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, Vice President of Investor Relations. Please go ahead.

Thank you, Dave. Good morning, and welcome to the Liberty Energy Fourth Quarter 2025 and Full Year 2025 Earnings Conference Call. Joining us on the call are Ron Gusek, 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 view 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 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 capital invested as discussed on the 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 2025 operational and financial results. Liberty's strong fourth quarter results capped a year marked by heightened oil market uncertainty and softer industry completions activity. Our team's focus on technological innovation and strong operational execution drove superior performance and a resilient CROCI of 13% in a volatile year. We delivered revenue of $4 billion, adjusted EBITDA of $634 million and a return of capital of $77 million from cash dividends and early year share buybacks, all while investing for growth and long-term value creation. We strengthened our customer relationships by expanding our simulfrac offering with strategic dedicated customers and delivered meaningful efficiencies, leveraging Liberty developed AI-driven asset optimization software and our digiTechnologies transition, we reduced total maintenance cost per unit of work by approximately 14%. Concurrently, we built the LPI execution platform for earnings growth with strategic partnerships and targeted investments. We have been strong commercial traction, capitalizing on the revolutionary transformation of power supply and delivering that is redefining the energy landscape. We are at the forefront of a seismic shift in how data centers and other large loads are sourcing power. On-site generation has emerged as the preferred long-term energy strategy for large consumers of power due to evolving in grid dynamics and market pressures. Our robust power execution platform is built upon 15 years of industry-leading experience in the design manufactured, engineering and operation of complex industrial scale assets, leveraging our broad North American geographic footprint, expansive supply chain and AI-enhanced operations and maintenance systems. Our comprehensive power solution is designed to address our customers' top priorities, rapid, scalable deployment with uninterrupted operations and predictable power costs. LPI's Power-as-a-Service offering underpinned by the Forte generation platform, Tempo power quality management system and our midstream services delivers resilience, economic efficiency and operational flexibility. Our core solution could further unlock power cost advantages through grid integration while also transforming our customers into active contributors to grid reliability for local communities. LPI's distributed power solutions are a strategic cornerstone of resilient future-proof energy planning for our customers. Earlier this year, we announced an agreement with Vantage Data Centers to develop and deliver at least 1 gigawatt of utility-scale high-efficiency power solutions, supporting the energization of Vantage data center projects for hyperscale end users. The agreement is anchored by a firm reservation of 400 megawatts delivered during 2027 with a contracted payment structure that aligns with the expected returns under an ESA with end users. This agreement creates a collaborative framework to accelerate the deployment of power solutions for Vantage's Data Centers, preserving flexible execution to meet customer needs across a broad portfolio of data center sites. We also entered into a power reservation and preliminary ESA with another leading data center developer for a 330-megawatt data center expansion in Texas. The project is currently expected to begin operations in 2 phases, with the first half online in Q4 2027 and the second half in Q2 2028. The agreement defines the economic terms of the expected ESA as well as the construction schedule, cost recovery and termination payment provisions in the event the final agreement is not executed. Our project portfolio is both deep and diverse, which reflects the breadth of the LPI distributed power solution. We are working with clients that want a pure behind-the-meter solution for the life of their project, clients that want to interconnect the project to the grid as soon as possible and all flavors in between. LPI is one of the only companies that can scale effectively between 100 megawatts to multi-gigawatt power plants and have the geographic footprint to own and operate generation across North America. Our projects will be developed using LPI's Forte modular standardized construction approach, designed to derisk project execution and will include the Tempo power quality system to manage the high-amplitude, cyclical load variations of AI workloads. These customers could also benefit from the core solution with a potential grid integration, optimizing power costs and providing access to grid attributes that they value. As we enter the new year, Liberty's premier completions business and rapidly scaling power infrastructure platform position the company to lead through market cycles and capitalize on power growth potential. During 2025, we strengthened our core oil field service operations while aggressively expanding our reach into the growing power market. U.S. power demand is rising at the fastest pace in decades. The convergence of AI-driven data center expansion, the onshoring of domestic manufacturing and increasing industrial electrification has created structural demand growth for power. Under investment in grid infrastructure, transmission constraints and evolving commercial realities and utility reforms, driven in part by public concerns have catalyzed broader market recognition of the inherent strategic value of distributed power solutions. Against this backdrop, data center demand for power is projected to grow threefold by 2030 and already long interconnection queues continue to lengthen, highlighting the urgent need for flexible, scalable capacity to meet rapidly evolving energy requirements. LPI is well positioned to support this call, providing power consumers with predictable long-term power prices. Our platform is designed to be economically competitive with today's grid prices at our targeted returns and is increasingly advantaged as grid power prices rise overtime. Within North American oil and gas markets, conditions have now stabilized after a protracted period of softening activity as the industry has largely adjusted to last year's OPEC+ supply concerns, and tariff-related volatility. Fourth quarter completions activity defied normal seasonal sequential declines, surpassing expectations. Completions demand is projected to hold firm in 2026. North American producers are responding to global oil and gas dynamics with flat oil production targets and modest growth in gas-directed activity. Global oil markets are currently balancing a structural oil surplus, elevated geopolitical risk and an OPEC+ production pause, keeping oil prices largely range bound. Natural gas markets are supported by significant expansion in LNG export capacity and multiyear growth in power consumption. Industry fundamentals are expected to improve over time as supply side dynamics gradually rebalance with completions demand. Recent pricing pressures on completion services, combined with the slowdown in activity have driven an acceleration in equipment cannibalization and attrition, while underinvestment in next generation technology has limited the replacement of lost capacity. As the market recalibrated at the start of the year, fewer crews are available to meet any incremental completions demand. E&Ps remain focused on harnessing efficiency gains and engineering solutions to lower the total cost per unit of energy, driving the bar higher for technologically superior services and operational success to achieve these results. Few service providers are positioned to meet the increasing demand for multi-frac jobs, 24-hour continuous operations and AI-optimized automation and real-time operational transparency that enhances completions execution and data-driven decision-making. This ongoing flight to quality is fundamentally reinforcing Liberty's market leadership as producers rely on our total service platform, seamlessly aligning our integrated services to deliver a superior service and drive relative outperformance. This quarter, we launched Atlas and Atlas IQ, a unified technology platform that transforms real-time data into actionable insights, enabling faster decision-making and improved operational efficiency for both our customers and Liberty's operations. Atlas is a cloud-based completions data platform that automatically deploys with every Liberty crew, delivering subsecond operational equipment and performance data without requiring additional customer infrastructure. By consolidating live and historical field data, documents and automated reporting into a single secure portal, Atlas gives customers immediate visibility into their operations. Atlas IQ extends this capability with an AI-powered assistant that enables natural language queries across operational data and technical knowledge,, delivering fast context-aware insights while keeping all data private within Liberty's environment. Together, these platforms enhance data visualization, improved decision-making and enable both Liberty teams and customers to respond more effectively in a dynamic operating environment. Liberty has evolved from a premier North American completions company into a diversified energy technology and power infrastructure platform. We invested in our technology and culture, while growing our oilfield market share and developing LPI. This proactive stance has left us well positioned to capitalize on the dual tailwinds of a potential completions inflection and the generational surge in U.S. power demand. Our differentiated power execution platform and a robust pipeline of power projects position us to capture structural growth in power demand. We now plan to deploy approximately 3 gigawatts of power projects by 2029 to deliver sustained long-duration earnings and high returns for our investors. Our first quarter is expected to reflect the full realization of pricing headwinds and winter weather disruption to drive lower sequential revenue and adjusted EBITDA. While the precise timing of a broader oil market recovery remains uncertain, we are anticipating stabilization in completions markets, significant demand for our digiTechnologies platform at improved economics and a powerful growth engine with AI and cloud data center power demand. We are focused on driving value creation, prioritizing long-term returns with our industry-leading completions business and our Power growth platform. Our success is fueled by the combination of cutting-edge technology, a dedicated workforce and strategic partners across the energy ecosystem, powering innovation today to shape the future of the industry. I will now turn the call over to Michael to discuss our financial results and outlook.

Good morning, everyone. I'd like to begin by first echoing Ron's sentiments. Congratulations to the entire Liberty team for navigating such a volatile year with strong results. We drove this achievement by delivering operational and safety records quarter after quarter, leveraging our vertical integration to deliver superior service and capture a larger part of our customers' spend and advancing our industry-leading AI enhanced digital solutions to not only optimize our performance but also provide customers with enhanced visibility into our operations. New technologies and AI-driven software development are making a fundamental difference in driving margin enhancement and differentiating our service offering to customers. As we look ahead, we're using the full resources of the Liberty platform to drive success in our distributed power solutions business. LPI's durable competitive advantages are built upon our differential culture and exceptional people and are structured to deliver strong cash returns from disciplined organic investments in technology and equipment over the long term. Our most recent announcements with 2 leading data center developers represent important milestones in our journey. These contracts reflect the strength of our strategy of investing in differential technology and assets that provide sustainable long-term commercial advantages. Engineering sophisticated power quality systems to meet complex and evolving load requirements and unlocking price optimization through opportunities through grid participation. Over the next 3 years, we have a variety of projects within our pipeline that we expect to execute with underpinning our goal of monetizing 3 gigawatts of power by 2029. These projects are expected to carry the same economics we have discussed in the past, approximating a high teens unlevered returns profile with long duration ESAs. Let's turn to our earnings results. For the full year, revenue was $4 billion compared to $4.3 billion in 2024. Net income totaled $148 million, and adjusted net income was $25 million, excluding $123 million of tax-effected gains on investments. Fully diluted net income per share was $0.89. Adjusted net income per fully diluted share was $0.15, and full year adjusted EBITDA was $634 million compared to $922 million in the prior year. In the fourth quarter of 2025, revenue was $1 billion, representing a sequential increase of 10% driven by activity levels that meaningfully exceeded the industry. Fourth quarter net income of $14 million compared to $43 million in the prior quarter, adjusted net income of $8 million compared to a loss of $10 million in the prior quarter and excludes $6 million of tax-affected gains on investments. Fully diluted net income per share in the fourth quarter was $0.08 compared to $0.26 in the prior quarter, and adjusted net income per diluted share was $0.05 compared to a loss of $0.06 in the prior quarter. Fourth quarter adjusted EBITDA was $158 million, increasing from $128 million in the prior quarter. General and administrative expenses totaled $65 million in the fourth quarter, compared to $58 million in the prior quarter and included noncash stock-based compensation of $6 million. Excluding stock-based compensation, G&A increased $6 million primarily due to higher variable compensation costs associated with better-than-expected full year financial results. Other than expense items totaling $3 million for the quarter, inclusive of $7 million of gains on investments, offset by interest expense approximately $10 million. Fourth quarter tax expense was $3 million, approximately 20% pretax income. We expect the tax expense rate in 2026 to be approximately 25% of pretax income and do not expect to pay material cash taxes in the year. We ended the year with a cash balance of $28 million and net debt of $219 million. Net debt increased by $49 million from the prior year. In 2025, cash flows were used to fund capital expenditures, $53 million in cash dividends and $24 million in share buybacks. Total liquidity at the end of the year, including availability under the credit facility, was $281 million. Net capital expenditures and long-term deposits were $203 million in the fourth quarter and $571 million for the full year, which included investments in digiFleets, capitalized maintenance spending, LPI infrastructure, power generation and other projects. Fourth quarter capital expenditures included $79 million in deposits for long lead time power generation equipment. In 2025, we returned $77 million to shareholders primarily through quarterly cash dividends and modest share repurchases in the first quarter. We also invested $15 million in acquisitions and monetized $151 million of investments. Looking forward in 2029, we anticipate revenue will be approximately flat year-over-year, as we expect higher fleet utilization will be offset by industry-driven pricing headwinds. We anticipate increased development and overhead costs for the expansion of our LPI, distributed power solutions business of approximately $15 million to $20 million. Together, these will drive lower adjusted EBITDA year-over-year. Over time, we expect frac fleet supply attrition as demand will tighten markets, driving an opportunity for price improvement. We also anticipate strong contribution from the distributed power solutions projects in the coming years. Our completions capital expenditure moderated in 2026 to approximately $250 million, including $175 million in maintenance capital expenditures. The remaining related to the approximately 3 to 4 digiFleets we intend to build. We continue to see strong demand for our digi offering and investment is further underscored by superior economic profile from lower maintenance costs related to other fleet technologies. Looking at our Power business, we expect to take delivery of approximately 500 megawatts of power generation equipment to 2026. Our capital expenditures are expected to be split between approximately $275 million to $350 million in long lead time deposits and approximately $450 million to $550 million of project-related expenditures. The latter of which are expected to be funded by project financing as we discussed on our last earnings call. The LPI distributed power solutions business inherently carries a longer duration time horizon with multiyear execution cycle for projects and long-duration earnings profile. We have a diverse portfolio of projects in our pipeline and an execution plan that position us to reach 3 gigawatts deployed plants by 2029. These opportunities are at different stages of the development cycle from early planning and design to near-term ESA execution. The technical solutions we've engineered and the strong partnerships across developers, hyperscalers and OEMs position us well to achieve these targets. Our capital is focused on investments to create lasting competitive advantages. We continue to reinforce our leadership in completions while building a differentiated power business with diverse end markets, less cyclicality in targeting strong long-term returns. By combining advanced technology, strong partnerships and advantaged assets, we are creating an enduring business for decades to come and aiming to be the partner of choice for all of our customers. We are excited for the years ahead. I will now turn it back to the operator for Q&A, after which Ron will have some closing comments at the end of the call.

[Operator Instructions] our first question comes from Stephen Gengaro with Stifel.

2 questions for me. I think first, Ron, Last quarter, you talked about the pipeline of opportunities and how it has significantly strengthened over the prior 3-month period. Can you talk a little bit, I mean, given your comments about expanding the 3 gigawatts and what you're seeing in the market commercially right now?

Yes. I'll add some comments and maybe Michael will have some to add on after me. But I would say, we seen a continued trend in what we saw over even the middle months of last year, which was this idea that rather than co-located behind-the-meter power being a bridge idea, a transition towards co-located behind-the-meter power representing the best solution for long-term power provision at a data center site. They've recognized that not only does it check the boxes you continue to hear about like speed to market and concerns around grid stability and public concerns around the -- what it's going to mean for the price of power, but also from a commercial standpoint, recognize that if you're looking for surety of power price over the long term, we have the best ability to provide that with a co-located behind-the-meter solution. And then we can, of course, layer on top of that, the potential attributes that come with any grid interaction should that be of interest to them. So we have that commercial strategy available to them. to leverage the grid to the extent it makes sense. As that snowball has continued to roll down hill and get bigger and bigger and bigger, the interest in having partners like Liberty alongside you for power provision has just gotten greater and greater and greater. What you've seen then as a result of that is some real urgency to lock up power to have surety of that supply, and you've seen that in these 2 most recent agreements we've announced, first with Vantage and then with this subsequent data center fabricator that they wanted to be able to guarantee to their end use customer. We have the power. We can show that to you. We know where it's coming from and we've got it locked up with a reliable partner. That continues to gain momentum. And as a result, the gigawatts we had talked about can -- I would say, continue to get firmer and firmer and firmer and the opportunity set has gotten larger and larger and larger. Michael, anything to add there?

No, I'd say -- I just would reiterate what Ron said. I mean for the large tech companies, their business growth and what is going to change the world is driven off the surety of being able to expand their data center volume and AI growth. And the key about that is having surety of when you can bring these billions of capital to bear and organizing that supply chain. As you've seen with sort of the investments from the Big 6 go deep into their supply chain. And the key -- one of the key factors of that is surety of power and surety of time when that compute can come online because there is a long supply chain that they have to organize to make sure that happens. And we provide that security and that is valuable to the Big 6.

And then the follow-up was just -- I know that your initial investments are in recip -- recips. And when you think about the expansion to 3 gigawatts and maybe also like what -- does the customer have a preference. So how do you -- do you see your mix evolving into the customers care? Or are they just really focused on securing power?

I would say a couple of things to that, Stephen. First of all, we can absolutely achieve that 3 gigawatts entirely with recip in our supply chain today. We've got line of sight to that as we sit here right now. So absolutely confident we could do that. To the extent it made sense to have turbines as a part of that mix for a particular project. That's absolutely a possibility as well. If you think specific to the technology, and this is something we've certainly talked about in the past. The value of recips is really inherent in a couple of factors. Number one, efficiency of capital deployment. When you think about the plus [ N+ equation ] for achieving the sort of reliability that data center providers desire on their site, that's very efficiently achieved with a modular approach using gas recips. Layered on top of that is the heat rate or efficiency of that asset, and we've talked about that as well. If you think about the platform of gas recips that we're going to use the -- first of all, the high-speed smaller, more modular engines, 2.5 and 4.3 megawatts, but then layered on top of that, these larger medium-speed assets. You're talking about an asset that has a -- particularly in the case of the medium-speed engines, a heat rate that's competitive with many of the earlier generation combined cycle plants think '90s through 2010 time frame in a simple cycle environment and under challenging operating conditions, not far off of even modern combined cycle plants today. So you have a very, very efficient asset in terms of converting natural gas into electricity, meaning a very, very competitive power price, not just today, but tomorrow and well into the future. So I think from that standpoint, operators recognize the value that gas recip brings to the table. Again, not to say there won't be turbines in our world down the road. But at this point in time, I would say our focus remains gas recip as the technology of choice for deployment.

And I think that is recognized by our customers, Stephen. The construct to the gas recip, which probably a year ago was more unfamiliar to the power teams that were being built inside the Big 6. Now there is a lot of familiarity about the efficiency of the N+ equation and the inherent benefits of the execution and the ability of putting those to work. And I think that is a key factor. If you think about the fact that we will use 1/3 less fuel than a simple cycle turbine. Just when you -- we think about the emissions profile, it is significant. So therefore, we believe that we have a -- we are having the right technical solution for our clients. Very like when we built -- started building and electrifying our digital assets, digiFrac assets. We did this -- we did -- we looked at all of the technologies, we're technology-agnostic company, and we are a team that is based around an engineering -- excellent engineering leadership that focuses on what is the right solution, not the easy button.

The next question comes from Keith MacKey with RBC Capital Markets.

Just wondering if you can comment on the delivery of equipments, where you are in the process there with respect to delivery packaging and ultimately, what underpins your confidence in being able to meet the time lines for the upcoming deals that you've got to commit to?

Yes, Keith, I'll take a lot of that. In reality, we've spent a lot of the last 6 months developing -- expanding our deep relationships with our supply chain. And when you think about it, we always had very, very strong relationships in the high-speed arena with the Jenbacher and Caterpillar, and we've expanded those relationships to all of the large medium-speed engine manufacturers. And we have been -- we spent some time in Europe. We spent a lot of time on their factories, their factory floors with their production planning and have shored up the delivery schedules out as far as through the end of '29 in some cases, for the ability to execute on these long lead projects for our customers. When you think about it, these projects are going to start with initial implementations and it is much more capital efficient, cost-efficient and better to expand a data center -- in an existing current data center than it is to build greenfield. So as we build these initial campuses, those campuses will continue to expand right through the 2030S to hit the compute levels that are being demanded by our ultimate end users.

Okay. And just 1 more question, if I could. So 3 gigawatts by 2029. Can you just comment on will that likely be more deals with multiple customers? Or the existing deals you've announced will likely have some potential add-on capacity through time?

It will be a combination of both of those, Keith. We certainly expect that with our current customers, those will be growing opportunities together as we continue you to expand those, not only starting initial facilities, but additional facilities beyond that. And certainly, we expect to add additional customers in that mix as well. We've got ongoing conversations with a number of different partners in that space. So expect to have a number of legs on that stool, ultimately down the road.

And the next question comes from Marc Bianchi with TD Cowen.

I guess maybe, Michael, this is probably 1 for you. So if I heard you right, it sounded like you talked about $1 billion worth of spending for 2026 and maybe half of that is covered by project finance. Do you anticipate the other half to be funded through free cash flow? And maybe you could talk a little bit more precisely about how you're thinking about EBITDA for '26?

So Marc, the -- while I talked -- I split the spending into a long lead time deposits and specific project spending that we funded by project finance. Those long lead time deposits are really for long-lead ton generation that as soon as that generation is assigned to a project, that will then move into the project financing roll. That is all being sourced, package, manufactured engineered through our Liberty Advanced Equipment Technologies group, which is a registered manufacturer and purchasing company. That will eventually be sold to the project companies and then there will be project financing -- structural funding at the project level that will support that spend. So you see, I would expect to see those deposits that I've talked about for the year '26 actually move into project financing runs within the majority of that within that year. So there will be a movement between those 2 categories. But I wanted to give you kind of a split on that. So there will be more project finance capability that is given by those numbers. The rest of the spending, we believe that we will easily handle with very, very fortress-like balance sheet that we have now and our ability to fund that through free cash flow and debt availability.

Okay. And how should we think about the level of EBITDA? I mean, I think if I sort of read back what I heard, revenue is flat in '26, higher utilization, offset by pricing, EBITDA down, but just any steer on sort of the magnitude there? Things were quite strong in 4Q, so you're starting from a nice level?

Right. Yes, I think 4Q was an anomaly. We had the visibility, we had almost the opposite effect of the seasonal swing. We had, I think, what was some people finishing our programs that they had may be delayed from the beginning part of the year due to economic uncertainty and geopolitical worries. So that was -- I think I would look at somewhat of that bounce up in Q4 as a bit of an anomaly. And so yes, so the EBITDA will be down, which is, as you would imagine is, but virtually all driven by the completions [ business ], as EBITDA will start to kick in for the power business in a significant way in '27.

Marc, I would say just -- I'll just add a little more color to that and maybe a few things to keep in your mind about this year. I would say we probably got pricing off low to mid-single digits as rough order of magnitude to give you some sense of how that will impact us on the EBITDA line. And then I would also keep in mind that whether we've also had a pretty meaningful weather event already this year. We -- over the course of this past weekend prioritize safety for our crews and the subcontractors that work with us out in the field. Obviously, road conditions very, very challenging in Texas and Louisiana. And as a result, through close communication with our customers, made appropriate decisions around activity levels out in the field, that probably impacted close to 2/3 of our capacity. The majority of the equipment operating in Texas and Louisiana, over a period of maybe as long as 5 days. Probably a bit early to tell exactly what the true impact of that is going to be, but it was a meaningful event for sure.

Next question comes from Jeff LeBlanc with TPH.

I believe in the past, you've mentioned that LPI intends to help their hyperscaler partners secure the fuel source. And I want to make sure this is still the case. And if so, has there been a greater urgency from your partners on securing these agreements as demand continues to increase. Does it make the LPI platform more attractive to your customers?

Jeff, I think you described it perfectly. Certainly, just like in our completions business, we aim to building an LPI a business that really is a full-service business, power-as-a-service from beginning to end. And so that includes, of course, the midstream side of things. We've got a very capable team under Richard Bradsby that is absolutely capable of going out and making arrangements for interconnect pipeline. We can interact on behalf of the customer with respect to natural gas and the supply of that. We're not going to take on any risk in that regard. But we absolutely have the capability and expertise to play a significant role in that. And I would say, it's one of the things that makes us a very, very valuable partner in this space is not only that midstream capability, but all of the other pieces of the puzzle we bring to the table. I think you've heard from us that we've been very thoughtful around the construction of that business and the capabilities that we have built within it beyond the midstream side of things, the commercial interaction with the grid, the packaging capabilities, the engineering solutions around power quality services, all of these things are assets that we think differentiate us from somebody who might be able to bring generation to the table.

And the next question comes from Josh Silverstein with UBS.

So you mentioned that you have confidence in getting the 3 gigawatts delivered -- or sorry, deployed in 2029. Can you just talk about how this additional 2 gigawatts may change from a cost regular -- relative to the first gigawatt? Or is there additional cost because of the tightness in the market or similar economics to what you were paying before?

No, I would say you wouldn't -- you shouldn't expect meaningful change in economics at all. One of the great things about having strong partners on the supply chain side, a strong relationship with those counterparties that we're doing business with is that those relationships don't change. And we are not -- we're not finding ourselves in a position where the wins of the market are impacting our ability to procure the equipment we need at costs in line with our expectations. And so we've suggested in the past about $1 million a megawatt of the generation as a nice round number. And then maybe $1.5 million, $1.6 million, depending on complexity of the load case for all-in with balance of plant. And at this point in time, I would tell you that our expectations around those costs have not changed.

Got it. And then when you're having discussions with data centers or other operators, are they still interested in signing these 10-, 15-year agreements? Or is there some sort of out that they're trying to get and maybe 5- to 10-year window, assuming that there's going to be an improvement in grid connectivity then?

No, definitely not. I would say, if anything, the pendulum swinging the other way with more openness to the idea of distributed, co- located, behind the meter power is the right long-term answer. I think we've been able to demonstrate and the market has recognized over the last 12 months that this solution is the better long-term solution for a whole host of reasons, reliability, economics, the commercial optionality that the grid brings, addressing public concerns around cost of energy and the list goes on. So I would say that the willingness to enter into a 15-year ESA with a distributed power generation company like Liberty is absolutely getting greater and greater and greater. My guess is that you're going to see how we think about power systems evolve over the coming years with the recognition that distributed power is going to play a much, much bigger role in our world, that we're going to build these data centers, as Michael alluded to, they will continue to expand. But that in the event the grid arrives, we are not going to be there as backup but actually is the primary supply for the data center and then additional resilience for the grid. I think we can bring a story to the community that says we are a benefit to that community and their cost of power over the long term, not a detriment as a presence there.

Let me give us just a little bit of color to Ron's comments there as well, I think you have to remember the underlying economics that drive everything in the industry. We are bringing a solution to bear that provides power at grid parity now. That grid parity has a much lower -- that power has a much lower inflationary component because the vast majority of the variable cost is related to natural gas. And the estimation of the inflation rate of gas over the next years 15 years compared to the estimation of grid power prices over the next 15 years are very, very different. Gas prices will range -- relatively range-bound. Grid power prices, everybody expects to increase significantly because we are rebuilding a 50-year-old transmission system, and that is going to be passed along either directly to the large loads or as part of a general upgrade to the system. So we are grid parity now with -- and 5, 10, 15 years from now, we're going to be significantly lower than the grid price, right? Now we can, with our Coras system and the team that we're building there that we have built there provide you integration with grid, if there are other attributes that you wish to take advantage of or the ability to actually bring your sort of peak power price down by taking where there is oscillations where there is cheap power available, we're providing you a machine heat [ rate ] guarantee, and we will never go above this power price. But if the power price in certain parts of the day or certain seasons, where it's very sunny in the winds blowing all the time, and therefore, there's a little bit of excess kind of that renewable power. We can buy that power when we are grid integrated and bring down your costs significantly below the grid on average pricing. So we have a solution that works economically for the next 15 years, and that is what's driving our customers. They are incredibly, incredibly financially focused business people, and we bring them an economically winning solution.

And the next question comes from Derek Podhaizer with Piper Sandler.

Just wanted to get your take on the supply side for power generation assets. Obviously, it feels like every day, we're hearing a number of OEMs entering this recip and turbine space, talk about converting and repurposing older jet engines to power data centers. So obviously, this creates a bit of an oversupply concern that's emerging in the market. but it really sounds like you're creating this integrated power services infrastructure solution to defend this moat. Just could you help us understand a bit more about -- we hear about all the supply potentially coming into the market, but what makes it different for you guys in building that moat and why you really should -- we shouldn't have any concerns as far as this excess or flood of supply or the perception of that supply coming into the market?

Thanks for the question, Derek. Of course, it's not as straightforward as just bringing supply to the table. If you think about the complexity of the load and the other components that have to be brought to bear to be successful in the power generation space, particularly for a data center. It's a lot more than showing up with a used turbine repurposed to run generation. I think we have talked about all the components that we have built into the LPI platform. And I think a real testament to the success we've had there and the belief that people have in that are these recent deals that we have announced. Vantage has vetted the LPI platform, the capabilities we bring to the table that range from the midstream capabilities, the packaging and supply chain capabilities, our power quality systems and the technology that we will deploy there. And with respect to that technology, the specificity of that with regards to the type of load that we are going to be addressing the grid interaction capabilities that Michael just spent some time talking about and our commercial optionality there. As you bring -- as you think about that entire portfolio of services really our LPI Power-as-a-Service platform, that stands far apart from somebody who could bring a gray market turbine to the table and some generation attached to that. As a result, I think we remain extremely confident in our space in the market and our ability to continue to grow this business despite the fact that you're going to see abundant supply there. I'd argue that's beneficial maybe from a time line standpoint that will potentially enable us to get these projects across the finish line quicker rather than worrying about a stretched out supply chain, that maybe adds a little bit of flexibility there. But in terms of displacing LPI and our place in that market, absolutely not.

Yes. I think the only thing that it will do, when you think by the time you take a gray market turbine and refurbish it to 0 hours, you're really not talking much difference in total costs, from the brand new version of it. And then obviously, that -- all that does is actually speed up the supply time line from the delays of expanding the turbine factories themselves. So that really just changes that. And the only thing that they will do with our partners and our ability to put generation into multiple sources of generation into our power solutions group will just enable us to speed our growth rather than slow it down.

Right. No, that makes sense. That's is very helpful color. And I mean, clearly, recreating the integrated solutions that you've done in frac, in the power side and the position that you've been able to build with frac. So it's exciting to see. I guess on the follow-up side, sticking with the [ Power 3 ]. Maybe just talk about M&A, not necessarily from buying power generation assets. But as far as supporting Forte, Tempo, Coras, this is -- these are the clear pillars to your integration strategy. What could we potentially see from Liberty, whether it's bolt-on tuck-in to support the build-out of this integrated solution?

I think I'll take this as well. As you know, we're organic builders, right? That is our focus. We will develop partnerships where we've got very, very close partnerships. But very much along as we've built the frac business, look to us to add technology or things over time that make sense that really that increase our vertical stack and increase our technological heft. So as we add things like that, those are the key things that will be small additions where they bring and they expand and they fit nicely within the puzzle that we have built.

We've always been thoughtful about making sure we understand the things that are -- have significant implications in terms of our ability to execute. So if you think about on the oilfield services side, we recognize that in the transition of natural gas, we had to control the CNG supply that when we transition to an electric fleet, we wanted to control power generation, that we've recognized we had to have some manufacturing capability in-house, that it made sense to have some sand production capabilities to support our business. We find those things that are key inputs critical to our success. And those are the things you should expect us to focus on to the extent those show themselves on the power generation side.

Key long lead items that you can make sure that you have access that allows you to derisk execution are also valuable to us.

And the next question comes from Dan Kutz with Morgan Stanley.

Ron, I just wanted to put a finer point on the pricing comment that you shared earlier, I think you said that, frac was down maybe in the low single digit, mid-single-digit range. And I was just wondering if you could share what the time frame was for that comment, whether it was kind of like a year-over-year or expected in 1Q or kind of cumulative in 4Q through 1Q, just so we can think about how much of those kind of pricing decrementals we should flow through our estimates for 2026?

Dan, I think you want to think about that as really relative to the second half of '25. The pricing that we're going to see in '26 is really a reflection of RFP season, that's taking place against a second half '25 backdrop as we're going through that. In some cases, in Q3, some of that stretching out into Q4. But that's really the time frame against which you want to measure that going forward.

Understood. And then -- go ahead.

No, sorry, go ahead.

And then maybe just on the improved utilization comment in 2026. I guess just ballpark, should we think about normal incrementals on the higher utilization? And maybe if you could kind of unpack some of the good drivers in a little bit more detail, whether it's just fleet demand resilience versus further increases in horsepower per fleet from more final frac and continuous frac? Or if a big factor is the kind of like the quality that you flagged and the associated Liberty market share gains?

Yes, that's a very good question. And to your point, there is a lot to -- there are a lot of pieces of the puzzle there that are moving, in some cases, counter to one another, in some cases, supportive of one another. I would say that in terms of utilization, it's probably fair to think about that from a normal incremental standpoint. But there are some puts and takes to that. We continue to be asked for that drive towards continuous pumping. And so that remains a very specific goal for some of our customers, and we are working hard alongside of them to plot a path to accomplishing that outcome. As you noted, intensity continues to climb and fleets continue to get larger. As you think about an environment, I'll can out the Western Haynesville as an example. That will be the deepest, highest-pressure work we do, I think, anywhere in North America and will require the largest amount of horsepower on any given location that we would have any place. So as we continue to see people -- operators trend into those sorts of environments. Our fleets are going to continue to get bigger. The amount of intensity on the well site going to continue to climb. Alongside of that, we'll continue to push for that 24-hour a day, 7-day a week pumping environment that will be offset to the extent we can manage it by efficiencies that we gain in our operations through the use of AI. We've alluded to some of the savings that have come through the implementation of our software platform, but that's meant from a maintenance standpoint. And in parallel with that, the deployment of the digiTechnologies and the impact -- the positive impact that they have had from an operations standpoint. So there's a lot of things moving there, and as a result, probably makes it a little difficult to get to exactly the puts and takes, but you're thinking about all of the right variables in the math.

And the next question comes from Eddie Kim with Barclays.

I just wanted to ask about the end markets for your power generation equipment. In the past, you've talked about commercial and industrial and potentially even deploying equipment for Permian micro grids. But at this point in time, is it fair to say the vast majority of the 2 gigawatts incremental 2 gigawatts you plan to deploy by 2029 are likely all -- most, if not all, going to be deployed for data center operators? Or just curious on your thoughts on the end markets for your power gen equipment.

I would certainly say, Eddie, that relative to my comments on this call last year, where I said I thought we'd probably be primarily C&I opportunities, maybe some oil field electrification as the largest slice of the pie ultimately growing into data centers. The reverse is true today. Certainly, the large percentage of the assets that we will deploy projects that we will take on will be in the data center space. But we are absolutely still pursuing a number of C&I opportunities. There still continues to be this desire to electrify operations in the oilfield and we are at the table for a number of those conversations as well. So I don't want to suggest that those have gone away by any stretch of the imagination. But to your point, they will represent the smaller piece of the pie relative to the data center opportunities in front of us.

Understood. Understood. That makes sense. And then shifting over to pricing. In the past, you've talked about for some kind of the longer-term opportunities, like, say, 10 or 15 years maybe a 5, 6 year payback on the upfront cost of the equipment was appropriate. Is that still your expectation? Or have your thoughts on pricing and payback changed at all?

No, no changes there at all. I think we still believe that a 5 to 6 year payback is very, very reasonable that we should expect unlevered returns in the high teens. So no changes from what we've guided to in the past.

And the next question comes from Caitlin Donohue with Goldman Sachs.

Can you provide some color on what you're seeing in the market in terms of different size megawatt units as a packaging solution for your customers. I know we've been seeing some of these units come in at 2.5 and 5.5 megawatt units, but there's the possibility of 10 megawatt units coming into the market over time. What is the customer interest in this? And how do you see Liberty potentially offering this over the longer term?

You're going to see a mix of both of those technologies in our world for sure. We absolutely have a good amount of the smaller high-speed gas engines, the 2.5 and 4.3-megawatt assets that will be a part of our world. The wonderful advantage to those assets is that as a high-speed asset, they're very, very responsive to load dynamics and so they can play a very, very important role in a complex load use situation. They also remove a lot of the EPC risk on location, in that we prepackage those assets. So they come into the Liberty Advanced Equipment Technologies group. We're packaging those up. And that results in relatively minimal construction required on location. They show up in a container. We do a little bit of interconnection work with the central control facility, some plumbing and wiring and whatnot, and you have a power plant ready to go. You transition to that larger medium-speed asset in the 10 to 12 megawatt range. You get some inherent advantages there in that. You have a large, stable platform, a lot of rotating inertia there and incredible efficiencies. You're talking about an asset with a heat rate that's probably sub-7,000, not exactly in line with modern combined cycle but very, very close to modern combined cycle for a fraction of the cost. And so to the point Michael was making earlier around the economics of our power generation, effectively the efficiency of the conversion from natural gas into electricity and the reduced emissions footprint that comes with that efficient conversion. These large assets play an important role in that. You can expect to see on these larger installations, I think the gigawatt type scale campuses, power hauls, 200-megawatt blocks of these large medium-speed engines that are going to be a key piece of that. Depending on the end use case potentially paired with some amount of smaller high-speed engines and then, of course, our power quality system to go along with that to deliver that load. But both of those technologies critical to the path forward, and you're going to see both of them play a very, very important role in Liberty's supply chain and execution going forward.

That makes sense. And then just 1 last quick one on, in terms of that 3 gigawatt number deployment by 2029, is there a cadence that we should be looking for in terms of that deployment over the next few years? Or can we expect it to be a little bit more lumpy as contracts or signed over time?

Yes. As far as -- contracts are signed over time, but it will accelerate from now through to the end of '28 with the and service. That's the way you should think about it. The contract -- you'll hear the contract amounts when the contract announcements are made, but really, that will be defined by the accelerating speed of our supply chain and then our ability to install those in the field. Obviously, when we talk about that 3 gigawatts by 2029, given the time frame of our shipments arriving, you take you take ownership in Europe, you've got to ship them to the U.S., you've got to move them to side. We will have -- it's not like we are stopping in 2029. So 2029 will continue to accelerate beyond there. We've just had our '29 announcement.

I will now turn it back to Ron for closing remarks.

I received an unexpected letter this past Friday. It was from a woman named Nancy, and it came to me through a bit of mistaken identity. As it turns out, the local utility provider where Nancy lives in Massachusetts is also called Liberty and she was writing to the CEO of Liberty to express her concerns with the cost of heating their home. We've since sent the letter off to the correct Liberty with the hope that they will address her concerns. But in her letter, she raises an important issue that I want to close with today. Nancy wrote that she and her husband are in their 70s and living on social security, she went on to say that last month, their gas bill was $226, of which $68 was the gas and $158 was the delivery charge. This month's bill was $319, of which $102 was the gas and $217 was the delivery charge. She pointed out that the delivery charge is more than 2x the cost of the gas and wanted to know why. One in 3 American households today experiences energy poverty or the inability to access sufficient amounts of electricity and other energy sources due to financial constraints. And yet, States like Massachusetts continue to settle their residents with additional financial burden in the pursuit of net zero targets and other similar energy initiatives, a program called Mass Save in this case which is an integral part of the state's plan to become carbon neutral by 2050. The cost of this program is carried by the rate payers, people like Nancy and her husband through a fee added on to their cost of delivery for natural gas. People in Massachusetts have seen their gas bills climb by as much as 20% or out $60 this month in Nancy's case directly because of this program. Net zero policies raise energy costs for American families and businesses, threaten the reliability of our energy system and undermine energy and national security. They have also achieved precious little in reducing global greenhouse gas emissions. The fact is that energy matters. It's what keeps people alive on weekends like this past one, putting families in a position where they are forced to choose between a comfortable or even safe indoor temperature and putting food on the table is simply unacceptable. And state mandates like Mass Save are only amplifying this issue. Liberty turns 15 this year. I am incredibly proud of the Liberty team for the significant contributions we've made over those years to enable and advance, the shale revolution, a step change in U.S. energy supply that ensures abundant, affordable, reliable energy for families like Nancy and her husband. I am equally energized by the opportunities ahead to carry on this important work, continuing to grow our core oilfield service this business while also expanding our new and growing LPI business to provide the necessary power for growing data center demand, helping ensure American families also have abundant, affordable and reliable electricity to meet their daily needs without hardship. Thank you, everyone, for joining us today.