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.

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, adjusted pretax return on capital employed and cash return on capital invested are not a substitute for GAAP measures, 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 a calculation of adjusted pretax return on capital employed and cash return on capital invested 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 first quarter 2025 operational and financial results. Liberty Energy Inc. delivered a solid first quarter with revenue of $977 million, net income of $20 million, and adjusted EBITDA of $168 million. We distributed $37 million to shareholders through opportunistic share repurchase and dividends. We saw strong sequential improvement in utilization across our fleet, reached new heights in operational efficiencies and safety performance, and set a new high watermark in asset lifespan for equipment components. Our early year results demonstrate a positive rebound from the fourth quarter of a trend that has continued into the second quarter. In recent weeks, tariff announcements and a more aggressive OPEC plus production strategy have sent ripples across the energy sector. Today, we have excess demand for Liberty Energy Inc. services as our customers align themselves with top-tier providers in a clear industry flight to quality. While North American producers have not yet meaningfully changed development plans, we expect our customers to assess a range of scenarios in anticipation of commodity price pressure. We are staying close to our partners in this dynamic market. As we all know well, the oil and gas industry is cyclical in nature, and periods of uncertainty test the strength and resilience of players across the value chain. The outcome of tariff negotiations as well as forward production plans for OPEC plus could yield a wide range of outcomes in the future. In the face of these potential outcomes, we are applying our core tenets to guide our team in charting a course to meet any potential challenges, support our customers, suppliers, and our employees, and build an even better business with enduring advantages. Today, we are better positioned than ever to navigate market uncertainties with greater scale, vertical integration, technological advancements, and a fortress balance sheet. Over the past few weeks, we have stayed in constant dialogue with our customers and suppliers, collaborating on ways to expand efficiencies and actively engaging on tariff mitigation strategies. Our engineering teams are having more dialogue with customers on optimizing completion practices to make more informed decisions. Our operations team is leveraging real-time data analytics using over one billion data points collected daily to maximize efficiencies and drive the lowest total cost of delivery. These insights further extend to our ongoing collaboration with our supplier partners, and this visibility allows our collective teams to react quickly and decisively. Prior cycles have proved the resilience of our strategy of leading the industry with discipline while strategically enhancing our competitive edge. As global oil markets contend with tariff impacts, geopolitical tensions, and oil supply concerns, North American producers are evaluating a range of macroeconomic scenarios. The recent pause on tariffs has momentarily eased pressure on the global economy and, in turn, global oil demand concerns. However, markets remain focused on supply-side dynamics, including the evolving OPEC plus production strategy and potential constraints on Iranian, Russian, and Venezuelan oil exports. Natural gas fundamentals are more favorable on rising LNG export capacity demand in support of global energy security. While the current prices are not immediately driving changes in North American activity, we expect oil producers are evaluating a range of scenarios in anticipation of oil price pressure. Concurrently, gas producers could prove to be beneficiaries of potentially lower associated gas production in oily basins. Today, we have not seen significant change in oily customer activity. However, we are optimizing our fleet schedule to accommodate additional demand. In contrast to prior oil and gas cycles, recent years have seen steadier activity in both higher and lower commodity price environments. Larger, well-capitalized producers that comprise a larger portion of shale production today are better able to withstand a broader range of commodity prices, while smaller producers may be more reactive to market swings. The pandemic-driven downturn in the energy sector has seen significant consolidation as well as a strong focus on capital discipline and balance sheet strength, and most producers have targeted flat to modest production growth. Today's frac activity simply supports maintenance of current oil production levels, mitigating the possibility of steep declines experienced by the service industry in past cycles. While macroeconomic risk could lead to lower oil production in North America, the industry is operating from a higher base of production today than in prior cycles, implying a decline in service activity would likely be less pronounced than in the past. Liberty Energy Inc.'s differential service platform is stronger today than at any point in the last fourteen years. Our unmatched scale, integrated services, robust supply chain, and advanced technology systems uniquely enable us to deliver more value, lowering the total cost to produce a barrel of oil. Fleet modernization with advanced sensors, real-time data capture, and enhanced data visualization tools is driving tangible benefits and improving decision-making, allowing our teams and customers to respond faster and more effectively in a dynamic market. We are also working closely with our customers to bring innovative engineering and designs to their completion strategies. This integrated high-performance model reinforces our position as the service provider of choice in a competitive market. Strategic investments in equipment technology, digitization, and power generation have positioned us to deliver safer and more efficient operations with reduced fuel and parts consumption and improved reliability. These advancements in equipment component longevity demonstrate these benefits. In the last three years, the average life expectancy has increased 27% for engines, 40% for fluid ends, and an impressive 37% for power ends over the last two years, in part through the implementation of AI-driven predictive maintenance strategies and continuous machine learning. Furthering these efforts, in the first quarter, we launched The Hive, our next-generation digital intelligence hub, a centralized platform right here in Colorado that monitors frac operations with 24/7 oversight, enabling the Hive tech team to provide real-time solutions to the teams in the field. These are only a few of many technology initiatives we are currently anticipating sequential growth in revenue and profitability in the second quarter from higher utilization. Our priority is to maintain a strong balance sheet, which will allow us to navigate in any environment while executing on our long-term strategic plan. We are actively assessing the implication of tariffs across our business and have already begun mitigation efforts. Michael will expand further on this. Growing power demand from data centers, manufacturing, mining, and industrial electrification is enabling us to expand our power services beyond the oilfield. The acquisition of IMG, a leader in distributed power systems, opportunistically augments LPI with power plant EPC management and PJM utility market operations and expertise that we would otherwise have built over a period of time, accelerating our entry into the PJM market. We also cultivated bench strength with key leadership in the first quarter. Our pipeline of power opportunities across North America continues to grow, including projects in oil and gas, the commercial and industrial space, and smaller data centers up to 250 megawatts in size. We recently announced an MOU with Range Resources and Imperial Land Corporation for potential industrial development that would be anchored by a cutting-edge LPI power generation facility. Conversations with two other partners for similar agreements are underway. We still anticipate delivery of our first generation capacity in the third quarter, with packaging to be completed in the fourth quarter and operations beginning in Q1 of 2026. We are excited by the opportunity ahead to expand in these key growth areas. We have, in a potentially changing market, top-tier customers who are well-capitalized and less sensitive to commodity swings, loyal and committed suppliers and partners, a strong balance sheet, and technological achievements that place us in an even better position today than prior cycles. And a strong culture that finds our teams to deliver at the highest level. I will now turn the call over to Michael to discuss our financial results and outlook. Good morning, everyone.

We kicked off 2025 with a solid start to the year. I am proud of the team for executing at the highest levels, especially coming off a challenging close to the 2024 year. Let us take a moment to celebrate the team's achievements. In the first quarter of 2025, revenue was $977 million compared to $944 million in the prior quarter. Our results increased 4% sequentially as higher activity levels more than offset pricing headwinds. We saw improvements across all of our businesses from higher utilization of frac and wireline fleets. Permian sand mines were fully utilized despite weather disruptions and oversupplied market conditions, additional next-gen sand systems that increase simul frac efficiency, and a growth in CNG fuel delivery. First quarter net income of $20 million compared to $52 million in the prior quarter. Adjusted net income of $7 million compared to $17 million in the prior quarter and excludes $15 million of tax-affected gains on investments. Fully diluted net income per share was $0.12 compared to $0.31 in the prior quarter, and adjusted net income per diluted share was $0.04 compared to $0.10 in the prior quarter. Fourth quarter adjusted EBITDA first quarter adjusted EBITDA of $168 million compared to $156 million in the prior quarter, an 8% sequential increase. General and administrative expenses totaled $66 million in the fourth quarter, in the first quarter compared to $56 million in the prior quarter, and included non-cash stock-based compensation of $15 million. G and A increased $10 million primarily due to accelerated and modified stock-based compensation. Other income items totaled $10 million for the quarter, inclusive of $19 million of gains on investments and interest expense of approximately $9 million. First quarter tax expense was $8 million, approximately 28% pretax income, and cash taxes were $9 million. We expect the tax expense rate in 2025 to be approximately 28% of pretax income, and cash taxes to be approximately half of our effective book tax rate. We ended the year with a cash balance of $24 million and net debt of $186 million. Net debt increased by $15 million from the prior quarter. First quarter uses of cash included capital expenditures, $24 million in share buybacks, and $13 million of cash dividends. Total liquidity at the end of the quarter, including availability on the credit facility, was $164 million. Net capital expenditures were $119 million in the first quarter, which included investments in DigiFleets, capitalized maintenance spending, LPI gas compression and delivery infrastructure, and other projects. We had approximately $13 million of proceeds from asset sales in the quarter, and as a reminder, our 2025 planned CapEx for the completions business moderates to $450 million in the plan. That captures maintenance and Digi Technologies. We have another $200 million allocated for power assets. We have significant flexibility in adjusting our capital spending though and are well prepared to adjust these targets should the macroeconomic environment meaningfully change. In spite of the market turmoil, the strong momentum we exited the first quarter has continued into the second quarter. We are expecting sequential growth in revenue and EBITDA, reflecting stronger utilization across all of our basins. Given the uncertain market backdrop, we are closely monitoring the market and are evaluating a range of macroeconomic scenarios to stay ahead of any potential changes in activity. Our teams have been working diligently to assess tariff implications and mitigation strategies for the benefit of both us and our customers. Tariff announcements continue to evolve, making it a challenging exercise. Right now, we are expecting modest tariff-related inflationary impacts on engines and other equipment components, some of which are being offset by lower prices or volume discounts. We are also redirecting internationally sourced chemicals to either domestic sources or countries that are less impacted by global tariffs. All said, we do not anticipate a significant direct impact from tariffs at the moment. Transformative work in the years since the pandemic of leading the industry with technology innovation, strengthening our customer and supply partnerships, and expanding the scale and integrated platform to deliver greater values for our customers allows us to thrive in any demand environment. In a rapidly evolving market, our goal is to maintain margins, execute on disciplined capital deployment, and protect our balance sheet against an uncertain backdrop. I will now turn it back to the operator for Q and A after which Ron will have closing comments at the end of the call.

Thank you. We will now begin the question and answer session. And you would like to withdraw your question, please press star. Our first question today will come from Stephen Gengaro of Stifel. Please go ahead.

Thanks and good morning everybody.

Morning. So, Ron, you mentioned in the press release on the call the sort of the high demand for your high-quality assets. And so, kinda, when I think back historically over many years, I have always kinda remembered, like, the larger companies talking about the flight to quality. But, you know, in years past, they would have to give up, you know, material price despite the demand staying high and utilization staying high. What are you seeing now in terms of sort of the flight to quality and the desire for the gas-burning assets and kinda how those price discussions go relative to sort of the demand for your assets?

Stephen, I would say that of course we talked about on the fourth quarter call that downward trend that we had experienced in price through kind of the back half of 2023 and all the way through 2024 and certainly as we headed into RFPCs and we were having price re-negotiations. But that has been the end of that price conversation at least at this point in time. Utilization and the work that we are doing today is based on the pricing we set in our RFPCs in there. And I would say that the additional inbound inquiries we are getting are in most cases customers who already have Liberty Energy Inc. working for them in some way, shape, or form. And we are looking for additional Liberty Energy Inc. capacity. And to the extent we have white space on our calendar or are able to juggle things around, are working to accommodate that additional work now. But at the same pricing that we entered into this year planning to do that work at. As for the next generation assets, I would say that pricing remains very resilient there. You know that we have announced CapEx and a commitment around building some additional Digi fleets this year. And those fleets are going to work under pricing expectations that are in line with our requirements for deploying next-generation technology to the field.

Great. Thank you. And then the follow-up maybe for Michael. Have you thought at all about kind of any impact on raw material costs on sort of your ongoing maintenance CapEx for the year? Is it still sort of too early to think about any material changes to that?

No. Steven, yeah. Our supply chain team is working with suppliers on that, you know, as we speak. You know, for the moment, as I said, we are not expecting to have significant amounts of change on that pricing, so that will be offset by volume discounts and suppliers working on efficiency moving some of the supply onshore to the US. Obviously, there is, you know, kind of inflationary pressure on some of the raw steel and iron that comes into the country. That was already in place up until this point. So we are not expecting to see particularly major changes in those prices at the moment.

Thanks. It sounds like the longevity of the equipment that you mentioned earlier could also help mitigate that. Is that reasonable?

That is a very reasonable slope.

Okay. Thank you both.

Our next question today will come from Dan Gutz of Morgan Stanley.

Hey, thanks. Good morning. So I just wanted to check in on the PowerGen business kind of from a contracting or a customer conversation perspective, is there anything you could share in terms of the pipeline of opportunities for that business as, you know, appreciating that. I am sure you cannot be too explicit, but just you know, directionally or broadly, it was hoping that you could kind of share any updates or thoughts on the contracting efforts for those assets. Thank you.

Yeah, Dan. To the extent we are prepared to talk about it today, I would say we remain extremely excited about the opportunity, quite positive on the outlook. I would tell you that our pipeline of opportunities today significantly exceeds the capacity that we have ordered and have announced. So we continue to work on those conversations and they are taking place in a number of areas that I identified in my opening remarks. We have some very advanced conversations with a number of our E and P partners around the electric in the data center space and also along the lines of that MOU we announced where it would be a greenfield development around effectively an industrial complex that would house a data center. And then of course some other commercial and industrial opportunities. But I would tell you we are quite excited about where those things are to some in some cases, we are in the air permitting phase already. So we have some things moving along there. But at this point in time, not prepared to say too much more than that. Safe for saying that we remain very, very confident that as we deploy those assets in the first quarter of 2026 and put them to work that that will be under contract and in line with the broad guidance we have given around contract term length and return profile.

Great. Yeah. Understood. And that is all helpful. And I guess you know, appreciating that there is a lot of uncertainty and that you guys are being mindful of different macro scenarios. But is kind of the at this point, the read that the full year guidance you guys laid out, I know, Michael, reiterated the CapEx guidance, but for I think it was the $700 to $750 million of consolidated EBITDA for the full year is kind of the takeaway that that is still intact today, or are there any puts and takes there that you would kind of highlight at this point?

Dan, I would say that at this point in time, certainly we are not going to make any changes to that. It is far too early to do so. As we have indicated, our outlook into Q2 is very, very strong. We have great line of sight through the quarter. And it looks quite robust and we expect it to be up over Q1. It is too early to say what the back half of the year holds. I think there is a range of possible outcomes there. As our customers begin to maybe as the industry more broadly begins to get some clarity around what the future holds from a tariff standpoint and OPEC plus production strategy. We will see our customers lay out their plans for the back half of the year and we will be able to adjust accordingly if that is necessary.

Yeah. Fair enough. That is helpful. Guys. I will turn it back.

Our next question today will come from Arun Jayaram of JPMorgan.

Yeah. Good morning. Gents, since 2018, U.S. Shale oil supply is up two and a half million barrels. Looking at the 914 data. So one of the plausible scenarios is if OPEC brings back, you know, some of the two million barrels offline that, you know, we could see, you know, lower US oil production as, you know, potentially if OPEC muscles in a little bit. So I wanted to get your thoughts on how you would view a more normalized frac fleet count. I think we are roughly at two hundred fleets today. If the US oil supply went down by a million barrels to call it, you know, the low twelve million barrel range? And how do you think about Liberty Energy Inc.'s earnings power in that type of scenario?

Yeah. I guess I would say that if you thought about where production stands today and you probably want to be more specifically focused on unconventional production, so the share of that thirteen point five million barrel that comes out of the tight oil world. If you thought about that world today, our active frac fleet count in the industry is basically focused on holding production flat. So we have a frac crew count of, call it, two twenty crews today that are basically working to hold us flat at thirteen point five million barrels and really the subset of that being I think round numbers, nine million barrels a day of unconventional production. And so if you thought about a rough ratio there and you knocked a million barrels off to a little more than ten percent, of the production in unconventional, you probably get approximate reset in frac crew count, needed frac crew count to sustain that production level. So maybe we come off from two twenty to one ninety or something like that. But I do not think it would lead to a catastrophic situation in pressure pumping.

That is very helpful. Thanks for that. And I wanted to you made some interesting comments on the gas side that you are gearing up. Maybe to support a little bit more gas activity. Could you maybe just elaborate on some those comments and what you are seeing in some of the natural gas basins?

Sure. The, of course, the gas market had been in a pretty challenged relatively depressed, but we have seen some real strength in them of late, supported by both reshoring of manufacturing and anticipated growth in power demand here onshore North America and also more significantly LNG export capacity and even a bit of early growth in expectations around that for the broader global market. And so we have got a situation now where even with a bit of volatility in gas prices, the prop price in forward strip have been strong enough that we have seen people in the gas basins look to bring additional capital to bear, put incremental rigs to work and ultimately as a result require additional frac equipment. And so for us, of course, we feel that primarily in the Haynesville, given that is where we have frac equipment based. But we are actively working today with customers to fit additional work onto our calendar as we head through Q2 and out into Q3. So I would say positive shoots there and we will of course we never know what the future holds but it looks pretty good right now.

Great. Thanks a lot.

Our next question will come from Suraj Paun of Bank of America. Please go ahead.

Hi, good morning, Ron and Mike. Maybe I want to touch on the power side of the business a little bit, Ron, Michael. Let us especially the MOU you announced with the range and imperial. Just help us think about how would that work commercially? Who is the contracting party, right, I mean, where do we get the visibility on the earnings of for Liberty Energy Inc. on the power side of things. Right? So maybe just help us understand the contractual output as that MOU progresses.

So I am going to let Michael talk to that, but before he answers that question, I want to give you a shout out for best title on note yesterday. So, love the headline.

Yes. So there is a lot of this is a good example of partnerships that have, you know, that is being drawn to Liberty Energy Inc. This is a well-known industrial developer in the northeast looking to develop an industrial park on eight hundred and seventy-five acres of land. Looking to anchor up with a data center, in conjunction with Liberty Energy Inc. building a power plant and range resources providing the gas. Right? So we have got sort of fiber running nearby. We have got ability to build it. So, yeah, this is long-term development plans. This is part of when you think about the things that, you know, you will hear out of Washington about sort of reshoring of industry and the reshoring of sort of industrial capacity into America and the combination of great natural gas resources that we have in conjunction with the right place. Right? You know, sort of Liberty Energy Inc. on the power side, your range being sort of a great gas provider on that side, and then obviously industrial development. But these are long-hitting projects. These are things that are going to take a while. You are talking probably two plus years by the time you get through sort of your anchor tenants development, you know, starting into construction, etcetera. But there is a this is where you are developing this business a sort of pipeline of large long-tenured projects that are going to support business, you know, far into the future. And so this is a great example of sort of the way that American business is coming back together to reassure sort of industrial capacity into America.

I maybe just add one thing to that. And it is this idea around comp about the cost of energy. Of course, people would always say that ideally they would be on the grid, but the challenge with being on the grid is that do not know what the power price is going to be next year or the year after that. And I think if you look back in history, evidence would suggest that power prices on the grid continue to get more and more expensive on an annual basis. In a situation like this where we have a strong partner on the gas side, LPI on the power generation side, our ability to provide confidence to the end user of that power generate of that electricity around their long-term cost of energy in a facility like this, is differential to what the grid could possibly provide. And so these environments where we have that gas partner and power generation together offer a very, very unique and differential scenario for the end users that ultimately find themselves home in this data center.

Right. Right. Now that makes sense. That is super useful, Ron. I know you talked about heat rate and obviously now that you have gas supply visibility, so that is how it makes a lot of sense. And then just very quick follow-up on just that. I think maybe you or Michael made the comment on focusing on smaller data centers to two fifty megahertz. Can you walk us through the rationale behind that, why you focus on that? Is that is because of the amount of capital you are willing to deploy, or is there some other factors are going into that decision?

I would say that it is really just a function of who we are talking with today. That is not to say that down the road we would not be looking towards some larger projects. But the projects that are in our pipeline today are primarily on that smaller size. I think they represent a great opportunity and a strong fit for the capabilities and assets that we bring to the table and our focus on at least early on in our growth of LPI. But that is not to say that we would not down the road have some conversations around much bigger data centers. That was more a comment around the current pipeline of opportunities that we are focused on.

It is also the customer base, Rob, where you have got customers that are really looking for time to market. You know, they need that compute space relatively quickly. And so they are now looking at building out these data centers in a modular fashion. So whether or not we are building out sort of a, you know, a hundred to a hundred and fifty megawatts first or hundred and fifty megawatts, the plans they have are to be able to expand that over time. But ideally, what they are trying to do then get sort of, you know, compute power to market as quickly as possible you know, to meet the demand of their customers.

Okay. Perfect. Now that makes sense. And then one quick unrelated one on you said you have had a good start to the second quarter. Right? I know the future remains uncertain at this point, but how quickly do you think you would get visibility on that, Ron? Like, Right? If I am thinking about two queues specifically at this point. Right? It seems like the run rate you are at, you might be doing the comfortably better than consensus EBITDA. Forecast right now. Right? But how quickly can that change? How quickly do you get visibility whenever things change if they change?

So I do not think things are going to change rapidly. I am relatively confident that our Q2 will play out very close to how we see it today. I think it is unlikely that we are going to have any of our customers remove a pad in the next month or two. It is my expectation that to the extent we do see some changes, that is going to be back half of the year weighted. As to when we find out, I think that ultimately depends on when people feel they have some clarity around what the future holds. We are in the middle of a ninety-day pause for most of the world today. Of course, the back and forth with China continues unabated at least at this point in time. As we begin to get some confidence around how that plays out and what OPEC Plus's strategy is going to be, I think you are going to see our customers, the E and Ps begin to settle in on their guidance. We are going to get WTI settle in at a place that reflects what that global economic environment is going to look like. At that point, we will have some clarity around what the future will hold. But there are still some moving pieces there yet. So I do not think it is happening in the next week or two.

Okay. Perfect. No. I got it. The market is focusing on the present perfect right now. Ron's now with that, I will turn it back to Ron, Michael. Thank you.

Thanks so much.

Our next question today will come from Scott Gruber of Citigroup. Please go ahead.

Yes. Good morning.

Morning. Stay on the good morning. Wanna stay on that same line of questioning.

So if the second half activity is, call it, modestly weaker, you know, would you look to adjust your DigiPrime deliveries this year? Are you able to defer some of those and in what conditions are you looking to make that decision? Or would you just simply take deliveries this year and then potentially look to adjust the 2026 program?

No, Scott, we certainly have flexibility to make adjustments in the back half of the year if that became necessary. We are certainly in conversation with our suppliers around what adjustments we could make and what that would look like, how we might think about that headed out in 2026 and certainly could make adjustments there as necessary as well. There is a counter piece to that as well and that is the customer on the other side of that Digi fleet. We will deliver a Digi fleet in the back half of this year that frankly the customer could not operate without. And so there are some puts and takes there for some of that capacity. But we do have flexibility there and are absolutely willing to make adjustments as needed.

I got it. And then thinking about buybacks from here, your stock is up nicely today, but it is still down here today along with everybody else. You know, would you be willing to use the revolver to continue buybacks or will free cash flow really govern the pace of buybacks from here?

Yes. Obviously, we have what we would consider a very, very depressed stock price today. And as a result, it looks pretty opportunistic from a buyback standpoint. And certainly we were active in Q1 as a result of that. But as we look forward, of course, there are some storm clouds on the horizon. We do not know if that storm is going to roll in here or not. But I think a prudent approach to the rest of the year would have us focused on not only just the buyback opportunity, but also the strength of the balance sheet and how that plays in. So if we think about best setting up Liberty Energy Inc. for whatever the future might hold, you can know that we will be keenly focused on a fortress-like balance sheet that will enable us to navigate whatever is coming our way. But in consideration with that, of course, our CapEx expenditures and also share buybacks to the extent we think that makes sense. But know that with uncertainty in front of us, priority number one will always be the balance sheet. And so that would likely in fact, I will say certainly preclude using debt for buybacks.

Well, I appreciate the color, Ron. I will turn it back. Thank you.

Our next question will come from Waqar Syed of AT Capital Markets. Please go ahead. Thank you.

Congrats and a good quarter. Ron, if we if WTI stays at the at, like, let us just say, sixty dollars a barrel or so this year and next, like, how do you see activity kind of trend both on the drilling side and the pumping side? And then maybe if you could provide you know, you have done some guidance on, like, you know, what a five dollar move in either direction would entail on activity side and then perhaps maybe on some pricing side as well.

Yeah. Waqar, I think if oil stayed in the low sixties, well, that is not an exciting environment for us by any stretch of the imagination. I think at most we probably feel modest ripples in activity levels. We are going to see some smaller and likely private companies react to that with probably a pullback in activity. But I think for the vast majority of folks and certainly the large publics, they are going to carry through with their announced CapEx budget for the year in that environment. I do not think that is a low enough price to have them meaningfully change activity. And so I think for us, we would expect that while there we would maybe have a modest amount more white space on the calendar looking out through the rest of the year than we might have been it would not be significant. Now if we saw to your point a five dollars move on oil upwards, I do not think that changes things really at all. Downwards to the point where we get a five handle in front of WTI, I would certainly expect a pullback in rig count. I do not know exactly what that number would be. It would be speculation at best to tell you where I think that would have us head. But as I indicated a little earlier, of course, basically our rig count and frac crew count today is working to hold production flat in so, you know, if any reduction for sure is going to result in a reduction in oil prices and or reduction in production level here. And so I just do not know how far we would see that go. Again, I do not think we feel it is going to be huge. I think given goals in North America to hold production, we probably see modest production in service activity. Maybe it is ten percent or fifteen percent, but I just cannot see a path to something significantly greater than that, at least at this point in time.

Sure. And then is your Q2 guidance, you know, are you seeing any impact of price declines that were implemented back in Q4? Have they all rolled through in Q1 or they are still to come in Q2 as well?

No. Any price adjustments we have made are already in place today. They have all been they were all put in either right at the start of the year or partway into Q1. So we are already feeling the full impact of those.

Yeah. And then just a quick follow-up on that. Then but your customers have seen almost, you know, twenty percent, fifty, twenty percent kind of cut in their cash, you know, revenues with this oil price change. Do you think they are okay with the private pricing that was settled back in Q4, or are they asking for additional cuts?

I think our customers recognize that their service pricing has already gotten to a pretty good spot. It has been declining for a couple of years now. And I think they recognize that having a sustainable service platform is important to their activity levels, not only today, but also going forward. And so I think there is a recognition that you have to be careful about how far you ask a service provider to go.

Sure. Well, thank you very much. Thanks for the color.

Our next question today will come from Adi Modak of Goldman Sachs. Please go ahead.

Yeah. Hi. Good morning. Ron, you spoke about the DG fleet commitments, and Michael, you talked about the flexibility in the CapEx. So maybe can you provide a little bit more color around where the flexibility is more broadly and how you are thinking about the low end of CapEx should you need to change that floor?

So, Adi, we have a good amount of flexibility in deliveries in the fourth quarter and obviously a huge amount of flexibility in what we spend in the early part of 'twenty-six and the full part of twenty twenty-six. So I think that is where we can adjust at that point. So we can delay some of the engine deliveries, we can delay some of the packaging, we can move that out. We can slip it out within a period of time and then offset what would have been new builds in twenty twenty-six. So yeah, we have a lot of flexibility to manage cash flow as we get into the back half of the year.

Okay. And then anything incremental you can share on the power contract for later in the year around how those conversations are going or strategies, anything you can share at this point?

No. I think Ron, you know, I think was very, very erudite about how he put it, and I think they are going very, very well. We are excited about where the business is going. As you know, there, you know, with any sort of large commercial and industrial facility, there are a number of players at the table that, you know, need to come together, you know, from, you know, sort of EPC, hyperscalers, the final customer, you know, the permitting around that, the air permitting around that, etcetera. So there is a lot of moving parts as these projects move forward and they get to FID.

Great. Thank you.

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

Good morning. Two-part question to start on the portfolio, but you have inherited with the IGM acquisition. First, I believe IGM had a pipeline of potential solar PV or solar PV plus thermal opportunities. Could you expound on that project set and whether we might see LPI move forward with any of those? And then second, when it comes to IGM's position and advantages within PJM, you know, did Mike's team set up sort of expedited access or lock up certain interconnects? Just wondering if that came into play either with the range and imperial deal or you know, do you expect to have a certain advantage when it comes to accessing, securing interconnects as a result of the work, IBM has already done?

Right. So I would like to take a little bit of that if you like. So IMG, sort of just the other way around. The IMG Group was originally the original name, the IMG, the team. Yeah. They have got about ten sole projects that are in that are being studied at the moment in the queue. These are historical from their yeah. Sort of the pushing from their European-backed PE funds before. As we move forward then, those projects as they get reviews will have some value, and we will most likely either partner or sell those to another developer to develop those. And if we develop them with that interconnect in conjunction with thermal to the thermal generation. So that is something that we will look at as we go through. As you know, the PJM interconnection queue, these are projects that were put in the queue, I think probably nearly three years ago. That just some of them are just getting reviewed this year. So it is a very, very slow process. The IMGT, we are a network provider. And have a market provider into the PJM market. And at one point just over a year ago, we are selling power from eleven separate power plants into the PJ market. You are managed through their network operating control center in Pittsburgh. So they bring a lot of expertise in that part of the world and in that market, which I think is great. Which is definitely something a market, you know, when along with if you think about us and our historical relationship with Texas the Aerocop market now, adding PJM and they were sort of close relation for us on that side of the world.

Very helpful. Sorry about the temporary dyslexia there, Michael. And then I wanted to know where you are at with the latest update you gave us all for LPI for the distributed power, fleet. It still was entirely not forget, reshuffricating gensets. Where are you at on the timeline for ordering your first gas turbine package and you know, when you do pull the trigger on that, what is the earliest delivery time frame you think you could manage?

We are definitely focused on the get the high, firmly efficient guests reciprocating engine for our production for our power generation at the moment, whether that be Caterpillar and into you partnerships or any partnerships with N. E. O. Yombucha, At the moment, on that side of the world, we think that has a the modular reciprocating engines with their high thermos efficiency is a great product. Obviously, if you have a space constraint, gas turbines make a lot of sense in certain areas and certain times in depending on whether or not you are working in the oil and gas areas, where you may or may not have gas quality issue, you may want to use a gas turbine. Generally, I would say, you know, sort of the smallest solar turbines are probably about a year and a half, two years of the earliest delivery you could take. I can get a guess the aero derivatives now are probably in the three plus years. It is about where jet light deliveries. I think in general in the market, we are not looking at ordering any of those at this present point in time.

Got it. Appreciate you taking my questions.

Our next question today will come from Jeff LeBlanc of TPH. Please go ahead.

Good morning, Ron and team. Thank you for taking my question. Wanted to see if you could talk about Liberty Energy Inc.'s attrition rate and what level of reinvestment is required to offset this attrition beyond normal maintenance? I guess, phrased another way, how long could you pause the DG fleet rebuild program without impacting your deployable horsepower? Thank you.

Yeah. Jeff, well, we use ten percent as a round number on an annual basis, it is certainly possible to extend the life of a pump out beyond that. Adding two or three or four years is not an impossibility by any stretch of the imagination. There is a cost that comes with that, of course, from a maintenance CapEx standpoint. But it absolutely is possible. Could we in the most extreme case, go through 2026 without building a single new pump? And still be comfortable with the deployments of our fleet as it stands today we certainly could.

Thank you for the color. I will hand the call back to the operator.

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

Hi, thanks. I was hoping you could put some bookings around the magnitude of revenue increase that you are expecting for the second quarter?

I think we are comfortable with the guidance we have given out publicly at the present point in time and we have seen positive momentum coming into the quarter. Obviously, sort of given where we are in the market, you are not going to see a massive sort of hockey stick going into the quarter. So slow and steady progress is what we expect over the year.

Okay. Thanks for that, Michael. And maybe within that, as we think about the moving pieces that are driving the improvement, I think there is maybe some benefit from Australia in 2Q that was not present in 1Q, but then you have Canada that might be down a little bit in 2Q. Can you just sort of talk about the moving pieces? Because I am really what I am really curious about is, like, what is happening with the frac service part of your business as we go from one q to two q? Is that is that improving as well? Or is that maybe more flat with these other things taken into consideration?

I think basically what you are what we are feeling is pretty normal seasonality. Of course, as we progress through Q1 for let us talk about our lower forty-eight fleet. While some of the basins get out of the New Year with a pretty quick start. The further north you get, kinda slower that ramp is. And so if you looked at the progression through Q1, we came out in a very strong position. March was the from a utilization standpoint was the strongest month in the quarter and that carries on into Q2 for the most part across the board. To your point, Canada has a little bit of seasonality during the second quarter. That just comes with breakup there. But even up there, our operators customers are getting better and better and better at being able to work through that, about getting assets out into the field on a longer pad and working through most of breakups. So even there, people are working hard to mitigate some of that seasonality effect. And so if you think about going from Q1 to Q3, in the frac business, it is not hugely different than we might have anticipated regular year absent all this background noise that we are dealing with today.

You have a slightly less weather effect in Q2, slightly longer daylight hours. Life easier to be a little bit efficient. So in general, that is why I always generally have fixed.

Great. Thanks for that color, guys. And then the other one I had was just on the power business as you kind of prepare for the delivery of these gensets. Should we see some incremental costs creep in before you have got revenue and what does that look like? Are we talking about single-digit millions of EBITDA kind of hit in the third or fourth quarter or is it is that not something that we should be concerned about?

Yeah. There will be, you know, there will be some more of that to revenue sort of appearing from that from some of the equipment that we have on the ground. But you will see CapEx starting to roll in at the back end of the year as we package these gensets and get them ready to go out for revenue generation at the beginning of the first quarter. So yeah, you always see, as with any heavy equipment provider, sort of equipment business, you know, you are always going to see CapEx lead earnings. Just as to say pretty much exactly the same way you see it when we build Digi Fleet. Right? The Digi Fleet CapEx comes in the six months before the Digi Fleet that digital fleet starts to do. So it is really not a lot different to the historical trends that Liberty Energy Inc. has always had.

And I would say that, you know, as you think about it from a people standpoint, of course, it is not near the same intensity as our frac business is. You know, when we are when we are preparing to stand up a frac crew, we have got a hundred people to onboard as part of that. That takes the better part of a quarter to get through something like that. You are not going to see that same sort of upfront impact in this environment when we are going to be when we are going to be operating a power plant. We just do not have to attach the same sort of intensity to that from a personnel standpoint.

Yeah. That is a good point. Thanks for that, Ron. Appreciate it, guys.

Our next question will come from Keith Mackey of RBC Capital Markets. Please go ahead.

Just maybe to try to summarize some of the other questions and answers around the outlook Ron, Michael, would it be roughly fair to say that if we stay in this low sixty dollar range for WTI, for the rest of the year that your guidance range of seven hundred to seven fifty should hold. But if we go below that, then maybe there are some adjustments that would need to be made. Is that a fair way to think about it?

I think that is a fair way to think about it as fast as we can see today.

Yep. Got it. Thanks for that. And just on the buyback, was the amount done in Q1 representative of what you think you will do for the rest of the year? Or should we be, should we be lowering or raising that a little bit?

You know, as Ron pointed out, you know, we will be focused on the over the last two weeks, obviously, we have had a significant amount of macroeconomic news that the industry is trying to digest. And as far as that goes, we are working in real-time with our customers to see what effect that may have if it has any effect. So I would say a little similar to your last question. If we had outlook into the steady oil price where we put our plan together at the beginning of part of this year, as you said, sort of, you know, mid-sixties. Going forward, your assumption on buybacks will be correct. As we look at the macroeconomic outlook and we look at the clouds on the horizon, we will obviously take a very, very prudent approach to the balance sheet and spending money.

Okay. Thanks very much. I will turn it back.

Our next question will come from Roger Read of Wells Fargo. Please go ahead.

Maybe come back to the power grid option here or opportunity here, the collaboration in the early next year, what is the right way for us to think about the pace of CapEx? Is there you know, all the key items have already been ordered. Is there anything that we do have to watch out here in terms of a, you know, a critical item?

I would say, you know, a slow and steady as we think about this business, you know, we are going to build this business. Very much like we built the Frank business, right? Slowly, steadily, organically. Right? And I think that is the way you look at it. You know, this we look upon this as you know, a decades-long opportunity. And so building the right expertise, you know, getting the right partners getting the right initial projects, doing that is going to be key. So slow and steady increase over the next three years, I think, is the way you should think about it for us.

Yes. The only color I would add to that is probably certainly as you think about generator delivery, they come at a pretty steady cadence and we will be packaging them at a pretty steady cadence. Ultimately, we will get to a position where we have to deploy the balance of plant and you maybe see a modest uptick in CapEx there as we go through that construction phase on an individual project and then settles back down to that steady cadence that Michael alluded to.

And very low maintenance capital after that. That is the other view of this business. Right? Once the initial capital is in place, unlike with the freight business where you are running in very harsh conditions where you are wearing out fluid end, power end, etcetera, of that variety. The maintenance capital on the ongoing maintenance capital beyond the initial capital is relatively low. Very low.

Yeah. Appreciate that. And then as a follow-up to the earlier comments about maybe a little better activity or at least some signs that customers want to get more active in the gas areas. How does that affect how we should think about the cost structure over the next two quarters? Do you have any pricing is relatively flat, activity, call it seasonally up a little bit, and most places would generally know, kinda help margins out. But if you are moving equipment around or doing some hiring in some local areas, what is the right way for us to think about that on the cost slash margin structure?

I would say that you are not going to see anything meaningful there at all. When I say we are optimizing the calendar, yes, occasionally, it might mean a fleet move but we aim to make sure that happens over for a period of time such as that is absorbed over a number of jobs maybe a quarter or more. In terms of people, we are able to do that with the headcount that we have available today. So I do not think you are going to see anything there that would really show up.

Okay. Great. Thanks, guys.

Thanks, Roger.

Our next question will come from Eddie Kim of Barclays. Please go ahead.

Hi, good morning. Thanks for squeezing me in here. I will try to ask Mark's question a different way. In terms of kind of the magnitude growth you are expecting in EBITDA in the second quarter, I mean, if I took take a look at last year, your second quarter EBITDA was up twelve percent sequentially. But, obviously, you had a very strong quarter here in the first quarter. So is mid-single-digit growth in EBITDA fair to assume from a modeling perspective or would even that be a bit aggressive just given the market uncertainty we are facing?

No, I think if we think about our standal seasonality, normal sort of activity incrementals coming on from there. So, yes, I mean, I think that is kind of the single digits as a safe number as we see at the moment.

Okay. Great. And just my follow-up is on the CapEx for the four hundred megawatt power is down. So two hundred million dollars this year on the hundred fifteen megawatt, but you did highlight, you know, some potential inflation due to tariffs. So is it fair to assume that the CapEx on the remaining two hundred fifty megawatts will be higher on a per megawatt basis as a result of the tariffs? Or were those costs sort of locked in at the time that they were ordered?

Yeah. There is I mean, obviously, Eddie, it is a moving target at this present point in time. Right? You know, the tariffs are changing at the stroke of a pen. So when we are talking about deliveries that are nine, six, nine months from now, you know, we are managing that sort of on a day-to-day basis. Right? There are the vast majority of the CapEx that we have on order for power generation is actually US content and US-based. There is some that is coming in from Europe and we will see how that plays out over the balance of the year.

Got it. Perfect. Thanks for that color. I will turn it back.

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

While we are experiencing some turbulence at present, it does not change the immutable fact that the world needs more energy. Lots more energy. And so I remain incredibly bullish on the long-term outlook for oil and natural gas and more specifically North American oil and natural gas. Over the past decade, our industry has gotten stronger more resilient in the face of headwinds. This is in no small part due to the hardworking people in the oilfield services sector. They have brought technology and innovation in all facets of drilling and completions, driving up efficiency and driving down the cost of producing a barrel of oil or MCF of gas. Helping ensure North America remains highly competitive in the global market. So to all of you in the service sector, I say thank you. Thank you for the work you do that ensures even when we are staring into the face of uncertainty, we can do so confident in the fact that this too shall pass. And our industry will come through it stronger than ever. Thank you all for joining us on the call this morning. Enjoy the rest of your day.