Welcome to the Liberty Energy 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 now like to turn the conference over to Anjali Voria, Director of Investor Relations. Please go ahead.

Thank you, Gary. Good morning and welcome to the Liberty Energy Second Quarter 2024 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 views about future prospects, revenues, expenses or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions and are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share, and adjusted pre-tax return on capital employed, are not substitutes for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA, net income to adjusted net income, and adjusted net income per diluted share, as well as the calculation of adjusted pre-tax return on capital employed discussed on this call, are available on our Investor Relations website. I will now turn the call over to Chris.

Thanks, Anjali. Good morning everyone and thank you for joining us to discuss our second quarter 2024 operational and financial results. Before we begin, I'd like to recognize our Houston-based colleagues that were impacted by Hurricane Beryl. Many were left without power for several days, but they rose to the occasion to meet the needs of our business and support each other and the broader community with remarkable resilience. I want to thank them for their exceptional efforts. In the second quarter, Liberty delivered strong operating and financial performance, demonstrating the value of Liberty's competitive advantage. Revenue of $1.2 billion and adjusted EBITDA of $273 million grew by 8% and 12% sequentially, respectively, while industry drilling and completions activity modestly softened over the same period. Record average daily pumping efficiencies and our record safety performance, coupled with increased utilization of our fleet, underpinned the strong results. Our company culture, long-term customer partnerships, innovative technologies, scale, and vertical integration allowed us to deliver a 28% adjusted pre-tax return on capital employed for the 12 months ended June 30, 2024. We generated strong cash flow and distributed $41 million to shareholders in the second quarter. Since the reinstatement of our capital return program two years ago, we have distributed $458 million of cash to shareholders through the retirement of 13.2% of shares outstanding plus quarterly cash dividends. We plan to continue strategically deploying capital to expand our competitive advantage and leadership position while returning capital to shareholders. Our culture of innovation and Liberty-developed technology are at the root of our success to date and the key to our future. This is reflected in today's highest-ever operational execution and safety performance over our 12-year history. We are driving performance by harnessing data and software solutions throughout our organization. Three specific examples are: one, our record diesel displacement with data analytics driving enhanced gas substitution; two, our preventative maintenance programs extending asset life performance and reliability; and third, Liberty's custom-built AI-empowered logistics software platform we call Sentinel. Before I highlight these three specific innovations, I want to remind everyone that Liberty alone has designed and deployed our own custom pump technologies and power generation technologies that allow us to optimize fleet architecture for performance and capital efficiency. Most importantly, we have built a culture of accountability and awareness around safety that we ceaselessly strive to improve. We have driven a 25% reduction in recordable incident rates over the last year alone, down to roughly 50% below industry averages. I'm very proud of this fact. I believe we are the most competitive, most efficient frac company in the sector. Let me add a few more comments on our recent technology-driven enhancements. Our diesel displacement is now at the highest level in the company's history thanks to the deployment of our natural gas fuel digiFleet and record gas substitution with our dual fuel equipment. Over the past year, dual-fuel gas substitution levels have increased over 25% for three reasons: investment in automated operating systems, increased expertise and visibility with real-time data on critical gas parameters, plus the coordination made possible by our addition of Liberty Power Innovations to supply on-site natural gas. Our predictive and preventative maintenance program, coupled with data visibility and analytics, allowed us to increase uptime and run assets at optimal operating ranges for frac performance and to achieve maximum gas substitution. We further enhanced our LPI portfolio with the commissioning of our operations in the DJ Basin, including compression capacity and logistics assets with our first CNG sales in June, serving both Liberty fleets and customer drilling. Vertical integration drives efficiency. It is hard to overstate the impact of our advanced Sentinel logistics platform, harnessing real-time data and AI predictive analytics to precisely forecast on-site proppant demand and inventory, then optimize transportation and logistics. Since inception, we have reduced our already low downtime due to proppant delivery by 90% and decreased the truck count and delivery time by approximately 35%, improving collaboration with supply chain partners and ultimately lowering the total delivered cost for our customers with fewer assets, less time, and improved performance. That is why we built the Sentinel system. We launched in the Permian approximately a year ago and have now expanded to all U.S. basins. We are now focused on deploying Sentinel logistics solutions across our LPI CNG business. Sentinel is a key tool as we expand our business going forward. We strive to deploy the right technologies at the right time for the right reasons. AI is yet another tool that we are now utilizing to enhance our operations. AI is both enhancing our business and growing the demand for our services. We are excited about the potential opportunity to meet that demand through our LPI business. Our LPI business is starting in the oil field, where we are building assets and expertise to reliably deliver both natural gas and electricity 24/7 in remote areas. On frac locations, we rapidly construct a 25 to 35-megawatt power plant, fuel it, operate it, and then tear it down roughly once a month and move that plant somewhere else. Our technology, assets, and expertise are positioning us very well to expand the playing field for LPI. Global oil and gas markets remain constructive on favorable multiyear market fundamentals despite near-term volatility in commodity prices. In June, a decision from OPEC+ to gradually unwind voluntary production cuts beginning in October drove oil prices lower. Even then, prices were well above those supportive of attractive exploration and production returns. Oil prices have since recovered on relatively balanced supply and demand dynamics, owing to relatively robust global economic growth and a rising demand for transportation fuels with the summer travel season underway. Natural gas prices saw a resurgence from early spring lows as gas producers reduced drilling and completions activity and curtailed production. Recent reinstatement of some curtailed production has moved prices downward but still above recent cycle lows. The commissioning of new LNG export facilities and continued growth in power demand are expected to drive higher natural gas demand and eventually firmer natural gas prices than today's levels. Frac industry trends have moderated marginally in recent periods, following slightly softer drilling activity in both oil and gas basins during the first half of 2024. Industry-wide completions activity has declined to levels consistent with approximately flat oil and gas production. For the U.S. to deliver rising oil and gas production levels, completions activity would need to rise. Signs of tightness for quality frac crews may emerge in 2025 on a demand pull for energy. The attrition of older equipment from higher intensity fracs with increased horsepower requirements is reducing the available horsepower to meet an eventual increase in frac fleet demand. As exploration and production operators continue to consolidate, their efforts are focused on efficiency gains through partnerships with service companies that can deliver superior performance and provide technical solutions to create value. Liberty's supply chain has continued to rapidly innovate and drive efficiencies in procurement, manufacture, and delivery of essential materials for frac operations. The resulting efficiencies benefit both our customers and our business. Liberty's digiTechnologies and LPI services, along with top-notch supply chain, scale, and integrated services, enable us to drive improvements across the board for our customers and grow our industry competitive advantage. As we continue to execute on our returns-focused value proposition, we are well-positioned to deliver strong financial and operational performance. Our strategic investments deepen our portfolio of natural gas-fueled pumping and power generation technologies, driving higher earnings and cash flow generation potential. Industry conditions moderated through the first half of this year. We now anticipate that total North American completions activity will be modestly softer in the second half of the year due to budget front-loading by some operators. However, we expect Liberty's financial performance to be similar in the second half of the year compared to the first half. We expect to continue investing in our competitively advantaged portfolio, deliver healthy free cash flow, and return capital to our shareholders. We are committed to safely and responsibly creating long-term value for our partners and shareholders. With that, I'd like to turn the call over to Michael Stock, our CFO, to discuss our financial results and outlook.

Good morning, everyone. I'm pleased to share that we have delivered solid financial results for the first half of the year, despite softening industry conditions and activity levels. Our teams came together to drive outstanding efficiencies during the second quarter, safely delivering more pump hours, more stages, and pumping more proppant than ever before. We have made significant progress on our investment strategy, designing and delivering next-generation digiTechnologies that are in high demand while expanding our LPI infrastructure to ready ourselves for growing natural gas demand. We have also continued to deliver on our capital returns program. Two years in, we have now returned $458 million to shareholders, predominantly in the form of accretive buybacks. We expect to continue to execute on these initiatives for the remainder of the year. In the second quarter of 2024, revenue was $1.2 billion compared to $1.1 billion in the first quarter. Our results increased 8% sequentially, as accounting efficiencies and integrated services offset lower sand and other consumable prices and market headwinds. Our teams produced record pumping hours, record stage counts, and record proppant pumps, bucking the trend of industry activity declines. Second quarter net income after tax of $108 million increased from $82 million in the prior quarter. Adjusted net income was $103 million compared to $82 million in the prior quarter. In recent years, we have made investments in several energy companies such as Oklo and Tamboran, which have the potential to help meet the world's growing demand for energy. Both Oklo and Tamboran commenced trading on the New York Stock Exchange during the second quarter, resulting in a net unrealized gain of $7 million before taxes. As a result, we're providing adjusted net income to exclude items outside our normal operating results to provide a more useful measure of comparison for net income from period to period. Fully diluted net income per share was $0.64 compared to $0.48 in the prior quarter. Adjusted net income per diluted share was $0.61 compared to $0.48 in the prior quarter. Second quarter adjusted EBITDA was $273 million compared to $245 million in the same prior quarter. General and administrative expenses totaled $58 million in the second quarter and included noncash stock-based compensation of $5 million. General and administrative expenses increased by $5 million sequentially, primarily due to higher compensation expenses, annual salary adjustments, and other miscellaneous expenses. Other income items totaled $1 million for the quarter, inclusive of the aforementioned $7 million net unrealized investments gains. Excluding these gains, net interest expense of $8 million was relatively in line with $7 million for the prior quarter. Second quarter tax expense was $33 million, approximately 23% of pre-tax income. We continue to expect the tax expense rate in 2024 to be approximately 24% of pre-tax income. Cash taxes were $8 million in the second quarter and we now expect the 2024 cash taxes to be a maximum of 70% of our effective book tax rate for the year. We ended the quarter with a cash balance of $30 million and net debt of $117 million. Net debt declined by $25 million from the end of the first quarter. Second quarter uses of cash included capital expenditures, $30 million in share buybacks, and $12 million in quarterly cash dividends. Total liquidity at the end of the quarter, including availability under the credit facility, was $271 million. Net capital expenditures were $134 million in the second quarter, which included investments in digiFleets, LPI infrastructure, dual fuel fleets, upgrades, LAET, Liberty Advanced Equipment Technologies, facility construction, capitalized maintenance spending, and accelerated maintenance spending on our fleet in transit to Australia and other projects. We had approximately $2 million of proceeds from asset sales in the quarter. We now expect capital expenditures to be around the high end of the range for 2024. Also in the quarter, we invested $16 million in the B2B Basin operators to support this exciting new source of natural gas for the world. Our ability to generate strong cash flows through cycles enables our commitment to capital returns. In the second quarter, we repurchased $30 million of shares or nearly 1% of the shares outstanding, and distributed $12 million in cash dividends. We continue to deliver on our return of capital program while reinvesting in high-return opportunities that increase our long-term cash flow generation. While we have seen a slight moderation in industry activity through the first half of the year, Liberty has mitigated these impacts by focusing on meeting the increased complexity of our customers' demands. We have been able to leverage our technology investment, scale, integration, and focus to drive superior results. While continuing to build our competitive advantage, in the second half of 2024, we now anticipate flattish financial results but largely mirror the quarterly cadence of the first half of the year. We're also expecting digiTech deployments to continue ratably throughout the year and are on track to end the year with close to 90% of fleets primarily powered by natural gas. I'll now turn it back to the operator for Q&A, after which Chris will have some closing comments at the end of the call.

Our first question today is from Scott Gruber with Citigroup.

Chris, can you provide some color on pricing trends across the various frac technologies today? Investors have been asking whether the Tier 2 pricing is just getting so wide kind of versus DGB and e-frac that it's starting to exert some negative pressure on those newer technologies? What do you guys see in the marketplace today?

Yes. Look, as we said, Scott, the market activity level is slowly declining which I would say is making the market softer, with modest changes. And look, this has been going on for almost two years now from the peak activity in late 2022. Of course, if you've got your choice of frac technology and you do today, a straight Tier 2 diesel engine is the lowest choice. That's the oldest equipment. It doesn't burn the gas; it's more expensive to fuel. For the larger operators with large steady programs, there's very little of that technology still employed. But you've got a lot of smaller companies that don't have a full fleet program but they're still spending significant CapEx. That's where most of the Tier 2 diesel frac equipment is operating. But yes, that market is softer. I think you're seeing the fading away of Tier 2 diesel engines. They're not going to be gone for probably still several years, but yes, they're declining. The desirability of them is lower. But again, still many of those fleets are running, including from Liberty.

Got it. And how would you describe the incremental demand for e-frac? How far out are your fleets contracted, are 9 to 10 spoken for? Are you starting to have discussions on the early fleets for next year? I'm just kind of curious about how those discussions are going and how far out are those discussions today?

Yes. There are ways out. Look, everything we're ordering equipment for and looking to construct in the next year is spoken for. We're in discussions with many others, more than we can supply, for fleets that might deploy or start in the first half or middle of next year. So that's a ways out. That next-generation equipment is not only cheaper to run because it's burning all-natural gas versus the extreme old diesel or some mix of the two, but it's quiet, precise, and high-tech. The demand for that is quite significant.

The next question is from Marc Bianchi with TD Cowen.

I wanted to ask Chris on your outlook for the progression into 2025. You sounded kind of constructive on the direction of demand just based on where oil production and gas production are at current frac levels. But if I look at what E&Ps are doing, just being in maintenance mode and consolidation and the efficiencies that are happening, they're not looking to grow in 2025. So is it that you see them changing that plan? Or is it something coming from private? What are you seeing that kind of gives you the optimism about growth in 2025?

Yes. Look, I would say our expectation for growth in 2025 is likely modest. The current activity today would not support even flat natural gas production. We have to be careful of too much growth which has been the mistake in the past among the natural gas operators. Today's oil production is also pretty flat. Crude production has been flattish for 6 or 8 months. We've still seen activity decline a little bit since then. So the production trends you're seeing today reflect what frac activity was 3 to 6 months ago. We haven't seen a production trend reflective of today's frac activity. It's probably flat at best oil production. So again, I'm not predicting a big change next year, but this second half of this year is going to be a little softer than the first half.

Okay. And those are kind of market comments, not necessarily Liberty comments, but maybe you sort of follow that trend.

100%. Those are market comments. Look, as we said, we've had a meaningful 25% to 30% decline in active frac fleets industry-wide, from two years ago to where we are today, and Liberty is basically flat through that period. So yes, we have not followed the industry trend. We haven't added fleets. We don’t want to put anything into a soft market. But the interest or desire among operators to work with Liberty is high. The biggest reason for that is just performance. The operational performance of our teams and the way we do business. The second reason is high-tech and next-generation equipment. Those things keep demand for Liberty high, but again, yes, as conditions soften, you won't see an increasing fleet count from us, but we haven't reduced it as we thought we might. The customer demand and continuing the relationships have been quite strong.

Yes. Yes. Makes sense. And then just one more on kind of the near-term progression. So if the second half is going to be similar to the first half, is the right way to think about it that from an EBITDA perspective, third quarter looks like second quarter and fourth quarter looks like first quarter, so essentially a mirror image? Is that what we're talking about?

That's exactly our guess. That's our guess. And of course, we got a pretty good view into Q3, yes, which looks flattish. And Q4, you don't know, but that would be our expectation. It's probably similar to Q1.

The next question is from Arun Jayaram with JPMorgan.

Chris, I was wondering if you could kind of elaborate on some of the trends and growth initiatives you have for LPI and what kind of demand trends you're seeing for that offering?

Yes. So again, huge interest there as well. Look, there's just this massive cost savings to burn natural gas instead of burning diesel. The question is how do you do that? That's been going on in the industry for, geez, I mean, the second fleet we built was dual fuel. It's been going on for at least a dozen years. What we've tried to do is set that bar higher, ensuring we have reliable gas supply to every pump that's operating on location and that goes up and down with the trends in frac activity. There’s just more gas burned for hydraulic fracturing operations than there was the month before that. We launched that business in the Permian, and we still have a lot of growth there. We are just, as we announced, kicking off in the DJ. We're doing some work in the Haynesville as well. We are not in the other basins Liberty operates in yet, but we will with time. Most of our gas is to operate our own frac fleets, but we are also supplying customer rigs. That will broaden into other industry applications. As you look into next year, that sort of virtual pipeline will broaden to power electric generating assets even outside of our industry. I don't think we see that until next year. There’s just so much growth and so much to be done within the industry first. But yes, there's just huge running room for that business.

Great. And I had a housekeeping question on the balance sheet, maybe for Michael. Michael, can you walk us through the capital lease item on the balance sheet, which looking at it right now, it's $236 million? What is running through capital leases versus CapEx?

Yes. So we've run a number of things through capital leases. Generally, it's rolling stock. The interest rates on capital leases are actually slightly lower than our ABL facility at the moment. So it's a very effective way of arbitraging a short-term loan to fund some of the moving stock that we roll.

What would you characterize as that moving stock? Just a little bit more elaborate on that?

Tractors, CNG trailers, things of that variety.

The next question is from Jeffrey LeBlanc with TPH.

For my first question, I wanted to see if you can give us an update on how much of your capital expenditure is allocated to LPI this year. Additionally, given that the LPI value chain extends beyond mobile power generation and historically, the $60 million stake price for digiFleet included power generation, how should we be thinking about the megawatt capacity that will be in operation by year-end?

So if we take that one, we're running about 125 megawatts of power generation at the moment. We have probably a bit more than 50% of that under construction for our future power generation in the oil field. Obviously, that doesn't include virtual megawatts that we use with digiPrime. Most of the CapEx that's being spent at the moment is on moving the molecule. We're managing the molecule to the frac fleets, which increases uptime, increases efficiency, and increases the substitution rate. That comes in the form of CNG trailers, the compression that we built in the DJ Basin, and fuel distribution on-site.

The next question is from Stephen Gengaro with Stifel.

I'm not sure how much you can break this out, but I'll ask. When we consider Wall Street's calculations, we often divide EBITDA by fleet or revenue by fleet to arrive at a figure. When we look at your revenue or profitability per fleet compared to two or three years ago, can you provide any guidance on how much of that is solely from fracking and how much is influenced by a mix of newer fracking assets and integrated services like LPI?

Let me take that one, Steve. The reality is we're focused on a single segment, everything revolves around frac. You are correct to suggest that investors should consider frac. Over the last five years, we've discussed our expansion and vertical integration. We own sand mines, handle gas delivery, and manage manufacturing, which has reduced our maintenance costs. We're constructing a new manufacturing facility in Oklahoma to produce some of our digiPrime and power generation equipment to support our partners who typically assemble our equipment due to limited capacity. We control the design, bill of materials, and manufacturing instructions, which enhances the efficiency of building our equipment. All our investments, including digiFrac, integrate power generation, gas delivery, and pumps. We are the only company that encompasses this entire value chain and profits from it, which sets us apart. Everything is geared toward supporting frac. It all comes down to the teams operating effectively, and we generate revenue through this complete value chain, Steve.

Great. That's very helpful color, Michael. This is a follow-up to that. A recent Kimberlite survey came out, and we were speaking with them recently. One of the things that stood out to me was there's two companies that have completed wells in seven days or less. If you were in one of your biggest competitors, I was just curious, what drives that? Is that the overall integration of the fleet? Or is that just your highest-end digital assets that are driving your ability to lead on that front?

Look, I'm going to have Ron answer that question. But the short answer is the humans, the people that run Liberty frac fleets. That's the biggest differential and just that attitude about how to coordinate the symphony to deliver. But I'll let Ron elaborate a little more about the technologies and how this is all done, but really, it's culture in humans.

Yes. Stephen, I think Chris hit on the biggest point there. We've always focused on culture since the beginning and creating an environment where people wanted to come and make a career out of it. I think that's been demonstrated in our performance now for 13 years. It's hard to put a value on that, but I think it plays out very, very well in that Kimberlite report and the response from our customers around the service quality they get. But then I think all the points Michael made earlier pile on to that to help support that. Of course, we deliver great service in the field, but that's supported by industry-leading technology developed in-house here at Liberty and supported by a team here at Liberty. It's supported by a world-class supply chain organization that ensures we have multiple legs on the stool that, of course, we have some amount of internal support, whether that's manufacturing or sand or things like that. You layer on top of that the work we've done in artificial intelligence in terms of understanding both the operation and performance of our equipment, the ability to predict in advance when we need to take care of some maintenance on those assets, maximizing uptime we’re seeing on location and with the assets each and every day. We have maybe unrivaled level of visibility into our operation in the field now, not only for the equipment itself, but as Chris talked about in his opening comments, the Sentinel Logistics platform and our supply chain ensures that we never run short on sand, chemicals, or parts in the field. You lay all of those things on top, and we continue to find ways to be more and more efficient on location every day.

The next question is from Waqar Syed with ATB Capital Markets.

Chris, this is kind of a big picture type question that I'm asking. I'm going to throw out some numbers here. And if I look at this quarter, compared to the year-ago quarter, your revenues are down only 3% but your EBITDA margins are down 240 basis points. EBIT margins are down about 70 basis points. DD&A quarterly DD&A is up about 25% and return on capital employed is down from about 30% to 20%. Now having said that, these are still best-in-class results. A 20% return on capital employed is still very, very attractive. But it does feel to me that all the value that you're adding, all the investments that you're making, efficiency gains, a large portion of that benefit is accruing to the customer, and you're not getting the fair share that really your effort entails. Is there a new type of contracting structure that you could think of — performance-based? Or you've seen some of the drilling contractors pursue that. Is there some other arrangement that pumpers could make where they're making so much investment, so much effort but probably not fully getting the benefit of that?

Waqar, that's a fair summary of the situation. The short answer is that the business remains cyclical. What's encouraging is that this current cycle is much less extreme than previous ones. We have experienced significant ups and downs in the past, but the numbers you mentioned indicate that business conditions have been weakening for nearly two years. We are likely nearing a low point, and things are relatively stable right now. Two years ago, we saw a significant peak, but today conditions are weaker. If you observe the entire industry, there has been a noticeable decline, much more pronounced than what Liberty is experiencing. However, it is still a slower and more gradual cycle. Regarding return on capital employed, we do have new assets, most of which are long-term investments that we've developed, and we do bear the costs associated with those. When we invest, we consider the returns on these assets over the next decade, which guides our investment strategy. We have performance-based clauses in several contracts with customers, focusing on how we can improve and succeed together. Our ongoing focus is always on the long-term returns from our investments. What you're witnessing is not a fundamental change in contracting or the industry's operation; it's merely the impact of a slow and modest cycle. But that’s a great question, Waqar.

Okay. If I may ask another question regarding completion activity for next year, the projections from various sources indicate that U.S. oil production, specifically liquids production, is expected to increase by about 5,000 to 6,000 barrels a day year-over-year in 2025. What level of completion activity do you believe would be necessary to achieve that kind of production growth?

Well, modest but definitely an increase. Definitely an increase from where we are today. Again, I don't think it takes much to change the feel of the business cycle a bit. I would say that at probably this year's investment levels, we will likely see a slight shrinkage in the available supply of frac equipment. There are a lot of Tier 2 fleets still running that are not being reinvested and wearing down, but new gas-powered fleets are being built, but likely less this year than the attrition of older fleets. An increase in active fleet count nine months from now over where we are today would not be insignificant for what it would do for market conditions.

The next question is from Derek Podhaizer with Barclays.

I just want to go back to Scott's question at the top of the call. Diesel CNG spreads are tightening out there. We talked about Tier 2 diesel pricing coming under pressure, assuming that's going to weigh on your dual fuel at first. Is that a valid assessment? And then maybe as the goal of investing in LPI is to drive integration through CNG, is that a way to help protect pure frac pricing along with the rest of your integration strategy? Maybe just some comments around there, please?

Right. So if I take that one, I'll take the last half first. Yes, our integration, our vertical integration investment strategy is definitely about driving higher returns on our invested capital base. We're focusing on how to make things more effective and profitable for Liberty. The ability to run the CNG business will allow us to maximize our operation and maintain lower costs. That was a key part of the investment in LPI, ensuring that we drive efficiency. Liberty is effectively mitigating the impacts of declining activity over a two-year period and maintaining strong returns. But as Chris mentioned, as the market tightens, we should see the improved margins and bottom line faster as the market improves, strategically, these are long-term investments.

Yes, I'd add a couple of things there. First of all, it’s important to remember that just because you put a dual fuel fleet out there doesn’t mean you get to a specific substitution ratio automatically. We're seeing excellent results due to a lot of focus internally on maximizing the fuel substitution. Continuing more complexity in operations and a focus on outputs keeps our customers working with us, not just in high-level efficiency but in how we operate.

Got it. Next question is maybe just more color on what's driving you to reach the high end of the CapEx range. I know last call you guys were holding out on some growth opportunities in the back half of the year from privates, but obviously, we're not seeing that. So I would assume you’d have some softening of CapEx just with overall activity. Are you reallocating some CapEx dollars into growth projects, specifically LPI or maybe your upgrade program from Tier 4 to Tier 4 dual fuel or Tier 2 to Tier 2 dual fuel? Just some more comments on what's driving you up to the higher end of that CapEx range now?

It's really the timing. We've got a few additional growth projects that we're investing in for construction facilities. But the softer activity this year doesn't affect our CapEx program. We're investing for the next 5 to 10 years. It takes into account our long-term view of our capital return opportunities. We are continuing to show returns for our investors and maintain very high standards for our capital deployments.

The next question is from Neil Mehta with Goldman Sachs.

The first question is it's always hard for us to get visibility on DUC trends because the data is so noisy. So Chris's team, would love your perspective on what you're seeing in terms of drilled and uncompleted wells out in the field, any regional color? And how does that feed into your view of pressure pumping utilization moving into 2025?

Yes, Neil, I think it is hard to see exactly that data. Personally, I believe the DUC story has generally been overinflated. During COVID, there was a huge build-up of DUCs during the OPEC production cuts. Most of the DUCs are just wells in progress. There are exceptions, but we don’t view DUCs as a big driver of future frac activity or optimism.

And then just a follow-up on capital allocation. You guys have done a terrific job returning capital to shareholders. The stock still trades at a big discount relative to other things in energy. So just your perspective, even if we go into a softer environment than maybe some folks would have anticipated in the back half of the year. Do you still feel you're well-positioned to return capital in the form of buybacks to shareholders? And while we're on the topic of capital allocation, do you see yourself participating in consolidation? Or do you continue to think buying back your stock is the best use of the incremental dollar?

Right now, the dominant use has been buybacks. That's not likely to change. We look at everything from consolidation. If there are opportunities that present themselves that add unique value, we will consider those. But acquisitions have not been a big part of our past and are likely not going to be in the future. There won't be nothing, but it’s got to be pretty compelling. We're much more focused on growing organically and developing internally. Over the next few years, buybacks will likely be a huge use of our free cash flow given the value of the stock at the moment. Treating it as a single-digit price-to-earnings ratio with very attractive long-term cash return on capital invested.

The next question is from Tom Curran with Seaport Research Partners.

On the natural gas side of the market, how developed is your visibility on this trajectory of incremental structural demand comprised of new LNG export trains and data center capacity growth? Are you at a point where you can look to mid-2026 or early 2027, translate that gas demand path into a specific number of frac spreads and then estimate a rough range of the additional spreads that this new secular gas pull would require?

We have done some of that, but there’s so much range. You can be a little more quantitative with LNG exports because we know the projects with FID and those under construction. Electricity is the bigger wildcard; its availability could change demand. There is a positive macro outlook for U.S. natural gas from both LNG and electricity demand, but we’re not giving specific numbers right now.

Sounds good. And we'll let Ron pick up the tab for those beers. Turning to LPI; it sounds as if a portion of your CNG sales in June were to your customer base for its drilling rigs. Were those land rigs CNG deliveries a separate third-party revenue transaction or part of a bundled contract? My impression has been that Liberty's own fleet needs, were likely to command the bulk of LPI's capacity this year. Could I just get clarification on that and maybe an update on the outlook for external third-party business trajectory?

Yes. The vast majority of our gas deliveries are for our fleets. We've been delivering for drilling rigs since the Siren acquisition for key clients in both the Permian and DJ Basins. Delivering gas usage for drilling rigs is much lower than it is for frac operations, but it's just part of the business to support our overall health.

Yes, it's a partnership thing. You've got customers that are running rigs out of gas, and Liberty is the highest cost supplier there; they want to use it. So yes, it's not a huge part of our business, but it is a nice part of our partnership.

Got it. And I'll just squeeze one more in here. Ron, I'm sorry if I missed this, but did you provide an update on how many active digi spreads you expect to have deployed exiting the year?

No change in our plans there at all, Tom. We're still on track to have 10 next-generation fleets operating by the start of next year. So no change in our outlook for that.

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

Certainly, vertical integration has been a differentiator for the business, and we've talked about it on the call so far. But just curious if you can give us a little bit more color or even potentially quantify, how far along do you think you are in this process? Is there a lot more benefit to be realized from adding service lines or growing existing service lines that you've got? I know LPI is certainly a big part of that. But just some general color on how much of the value chain you think you've actually been able to capture to date in frac and how much more you think there is to go?

Look, I'd say we have vertical integration in most of the big items that matter. So yes, I wouldn't say there's a huge amount there. The biggest focus at Liberty is just how do we get better? As we always say, we didn't do the vertical integration to add business line profitability; we do add it but mostly to make frac the core business better. More reliable, safer, more efficient, and a better experience for our customers; that's what's driving it. I would say the bigger prospect for us, growth in the next 5 or 10 years is taking the tools and technologies that we've developed.

Okay, very good. You have investments in businesses outside of frac. I know you talked about Oklo and Tamboran as the impact on earnings per share. You've also got a few others. Can you just talk about maybe the one or two most important insights or lessons you learned from having investments in energy businesses outside of frac?

Yes. As career energy nerds, we get asked to invest or advise other entrepreneurial energy companies a lot. We get pitched on a million things. Most new venture energy businesses, even if everything went right, don’t have a prospect to be a meaningful positive addition to the global energy system, which means they rely on subsidies. We're not takers of those bets. Oklo is a great example of the right nuclear technology and business model; the technology is fantastic. Tamboran has an awesome resource in a geographically desirable location. I think Liberty could be very helpful in making that successful, and I think the upside for us is quite large there.

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

Alright, everyone, feel free to drop off if you want, but I'm going to talk a little bit more about energy. With the benefit of 2023 energy data which is now available, thanks to the Energy Institute's recent publication of the statistical review of World Energy, I want to take a moment to provide an update on the so-called energy transition. The Energy Institute's work to quantify global primary energy is quite valuable to all energy enthusiasts like us at Liberty. However, we made two important adjustments to the Energy Institute's number within our Bettering Human Lives report. First, EI does not account for developing country use of traditional biomass in their primary energy numbers. This traditional biomass energy is the source of the world's largest energy problem. Hence, we believe it is critical to always include this in all energy reporting. Traditional biomass serves as a cooking and heating fuel for 2.3 billion people living in poverty. Our Bettering Human Lives Foundation works to help those 2.3 billion people transition to clean cooking fuels, allowing longer, healthier, and more opportunity-rich lives. That is a real energy transition that we need to hasten as quickly as possible. You can't eradicate what you don't attempt to measure. The EI employs an input equivalent methodology that grossly inflates the primary energy from electricity produced by wind, solar, hydro, and nuclear. They multiply it by 2.4x in their conversion of terawatt hours to exajoules. We reversed this adjustment and simply converted reported terawatt hours to energy equivalent exajoules, which is the actual energy delivered to and consumed by consumers. We discussed this more in the Bettering Human Lives report. For us, it’s critical to be honest in the reporting on energy, climate change, and human progress. The U.S. Energy Information Agency recently reversed its long-standing practice of using an input equivalent methodology and is now in step with us in its reporting, which is encouraging. With these adjustments, we find that over the past 50 years, global primary energy consumption has more than doubled, up 126%, with a 1.6% compound annual growth rate in energy consumption over the last 50 years. Energy additions from hydrocarbons over that time have been nearly six times higher than all other energy sources combined. The hydrocarbon share of primary energy was 85% fifty years ago and remains 85% today. Since the start of this century, global primary energy consumption has increased by nearly 50%, with a compound annual growth rate of 1.7%. Thanks to the American shale revolution, energy additions from fossil fuels are over seven times greater than all other energy sources combined in the last 24 years. Hydrocarbon share of primary energy has actually increased by 1.4% back to the 85% level of fifty years ago. In just the last year, global primary energy consumption increased by 1.6%, in line with long-term trends. Additions from hydrocarbons saw oil as the largest contributor, with coal following. Natural gas has been the largest source over the last decade. Hydrocarbons remain at 85% of primary energy, while wind and solar combined for only 2.6% last year. I will close with a request to all my colleagues in the industry, particularly the analysts and bankers, to stop using the deceptive and destructive term energy transition. First, because it is simply incorrect. The share of hydrocarbons in the global energy supply stack has not shrunk in 50 years. In fact, hydrocarbons have grown their market share over the last 24 years. The incessant repetition of this misleading term contributes to a misunderstanding of the global energy system, leading to damaging policies and misinforming the younger generation. Energy is far too important to get wrong. Seven billion people are striving for energized lives just as we in the privileged one billion are. Let's not use deceptively destructive language that impedes their access to affordable energy. We should all strive for accuracy in our language. Let's stop using the misleading term energy transition and advocate for energy addition instead. How about new energies or alternative energies, terms we used before we got off track? Have a great day, everyone.

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