generation space.

Very helpful. Thanks for squeezing me in and taking all the questions.

All right, thanks Tom.

And our next question will come from Eddie Kim with Barclays. Please go ahead.

Hi, good morning. Sorry if I missed this, but is there anything at all that's different about the nature of the equipment on this incremental 400 megawatts, versus the 130 megawatts you already have deployed on your digiFleets, either from a power density standpoint, or anything like that? Or is it pretty much the same equipment? And separately, just your guidance on the power-related CapEx in '25 of $200 million implies about $1.3 million of CapEx per megawatt for this year. Is that also a fair assumption to use, for the '26 deliveries as well? Or should we maybe expect to see some level of inflation next year?

Yes. So let me take the first question, and then we'll touch on that second one as well. So in terms of differences, not a huge amount there. There'll be a couple of things I would point out. For our frac business, of course, we build everything as mobile power generation. It's all on wheels, because we drive it out to a location. We set it up. It's there for 30 days. We tear it down and we moved to another location. As we think about the power generation world, we're likely to be in a spot, in some cases, for decades at a time. And so, we're likely to build far less mobile power generation there. It's likely to be skid-mounted, gain more in a stationary application. We will also bring to the table larger generation assets in the power gen business than we do in the frac business. So again, thinking about mobility versus something that could be stationary for a while, we're comfortable bringing a heavier, larger asset to the table for those power generation situation. So you're going to see in our portfolio there, for example, the 4 - 4.3, 4.5 megawatt gas recip engine from Jenbacher as a case. So that's not something that we would probably put in our frac business just given the size and scale of that engine. To your second question around the CapEx, there's a couple of variables that will play into that. One of them is just around timing, around pace of taking delivery assets versus deployment, deposits and things like that. So that is part of variable. But then the other thing you want to think about is, if we think about the broader picture deploying not only the power generation. But also a balance of plant, the transformers, the bus, the conduit and cable and things like that. We think about it in round numbers, a megawatt of power costing about $1 million. But once you layer that balance of plant on top, you're probably talking about something closer to $1.4 million - $1.3 million, $1.4 million as a round number to include everything. That's going to vary a little bit application-by-application, depending on how much work we're going to have to do, whether there's a gas pipeline to be built or not, whether the substation exists or not. So you'll see a little fluctuation in that number, but that is the other reason you see probably a little higher CapEx per megawatt deployed, than just the flat cost of generation.

Understood. Got it. Thanks for that color. And just a quick follow-up. Have the deliveries of the 100 - the expected deliveries of 100 megawatts by the end of this year. Have those orders already been placed? And if so, I mean, should we expect to see the majority of that $200 million CapEx hit to take place in the first half of this year? Just trying to think about lead times for this equipment? Is it a year, year and a half? Just any color there would be great?

Yes. So all those orders have been placed. All of that is underway in our supply chain already. So we're firm on taking delivery of that. If you think about lead time for the assets, it's not a year to 18 months for assets like this. The time frame is shorter than that for us, to be able to take delivery of power generation, even packaged. And so, I think that's part of our advantage as we think about these opportunities. It's just ability to respond very, very quickly relative to other solutions in the marketplace today.

But I'd like to clarify, all 400 that we've announced, are all scheduled in the supply chain coming out of the manufacturers, right? Yes, I think Ron is alluding to the fact that, yes, could we add to that, with the right opportunities and speed make that 400 increased. Yes, we could. But before all the 100 is scheduled in manufacturing and a time - definite when it's coming out, and will be packaged and ready to go.

Got it, got it. Thanks for that clarification and all that color. I'll turn it back.

Our next question comes from Keith MacKey with RBC Capital Markets. Please go ahead.

Hi, good morning and thanks for taking my questions here. Just, Ron, since you're building a kind of business in new industries for - as you point out, a long-term set of opportunities. Can you just maybe give us a little bit of color, on how you see the power business unfolding over the next, say five years? When we think about the level of investment you've outlined for 2025 and 2026, it kind of looks like you could maybe build a business that does, between $150 million to $200 million of EBITDA in five years. So would you be happy with that? Is that sort of what you're targeting here? Or is it too early to say, what things will look like in that far away?

I would tell you, Keith that I'm incredibly bullish on the opportunities in this business, and I think we're going to grow a business larger than you have suggested there. I really think we have an opportunity over the next five to eight years, to grow a business that maybe rivaled our oilfield services business in scale. And certainly, I don't have any reason to say we wouldn't pursue that.

Okay. Thanks for that. And just maybe turning quickly to the frac business. You talked about average fleet sizes having to get bigger. How has your fleet size changed over '24 and maybe '25 if you have a sense of that?

Yes. I mean just at a high level, we have more simul-frac work in our world today than we did in 2024. We have some customers who are moving towards that. Some frac varies a little bit from customer-to-customer, but you could see fleet sizes increase anywhere from 30% to 100% depending on their thoughts around simul-frac or trimul-frac.

Okay, thanks for that. That's it from me.

Thanks, Keith

This concludes our question-and-answer session. I would like to turn the conference back over to Ron for any closing remarks.

Our mission is a simple one, to better human lives. That starts here at Liberty, with the lives of everyone here in the Liberty family. With the success of our business, it grows beyond that, to the communities we work in and ultimately, the world. We took a step further in this mission last year with the launch of the Bettering Human Lives Foundation, enabling a more direct path to address the urgent challenge of energy poverty in Africa. I could not be prouder of our team, and all that we accomplished in pursuit of this mission, a journey that Chris started us on almost 14 years ago, and has never wavered from since. And I'm excited to carry on our pursuit of that mission, as we start the next chapter in the Liberty story. I'll end with a thank you to the entire Liberty family. While it's not always recognized, the world depends on you, and the work that you do each and every day. Thanks for that. Thank you for joining us on the call today.