Welcome to Liberty 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, this event is being recorded. I would like to turn the conference over to Anjali Voria, Strategic Finance and Investor Relation Lead. Please go ahead.

Thank you, Nick. Good morning, and welcome to the Liberty Energy First Quarter 2023 Earnings Call. Joining us on the call are Chris Wright, Chief Executive Officer; Ron Gusek, President; and Michael Stock, Chief Financial Officer. Before we begin, I would like to remind all participants that some of our comments today may include forward-looking statements reflecting the company's view about future prospects, revenues, expenses or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA, and adjusted pretax return on capital employed and cash 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 adjusted pretax return on capital employed as discussed on this call are presented in the company's earnings release, which is available on the Investors Section of its website. I will turn the call over to Chris.

Thanks, Anj. Good morning, everyone, and thank you for joining us for our first quarter 2023 operational and financial results. Liberty delivered an outstanding first quarter, with Adjusted EBITDA of $330 million and fully diluted earnings per share of $0.90, navigating volatile oil prices resulting from financial sector stresses that sent ripples across the energy sector. This was our fourth consecutive quarter of record profitability, which is reflected in our trailing 12-month adjusted pre-tax return on capital employed of 43%. Revenue for the quarter was $1.3 billion, a 59% increase over the prior year. We have the unique opportunity today to grow our earnings per share meaningfully by both growing our total profits and reducing our share count. Our 10% sequential growth in earnings per share this quarter was nearly one-third from reduced average quarterly share count. Michael will discuss our financial results in more detail later. We are proud of the Liberty team for executing at impressive levels. Liberty has an 11-year track record of delivering significantly higher average returns than the overall market. Our competitive advantage has never been larger and our industry is in a stronger position with significant consolidation and the leading players focused on returns and investing with discipline. Supplying the world with oil and gas is mission critical and spare production capacity today is quite modest, implying a positive outlook in the coming years for our industry and company. We began 2023 generating strong free cash flow, putting us in a position to invest in the business and return cash to shareholders. Since the reinstatement of our return of capital program in July of 2022, we have now returned $218 million to shareholders through cash dividends and the retirement of 7.1% of outstanding shares, while continuing to invest in long-term growth and expanding our competitive advantage. We now have $300 million remaining in our authorization and we are focused on the opportunistic execution of our buyback strategy. The speed at which we execute on our buyback authorization will be driven by the dislocation in our stock price relative to what we believe the intrinsic value of the stock to be. Three years on from the onset of the global pandemic and severe crash in energy markets, discipline is now widespread in the energy sector. North American frac activity predominantly just supports the maintenance of today's oil and gas production levels. The days of breakneck oil and gas production growth are over. The large majority of contract activity is required to simply maintain today's record high oil and gas production levels in the U.S. and Canada. Service sector margins are now at healthy levels, more in line with our E&P customers that have been experiencing strong margins for many quarters. In this longer, perhaps steadier ahead, there will be episodic challenges like we are seeing today in natural gas markets, and of course, recessionary risks. Today, we have excess demand for Liberty Services as our customers want to align themselves with the top performers. This is part of a broader industry flight to quality trend. We will lead the way in maintaining pricing and profitability as we invest in our digiTechnologies offering and retire older equipment. We believe these actions will support strong long-term returns for both Liberty and our customers. The oil field is undergoing a transformational change in how frac leads are powered from diesel to natural gas and Liberty is at the forefront of this change. We were early drivers of this industry shift deploying our first dual-fuel fleet 10 years ago. Today, our suite of digiTechnologies, including mobile power generation, state-of-the-art digiFrac electric fleets, the industry's first hybrid up digiPrime and our electric wire line solution, digiWire, bring together the best of our innovation with the highest thermal efficiency and lowest emissions solutions in the market. This suite of new technology developments allows us to deliver a customized fit-for-purpose solution. We can integrate digiTechnologies with either full or partial grid power. We can fuel digiFleets with any type of gas, including fuel gas, CNG, or LNG with Liberty Power Innovations we’ll provide for our customers. During the first quarter, we deployed our first digiFleet, comprising digiFrac electric pumps with no disruption to completion operations. We are pleased to announce that the crew quickly reached a milestone achievement of 1,291 minutes of pumping time in a day or over 90% of the available time with plug and perf operations. As part of the new digi suite, our digiWire unit will be deployed alongside that fleet next month. We are excited by the strong positive reactions from our customers. Our second digiFrac deployment will be underway this quarter, again deployed in a modular fashion that will maintain completion schedule efficiency during the rollout. In February, we also unveiled our revolutionary hybrid pump digiPrime at the SPE Frac Conference in Houston. digiPrime is an extremely efficient, 100% natural gas engine that we will use as the primary source of horsepower on location base power, complemented by one or two digiFrac electric pumps to manage transient load and precision rate control. This configuration minimizes gas consumption, emissions, and fleet capital. digiPrime hybrid technology also generates and stores electricity to run a fully electric backside, powering sand handling chemical additions, hydration units, the data fan, and digiWire. As we undergo this technology transition to gas-driven equipment, a priority for Liberty is to secure the supply chain that fuels these fleets. Having control over the technology, power generation, and fuel services ensures that we put the best technology in the field driving even further improvement in our industry-leading operational performance. We launched Liberty Power Innovations to expand our vertical integration alongside our sand, logistics, manufacturing, and design capabilities. These business lines must check two boxes: strong returns on capital within their own realm and drive operational efficiency and performance in our core frac business. LPI's initial focus will be on CNG and field gas processing services that support the secular demand shift towards natural gas as the primary fuel of choice. We will provide uninterrupted delivery of fuel for frac leads and other customer needs. Today, we are already fueling both drilling and completions in the Permian and Haynesville through both acquired operations and our own organic efforts. To accelerate LPI’s expansion, earlier this month we announced the acquisition of Siren Energy, a Permian-focused, integrated natural gas compression and CNG delivery business. Siren brings its installed and expandable gas compression facilities at two Permian sites, together with transportation, logistics, and well site pressure reduction services. Our early plans include a strategic expansion to power our digiFleets and dual-fuel fleets and other growing needs from our customers for reliable CNG. We have equipment on order to increase our compression capacity in the Permian and expansion into other basins; grow our fleet of CNG trailers and expand our field gas processing and treating capabilities. Dependable access to fuel is critical to maintaining highly efficient fracked operations that drive Liberty’s industry-leading performance and returns. The demands for energy and power generation for industry beyond the oil field are also on the rise. We expect to find compelling high-return operations opportunities to leverage our expertise and industry-leading thermal-efficient mobile power generation technology together with our integrated fueling and logistic services. We will be highly selective in deploying capital only in the compelling opportunities that may arise with micro and mini grids, data centers, utilities, emergency power, etc. Our logistics platform is also designed to deliver RNG and hydrogen, as well as CNG. The synergy between these critical components position us to capture greater value with our assets. Today, our supply chain and logistics team continues to deliver outstanding cost-effective performance, enabling the efficiencies of our fleets to produce day in and day out. We think critically about what components of the supply chain are necessary to provide a base load of support for our fleets versus what areas are sufficiently and reliably supplied in the market. We will continue to invest in areas that promote the highest efficiencies with high-return opportunities. By doing so, we will build strong customer relationships based on dependability and elite service quality. Tight frac markets persist in North America. Domestic natural gas markets are now beginning to show signs of a widely anticipated slowdown, but the softness is likely transitory ahead of a wave of LNG in Mexico pipeline export growth. The vast majority of frac services are weighted toward oilier basins and are working to simply maintain today's production levels implying the demand floor for frac services. Today our calendar remains strong with some expected movement from gas to oilier basins during this transient period. The fundamental outlook for North American hydrocarbons is strong as constrained global oil supply is confronted by rising demand in emerging markets and a gradual recovery in China. North American E&P companies have demonstrated strength and discipline amidst economic turbulence. Development programs are largely unchanged as production has been roughly aligned with oil demand in the years since the pandemic and E&P companies are financially healthier today relative to prior cycles. In early spring, financial sector stresses and the heightened perceived recessionary risk on global oil demand resulted in a rough fall in oil prices. Concerns have since eased as markets digested the news and economic data showed resiliency, a surprise collective and proactive output from OPEC+ members coupled with falling Russian supply drove oil prices back to pre-bank stress levels. The ebbs and flows are always expected in a cyclical industry, but we see a multi-year upcycle ahead that will favor companies that offer unique, dependable, reliable solutions. Liberty’s focus on innovation puts us in an elite class, offering differential technologies and superior reliability. We are building unique technological, operational, and cultural advantages that will enable us to continue broadening the markets and service offerings of Liberty Energy. With that, I'd like to turn the call over to Michael Stock, our CFO, to discuss our financial results.

Thanks, Chris. Good morning, everyone. We're off to a strong start in 2023, building on the momentum of the last several quarters with an improved trailing 12 months return on capital employed of 43%. I am pleased to share that we’ve achieved our fourth consecutive quarter of record profitability in company history, a testament to the hard work of our team to deliver high efficiencies. We delivered on our strategic priorities, balancing our industry-leading return of capital program with continued investments that keep us ahead of the curve. The strategic expansion of our digiFleet technology offering coupled with our new LPI Group uniquely positions us to offer win-win solutions to drive productivity and profitability for both us and our customers. In the first quarter of 2023, revenue increased 3% sequentially to $1.3 billion. We delivered on our expectations and built on the solid foundation of the prior year financial results. Pricing moved rapidly last year. Post-COVID induced pricing declines are now back in stable territory, where service companies can make a reasonable return while reinvesting in their businesses. First-quarter net income after tax of $163 million, increased from $153 million in the fourth quarter. Fully diluted net income per share was $0.90, compared to $0.82 in the fourth quarter. General and administrative expenses totaled $53 million in the first quarter and included non-cash stock-based compensation of $6 million. G&A increased $4 million sequentially, primarily on non-cash stock-based compensation expense, associated with annual grants in the first quarter, IT and legal expenses. Net interest expense and associated fees totaled $8 million for the quarter. This included approximately $2 million related to the extension of our ABL facility and the retirement of our term loan facility. Tax expense for the quarter was $54 million, approximately 25% of pre-tax income. We expect tax expense for the full year to be approximately 23% to 24% of pre-tax income. First-quarter adjusted EBITDA increased 12% sequentially to $330 million from $295 million achieved in the prior quarter as our teams executed at high levels through normal seasonality. We entered the year with a cash balance of $21 million and net debt of $189 million. Net increased $14 million from the end of the fourth quarter even with the execution of $75 million of share buybacks and $9 million towards our quarterly cash dividend. Total liquidity at the end of the quarter, including availability under the credit facility, was $308 million. In January, we amended our ABL facility to provide a $100 million increase in our borrowing capacity to $525 million. In conjunction with our ABL expansion, we retired our $105 million term loan, reducing our effective interest rate. Net capital expenditures were $133 million on a GAAP basis in the first quarter, which included costs related to digiFleet construction, capitalized maintenance spending, and other projects. There were approximately $3 million of proceeds from asset sales in the quarter. Net cash from operations was $204 million for the quarter, and returns to shareholders amounted to $83 million in the quarter. In July 2022, we installed a share repurchase program to take advantage of the dislocated share prices in a vastly improved market. During the first quarter, we upsized our authorization to a total of $500 million reflecting our conviction in our ability to generate strong free cash flows. We also reinstated our quarterly cash dividend of $0.05 per share in the fourth quarter of last year. In the first quarter, we returned $83 million to shareholders, including a share repurchase of 5.2 million shares, which represents 2.9% of the shares outstanding at the beginning of the quarter for a total of $75 million, and the balance was returned as dividends. We have now returned to shareholders a cumulative $218 million in the last nine months. We continue to differentiate ourselves with an industry-leading return of capital program while reinvesting in high return opportunities and growing our free cash flow. Looking ahead, we're expecting modest sequential growth in the second quarter, expanding on the solid results we achieved in the first quarter and reflecting stable pricing, normal seasonality, and a solid base of customer demand. We're not seeing softness in the gas markets significantly impacting our second-quarter results. But early visibility into the second half of the year suggests we will likely shift a few fleets into the larger oily basins as demand from Liberty exceeds our supply as gas basin customers slow their activity in response to near-term gas market conditions. Our general outlook for the year remains positive and in line with our first-quarter commentary. As we navigate the upcoming years, we are well-positioned to maximize free cash flow generation to support our capital allocation priorities with disciplined investment; to expand earnings per share; balance sheet strength; and the return of capital to shareholders. I will now turn it back to Chris for a few remarks ahead of Q&A.

Thanks, Michael. If a foreign power offered the U.S. $1 trillion to destabilize our electricity grids while also raising electricity prices, surely we would scoff at such an offer, imposing lower quality service and higher prices on a network that is the lifeblood of a modern economy. Heck no, unfortunately this is the road we are heading down with the passage of the IRA bill last fall, we will spend not receive hundreds of billions of dollars in uncapped subsidies that will likely draw trillions in investment dollars to build low energy density, unreliable electricity generation sources. The same political forces, absent thoughtful evaluation, are also forcing the retirement of reliable dispatchable electric generation capacity that keeps our lights on, factories running, and life-saving incubators supporting the miracle of life. We know where this leads, as we've seen it already unfold in California, Germany, and the United Kingdom, etc. See the recent book, The Unpopular Truth by Schernikau and Smith for a detailed dissection of today's electrical grid policy follies. We are passionately and vocally opposed to this impoverishing industry and this trajectory that squelches opportunities and jobs. But sadly, it is the current course that we are on. We will never stop advocating for a radical course correction. With that being said, Liberty Power Innovations will likely see many highly attractive business opportunities to supply reliable, dependable power solutions to those who simply cannot operate without it. Our business and advocacy are centered around our mission—bettering human lives by being more energy efficient and providing better energy. We will now open the line up for your questions.

Thank you. First question will be from Derek Podhaizer, Barclays. Please go ahead.

Hey, good morning guys. Maybe we address the gas markets right up front. So, you talked about next quarter maybe moving some fleets from the gas basins into oil basins. You talked about your early visibility comments, but maybe just skip we can expand on it a little bit. The case right now is fleets and profitability collapse in the back half of the year and then expected 30 to 40 rigs come out. Maybe just walk us through the year. Do you see these rig count declines materialize and what it can mean for Liberty’s profitability and your activity levels? Just want to try to get a better handle on what the potential magnitude could be for you guys as we move through the year to the end of the year?

You bet, Derek. Look, the movement is meaningful. We'll see it. We went from a frac market and rig market that was ever tightening to a small pullback, but the magnitude of the pullback is relatively modest, less than 20% of our activity is in gas markets. Maybe 20% of total industry activities in gas markets. Even if that pulled back by a third, that's a 6% or 7% decline industry-wide in demand for frac fleets. We already had in oil markets probably more activity that people wanted to pursue that they were unable to pursue for lack of capacity. So for Liberty, this will manifest in a couple of ways. One is, in the end of one big gas market we are in, the demand for Liberty even there outstrips the number of fleets we have. So we're going to see a little bit of growth in market share from existing customers that would like to see more of Liberty. And as Michael alluded, we might move one, probably at tops two fleets to other people that have been pounding the table to get a Liberty fleet. Otherwise, we'll move a fleet to another basin. So I would say the impact on us is probably not that meaningful. But since we do have a meaningful oversupply of natural gas, prices have collapsed dramatically. It’s macro. This is significant. It's not insignificant in the frac and drilling world. But I would say it's not a large impact on Liberty’s business and financial results.

All right. Great. That's good color. Maybe moving over to the Permian, I mean, we've heard some comments from your peers around this dislocation of the Permian market. I think specifically the spot market maybe could you talk to that a little bit? Are you starting to see that in your Permian fleets or given your dedicated agreements with customers, do you see some level of insulation? Just maybe more around the Permian basin?

Yeah, more of the latter. There are others that are seeing that much more than us. We're just not meaningful players in the spot market. All our fleets are dedicated either full-time to one customer. We do work for smaller players where we layer a few different customers in to fill up the activity on a fleet. But yeah, we have not seen anything meaningfully different in the Permian than we saw four or five months ago.

Great. I appreciate the comments, Chris. I'll turn it over.

Thanks.

Thank you. Next question will be from Neil Mehta of Goldman Sachs. Please go ahead.

Yeah, good morning, team. Just want to talk a little bit about the CapEx profile. How are you thinking about the cadence of digiFrac builds this year and next, especially if commodity prices stay here? And any guidance you can provide around capital spending numbers over the next couple of years?

Yeah, I would— I should say we reiterated that guidance from Q1. Obviously, we were going to be doing approximately 40% to 50% of EBITDA this year reducing down about 30% of EBITDA next year, Neil, and I believe that holds true.

Yeah, the demand for the digiFleet is strong, but we've just got to balance what are the best opportunities for them that fit in our profile, how we want to allocate capital. And if Michael just says - chunk of that is I think CapEx, a chunk of that is to return of capital to shareholders and to maintain a balance sheet that we’re just bulletproof for whatever the world might throw at us next.

Yeah, that's the follow-up. Can you just talk about the—you guys were aggressive in buying back stock in the fourth quarter. Shares have underperformed relative to energy and relative to your earnings power over the course of this year. So talk about how you'll continue to use buybacks as a lever and balancing that against a lot of uncertainty in the economic macro?

Yeah, look, the motivation for buybacks, or our ultimate motivation for the management team here, everyone that works at Liberty, is to grow the value of every Liberty share, right? That's our job. That's what we do. And when we get— and so there are many ways to do that: building a competitive advantage, strong customer relationships, delivering the above-average return on capital that we've delivered since we founded the company 12 years ago, that's a core part of that message. But when we get other opportunities at very attractive prices to buy back shares to increase the ownership amount of each share of Liberty stock by retiring shares at attractive prices, we're going to do that. And we're in sort of a special scenario right now, where we've got a very strong business. We're 12 years into the business. So we're past sort of the growth mode into established Liberty mode. Our needs for CapEx as a percent of our business size have shrunk, and we're presented with a compelling opportunity to shrink our share base. So, we're going to be all over that as long as that opportunity is there.

Thanks, Michael.

Thank you. Next question will be from Marc Bianchi, Cowen. Please go ahead.

Hey, thank you. I want to go back to the supply-demand balance a bit, because I guess— I hear you on the demand side. There have been some projections that I've seen for—I don't know, 30 fleets coming into the market and there's a lot of debate about how many of those are going to be incremental replacement. I was just kind of curious what your view is on the supply side and maybe how long it will take for investors to sort of know whether those are disrupting the market or not?

That is a good question. You know, we're sort of math and numbers guys. But we do our own projection and extrapolation. But for the marketplace, I get— obviously, it's going to take some time to just see the financial results flow through. But we do our own bottom-up frac fleet count. We have sales representatives in every basin. We track how many fleets are running today, how many are going to be running next month, how many are going to be running in Q3, and going to be running in Q4? What those fleets are and where they're coming from? So, I think there are about 30 frac fleets that have—that are planned or under construction. It looks like from our math and our customer dialogues, probably a little less than half of those will actually hit the ground this year and the other half or little more than half will hit the ground next year. So, do you think 14 fleets hit the ground this year? There are north of 250 frac fleets running right now. Even if you say, hey, the market is good. People are going to hang on with band-aids instead of the average 25 fleets that would—25 fleets worth of equipment that would fall out of the marketplace this year. Economics are strong. Maybe people in band-aids hold on to half of that, 12, 13, 14 fleets of equipment exit and 13, 14 fleets of new equipment arrive, that's pretty much a flat supply this year. And if we continue at that rate, it would actually be a declining supply because band-aids only last so long. Wishes and hopes don't really work. Equipment will drift out of the marketplace. So, the macro outlook right now remains pretty good.

Yes. That's really helpful context, Chris. I wanted to ask another follow-up to prior question on the CapEx side, so Michael, you said down to 30% of EBITDA in ‘24. I guess, or beyond '23, I think you guys put a slide deck out since the last quarter where you were talking about $450 million to $500 million of CapEx over sort of five to seven years, which would seem to be above that level that you talked about in ‘24 and beyond. But maybe just talk about what that was meant to show? And then, how does the LPI sort of play into whatever those sustainable CapEx numbers ought to be?

That was really to show that we have a replacement cycle with digiTechnologies that have emerged here as we slowly sort of like moving to replace the Tier-2. I know, I sort of disagree. That's where we came up with that 30% number. Again, obviously, that will depend on sort of like the strength of the market. But from where we see the market, the supply-demand balance staying very steady, the majority of the demand is coming from replacing the oil that is currently being brought to market. It's not really a major growth in oil production. And so, we see a reasonably strong, steadier market over the next few years. And a slow sort of replacement of Tier 2 pumps with digiTechnologies, which obviously is going to drive profitability. And that's where those numbers came from and no, and that's why we came up with those general numbers. Those two numbers jive together; one drove the other, so to speak. LPI this year, the catalyst for LPI was in the budget that we announced in the beginning of this year. Obviously, we've split that up. It hasn't changed the CapEx number, but we did the Siren deal, which we closed at the beginning of this quarter, which is going to speed the revenue and earnings generation of that power. I think when we look at LPI, as with all our businesses, it has to compete for capital and has had very, very strong returns and has to augment the efficiency of our base business. Chris, do you want to add anything to that?

No, I think it’s well said, Michael.

And can I just clarify Michael, the—I think it's $78 million for LPI. The acquisition, that's outside of the CapEx number that you would have guided to for this year, that would make sense I just want to confirm.

Correct.

Yep. Okay. Super. Thanks so much.

Thanks, Mike.

Thank you. Our next question will be from Stephen Gengaro of Stifel. Please, go ahead.

Thanks. Good morning, everybody.

Hi, Steve.

Two things for me. I think the first, when we think about the second half of this year and next year, how do you — when you look at fleet utilization? I mean, obviously, it seems like you think the market is reasonably tight. How are the conversations evolving with customers when you think about pricing and the demand for Liberty’s assets versus peers? And how do you sort of balance that? And how should we think about Liberty’s willingness to give up a little price to keep business and/or walk away if prices are lower than you think? How should we think about how you evaluate that with your customers?

Yes, so, look, we're in constant dialogue with our customers. Remember, most of our customers have been our customers for years. So, we're in a partnership here. You'd be surprised, but the vast majority of the dialogue with our customers is, how do we make operations better, more efficient? How do we get safer? How do we plan better for things that might have changed in drilling programs, about where assets are going to be? There is an undertone, of course, in all markets, customers would like prices lower and we would like prices higher. I mean, that's just human nature. But at Liberty, it’s always moved a little bit slower for us. Right? And we have all, not just Liberty’s but the whole industry suffered from sort of this hangover of this crazy overbuilding that was done in 2011, 2012, 2013, 2014. Those excess fleets only really have gotten burnt out in the last year or two. So we've had a bunch of years of excess hangover. Now which we have a certain amount of equipment. There is CapEx to build new equipment. There are returns on that. And there are returns for our customers. But the biggest needle mover for our customers right now to lower their well costs, to improve their drilling economics. Like the low hanging fruit is burn more gas and burn less diesel to power a frac fleet. You switch to wet sand where you can to save on drying costs and transportation. A lot of gas substitution sometimes is unreliable. You don't have it or you only two-thirds of the pumps get gas and the other third have to burn diesel. We're just knocking over these barriers to reducing costs. That's why we went into LPI. We have to have reliable gas every day, all day for all of our pumps. That is a huge cost-saving opportunity for our customers and return-enhancing opportunity for us. So those are the dominant discussions; price is sort of a frequent but smaller dialogue. But today, the pricing is pretty much stable. And we said this back in probably our Q3, certainly in our Q1 earnings call at the end of last year, we weren’t fighting for that last pound of flesh. We heard others say 15% more price is coming. We held the gun to people’s heads. Could we have gotten a little bit more at the end? Maybe, but we played that longer game. We're a partnership. Returns for us are good. Returns for our customers are good right now. Pricing for us is flat right now, and I don't see any immediate horizon for that to change.

Great. Thank you for the color, Chris. And my second question, when we think about LPI, your vertical integration strategy, and we sort of look out if we look out 12 months, but also longer term, two, three years, what do you think Liberty looks like? Are all fleets completely integrated or are there additional services at the well site you are offering? How should we think about like, sort of the medium-term strategic initiatives at Liberty?

The best input I can give there is look at the last few years. We— we get pitched every deal out there. We haven't been a large acquisition company. But in two downturns, when there are compelling opportunities, we will do those. Most of what we do is organic. LPI was an organic idea launched over a year ago to fix a problem of unreliable gas supply in time and across whole of fleets. And we brought in midstream expertise. We are developing technologies in a plant there. Are there other things we’re looking at that might either improve our current offerings or expand the shoulders a little bit? Yes, surely. Sure. But there are always way more ideas than there are compelling ideas. But you've got to dig into all these ideas and sort of run into the ground to figure out which ones are the most compelling in today's economics and future competitive advantage. And in the right humans and right technologies to bring something differential to the marketplace. So, we're not going to add seven business lines and we're sort of a slow steady company. But will we continue to evolve? Absolutely. Will we continue to grow our competitive advantage versus our peers? Yes. Will we broaden our base of business? Yes. Will we always be driven by delivering above-industry returns on capital and trying to grow earnings per share as fast as possible? Yes. So, I'm not giving any more specifics. But we just don't really release those until we're doing them.

Great. No. Thank you.

Good question. Thank you.

Thank you. Our next question will be from Keith MacKey, RBC Capital Markets. Please go ahead.

Hey, thanks and good morning. Maybe if we could just start up on customer or E&P consolidation, we’ve seen recently some public E&Ps buying private E&Ps and talking about slowing down their rig activity on the acquired lands. There's been stories written in the Wall Street Journal about larger consolidation. Can you just, Chris, give us some thoughts on where you think or what you think that more E&P consolidation would mean ultimately for Liberty versus competitors, perhaps?

I would say, in general. I think it's healthy. It's a normal business part of the business cycle and there are periods where there's less consolidation. There are periods where it's more active with stable strong prices right now, we're probably in a fruitful environment for more consolidation. We're aware of a lot of those dialogues that are going on before you hear about them. We think it's—again we think it's healthy. We think it's good. For Liberty, as you get more and fewer stronger players, we mentioned, I think, in our opening comments, there is sort of a move to go to upgrade service partners, whether you're a big company or a midsize company in today's world. So, it's change. In general, it's a positive trend for the industry. It’s certainly a positive trend for Liberty.

Okay, thank you. And just to follow-up, what—how should we take stable pricing to mean in the context of inflation? Does that mean there's going to be some pressure on margins? Or can you pass through pricing or cost increases in pricing?

Yeah, it's going to be a little bit of both. If you just straight inputs we’re buying that are inflation-driven, we're passing those through. There is inflation with many different ways. There's also a sort of a backdrop of efficiency that we're always trying to get better. So a little more efficiency can outrun a lot of organic inflation. So, yeah. I think we're viewing it sort of flattish across the board.

Thank you. And if I could just sneak one more clarification in? Michael, I think you said it, but can you just clarify? So, the guidance you talked about last quarter for 40% to 50% year-over-year adjusted EBITDA growth, are you sticking with that?

Yes.

Got it. Okay. Thanks very much. Appreciate the comments.

Thanks.

Thank you. Our next question will be from Luke Lemoine, Piper Sandler. Please go ahead.

Hey, good morning. Chris, you talked about how you are planning to pair the digiPrime pumps with your digiFrac pumps. But I guess, could you talk a little bit more about your digiPrime pumps and how these fold into conventional fleets over time, maybe as replacement pumps? And how you think about these relative to Tier 4 DGB, along with the performance characteristics versus Tier 4 DGB?

Luke, it’s Ron. Yeah, so, like Chris said in his remarks, you have to think that digiPrime is base load power. And so, for us, that means that you could really pair it with anything in our fleet, digi—the digiFrac electric pumps of course would lead to entirely next generation. But it pairs equally well with Tier 4 DGB or even Tier 2 dual fuel if we were going to do that. Really just something to manage the transient load kind of those peaks and troughs that come along with the world of fracking. So, you just want to think of that as base load power that we put in place that delivers the first 80% of the horsepower we require on location and then something on top of that to absorb the ebbs and flows of a day-to-day job. And then, so as you think about it, really it brings benefits in terms of the efficiency it delivers. Obviously we're moving to natural gas, but when you have that mechanical drive setup you just get incredible efficiency in terms of fuel use. And so, when you compare that to something like Tier 4 DGB, you get a 25% to 30% reduction in emissions profile and a significant improvement in effectively what we call fuel economy. So, big step forward for us.

Okay. Thanks, Ron. I’ll turn it back.

Thanks, Luke.

Thank you. Next question will be from Scott Gruber, Citigroup. Please go ahead.

Yes, good morning. Chris, just suffice to mean that down—good morning, morning. I just want to come back to the macro and ask about how it kind of could relate to your pricing. Obviously, your supply with math sounds pretty compelling on the market staying tight, but if the spot market does weaken from here, I'm curious, the impact really weigh and it would impact dedicated pricing. I assume spot would have to drop to some reasonably healthy spread to your pricing, given your superior efficiency. Curious if you had any color on, kind of from past cycles, what spread could be tolerated and sustained without pressuring your pricing? And at what level spot deflation, if it does happen, would start to concern you?

I think it's not possible to quantify because there's—spot pricing depends on the customer. It depends on how fast they're going to move to get stuff done. It depends on the service provider. Some companies have to provide huge discounts to other providers just to get the same job. So there are different players in the spot. So, yeah, we don't have enough visibility or specific insight into that. It's a factor, but yeah, it's not impacting Liberty today.

Okay. And then, just on the latest portfolio expansion here, can you speak to that next level of efficiency that you're able to bring? I mean, you guys do a pretty good job of tracking stage counts for yourself and others. Just a commentary on kind of what you're seeing at present and as you continue to kind of expand the portfolio, how you think that delta could continue to widen?

Again, hard to quantify, but just incredibly proud of our team. Look, we are at high record revenue, record profitability. We're as big as we've ever been today, obviously since we started the company. But yet the average performance of every fleet we have, the average across all the fleet was a record last quarter. So—and I get the biggest piece of that is humans, is culture, and passion for what people believe. So, we continue to enhance training. We mentioned with the LPI, I mean, they get gas supply has been a little bit of a headwind to efficiency, mostly it just means more diesel is burned than needs to be burned. So we're going to switch more of that to natural gas. But on the software technology training, there's just so many factors there. People keep always asking, hey, that’s just five years ago, but do you think that's plateaued? We’ve said maybe we picked some of the low-hanging fruit, but it continues to drive up. But that's the people, the humans, and the culture of Liberty. So, I don't know where it goes, but I'm reasonably confident it's going to continue to go up.

And which LPI do you think there's an ability to incorporate forms into the contracts where you can more directly benefit from a wide gas-diesel spread?

Oh, absolutely. Look, the biggest driver of these next-generation fleets is that huge delta between diesel and gas cost, but you can't just snap your fingers and get it. You have to have different equipment, different engines, and a different frac fleet for converting. You have to supply it. You have to look at the most efficient way to supply it. So, that's a thing that, of course, wins for both us and our customers. The majority of that benefit obviously goes to us because we're bringing the technologies, the equipment, and the people to do it. But it's a win for both sides.

Thank you. Next question will be from Roger Read, Wells Fargo. Please go ahead.

Yeah, thank you. Good morning. I am going to do kind of a good cop, bad cop question for you in the same question. You gave your outlook for natural gas and so, one question or the first part is, what if the downturn is a little bit worse, say, 30% to 50% decline in gas drilling instead of a one-third decline? How you might react to that? The second part of it is, is a follow-up to a question asked earlier, about E&P consolidation and ironically, this morning, we saw a large Japanese company buying into some gas assets in the U.S. So maybe as the rest of the world tries to integrate its way through the LNG chain, how do you think that might affect positively as we get beyond the sort of near-term issues related to low gas prices?

I will take the second one first. Ourselves and we’re not outliers here. But the outlook for natural gas over the coming decades is just simply tremendous and it's tremendous for a number of reasons. It's cleaner burning, and what I mean when I say clean, I mean, clean, not lower greenhouse gas emissions. It's also lower greenhouse gas emissions. That's a big driver of it, but it's cleaner burning as well for air quality. The air quality in the United States is the cleanest it's ever been in the last 80 years and the greatest risk to that is emissions that are blown in from Asia and Latin America. That's the biggest source of smog in the Western United States. So I have more of that industry and power that coal slowly switches over to natural gas brings clean air. Everybody is pro-clean air. So natural gas has great momentum. Japan, obviously, is a reliable source of electricity. You will see natural gas in the last 10 years is the fastest-growing source of energy, bar none. We hear things about percentage-wise small sources that again, ultimately don't add a lot of value, they're growing wider on percentage-wise. Where is the world getting more energy from? Gas is by far the winner in that race and likely used in the next few decades. Where's it great? Obviously, the U.S. is a tremendous place to produce more gas. Obviously, our exports are going to grow meaningfully. So I think all of that is happening. All of that is positive. Some will be pipeline to Mexico. The bigger chunk will be LNG. So for gas producers, I think they're in a great position, but just productivity just got ahead of export capacity. So, that will take as long as early 2025, where we are going to see a significant growth in demand for gasp for growing export markets in the U.S. The markets may firm meaningfully before that as well; we don't know. But again, for us, it's less than 20% of activity, easily deployable elsewhere and we've got great gas customers. So, it's not nothing, but it's not hugely significant to the outlook for Liberty’s business over the next one quarter or two years.

Thanks. Appreciate it.

Thanks, Roger.

Yeah. Thanks, Roger.

Thank you. Next question will be from Tom Curran, B. Riley FBR. Please go ahead.

Good morning. I just got two questions left related to LPI. So first, Chris, you've just spoken to that business’ potential future acquisition activity. But on the organic side, is LPI undertaking any R&D of its own or expected to pursue internal technology development including perhaps venturing into other types of alternative fuels? And then strategically, do you expect LPI's growth to help solidify natural gas-fueled reciprocating engines as the power source of choice for electric horsepower across the industry?

With what we do? It's just there are many spaces in which natural gas just wins. The problem, the limiter of natural gas in the United States and around the world is infrastructure. The U.S. is blessed with this awesome pipeline infrastructure that moves gas around. We're building better ways to LNG, but it's just more expensive to take it by LNG and then other countries, you see India has huge plans to build gas moving infrastructure as do many other countries. And what LPI is, is it’s sort of a virtual pipeline. It's a pipeline before there's a pipeline or it's a pipeline for just transient enough consumption that it doesn't make sense to build a pipeline. So we want to efficiently as possible tap into nearby pipelines, transport that, most you predominantly be in natural gas-powered vehicles and the compression technology, the storage amount of those trucks are absolutely working on technology to keep making that better and more efficient, you bet. And as we said, we can obviously transport RNG and hydrogen as well. But yeah, we see natural gas as a growing business opportunity and as I said in the opening remarks, just reliable electricity sadly is going to be a rapidly growing business opportunity as well. And we have the highest thermal efficient mobile electricity-generating source there is. And we have a growing logistics business to supply gas to it wherever those units are.

Got it. Makes sense. Thank you for taking my question.

Thanks, Tom.

Thank you. Next question will be from Saurabh Pant, Bank of America. Please go ahead.

Hi, good morning. I had a quick clarification and I think you had a comment in your press release about robust demand in larger oilier basins likely offsetting softer conditions in the gas basins. I just wanted to clarify on that. Do you expect demand in the oil basins to go up through the remainder of the year? Because I'm trying to put this into the context I think last quarter you were talking about a 10 to 15 fleet potential undersupply in the oil basins. So I just want to square that with that comment.

Yeah, let me look, our outlook right now in those basins is roughly flattish. On the margin are you going to see a little more private activity now that was above $80? Yes, there are small privates hard to get frac fleets economics where, maybe on the bubble if oil is above $80 and remains above $80, is there a little more activity in the oil basins? Probably. But overall, probably roughly flattish.

Okay. Okay. Okay. Now that's helpful, because private, it seems to us while cutting a little bit of activity on the margin even before the banking crisis, right? And now oil is back to that level pre the banking crisis. I was just wondering if they had activity; they don't add activity, right? But it sounds like you're thinking flattish. Should I—with a slight upward bias?

Yes, I think that's correct. Yeah, look at the story of the last 12 months. 12 months ago, privates were a much larger percent of activity than they are today. What’s happened over the last 12 months has been a sort of a rotation, a shrinkage of activity from privates and a meaningful growth in activity from larger companies because they were slowly ramping up multi-year plans, the larger companies.

Yeah, yeah, yeah, no, absolutely. And then another just quick clarification for me. You mentioned always seasonality in the second quarter, just to make sure we are all on the same page. I would normally think seasonality is favorable is a tailwind going from 1Q to 2Q. Just want to make sure that's what you meant when you said normal seasonality in the second quarter?

That’s correct. Usually I have the seasonal downturn from the Canadian side of the world and a slight seasonal uptick in the U.S. Generally, there is usually a positive movement.

Okay, okay, okay, perfect. Okay, thanks for that. I'll turn it back. Thank you.

Thanks, Saurabh.

Thank you. Our next question will be from John Daniel, Daniel Energy Partners. Please go ahead.

Guys, good morning. If my memory serves me correctly on the LPI, the Siren press release you talked about eventually providing power to industrial end-users or just things outside oil and gas, can you provide a bit of a timeline when you might be able to pursue that?

So John, it’s something— look, we've looked at for some time and obviously more seriously now as we're bringing the pieces together. But the demand for the assets we’re building right now within our core frac business is tremendous. So, you look at everything that we're foreseeably building right now is already got a home that's spoken for. So, it's not short term, but it's medium to longer term. There are opportunities there. Maybe I hesitate to give a specific time frame, but it's not in the next few quarters. But our look in our investigation to find the right opportunity, that's happening now.

Okay. Got it. And then the Siren, they had the two facilities. What's the optimal number of facilities across the country for you? Have you come to that decision or are you still evaluating?

It’s still evaluating—it depends on volumes and location of work. A simple look at the Permian is you got the Delaware and you got the Midland, and they're far enough apart that it makes sense to have different facilities there. You don't have nearly the truck traffic bringing gases you do sand, but you still want to ultimately optimize delivery costs versus infrastructure cost. But a big thing for us as well as the Permian is one basin. It's the right basin to start doing this, but it's just one basin.

Okay. And if you decided to build a new facility, what's the time from the decision to actually go live?

Yeah, I think it's around six months.

Okay. That’s all I got. Thanks for including me.

Thanks, John.

Thanks, John.

Thank you. This concludes our question and answer session. I would like to turn the call back over to Mr. Chris Wright for closing remarks. Please go ahead.

Yeah, I just want to thank everyone for their time today and interest in Liberty’s business, and a broader thank you to everyone in the Liberty family within the, wear our liberty jerseys, our customers, our suppliers, and everyone working in this broader energy ecosystem that makes my life and everyone's life possible. Thank you all, and we look forward to talking to you in three months.

Thank you. This concludes our conference. Thank you for attending today's presentation. You may now disconnect.