Good morning, and welcome to the Liberty Oilfield Services Fourth Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.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 the company's 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 and pre-tax return on capital employed 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 and the calculation of pre-tax return on capital employed as discussed on this call are presented in the company's earnings release, which is available on its website.I would now like to turn the conference over to Liberty's CEO, Chris Wright. Please go ahead..

Good morning, everyone and thank you for joining us today to discuss our fourth quarter and full year 2019 operational and financial results. We are pleased to have delivered solid financial results in 2019 given a market backdrop that became more challenging as the year progressed.

For the full year 2019 revenue was $2.0 billion an 8% decrease from $2.2 billion in 2018.Net income totaled $75 million in the full year and full year adjusted EBITDA was $277 million, a 37% decline from $438 million in 2018. Annualized EBITDA per fleet was $12.2 million compared to $20.6 million in the prior year.

Results were driven by challenging price environment that offset in increased in the average number of frac fleets deployed during the year and improved frac efficiency.Continued strong cash generation in 2019 enabled us to invest for growth, returned $41 million in cash to shareholders in the form of quarterly dividends, distributions and the repurchase of 1.2% of our total shares outstanding at the outset of the year while investing in growing our market share and organically growing our fleet count from 22 fleets at the end of 2018 to 24 fleets at the beginning of 2020.Pre-tax return on capital employed was 10% for the full year 2019.

All of this was achieved while improving our balance sheet to a positive net cash position at the year end.

The sequential slowdown of completions in the fourth quarter was more pronounced than that experienced during the same period in 2018 as operators managed completions to fix capital expenditures and some more constraints by capital markets.These constraints causes gaps in the completion schedule and negatively affected overall fleet utilization.

Despite these challenging conditions during the fourth quarter Liberty achieved position cash flow from operations without structural changes to our fleet count or workforce.We had visibility into the strong customer demand for Liberty's differential services at the start of the first quarter [hardening] Q4 a bit to best position ourselves moving into 2020.

This demand positioned us to commission our 24 fleet in January, a testament the level of dedicated customer interest for our best-in-class fleets.or the fourth quarter of 2019 revenue decreased 23% to $398 million from $515 million in the third quarter of 2019.

Net loss after tax decreased to $18 million in the fourth quarter compared to net income of $19 million in the third quarter.Fourth quarter adjusted EBITDA decreased 57% to $30 million from $70 million in the third quarter.

Annualized adjusted EBITDA per fleet was $5.2 million in the fourth quarter compared to $12.1 million in the third quarter.The pricing dynamic entering 2020 is challenging. Total industry frac stages in North America were up only marginally year-over-year in 2019.

However, efficiency gains across the industry have raised the number of frac stage is completed by each fleet by 10% to 20% which implies a decrease of at least 10% in the active frac leads needed to meet demand.

The slowing pace of frac to activity led to progressively lower demand for frac leads through the second half of 2019 resulting in pricing pressure on services.The substantial oversupply of frac equipment in the second half of 2019 was the pricing backdrop for 2020 dedicated fleet negotiations.

The supplies staffed fracturing fleets across the industry fell meaningfully in late 2019 while this trend is helpful in the long term, we believe the impact of attrition has not yet supported an improvement in pricing for services at the start of 2020.

Without improvement of pricing increased profitability will have to come from technology, increased efficiency and improved processes.Future activity projections for the industry are dependent on multiple factors including commodity prices, availability of capital and take away capacity in each basin.

For Liberty fleets demand is strong in 2020 and we chose to activate our 24 fleet earlier this year as part of growing our business with larger customers to support their long term development programs.Liberty has always employed a strategy of investing for the future based on long-term fundamentals.

Our competitively advantaged portfolio of highly efficient environmentally friendly frac leads coupled with our financial strength allows us to navigate periods of challenging markets and to take advantage when the cycle turns favorable.A significant topic at the forefront of investor and customer conversations within the industry is environmental, social and governance concerns which Liberty is focused on since day one.

We pride ourselves on advancing ESG solutions that are beneficial to all stakeholders, our customers, our communities and our employees.

Governance and compensation practices at Liberty have always been focused on transparency and maximizing alignment.Liberty is also a first mover in driving an environmental and socially conscious approach to hydraulic fracturing.We began deploying dual-fuel frac fleets in 2013, introduced our game-changing quiet fleets in 2016 and we're an early test partner with Caterpillar on both tier four diesel and tier four dynamic gas blending engines.We continue our aggressive efforts in developing next generation frac fleets to both reduce our environmental impacts and reduce customer costs by displacing diesel fuel with natural gas.We are in conversations with many customers about Liberty's next-generation fleets and recently came to terms to build fleet 25 a tier four DGB quiet fleet for an existing customer under a long term agreement.

It takes special circumstances in today's market to build capacity but this was just such a case. We don't view ESG fleets as special fleets. They are simply the way we do business. ESG concerns are not a box check for Liberty.

They are simply embedded in our DNA.As we continue to review future capital outlay decisions we undertook the comprehensive study on next-generation frac fleets under various operating conditions.

In order to better understand the pros and cons of next-generation options preparing frac fleets the Liberty team prepared a white paper in partnership with OEM manufacturers that compares tier four diesel, tier four dual fuel and turbine powered electric frac fleet and it is available for download on our website.The comparison looked at emissions profiles, fuel costs, operational considerations and capital costs for each of the three options.

The results of the analysis under field operating scenarios was that with current technologies tier four dual fuel fleets provides the most effective combination of fuel savings, reduced emissions footprint, operational efficiency and capital cost.

Greenhouse gas emissions are currently lowest for the dual fuel technology as our total overall emissions. We currently expect to deploy both dual fuel fleets in the near term and potentially next generation electric fleets in the future.During 2015 to 2016 downturn Liberty played [indiscernible].

We grew our market share and invested in our technology, systems and culture. We were well positioned to take advantage of an improving market.We are following the same strategy this time.

While the timing of an improvement in market conditions remains uncertain, we expect to make significant progress in 2020 across all fronts; customers, culture, operations, technology and next generation frac fleets. I will now hand the call over to Michael Stock, our CFO to discuss our financial results in more detail..

Good morning everyone. We're pleased with the performance of our team in the fourth quarter and the full year 2019 amidst a challenging market backdrop. For the full year 2019 revenue declined 8% to $2 billion from $2.2 billion in 2018.

Results were driven by a challenging price environment more than offsetting a 7% increase in the average number of frac fleets deployed during the year.

The income totaled $75 million for the full year due to a nuance and gap accounting related to the relative timing of exchanges from Class B to Class A shares and the quarterly earnings performance we reported $0.53 per fully diluted earnings per share which is lower than would have been calculated without the exchanges between the two classes of shares.

Full year adjusted EBITDA was $277 million a 37% decline from $438 million in 2018.

Annualized EBITDA per fleet $12.2 million compared to $20.6 million in the prior year.As Chris pointed out the continuation of strong cash generation in 2019 and [indiscernible] growth returned $41 million in cash to shareholders in the form of quarterly dividends, distributions and the repurchase of 1.2% of our total shares outstanding at the outset of the year.Pre-tax return on capital employed was 10% for the full year.

All of this was achieved while improving our balance sheet to a positive net cash position at year-end.

We are very pleased with the operational efficiencies gained during the year and the solid financial results a period of significant oversupply of frac capacity in the market and the resulting pricing pressures.The sequential slowdown in completions in the fourth quarter was disruptive as operators managed completions to fix capital expenditure budgets and some were constrained by capital markets.

These capital constraints caused gap in the completion of scheduled and negatively affected overall fleet utilization.Further, the oversupply of frac fleet was a negative drag on pricing for spot work available to fill in gaps related to dedicated operators scheduling issues.

Despite these challenging conditions during the fourth quarter Liberty achieved positive cash flow from operations without structural changes to our fleet count or workforce due to the visibility we had and strong customer demand for Liberty's differential services at the start of this quarter.For the fourth quarter of 2019 revenue decreased 23% to $398 million from $515 million in the third quarter of ‘19.

Net loss after tax decreased to $18 million in the fourth quarter compared to net income of $19 million in the third quarter.

Fully diluted net loss per share was $0.15 in the fourth quarter compared to fully diluted earnings per share of $0.15 in the third quarter of 2019.Fourth quarter adjusted EBITDA decreased 57% to $30 million from $70 million in the third quarter and annualized adjusted per fleet was $5.2 million in the fourth quarter compared to $12.1 million in third quarter.General and administrative expense totaled $98 million for the full year of 2019 or 5% of revenues and included non-cash stock based compensation expense of $9.2 million.

G&A expense totaled $26 million for the quarter or 7% of revenues and included non-cash stock based compensation of $2.5 million.Net interest expense and associated fees totaled $14.7 million for the four year 2019 and $3.2 million for the fourth quarter.

Income tax expense totaled $14.1 million for the full year 2019 and was $3.1 million benefit for the fourth quarter.We’ve ended the year with a cash balance of $113 million dollars at a net cash position of $7 million.

At year end we had no borrowings drawn on the ABL credit facility and total liquidity including $171 million available under the credit facility was $283 million.Liberty's financial results favorable long-term outlook strong balance sheet support our balanced strategy of disciplined growth and returning capital to our stockholders that is committed to compounding stockholder value by reinvesting cash flow at high rates of return and returning cash to stock holders as appropriate.During the year ended December 31, 2019 the company paid quarterly cash dividends and distributions to stockholders and unit holders of approximately $23 million.

Our board of directors announced on January 22, 2020 a cash dividend of $0.05 per share for Class A common stock to be paid on March 20, 2022 holders of record as of March 6, 2020 and a distribution of $0.05 per unit has also been approved for holders of units at Liberty LLC which used the same record of the payment date.As Chris discussed the pricing dynamics for 2020 are challenging due to the supply-demand imbalance in the frac market in the latter half of 2019.

This imbalance is being fixed by a reduction of supply but this takes time and is not affecting pricing for work in 2020 year.We see a frac market looks more positive over the next few years and this is the driver for 2020 investment decisions.

In the current pricing environment with current efficiencies we projecting the EBITDA per active frac fleet will be down slightly in the fall year 2020 when compared to the full year 2019 at approximately 10 million per active frac fleet.In mid 2019 we took delivery about 24 fleet and held down the market until a combination of the right customer with dedicated activity levels and projected returns supported activation.

This fleet was placed in the service in January for dedicated customer.In 2019 we also announced the commitment to purchase next-generation tier 4 dual fuel engines to upgrade to fleets in 2020.

Due to strong customer demand we've adjusted these plans and one set of these engines will be used to build as 25th fleet.We expect capital expenditures in 2020 to be approximately $165 million which includes $45 million for the completion of fleet 25, $85 million for maintenance capital about $35 million for technology fleet efficiency improvements facilities in general capital.Fleet 25 will be deployed before the end of the second quarter with a long term dedicated customer.

We believe redirecting the use of the tier 4 dual fuel engines for 25th fleet is example of optimizing a capital outlay for the highest long-term returns.We enter 2020 with a clear commitment to a value proposition designed to report, reward shareholders and stakeholders alike through commodity cycles.

We believe that investing in the future and as sustained focus on technology innovation combined with highly efficient operations in a strong balance sheet positions Liberty to a greater value for shareholders through the cycles.I will now turn it back to Chris before we open for Q&A..

U.S. oil production growth has slowed meaningfully over the last year and we believe this trend will continue with the anticipated 2020 reduction in EMP CapEx. It is unclear right now whether the corona virus will meaningfully disrupt the oil demand growth this year.In any case increased investment restraint by U.S.

producers and frac companies should lead to an improved supply demand balance in both the oil market and frac fleet market.ESG is a far broader subject than often discussed. Our industry like any industry has a broad range of ESG benefits and costs that should be considered.

For example over 2 billion people still suffer energy poverty lacking reliable access to electricity and clean cooking fuels.

Lack of access to clean cooking fuels alone kills more people every year than AIDS and Malaria combined.Energy poverty is also a major contributor to the other global scourges; hunger, malnutrition and lack of access to clean water. The folks at Liberty are strongly motivated to play our part in combating energy poverty in the U.S.

and around the globe which would dramatically improve the lives of millions together with major environmental progress via reduced deforestation pressure and cleaner air as wood and crop residue burning is replaced with far cleaner fuels like liquid petroleum gas.

Poverty remains both the greatest threat to humans and to the environment.In addition to contributing to the industry's role in combating energy poverty Liberty continues our mission to reduce the impacts of energy production on nearby communities and the broader environment.

Since our founding Liberty has been a leader in ESG conscious frac practices and are committed to continue to push the industry forward. We will now open the line for questions..

We will now begin the question-and-answer session. [Operator Instructions] Our first question is from Chase Mulvehill from Bank of America. Please go ahead..

Hey, good morning gentlemen. I guess first if we can kind of talk about the 25th fleet I just want to make sure that I heard you right.

This was a new [indiscernible] fleet or you actually upgrading some of the pumps to be able to squeeze another fleet out? So I just want to make sure I'm getting this right?.

It is a new-built fleet. We'd ordered pumps that we're going to upgrade across our fleet but the demand from existing customers and the significant interest across our customer base and new generation ESG fleet led us to make the decision. This is an additional fleet. A new built fleet..

Okay.

On the pumps that you would plan to replace with the new CAT pumps, are you still upgrading those as well?.

Chase we will be upgrading one set of the pumps rather than two, one fleet rather than two and then other fleet will just continue in its rotation as a tier 2 diesel..

Got it. Okay. And the 24th and 25th fleet it sounds like the 24th fleet started in 1Q.

So can you confirm that? And then what's the timing for the 25th fleet and then what basins?.

Yes. So Chase the 24th fleet did started in Q1 sort of in the middle of January started up. Q2 I think the 25th fleet will be starting in Q2 I'd say probably middle towards the end is probably when it's scheduled at the moment. That'll come on clear as we get through the build cycle. We don't really comment on the basin but….

Yes. We have a general migration at Liberty to grow our capacity in the Permian. We're not necessarily shrinking elsewhere but our net ads are in the Permian..

Got it. All right. So one quick one you talked about the 10 million of annualized EBITDA per fleet for this year.

Could you talk about the trajectory of kind of how we get there? Do you get to 10 million in the first quarter or is this a gradual progression and you end up getting above that by the time you get the 3Q of this year?.

Yes Chase generally you always have a little bit of kind of seasonal challenges and weak or slow start up at the beginning of the year. So say January will be under that path that run rate Q2 and Q3 obviously slightly over that run rate. I think Q4 likely will have a few challenges around the capital constraints as we have seen for the last two years.

I don't think that sort of works way out of the system this year. So I think that'll be sort of the run rate to be here like a slight a small bell curve as far as they go. A little bit higher in the middle of the year in the some quarters, a little bit lower and Q1 and Q4..

And a little bit of a change Chase in customer profile that should mitigate somewhat to drop in Q4, although that's, we don't think that's going away. We expect Q4 to be down again this year but I think it should be a little different for us this year, not quite as large of a drop as we had this year and last year..

Okay. All right. I will turn it back over. Appreciate the answers..

Thanks Chase. Have a good day..

Our next question is from Waqar Syed from AltaCorp Capital. Go ahead..

Thank you for taking my questions. Couple of questions here.

And number one this 25th fleet that you're adding is this a net add for the customer, are they cannibalizing one of your fleets or one of your competitors fleets?.

Waqar it is a net add. One of the things we're doing right now with some of our larger customers is just growing our market share [indiscernible] work. But this is a net add for that specific customer actually increasing the [indiscernible] completion gap..

Okay. And then $45 million investment that is hard to justify with the $10 million EBITDA. Is the return metrics are the EBITDA contribution from that fleet going to be very different from the average for the fleet? In the past it's normally $15 million to $20 million EBITDA per crew is what generally is required to justify a new fleet.

Are we still in the same kind of economics range?.

Yes. The EBITDA per fleet of that new fleet will definitely be higher than our average. We won't disclose specifics but yes the return on that fleet over the next few years I think will be yes no different, no lower than we deployed fleets in the past for..

Waqar just a little color commentary on that one. We really don't think that the return profile for this year which really was affected by the oversupply last year is really where we are as far as where the balanced market is at the moment.

So yes just we would say those were [indiscernible] are going to improve without any other changes in the next two years after that and that's where we look at. We look at that sort of three window. We look at the return profile or a little bit longer..

And then the same question kind of applies to the 24th fleet that you just picking up. This fleet was available to you last year as well but the pricing was just not there.

Is the return metrics for the 24th fleet also the similar to the 25th fleet?.

Waqar, we won't go into those details but yes as we said that all along it's a combination of the pricing and the strategic value of the customer the relationship or what it is and so yes fleet 24 is the combination of pricing which will be above our average pricing and the customer and relationship it's going forward compelled us to do it.

We're quite excited about it..

Yes Waqar, just another bit of color on that. As we said in Q2 of last year we had a view we knew that there was going to be this drop-off of the [banking] of last year 2019. So that was going to we knew that was going to be a challenge, so again with the changing customer mix we see that in being a little more steady this year..

Okay. And then the study and thank you for the first -- very detailed good study on the comparison between tier four dual fuel and electric fleets and traditional diesel engines. Now the economics of the, fuel economics change dramatically whether you use LNG CNG or fuel gas.

Do you know for the 25th fleet what the customer plans to use in terms of fuel gas?.

It will be a combination. That's being worked out. In all the cases we can migrate to using as much fuel gas as possible but you can't necessarily come out of the gate across a fuel where you're going to operate and always have fuel gas..

Okay. All right. That's all I have for now. Thank you..

Thanks Waqar. Have a nice day..

Our next question is from Stephen Gengaro from Stifel. Go ahead..

Thanks. Good morning..

Morning Stephen..

I think two things if you don't mind and just the first to follow up on some of the prior questions.

When you think about the tier four DGB fleets particularly let's talk about the 25th if you don't mind is there a willingness yet from the customer on these, on a longer term arrangements to share some of the fuel cost savings you're bringing to the table or the economics still just driven by efficiency?.

No absolutely. That's one of the drivers. There's two drivers for a customer and us to deploy one of these fleets.

One is it's going to be lower cost of operations and absolutely a sharing of that is fixed is part of the economics of why it makes sense for them and why it makes sense for us and the other is a lower cleaner emission profile that almost independent of cost is also a driver for some customers but for us to achieve that requires new capital deployment.

You got to have economic [indiscernible]. And Stephen just to clarify you said efficiencies the new fleets are actually the same [indiscernible] they are old fleets. They are not more efficient right. So there is no adherent sort of increase in efficiency just because it's a tier 4 DGB..

Okay. Thank you and then two others. One is when you look at the progression and you provided some color I think the chase on the EBITDA progression.

Just so I'm clear is the progression driven by utilization not any expected changes in price in 2020?.

Yes, that was driven by really a utilization Q1 because we have a significant amount of fleets to the North. North have a little more weather challenges. Also you always have a slightly slower start to the year so historically Q1 lower than your summer quarters. So yes that was without pricing.

So pricing goes up that would increase the general projections..

Great and just one final and it's back to the white paper you put out and I've been through it a few times and as you guys know but when you think about conversations with customers and your understanding the emissions profiles that you laid out, do you get any customers yet saying yes but for a few reasons it just sounds better if it's electric or how have those conversations gone?.

Yes. Look it is a complicated equation. It is not just a mathematical equation. So yes there's fuel, there's perception. I would say we don't have any customer that's not concerned about numbers. They're very concerned about numbers and there hadn't been a good supply of actually -- of those numbers out there.

So it's a combination of those what's there, there is more than just numbers in the decisions. And everybody's got a little bit of a different take or different view but I wouldn't say wild I wouldn't say wildly different..

Great, thank you for the answers..

You bet. Thanks..

Our next question is from Chris Voie from Wells Fargo. Go ahead..

Thank you. Good morning guys..

Morning Chris..

So first just to get a little more detail on the pricing if possible. Your revenues were down 23% quarter-over-quarter in the fourth quarter. Just curious if you can give a little color on how much of that was a pricing impact and then in terms of average pricing in 1Q if you expect that to be a little bit lower.

I think the range among competitors probably 0% to 5% but just curious you can give a little color on pricing in the first quarter as well?.

Yes. Generally Chris when we talk about pricing we like to talk year-over-year because then you can talk about dedicated pricing and as we've said sort of like a dedicated pricing 2019 down to 2020 we order 10% plus or minus down rough numbers.

Obviously Q4 what you had is you had the roll off of dedicated fleets as people were finishing up capital budgets and some capital constraints and debt market issues and so that utilization a good amount of that the sales team did a great job of refilling with other people on spot works.Now the spot pricing was very, very low in Q4 because of the large oversupply of equipment and people sort of like wanted to keep things working as sort of working out where the demand was going to be in 2020.

So it's really hard to compare pricing Q-over-Q generally I would say spot pricing will be up Q1 over Q4 but we don't do very much spot work other than when we need to fill gaps because of these artificial constraints that happened in Q4. So that's sort of where we are on pricing..

Okay. That's very helpful. Thanks. And then in terms of the first quarter I'd say on average most of your competitors are probably tracking maybe up mid-single digits in the first quarter but in general they have fewer active fleets and kind of consolidated work to those fleets in the fourth quarter.

You're going to have higher average fleets and likely a strong rebound and efficiency activity per fleet in the first quarter.

Can you give a sense of how much you expect first quarter revenue to be up? Is that going to be like 10% to 15% or maybe just a little color there?.

Yes, I think that's fairly reasonable number Chris..

Thank you [indiscernible]..

Great. Thanks. I'll turn it back..

Thank you. Have a good day..

Our next question is from James West from Evercore ISI. Go ahead..

Hey good morning guys..

Good morning James..

Chris curious about as you guys are evaluating new technologies and you’ve talked about some of these warrants and things out there like frac lock in the past.

Do you see anything new on the horizon here that could be a big game changer to efficiencies?.

I don't know about game changer. There's some of the things you and I have talked about. There's some other things we're working on but I would say there are incremental improvements. We're looking for is incremental improvement in efficiency, cost and safety.

Some may only hit one of those, some will hit two or three of those but that's the goal and to develop systems and then roll them out and perfect it I mean it takes some time but frankly that's one of the things we like about where we are.

We're not going to flip a switch and make the frac market great in three months from now but we have some things going on that make us feel pretty good about our competitive position and supply and demand with time will work itself out. Given top Q4 and all that I say we actually feel pretty good about our business right now. It may sound weird..

That's good to hear. And then Chris how do you balance the strategic nature of the business with the current pricing environment and really the high focus you guys have on returns in the business? Obviously with pricing where it is returns are under pressure.

You did a great job with the returns in 2019 but 2020 seems like it's more challenging like you're putting equipment into the market.

And so I'm so curious how you think about that? Are you willing to sacrifice a bit on the return side for strategic reasons because you see a better future out there or you still be earning above the cost of capital?.

Good to say, look it's a cyclical business.

So if you look at how we play 2016 for example no one earned positive returns but we didn't play 2016 for 2016, we played 2016 for the coming few years and so we took a different strategy because look we want the highest returns we get at all times but we won't make decisions to maximize return in this quarter or last quarter that will hurt the returns over the next few years.When we build a fleet, when we hire the people that is a many year commitment.

Our goal is to maximize the return on that capital deployed and that does not line up very well with max we can lay a bunch of heads off and lay down the six least profitable fleets or whatever and boost numbers in the short term but that's just not the way we play the game.

We want to maximize the returns on our capital invested over time and that's the same game or same story.Now this just downturns no we're approaching what we saw having 15 or 16 but I think the opportunities to get better to align with the right customers, to make the right strategic decisions they're the same.

I mean we had a lot of, we've been saying no to several customers for fleets at the end of the year. It wasn't just scrounging around to find enough so we could employ the fleets we have.

We only brought fleet 24 out because we had lots of interest and we had again fruitful dialogues about where strategically and economically the right place to place this fleet not just for today's pricing but that matters but what where's our best pathway to raise returns and profitability on those fleets through efficiency gains, through an understanding of the way pricing will unfold with time.

So it's multi-year returns on capital is what we look at it and I've always looked at..

Okay. Fair enough. Thanks Chris..

Thanks James..

Our next question is from Blake Gendron from Wolfe Research. Go ahead..

Hey thanks. Good morning. Thanks for taking my questions. I wanted to follow-up on James's last question.

You talked about playing offense in ‘16 playing offense again here I would say the big difference between now and then though is in 17 and 18 we saw a snap back in activity took a lot of slack out of the market and pumpers, got pricing fairly easily in that regime.

Now you're starting to see EMTs decouple spending an activity from the oil price and we might have a more moderated kind of flattest trajectory from here on out.

So I guess kind of longer term what gives you confidence that the share that you're gaining now is defensible given that investors will push back and say somebody else will go pumps sand for a lower price.

I guess that in a different way are you putting more stock in the dedicated customer arrangements, the technology and your alignment with customers on that front? Or are you putting more stock in the supply side attrition at some point getting better in 2020?.

More in the former than the latter and I agree with your comments. This downturn is in no way like the last downturn. We do not expect to snap back in huge growth and demand at all. In fact we wouldn't be surprised to not see that number of fleets demanded are not grow.

Not grow but yes still have a market improved.So, for us we do believe with time, there'd be you'd we're seeing the attrition happening now, we believe that will continue in the current economic conditions.

But the bigger thing for us is to align with the right partners that are going to be strong going forward that are not just commodity buyers and we can this guys price list shows the pound of sand is cheaper than yours.See you later and maybe will come back in the future. There's all different kinds of customers out there.

So, for us it's through time finding the customers that are strong and that want a mutually beneficial partnership. I think by being that short-term buyer cheapest kind of thing is not actually a long-term cost minimization strategy for operators.But look, everyone plays a different strategy and a different game and not all role done.

Question how people make their decisions. But so I'll take the biggest thing for us is to strategically align with the right customers or going forward we can have growing in better economics and we could work with them to deliver the same thing to them..

Okay, understood. And then as a follow-up here on the ESG side. First, I really appreciate the ESG commentary and saw the global reach for oil and gas and I hope this is a message that is spread across all the peers across the groups.

Specifically with what you guys can do in the field with ESG and as it relates to the whitepaper.The way that we read it is that there is one scenario in which electric frac is potentially as competitive if not more than dual-fuel from an ESG standpoint and that's on fuel gas.

So, we know that from an emission standpoint and from an overall return standpoint dual-fuel is more competitive, thermal efficiency is better across a wider range of operating conditions.But what is your conversation with customers around specifically investing in fuel gas infrastructure.

What's the viability you think in the Permian, is that something where every operator across all the entire basin can operate on fuel gas. And then, any conversation around customers buying the turbine and power generation ports into this.Because that would greatly improve the economics of the E-fleet versus Tier 4 dual-fuel as well. Thank you..

Yes. so, the fuel gas versus LNG and CNG is a dynamic moving thing. No, I don’t think will soon be a case where everyone will have fuel gas. But there has been precious little of that done over the last week.

We've been in the duel-fuel business for seven years now.We've done, I would say we've probably done a fair amount of the fuel gas use that's been done in the industry. It will grow, it is growing but it's not as easy as it sounds.

The like I disagree a little bit with the comment on the electric supply, who owned the turbine for example, I mean it's still capital.Capital in our book or capital on their book but it's capital that's deployed. So, on our note, there is an easy fix to that.

We are not and I want to be clear, we're not saying one technologies for ever, the winner would ever. We'd just evaluated what's happening today and what are the profiles of that.We have efforts in a few different areas to change the way things work today. So, that report was a state of the play as it stands today.

But yes, that will move forward and that will change..

Got it, understood. Yes, I was talking more from the perspective of the service company mind that you fleet if the customer will take on that cost. But that makes a lot sense because I appreciate the commentary in the time and I'll turn it back..

Thanks..

Our next question is from Ian Macpherson from Simmons. Go ahead..

I think if we accepted this principle that Liberty can continue to grow share in a market that is shrinking because of efficiencies and pricing is still weak. That's the question to me.

And fleets 26 and 27 earn outs if you have the ability to deploy 24 and 25 in today's conditions, it seems the conditions are getting worse from here at least based on your playbook.So, what are your thoughts on the next leg of growth and whether that might come into view this year?.

Again, that was in the details. No current plans, very possibly no more freights this year but if the conditions are compelling, combination of strategy, I mean strategic relationship. The economics of it are just in the short run but in the longer term, it will make sense.But there is a growing desire for the next generation fleets.

So, I think for us growth if there is growth beyond what we've announced and nothing to say there will be but for compelling economic and partnership opportunities, we're in dialogues.

We're in dialogues to do that.But we're well aware of the markets over supplied current economics are not great and that is a large check or are willing just to invest; quite a large check..

Got it, thanks Chris. That's it from me, thank you..

Yes, thanks..

Thanks, to you..

Our next question is from Scott Gruber from Citi. Go ahead..

Well, yes good morning..

Hi there, Scott..

Hello, Scott..

It was covered a lot of ground sort of really have one question to ask, the previous one in questioning.

But it just strikes me that when I think about your offer to strategy now, and then more of a reflective of your belief, then your competitive advantage actually improves over time and maybe more so in a tough market than a good market.Which you can actually make money in the tough market and reinvest in your business and then new people in technology while others cant.

And that's effectively a partner that your customers want.

For the minute, it just seems like the customer alignment is important but it's more of on an output than an input in terms of the underpinnings of your strategies.Is that fair?.

I think that's a reasonably fair statement of things. Yes, but the ultimate goal for us, the ultimate way to assure a high return on capital is to build the competitive advantage. We're all going to be playing in the same market. Right now in a year from now and 10 years from now.

So, what we need to be able to do is be able to deliver a higher quality.Service is more desirable to our customers and lower price. Right, I mean the loser cost for us to deliver it.

So yes, efficiency, scale, the right customer, the right investments and technologies, that's what will help us build an ability to do this to do a better job than our competitors and cost us less to deliver it than our competitors.So yes, I think you said it, that you said it well..

And good, that was it from me. Thank you..

Thanks, Scott..

Thanks, Scott..

Our next question is from George O'Leary from TPH. Go ahead..

Good morning, guys..

Good morning, George..

Is you think about the first quarter of 2020 that commentary you guys have given on revenue and kind of annualized EBITDA targets has been helpful and then also the trajectory and response to Jason's question was helpful.But just thinking about the first quarter, is in Q1 of '19 a decent analog to think about the profitability improvement or is the fact that maybe we have a little bit more benign of a winter season possibly a faster start to activity than we've had the last two years.Should we figure out the incremental margins as potentially being higher in Q1 '20 than they were in Q1 '19 or where there something that mitigate that as the pricing pressure more pronounced than it was last year?.

Yes, I think price and pressure is a little more pronounced. Q1 last year was a really efficient quarter, it was pretty benign. From that point-of-view, I think we came out the acre sort of quicker than we -- you would been average for the last five years.Sort of D/E rate I would say I wouldn’t make on that every year.

So yes, I think that was I think maybe Q1, rebound is going to be a little it makes good than the Q1 '19 one. But there maybe a little more difference between Q2 and Q3 and Q1 and '20. It wasn't '19 but overall averages across the board for the year..

Right, that's helpful.

And then, the DGB Tier 4 fleets, and I know you guys weren’t really move or in testing that technology they would speak to the first from your end on looking at these investments that are positive from an ESG standpoint but also benefit your customers from a cost standpoint and potentially benefit EVO as well.I was just curious how much demand pull is there from the customers for pressure pumpers for you to implement these new technologies whether it's E-fleets or the DGB Tier 4 offerings.

How much of its Liberty, how much of it's the customer's?.

But there is a lot from the customers and so with the dialogue. But I think as you've heard from others, the problem is everybody wants to get better and cleaner and do all that stuff but the economics for their economics in their business is so challenged that most want a better fleet and they don’t want to pay anymore.

Having that's where a lot of people are.And that's simply doesn’t work. So, the question is you got to have that bit. So, customer interest is and it's not for everybody, I would say a good majority of the customers out there, there are real areas in this is not an issue for them.

Why it's bigger players in the public eye or in the areas near, where there is a growing interest in plus then that the question the balance while we have way more dialogues in agreement to do something is to get better in that front, is it good chunk of capital upfront.And where business is like their business, so together there'll be some deals done to move this way or in a tough market that we're in today.

That migration into next generation frac fleets probably goes relatively slowly. Probably goes relatively slowly..

That makes perfect sense. Thanks very much Chris, thanks Michael..

Okay thanks, I appreciate it..

Our next question is from Emily Boltryk from Scotia Howard Weil. Go ahead..

Hey good morning, guys..

Good morning, Emily..

Just a quick question I may have missed it in the commentary earlier.

If you could just go again and with the CapEx breakdown for 2020, if there is any incremental CapEx needed to put 25 to work or 24 for that matter?.

Yes, a 24 -- three more's working there's no extra CapEx for that. The 165 million for the full-year of which 45 million is slightly to finish up fleet 25, the balance in maintenance CapEx technology improvements and fleet improvements.

So, as you could see year-on-year CapEx would be just down slightly and obviously EBITDA would be down slightly.But it cash flow generation. We'll actually be well not too dissimilar year-over-year on the free cash flow generation..

Perfect, thanks..

Our next question is from Thomas Curran from B. Riley FBR. Go ahead..

Good morning, thanks for taking my questions..

Good morning, Thomas..

Hi, Thomas..

On Liberty's YouTube channel, I noticed that you posted a series of premiere videos to introduce and explain various completion technologies that you can or expect to offer. Does that included a video on which Ron took a turn as the start provider in the overview or energy recoveries VorTeq system.

Would you update us on your latest thinking on in expectations for VorTeq.What's the earliest we might see commercially introduced a first system and then how many VorTeq units do you ultimately plan to deploy?.

That's a good question. And we're always a little careful about what say at Air Force Energy Recovery is a public company as well and they have not reported yet this quarter so have not provided any updated commentary.

I will go so far as to say that that testing is ongoing.We continue to pump sand through the VorTeq assembly in their test facility in Katy and we continue to be happy with the progress that they are making there.

So, at this point-in-time I'm not going to comment on a potential time for commercialization but certainly would go so far as to say that when and if we get to a point where we're happy with that technology commercially will deploy it rapidly across our fleets.Starting with those areas where we feel the benefits going to be realized as quickly as possible..

That's helpful, thanks Ron. And then, shifting gears from horsepower construction to contrition and what most of your rivals are doing, Chris, how much horsepower do you estimate has been permanently withdrawn from the industries marketed fleet.

And from here, how much more do you expect to be retired.How much incremental horsepower do you think will be put out the past over the next six to nine months?.

Well, I could say I don’t know and I don’t know. I don’t know that it has any incremental insight to what you have.

Clearly a lot has been retired, some has been sent overseas, a lot has been scrapped, some are shrinking fleet counts and using those extra horsepower to bolster their fleet so that they can keep efficiency up.So, a lot of fleets have grown.

But I think in the economic conditions we're in today, unless you have something special, it's a tough return time and particularly if you're bottom half player.So, I think the tough economic times right now, efficacy necessary. This is what we'll reduce supply and bring discipline in investing.

These cyclical business is our cyclical for a reason, and this is the necessary part of the cycle just as in times are pretty good. Whatever, the market place is I don’t have any particular insight.Everyone makes sort of game time decisions of what they're doing.

But there's very little building going on and there is a lot of fleets being aids and work a truck. So, supply is shrinking as there is just no way around that and that's what we need..

I appreciate the answers, guys..

Thanks, thank you..

Yes Tom, I appreciate it..

Our next question is from Chris Voie from Wells Fargo. Go ahead..

Hi, guys for pulling me back in..

Welcome back, Chris..

Just one more on your calendar, some of your competitors have commented on this. So, I just wanted to get your take in terms of visibility.

Should we think the calendar for the first quarter is pretty much full and to what extend do you have visibility into the second quarter at this point?.

Yes. We have an even larger percent now that are dedicated fleets than we've had. That's always been our model and it's even a larger total percent. And more single customer dedicated fleet.

So yes, the first quarter calendar is full, the second quarter calendar is full, the third quarter calendar is full.This stuff happens, right, people have the issues with wells or gathering systems.

I mean, there'll be it doesn't mean a sale guys are taking a nap, things happen and we tend particularly new customers like will move faster than they're usually moving, we catch up the race.So then, sometimes we have to supplement we are in talk with other customers to step in and fill gas.

Some of the spot work we're getting Q4 is to meet new customers. So, was a pretty or poor financial quarter for us in Q4 but some positive things happened in Q4?But yes, calendars full.

As far as we could see, we're still have some concerns for sure later in the year and we're working now try to get some of the privates that whenever to schedule their work as much as they can at every year..

Okay, that's helpful, thanks. And then, just one more on pricing and I think I understood this correctly but I think it might be good for everyone to appreciate it. If I've got it right.

So, the fact that you're getting rid of the terrible mix from spot pricing in the fourth quarter.Does that actually suggest that your average realized pricing in the first quarter will be higher than the fourth quarter?.

I've got probably got those numbers that way but yes..

Okay. Alright, I just wanted to make sure I understood. Thank you, I'll turn it back..

This concludes our question and answer session. I would now like to turn the conference back over to Chris Wright for closing remarks..

Thanks everyone for listening in today and your interest in and intriguing dialogue about Liberty. I want to sincerely thank the passionate wonderful folks our team Liberty that make it happen every hour of every day. I'm proud to be your partner.Safety is the top-of-the-list for us, all of us every single day.

I also wish to thank our customers, suppliers and investors who make it all possible.

Have a nice day!.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..