Liberty Energy Inc. Q4 FY2025 Earnings Call

Thank you, Dave. Good morning, and welcome to the Liberty Energy Fourth Quarter 2025 and Full Year 2025 Earnings Conference Call. Joining us on the call are Ron Gusek, Chief Executive Officer; and Michael Stock, Chief Financial Officer. Before we begin, I would like to remind all participants that some of our comments today may include forward-looking statements reflecting the company's view about future prospects, revenues, expenses or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in our earnings release and other public filings. Our comments today also include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA, adjusted net income, adjusted net income per diluted share, adjusted pretax return on capital employed and cash return on capital invested are not a substitute for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA, net income to adjusted net income and adjusted net income per diluted share and the calculation of adjusted pretax return on capital employed and cash return on capital invested as discussed on the call are available on our Investor Relations website. I will now turn the call over to Ron.

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

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

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

Yes. I will share a few comments, and then Michael may want to add some thoughts afterward. We've noticed a continuing trend from the middle of last year, emphasizing that co-located behind-the-meter power is not just an interim step but the optimal long-term solution for power supply at data center locations. It meets essential requirements like speed to market and addresses concerns about grid stability and electricity pricing. Furthermore, from a commercial perspective, we've established that co-located behind-the-meter solutions provide the best assurance for long-term power pricing. Additionally, we can enhance this by leveraging grid interactions if that suits our partners' needs. As interest in this model has increased, the demand for partnerships with providers like Liberty has also grown significantly. This has led to a pressing need to secure power supply, evident in our recent agreements with Vantage and another data center fabricator aiming to assure their end-use customer of reliable power sources. We can demonstrate our power capabilities, confirm sourcing, and have established these agreements with dependable partners. This momentum is building, and we anticipate that the gigawatts we previously discussed will become more secured, with our opportunities continuously expanding. Michael, do you have anything to add?

No, I would just reiterate what Ron said. For the large tech companies, their business growth and what will change the world depends on the certainty of expanding their data center capacity and AI development. The important aspect is having certainty about when they can deploy these billions in capital and coordinating that supply chain. As you have observed with the investments from the Big 6, deepening their supply chain involves ensuring reliable power and knowing when that computing capacity can be activated because they need to manage a long supply chain to ensure this occurs. We provide that assurance, which is valuable to the Big 6.

I understand that your initial investments are in recips. As you consider the expansion to 3 gigawatts, does the customer have a preference? How do you see your mix evolving to meet customer needs, or are they primarily focused on securing power?

I would like to address a couple of points, Stephen. Firstly, we can definitely achieve the 3 gigawatts solely with recips available in our supply chain right now. I’m very confident we can make that happen. If it makes sense to include turbines for a specific project, that is also an option. Regarding the technology, we have discussed this before. The advantage of recips lies in a few key factors. The first is efficient capital deployment. When considering the reliability that data center providers require, it is effectively accomplished with a modular approach using gas recips. Additionally, there's the efficiency or heat rate of the asset, which we have also discussed. Specifically, regarding the gas recips we will utilize, we have the high-speed, smaller, modular engines of 2.5 and 4.3 megawatts, along with larger medium-speed assets. These medium-speed engines have a heat rate that competes with many earlier generation combined cycle plants from the 90s to 2010 in a simple cycle context, and under challenging operational conditions, they come close to even modern combined cycle plants today. This means we have an exceptionally efficient asset for converting natural gas into electricity, resulting in a very competitive power price now and moving forward. Operators understand the value that gas recips offer. While I’m not saying turbines won’t play a role in the future, our current focus is on gas recips as the preferred technology for deployment.

I think our customers now recognize the advantages of our gas reciprocating engines. A year ago, the power teams within the Big 6 were less familiar with the efficiency of the N+ equation and the benefits of implementation. Now, there's a growing understanding of this technology. It's important to note that we use one-third less fuel than a simple cycle turbine, which significantly affects our emissions profile. We believe we have the right technical solution for our clients. Similar to when we began building and electrifying our digital assets, we evaluated all available technologies. As a technology-agnostic company, we prioritize effective engineering solutions over taking the easy route.

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

Yes, Keith, I'll address that. Over the past six months, we've focused on strengthening our relationships with our supply chain. We've always had strong connections in the high-speed sector with companies like Jenbacher and Caterpillar, and we've extended those relationships to include all the major medium-speed engine manufacturers. Our efforts in Europe involved spending time in their factories and working on production planning, which has helped us solidify delivery schedules extending into late 2029 for our long lead projects. These projects will start with initial implementations, and it is much more capital and cost-efficient to expand within an existing data center than to build a new one from scratch. As we establish these initial campuses, they will continue to grow into the 2030s to meet the computing demands of our end users.

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

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

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

So Marc, I divided the spending into long lead time deposits and specific project spending, which we are financing through project finance. The long lead time deposits are intended for generation that, once assigned to a project, will transition into the project financing phase. Our Liberty Advanced Equipment Technologies group, a registered manufacturer and purchasing company, is handling the sourcing, packaging, manufacturing, and engineering of these components. Eventually, these will be sold to the project companies, followed by project-level financing that will cover these expenses. I anticipate that the deposits I've mentioned for 2026 will largely shift into project financing during that year, indicating a transfer between these two categories. There will be an increase in project finance capability as a result of those figures. For the remaining spending, we are confident in our ability to manage it with our strong balance sheet and our capacity to fund it through free cash flow and available debt.

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

I believe that the fourth quarter was an unusual occurrence. We had good visibility, but it seemed to be the opposite of the typical seasonal trend. It appears that some individuals were completing our programs that they had postponed earlier in the year due to economic uncertainty and geopolitical concerns. Therefore, I view the increase we saw in the fourth quarter as somewhat atypical. As a result, EBITDA will decrease, which is expected, but this decline is primarily due to the completions business. The power business is anticipated to contribute significantly to EBITDA starting in 2027.

Marc, I would like to provide a bit more insight and share some key points to consider about this year. We are projecting pricing to be off low to mid-single digits, which gives a rough idea of its impact on our EBITDA. Additionally, we have already experienced a significant weather event this year. During the past weekend, we prioritized the safety of our crews and subcontractors in the field. Road conditions have been very challenging in Texas and Louisiana. Consequently, we made appropriate decisions regarding activity levels in close communication with our customers, which likely affected about two-thirds of our capacity, with most of the equipment operating in Texas and Louisiana for up to five days. It's still too early to determine the exact true impact of this situation, but it was certainly a significant event.

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

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

You mentioned confidence in deploying 3 gigawatts by 2029. Can you discuss how this additional 2 gigawatts might impact costs compared to the first gigawatt? Is there a rise in costs due to market tightness, or will it be similar to previous expenses?

No, I would say you shouldn't expect meaningful change in economics at all. One of the great things about having strong partners in the supply chain and maintaining strong relationships with our business counterparts is that those relationships remain stable. We are not in a position where the market fluctuations are affecting our ability to procure the equipment we need at costs aligned with our expectations. We have previously suggested around $1 million per megawatt for generation as a nice round number, possibly increasing to $1.5 million or $1.6 million based on the complexity of the load case for all-in with balance of plant. At this time, I would say our expectations regarding those costs have not changed.

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

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

Let me provide some additional insight into Ron's comments. It's important to understand the fundamental economics driving the industry. We now have a solution that offers power at grid parity. This grid parity has a much lower inflationary impact because most variable costs are linked to natural gas. The predicted inflation rate for gas over the next 15 years stands in stark contrast to the expectations for grid power prices over the same period. Gas prices are expected to remain relatively stable, whereas grid power prices are anticipated to rise significantly as we update a transmission system that's over 50 years old. These costs will likely be passed on directly to large customers or incorporated into overall system upgrades. Currently, we are at grid parity, and 5, 10, or 15 years from now, we expect our prices to be significantly lower than those of the grid. With our Coras system and our dedicated team, we can provide seamless integration with the grid. If there are specific benefits you want to leverage, we can help reduce your peak power expenses by taking advantage of periods when renewable energy is abundant. We offer a heat rate guarantee, ensuring that our pricing will never exceed a certain limit. During times when there is plenty of renewable energy, such as sunny days or windy conditions, we can purchase that cheap power and significantly lower your overall costs below the average grid pricing. Our solution is economically viable for the next 15 years, which is what appeals to our customers. They are highly focused on financial outcomes, and we deliver a winning solution that makes economic sense for them.

I wanted to get your perspective on the supply side for power generation assets. It seems like every day we're hearing about more OEMs entering the reciprocating engine and turbine space, discussing the conversion and repurposing of older jet engines to power data centers. This raises some concerns about potential oversupply in the market. However, it appears that you are developing an integrated power services infrastructure solution to strengthen your competitive advantage. Could you elaborate on what distinguishes your approach from the incoming supply and why we shouldn't be worried about the perception of excess supply in the market?

Thank you for the question, Derek. It's important to note that it's not simply a matter of providing supply. The complexity of the load and the various components necessary for success in power generation, particularly for a data center, is significant. It's more than just bringing in a used turbine modified for generation. We've discussed the many elements integral to our LPI platform, and the recent deals we've announced showcase the confidence others have in it. Vantage has evaluated the LPI platform and the range of capabilities we offer, which include midstream functions, packaging and supply chain management, power quality systems, and the technology we will implement. This technology is specifically tailored to the type of load we are addressing, including the grid interaction capabilities highlighted by Michael, along with our commercial flexibility. When considering our complete portfolio of services, it's clear that our LPI Power-as-a-Service platform is distinct from someone offering a gray market turbine with some generation attached. Therefore, we remain very confident in our position in the market and our ability to continue growing this business, even with the anticipated increase in supply. This new supply could actually help expedite our projects rather than prolonging the supply chain. However, in terms of competing with LPI and our role in the market, we are certainly not at risk.

Yes. I think the only thing that it will do, when you think by the time you take a gray market turbine and refurbish it to 0 hours, you're really not talking much difference in total costs, from the brand new version of it. And then obviously, all that does is actually speed up the supply timeline from the delays of expanding the turbine factories themselves. So that really just changes that. And the only thing that they will do with our partners and our ability to put generation into multiple sources of generation into our power solutions group will just enable us to speed our growth rather than slow it down. I think I'll take this as well. As you know, we're organic builders, right? That is our focus. We will develop partnerships where we've got very, very close partnerships. But very much along as we've built the frac business, look to us to add technology or things over time that make sense that really increase our vertical stack and increase our technological heft. So as we add things like that, those are the key things that will be small additions where they bring and they expand and they fit nicely within the puzzle that we have built.

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

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

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

I wanted to ask about the end markets for your power generation equipment. In the past, you've mentioned commercial and industrial applications and possibly deploying equipment for Permian microgrids. At this point, is it accurate to say that the majority of the 2 gigawatts you plan to deploy by 2029 will likely be for data center operators? I'm curious about your thoughts on the end markets for your power generation equipment.

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

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

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

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

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

Yes. Contracts are signed over time, but they will accelerate from now until the end of 2028 with the service. That's how you should think about it. You'll learn about the contract amounts when the announcements are made, but it will really depend on the increasing speed of our supply chain and our capability to install them in the field. When we discuss the 3 gigawatts by 2029, considering the timeline for our shipments arriving, once you take ownership in Europe, you have to ship them to the U.S., and then move them to the site. We will not stop in 2029, so that year will see continued acceleration beyond that point. We have already made our announcement for 2029.

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

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