Liberty Energy Inc. (LBRT) Q4 2020 Earnings Call Transcript

Good morning, and welcome to the Liberty Oilfield Services Fourth Quarter and Year-End 2020 Earnings Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. 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 the current conditions that are subject to certain risks and uncertainties that are detailed in the company's earnings release and other public filings.

Thanks Tom. Good morning, everyone, and thank you for joining us today to discuss our fourth quarter and full year 2020 operational and financial results. Wow. What a year for the world and our industry? I'm so proud of our team here at Liberty weathering the storm of COVID impact with tenacity and strength and ending the year with determination and resolve and building a better company. We successfully navigated these challenges with the unprecedented sacrifice and commitment of the Liberty family. We enter 2021 with excitement as Liberty will celebrate our 10th birthday as a company. While we're very proud of what we've achieved in our first 10 years, we're even more excited about what the amazing group of people that make up Liberty are going to achieve in the next 10 years. 2020 marked a transformative year in our short history. We started the year in a frac market that was already struggling with pricing due to an oversupply of equipment and reduced completion spending. We then rolled into the storm of worldwide COVID infections that led to a brief 25% drop in oil consumption by April 2020 and oil dropping into the $20 a barrel range. Liberty reacted quickly and changed our cost structure to meet the new market reality. We worked with E&P partners to plan a way through the crisis, to make sure that we reach the other side with the strength to take advantage of an inevitable rebound. Indeed by our signing a deal with Schlumberger to acquire their OneStim North America frac, completions wireline and Texas sand businesses in the summer of 2020, we are in a stronger position to capitalize on the nascent industry recovery. We've brought back frac fleets to work as our core customer partners restarted completions, and we ramped back up to 15.8 average active frac fleets in the fourth quarter. Most importantly, these fleets performed with a sterling safety record and we set a company-wide operational efficiency records in Q4.

Good morning. We're pleased to finish the year on a positive note. Despite the immense challenges the team faced in 2020, a disciplined approach to managing the business was very effective. Frac activity improved meaningfully in the fourth quarter, and we were able to put more fleets to work faster than expected. The Legacy OneStim business also saw significant improvement despite the inevitable disruption caused by the transition. We are so proud of the persistence and dedication exhibited by our Legacy and new team members during the quarter. And we're excited to write the next chapter of our story as one united team. As we look forward, we believe we now have the right operations footprint in place for 2021. We currently plan on running approximately 30 deployed fleets in the first quarter and maintain those fleets during the year with some normal seasonal variation in the U.S. and Canadian markets impacting utilization in various causes. I will talk further about our 2021 outlook shortly. For the full year 2020, revenue declined 31% to $966 million from $2 billion in 2019. Net loss totaled $161 million or $1.36 for fully diluted share. Full year adjusted EBITDA was $58 million compared to an adjusted EBITDA of $291 million in 2019. Adjusted annualized EBITDA per fleet is $4.4 million compared to $12.8 million prior year. Our adjusted EBITDA reconciliation now excludes stock-based compensation to more closely correlate to other industry reporting. Our focus in 2020 on managing capital expenditures was successful. We're happy to hit that target of positive cash flow on frac fleet operations during the last nine months of the year, that was severely impacted by the pandemic.

We are excited to bring together two premier frac service companies well positioned to lead a technology-driven structural change in the industry, a change that is necessary from the viewpoint of our customers, suppliers, and investors. Our plan of execution is focused on three areas: culture and leadership, technology development, and operational excellence. Right now, we're at the early stages, understanding what we're calling our Liberty red and Liberty blue teams are doing and why; and how we can leverage the best from each of the organizations. First, we strengthened our leadership team to execute our vision with a combination of the red and blue heritage folks. These are the individuals that will reinforce our culture of agility, idea generation, and empowerment, and drive collaboration across all our business lines to carry this business forward. Second, Liberty's history is rooted in the impactful utilization of real data and rigorous analysis. With our larger scale, we are now bolstering our knowledge base, representing a step change for innovation in the industry. We are creating a new technology leadership to house all our innovation and engineering. This will accelerate the rate of development of our leading data-driven engineering stimulation tools, leading-edge equipment design and technology development, innovation in ESG, and more. It is this collaborative model from start to finish that is key in driving value creation, and the differential returns we've seen through our company's history. We were early movers in deploying dual-fuel capability, doing so in just our second year of business in 2013. We were an early field test partner for Tier IV DGB, and a strong advocate for this technology as a viable option for next-generation fleets to meet reduced emissions initiatives. We continue to see strong demand for this solution as we add this upgrade to much of our existing Tier IV capacity. To further emissions and operational cost reductions, we are finalizing the testing of our proprietary engine idle reduction system. We expect to begin deployments of this system across our fleet a little later this year. The next step in our journey down this road of reduced emissions and improved operating performance will be our electric fleet. With electricity generated using natural gas reciprocating engines, the Digifrac platform will provide solutions to the challenges identified in many of the current iterations of electric fleets. In 2021, our Digifrac fabrication, field testing, and commercialization plans remain on track. We're working on integrating a fully electric process trailer, a combination blender and hydration, completing our power supply, design and assembling a power generation system. In parallel with this effort, we will be completing the development and deployment of a next-generation control system with fully automated pump operation for deployment across all Liberty fleets. As part of this initiative, we will also integrate the pump down control into the wireline system and ultimately into frac operations, allowing seamless oversight of the two integral operations on location. Third, from an operational perspective, we now have a much expanded software and technology platform. This will drive value by augmenting planning, execution, and equipment diagnostics with digital integration and automation. Our new larger organization takes greater coordination of all elements for managing our assets with the greatest efficiency to where we invest dollars for the right equipment and technology to how to best leverage our vertically integrated asset base and supplier partnerships. Our relentless desire to improve means that all processes are under the microscope. Along those lines, we have had great success in providing customers with both frac and wireline services, an area we know our Legacy Liberty customers would greatly benefit from by streamlining our frack and wireline response site to shave extra minutes off the day, every minute equals efficiency and translates to a lower cost of producing a barrel of oil for our customer and improved profitability for Liberty, the win-win we strive for. It has been an incredible start, spending time with our red and blue teams across all of our basins. The eagerness and excitement from our teams is humbling. As we move forward, we will come back to the street with the progress we've made. With that, I will hand the call back to Chris for closing remarks before we take your questions.

Thanks, Ron. The future for frac services is leveraging scale for innovation, with more data and technology, and empowering talented individuals to interpret and apply the analysis of this information to ultimately drive down the cost of producing hydrocarbons in the safest and most responsible way. As we enter our 10th year in operation, we are excited to lead a technology-driven structural change in the industry. We are uniquely focused on extracting significant value from our acquisition by bringing together two of the leading technology-centric service businesses in our industry, supplemented by an ongoing technology partnership between Liberty and Schlumberger. Early response to Liberty's acquisition of OneStim has been positive, as customers are finding value in our technology leadership, invention and creativity takes center stage in our industry. Liberty remains committed to the next decade of innovation as we were in our first decade as a company. We look forward to your questions. I'll turn it back to Operator for questions now.

We will now begin the question and answer session. The first question comes from Chris Voie with Wells Fargo. Please go ahead.

Thanks. Good morning.

Good morning, Chris.

I guess, first we'll start off with a kind of high-level question. And we've heard the refrain, no fleets without pricing. I think since kind of like the middle of last year, in practice, we've seen a lot of fleets coming to market at very low pricing thus far. So are there any factors that will be different going forward from this point in time compared to what we saw in the third and fourth quarter for the industry?

Well, Chris, I don't think you've heard that refrain from us. Our goal when the pandemic hit was to work with our partners to keep our relationships strong, and to get through the downturn and the oil price disruption together with our partners. So we made adjustments during the downturn to keep the economics working for both sides. And then we continued with an agreement to ramp things back up in a schedule that's actually been not much different than what we discussed and learned with our customers in April. To us, things have gone on plan. There's been no change. The key at the start was to preserve the relationships, and restart safe and efficient operations. And as we mentioned, we had efficiency records in Q4, likely also for safety. And now we've seen an oil price recovery, and now we will see price recovery in our frac services as well. So for us, things have gone as planned and are on track.

Okay. That's helpful. Thank you. And then maybe to follow up on the pricing discussions. Just curious if you can help us quantify how meaningful that might be. And maybe translate it into how we should model gross profit per fleet or EBITDA per fleet going forward? Do you see any of these as kind of in the bag thus far? Or is it going to be more of a slog as you get through the first half of the year?

We have several price increases that have already been agreed upon. While they won’t start immediately, we have target dates for their implementation. This has been a collaborative discussion for us. We initially lowered prices, maintained them for some time, and are now increasing them again. We have many agreements in place and anticipate securing more over the next few months. I will refrain from detailing the potential impacts on gross profit, and I'm not sure if Michael would like to add anything. We just need to see how things develop, but overall, we feel positive about our current position.

Great. Thank you very much.

Yes. Chris, on the pricing side, I think you'll probably start to see them slowly roll in from Q2 onwards after that. But this is again, these were discussions we had as the crisis headed into Q2 of last year. And as we say, we moved these pricings up with those clients in a planned fashion as we roll through the year. So I think for me unless we go through the year.

Great. Thank you.

Yes, good morning.

Good morning, Scott.

I want to stay on the pricing question but ask a question related to incremental crews. Chris, you talked about the anticipated pricing on active crews? Is the magnitude of that price increase sufficient to add incremental crews into the market? Or would you want to see something bigger, to more of a step change in profitability before adding incremental crews?

Yes. Scott, I would say, yes. It's something additional to the agreements we have in place now. We have the kind of partnership things we need to keep our customers generating strong returns, and the returns on Liberty's invested capital to come back as well. So those have been very constructive dialogues. And as I said, a number of agreements are completed. But yes, I think for us to stand up and hire new people and deploy another crew, that's a bar higher than what we're talking about so far.

That's good to hear. And then maybe just a little bit of color on 1Q EBITDA. Now that you'll have the OneStim fleets in the fold. And now that you've closed the deal, how do you think about the timing to liberalize those crews and close the margin gap between the two sides of the business?

I'll let Michael or Ron comment on that.

Yes. So, Scott, I mean, I think what you're going to see is you're going to see a slow ramp-up. What we're calling lively blue crews is very efficient. But this has been a nice surprise. With getting it fixed cost leverage, so officially, once you get past Q1, I mean, there's a lot of transitions to the noise and costs as far as till we transition on ERP systems and everything else we get to actual efficiency on the overhead side. So there's a lot of work going on in the Q1 side for that. I think you'll start to really see that drop through to the bottom line from Q2 onwards. And then, we'll start seeing sort of more integration and sort of like that efficiency gap, any efficiency gap closing. But the key things there is maybe not so much pumping on the day when they're on site, which is they're very impressive crews. Really a lot of it's around coordination and scheduling and reducing white space which is one of the prices that Liberty sales and operations team have excelled.

Is the goal to close the gap by the end of the year? Is that possible?

Yes, we anticipate that by the end of the year, there won’t be significant differences across various customers, fleets, countries, or basins. Regardless of the crew we utilize, it will consistently be Liberty.

Good to hear. Appreciate the color. Thank you.

The next question comes from Stephen Gengaro with Stifel. Please go ahead.

Thanks. Good morning, everybody. Two things if you don't mind. One, just to kind of continue on that topic. I was trying to understand when you're looking at the fourth quarter, you mentioned record sand volumes pumps, I would assume that means pretty high efficiency. Are we looking at a pricing dynamic earlier in the year that's very similar to the fourth quarter? And is there any kind of efficiency gains that we could see earlier in the year, which would lift that EBITDA per fleet?

Well, we did indeed have record sand throughput on our fleets, record efficiency across the Liberty fleet in Q4. And again, look, we'd love to see more margins then, but we know that's coming. For us, the key thing is the partnership with customers deliver safe operations and keep driving exclusively higher. There's always room to get better. But yes, it was a pretty high bar in Q4. I'll let Michael talk about there are probably incremental improvements in efficiency going into Q1. That's ambitious, but we'll probably achieve that. But I think just the fixed costs leveraged over a larger platform is also helpful. Michael, anything you want to add?

Yes, Steven, I think you'll see that the drain fleet operated very efficiently in the fourth quarter. We didn't experience as much of the decline in Q4 as we might expect, because completions were just starting to ramp up. I anticipate that this efficiency will level off into the first quarter as we experience some shifts in the calendar. So, I don't expect to see many efficiency gains from the combined operations in Q1. However, you will notice changes as we progress. One of the key points is that we will be leveraging our fixed costs. Throughout this year and into the next, we aim to significantly reduce our costs and improve the cost per fleet, along with the technological innovations that Ron is integrating into our model.

Great. Now that's helpful. Thank you. And then the other one was on the Digifracs. And can you share with us sort of your thoughts on how the model ultimately works? And what I'm thinking about is, like who owns the turbines? Is it you long term? And do you think customers will pay for a sufficient return on that capital? Or do you think there's another ownership structure of turbines down the road?

Ron, you want to take that?

Yes. So, Stephen, if you're trying to think of people trying to pitch this on the secondary ownership kind of rental, the only way you can do that is if you've got significant other uses for that power that you can access across a lot of different business lines, and perhaps a lot of different industries. But that's the only way. But we can guarantee that continuation of work, which means we're going to ultimately end up with the lowest cost of ownership for that power generation. So I don't think it really makes any sense doing it any other way.

Okay, great. I appreciate the color, gentlemen. Thank you.

Thanks, Stephen.

The next question comes from Sean Meakim with JPMorgan. Please go ahead.

Thank you. Good morning.

Good morning, Sean.

So Chris, there's been a lot of discussion about older equipment being discarded, which benefits you since you have a newer fleet. Your current contribution is linked to the OneStim transaction. Across the industry, most of the equipment that has been removed hasn't been operational for some time. There appears to be a potential division in the active market. E-frac and dual-fuel utilization across the industry are essentially sold out. In that segment, we are beginning to see some capacity returning in various forms, such as piloting new e-fleets or upgrading Tier IV fleets to dual-fuel. I'm trying to get a clearer understanding of your view on the potential division in the active market between legacy fleets and next-generation fleets. Additionally, how should we interpret the decrease in total capacity while still observing some additional horsepower being introduced in the active market? I would appreciate your insights on these two emerging trends.

Yes, Sean. I agree that the market is becoming divided. This has been a gradual process for some time. Liberty began developing dual-fuel fleets early in our second year, giving us several years to build that capacity. However, getting customers to engage and utilize it was a challenge. Now, customer attitudes have shifted significantly, and everyone recognizes the benefits of lower emissions and costs. There is some additional logistics involved, but dual-fuel is becoming increasingly popular. For those who require the highest standards, there's a demand for Tier IV equipment. You cannot upgrade an old Tier II engine to Tier IV, but you can upgrade it to Tier II dual-fuel, which is a positive step. Tier IV equipment needs to be built as Tier IV horsepower. The trend is toward stronger players migrating to increasingly upgraded fleets, while many older players are not as active. As seen with the move to high-spec rigs, transformation takes time, but it is definitely taking place. No one is manufacturing old legacy equipment, and maintenance has declined. Companies have consolidated fleets, reducing the number and possibly leading to further consolidation in the future. We are witnessing a decline in overall market capacity. While traditional Tier II diesel fleets still exist, their presence is shrinking both in terms of equipment and market share. Right-sizing the market will take a while; however, the past year has been particularly productive, and I expect this year will be as well. By the end of this year, we will have significantly less deployable capacity for frac fleets due to insufficient investment to maintain existing capacity. We will have fewer fleets available for fracing, even as more fleets are working. This progression is indeed underway.

Yes. I think that's fair. I appreciate that context. To touch on capital efficiency for a second, you're only about a month of looking under the hood. But I imagine your guys have been busy. So you cited in the prepared comments, a $1 million per fleet of maintenance capital savings from rationalizing the excess horsepower from OneStim. So if we're running 30 fleets, $30 million a year, do you have a sense of how many years that can run? Or what kind of an update on the aggregate savings versus the initial shot in the dark, to provide us late in 2020?

To answer that, I think our initial estimate is still the best we have right now. We have already adjusted our plans, and there's a lot of equipment available. I do believe we will follow this bell curve. It will likely take most of the first half of this year to finalize our strategy. We have the efficiency plan in place, and the bulk of the savings will materialize next year on the capital front, with some extending into 2023. Consider it as a bell curve. I would estimate that half of the savings will occur next year, about a quarter in the second half of this year, and a quarter in 2023. It might even extend a bit further into 2023. However, I still stand by our initial rough estimate, which suggests a variation of around $75 million, and we believe it will significantly contribute to our objectives.

That's a good framework, Michael. Yes. Thanks, guys. I appreciate it.

Thanks, Sean.

The next question comes from Ian MacPherson with Siemens. Please go ahead.

Thanks. Good morning team. Michael, does your CapEx envelope for this year include maybe at the high end or otherwise does it include the completion of the first Digifrac fleet in its totality? Or if you were standing up that fleet in the second half, would that be incremental, sort of new bill CapEx that could be above and beyond that?

Yes. The topic does include it, Ian. Yes, that would be the building of the first Digifrac fleet.

I understand the hesitation to provide more specific guidance than what has already been shared. However, you mentioned the goal of remaining pre cash flow positive this year. We can certainly work off your CapEx guidance and we have visibility on interest. Could you provide any insights regarding cash taxes or changes in working capital for this year that might assist us in refining our EBITDA estimates?

I would say that there will be very little cash taxes. We want to see some movement on the cash side. Working capital will experience a slight increase, but nothing significant. The OneStim business brought some working capital as part of the deal negotiations, so there will be a slight build that depends on how the second half performs. If we remain in a flat environment and macroeconomic indicators do not improve, along with fleet economics staying the same, working capital will likely remain steady. We plan to achieve some gains on inventory that will counterbalance an increase in accounts receivable. If prices improve significantly and we see quicker adoption, there may be a larger build in working capital, which would coincide with an increase in earnings.

Right. Understood. Great. My other questions were answered. So appreciate it. I'll pass it over.

The next question comes from James West with Evercore ISI. Please go ahead.

Hey. Good morning, gentlemen.

Good morning, James.

Chris, with Brent, at 60 and WTI in the high 50s, certainly higher than I think most budgets were set for your customers. Is there any talk at all of them kind of investing more this year? I mean, it looks to us like they're not invested enough to really even hold production flat at this rate. But are they starting to what they've announced kind of reinvestment rates of 70 to 80%? So, is that a signal that perhaps we could see a little bit better CapEx and perhaps we thought of a month or two ago?

I don’t think so, James. I have regular conversations with our customers. Among the public companies, I don’t expect any changes in their plans. The message has been understood; people recognize that we’ve had this impressive shale revolution and operators haven’t benefitted from it. So, for this year, I don’t anticipate any changes in the development plans established by the public companies, regardless of oil price fluctuations, unless prices drop significantly, which could lead to some cutbacks. However, I don’t foresee any new additional capital expenditures from the public sector. On the private side, it’s a different situation where oil prices and current economics do influence decision-making more. Thus, there might be more adjustments in their plans, but even there, access to capital isn't ideal, and nobody wants to strain their balance sheets. As cash flow increases, we might observe some slight increases in capital expenditures from private companies, which we’re already seeing to some extent, but not significantly. Overall, I think the current activity levels among public companies suggest a potential decline in production throughout the year. However, considering efficiency and some upgrades, I suspect that the production rate at the end of this December will closely resemble what it was at the end of December 2020. Oil prices may remain relatively stable this year, and I don’t expect we will be far from that.

Okay. Fair enough. And then, with respect to the Schlumberger technology portfolio that you now have acquired. Are there certain technologies that stood out to you? I mean, you've had a month owning the assets in the IP, which obviously took a look under the hood, as you do due diligence. Are there certain technologies in that portfolio that are incremental to what you guys already had? And could you ramp your own efficiencies even further?

Yes, James. I think there is. And even just on business processes, the more we look under the hood, it's like, wow, that's pretty cool. But we've been cautious in saying too much about them, because we've got to digest understand that we're planning to do I think Investor Day in May or something where we'll have a longer presentation. We'll give a little more color into the technologies across from operations to business processes, to ESG. We'll give a little more color or feel then yet. But yes, the surprises have been on the positive side as far as the technologies and the humans. One of the appeals to us of Schlumberger was that low turnover, long tenured, higher caliber professionals in the company and we haven't been disappointed. We're quite enthusiastic about it.

Okay, great. Thanks, Chris.

Thanks, James. Take care.

The next question comes from George O'Leary with Tudor Pickering Holt. Please go ahead.

Good morning guys.

Good morning, George.

We'll move towards next goals.

Thank you. Assuming your pricing remains unchanged for now, let's consider that, and I understand you mentioned there are some increases coming from your customers or partners in the field. If we assume pricing stays flat and considering the 30 fleets you expect to operate in the first quarter, could you provide some insight on whether fleet profitability, excluding pricing increases and any noise related to the OneStim transaction, would improve quarter-over-quarter in the first quarter in terms of either gross profit or annualized EBITDA, given the increased scale? We have touched on this topic a bit, but I would appreciate any additional details you can share.

Yes, George. We have significant fixed cost leverage. Our general and administrative expenses won't really increase much regionally. With this deal, we've emphasized how our G&A is structured. We're doubling the size of our Permian business without adding proportionally to our overhead, which is very positive. We'll also have an expanded supply chain team to enhance our collaboration with suppliers, which is key. As we delve deeper into these aspects, we'll see further benefits. We will also optimize G&A utilization and manage the logistics of our fleets, which reduces inefficiencies. Plus, we expect process improvements that will enhance our efficiency as we progress. The wireline business complements our operations well and represents a significant part of our downtime. By improving our operations, we can reduce downtime. We are currently one of the largest sand buyers in the country and have gained assets that will help us manage our supply better. All these factors will lead to improvements throughout the year, even without any pricing changes or fleet increases.

It's very helpful, Mike. From a tendering perspective, you mentioned that in the second half of the year, there seems to be increased activity, especially since December and continuing into January. The drilling rig count is also on the rise. You’re maintaining pricing discipline and not expanding operations unnecessarily. Can you share where you’re seeing the majority of opportunities? Is it mainly in the Permian with increased activity, or are there also signs of growth in the Haynesville? Where do you anticipate growth as we move through the year?

The Permian is definitely the largest area for increased activity. The Haynesville hasn't experienced as significant a decline and has remained relatively strong throughout the year. It has a geographic advantage for LNG exports. As we expect to set a new record this year, there won't be a substantial increase in activity there. The great thing about shale gas is its high production capacity, so I don’t anticipate any extreme fluctuations. The flexibility and activity will likely be more pronounced in the oil basins.

Just to add some color there to Chris's comments, if you have one second. I think interesting enough, Liberty has always been sold out, right? So we've had basins where customers have approached us over the years and said hey, we'd really like you to bring your efficiency, engineering technology into the technology focus to our basin, to our country, et cetera. What was done with this OneStim deal right expand that geographic base revenue. We started in the Haynesville. Now we've got a large regency. We're doing in the Mid-Con. We have operations in the northeast. People who've been approached us for years to come help, do some work within the model and do in Canada. Now we've got a base here that we can like do that, especially once COVID gets over a little bit, we can actually get people across the border. But you're going to see some things there, I think, George where you're going to see some sort of like, potential once pricing comes back, the additional market for us we had to take just by taking the Liberty of what they're sort of like Liberty special sauce that people have wanted and having access to in different basins.

Thanks, Michael. Thanks, Chris.

Thank you, George.

The next question comes from Connor Lynagh with Morgan Stanley. Please go ahead.

Yes, thanks. I appreciate you guys squeezing me and I'll keep it brief. Since we're at the top of the hour here. Just at a high-level framework, obviously, you've added pressure pumping, but there's the affiliated businesses, Michael, you're referencing wireline. There's the sand mines as well. I would imagine the incremental earnings contribution at today's pricing is pretty minimal. But could you give us sort of a framework to think about relative to say, 2019 on a per fleet basis, or however you want to frame it? How much can you add to your EBITDA per fleet or your earnings power both from just having incremental assets working, but then also the efficiency gains that you were talking about? I appreciate it, you might not be able to get super specific on the efficiency side, but would just love any thoughts on how we should think about that?

It's difficult to provide a clear answer at this time. I believe that by the next academic year, we will have more information. However, it's best to wait until we have at least one quarter of data to analyze before giving any specifics. This will allow us to ensure everything is properly accounted for under Schlumberger, as we are still clarifying parts of the historical cost structure. For now, there isn't much more to add, but the outlook remains positive.

Alright, fair. Just one last quick question on a related win then. The efficiency gains that you're talking about on wireline that being a big portion of downtime. Can you maybe help us think through how much of an uplift? How big of an outage is that on your quote average pad? And then if you guys were able to get to where you think is reasonable, how significant would that be?

So, over our past two, three, of course, we've tracked this for since the beginning of our time. The averages today are about six minutes per frac stage that we work on across our entire fleet. So, if you start to roll that up, obviously, that varies a little bit by basin in terms of the number of stages that we bump. But if you think about it from that standpoint at a high level, that will give you some sense of what kind of time we might be able to add over the course of a year.

Alright. Got it. I'll leave it there. Thank you.

Thanks, Conner.

The next question comes from John Daniel with Daniel Energy Partners. Please go ahead.

Hi, guys. Good morning. I just have really one question to follow on to Sean's question. But looking for a wild ask guess on your part, Chris. But as you look at your customers, we're just called the E&P industry. What percent of them actually care about lower emissions? And what percent of them are actually willing to pay for lower emissions?

That's a great question. I would say there's a common misunderstanding about our industry. It primarily consists of people from rural areas who have lived on the land. The concern for the environment has always been present in our industry. You're right about that, but the question is about the incentives and the motivation for that behavior. Right now, it's definitely challenging because the marketplace is very tough. Exploration and Production companies are often viewed negatively by investors, which heavily impacts cost considerations. Some of the larger and more proactive companies are willing to invest in these efforts, but they represent only a small percentage of the industry. Most others want to prioritize it but are hesitant to make significant financial trade-offs. We are in a similar situation; we want to make improvements and would love to have advanced fleets, but that's a considerable expense. So, while things are moving in the right direction, it's not an overnight change. I don't have a better estimate than yours. You've raised an excellent point: many discuss the issue, but only a small minority is ready to invest in it financially.

How would you characterize the transition, Chris? I mean, we're eventually going to get there, right? Eventually, you have to pay for it, and it's the right thing to do. But is there a significant change later this year or next year? I know we have no idea, but I'd like to hear your thoughts.

You know, John, I think it's so driven by oil prices and returns. And I think that a lot of people say to me, boy, with customers with this discipline on investment, that must be really tough for you guys, they're spending less. My view on that is exactly the opposite. The fact that oil prices have risen 25%, since people set their budgets, and nobody in the public world, and even in the private world isn't dramatic, that people don't want to change their budgets. We think that's a great thing, right? Because if people invest less, and truly hold back, that's the thing that moves the needle on oil prices. And you move oil prices to where they are today, and you take efficient operations, we're going to see strong returns on capital by our customers. We're going to see some respect and belief in our industry coming back from those returns. And that enables everything else, everything else. Look, that's what we're having right now. First, no one wants higher prices. But we need a sustainable industry. We need partnerships that can keep getting better. And more price to us is necessary for that. A, just to get a return on our existing assets. We need a little more price on top of that to invest in new assets. But I actually think, again, and you've heard me say, we’ve had a rough decade, I think the next several years for industry are actually going to be pretty good. I think it's supported by commodity prices that base. But I think that's going to lead to better returns across the value chain. And once you have better returns, the investment, the payment for lower emissions and better operations that follows with it. So yes, I think we'll see a very different attitude towards paying for lower emissions 12 months from now than we've seen the last 12 months. I couldn't be wrong, but that's my belief, John.

John, well, my editorial comment is the technology seems to be here of making meaningful changes. So hopefully, we'll see a rapid adoption. And by the way, great video on Northwest cost lift up the industry.

Thanks, John. I appreciate that.

The next question comes from Tom Curran with B Riley Securities. Please go ahead.

Good morning. That's dedication, guys. Thanks for still taking my question at such a late point in the call. I just had one technology question left. Curious, Chris or Ron, whether you currently provide your customers with any ability to track and monitor in real time an image, all the fluids involved in the frac slurry downhole. So in other words, as the frac job is being executed, do you provide that ability to image and monitor the different fluids subsurface? And if so, is it an ability you currently in-house? Or do you use a third party for that?

Tom, that is an interesting question. And as you probably know, Michael, Ron, and I and a number of others at Liberty team spent the largest piece of our careers developing fracture diagnostics, ways to measure how fractures grow and what they're doing. We have some of those technologies in-house. Well watch is one we've talked about a lot that give us indirect measurements about how far away from wellbores fluids are going. We've been looking at fracture diagnostic technologies, but it is not standard. We run frac models so we obviously in real-time we're transmitting to our customers from satellite dishes our model predictions of where we think fractures are growing and where the sand is, where the fluid is. So we do it on a predictive basis. We have some big picture far-field pressure measurements to infer that. But certainly, there's more that could be done there. And with the right technologies and the right value proposition, I think you may see more of that from Liberty in the future.

And just to be clear, Chris, you would expect to provide that in-house. And then just as a follow-up. What percentage of your jobs currently would you estimate involve some use of it?

The adoption of the modeling is progressing rapidly. While it hasn't reached half of the jobs yet, it is increasing quickly. As for the microseismic technology we developed 20 years ago, we do have some applications in jobs, but they are primarily from third parties, making up a small percentage. Thanks, Tom. Yes. I don't want to take ruin everyone's Friday morning. But we appreciate everyone's interest.

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

Thanks, everyone for your time today. I apologize for running over the one hour. We had expanded opening remarks due to the nature of the transaction we completed with Schlumberger. But thank you all for your time and interest in Liberty. And frankly, for your interest in this industry. Imagine if COVID had struck a world not energized by oil and gas, we wouldn't have vaccines now. We wouldn't have the ability to ramp up PPE and to communicate and send resources all around the world. So the world got hit a big blow. But thank God we had an oil and gas energized world to respond quickly. And we look forward to tremendous progress continuing on that this year. And we look forward to talking to you after the first quarter. Have a great day everyone.

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