Liberty Energy Inc. Navigates Challenging Market Conditions with Innovative Technologies

Liberty Energy Inc., a leading integrated energy services and technology company, has reported its financial results for the three and nine months ended September 30, 2024. Despite facing headwinds in the energy markets, the company has continued to invest in innovative technologies and solutions to support its customers and drive long-term growth.

Financial Performance Overview

For the three months ended September 30, 2024, Liberty Energy reported revenue of $1.14 billion, a decrease of 6.4% compared to the same period in 2023. This decline was primarily attributable to lower service and materials pricing, partially offset by higher activity levels driven by increased fleet efficiency.

Cost of services, excluding depreciation, depletion, and amortization, decreased by 1.2% to $840.3 million, reflecting decreases in materials costs and lower repairs and maintenance expenses, partially offset by higher personnel costs related to the increased activity levels.

General and administrative expenses increased by 6.5% to $58.6 million, primarily due to higher corporate costs to support the company’s expanding service offerings, partially offset by a decrease in cash incentive and stock-based compensation expenses.

Depreciation, depletion, and amortization expense increased by 16.0% to $126.4 million, driven by additional equipment placed in service, including the deployment of the company’s innovative digiTechnologies.

The company recorded a loss on disposal of assets of $6.0 million, compared to a gain of $3.8 million in the prior-year period, related to the disposal of used older technology field equipment.

Other expense, net increased by 67.0% to $11.3 million, primarily due to an unrealized loss on investments and higher interest expense related to the addition of finance lease liabilities.

Net income for the three months ended September 30, 2024, was $73.8 million, a decrease of 50.3% compared to the same period in 2023. The decrease in net income was primarily attributable to the lower revenue and higher expenses discussed above.

For the nine months ended September 30, 2024, Liberty Energy reported revenue of $3.37 billion, a decrease of 8.2% compared to the same period in 2023. The decrease in revenue was again driven by lower service and materials pricing, partially offset by higher activity levels.

Cost of services, excluding depreciation, depletion, and amortization, decreased by 4.4% to $2.46 billion, reflecting decreases in materials costs and lower repairs and maintenance expenses, partially offset by higher personnel costs.

General and administrative expenses increased by 1.9% to $169.3 million, primarily due to higher corporate costs, partially offset by a decrease in cash incentive and stock-based compensation expenses.

Depreciation, depletion, and amortization expense increased by 23.0% to $372.9 million, driven by additional equipment placed in service, including the deployment of the company’s digiTechnologies.

The company recognized a loss on disposal of assets of $6.1 million, compared to a gain of $7.0 million in the prior-year period, related to the disposal of used older technology field equipment.

Other expense, net decreased by 9.0% to $19.2 million, primarily due to an unrealized gain on investments, partially offset by higher interest expense related to the addition of finance lease liabilities.

Net income for the nine months ended September 30, 2024, was $264.1 million, a decrease of 43.1% compared to the same period in 2023. The decrease in net income was primarily attributable to the lower revenue and higher expenses discussed above.

Non-GAAP Financial Measures

Liberty Energy also reported EBITDA and Adjusted EBITDA, which are non-GAAP financial measures used to assess the company’s financial performance. EBITDA was $230.9 million for the three months ended September 30, 2024, compared to $314.2 million for the same period in 2023. Adjusted EBITDA was $247.8 million for the three months ended September 30, 2024, compared to $319.2 million for the same period in 2023. The decreases in EBITDA and Adjusted EBITDA were primarily due to the lower pricing and changes in activity levels discussed above.

For the nine months ended September 30, 2024, EBITDA was $741.9 million, compared to $939.9 million for the same period in 2023. Adjusted EBITDA was $765.9 million for the nine months ended September 30, 2024, compared to $960.6 million for the same period in 2023. The decreases in EBITDA and Adjusted EBITDA were also primarily due to the lower pricing and changes in activity levels.

Liquidity and Capital Resources

As of September 30, 2024, Liberty Energy had $23.0 million in cash and cash equivalents, a decrease of $13.8 million from December 31, 2023. The company’s primary sources of liquidity are cash flows from operations and borrowings under its $525.0 million revolving credit facility, the ABL Facility.

As of September 30, 2024, the company had $123.0 million outstanding under the ABL Facility, with $329.3 million of remaining availability. The company was in compliance with all debt covenants as of September 30, 2024.

Liberty Energy also has a share repurchase program authorized to repurchase up to $750.0 million of its outstanding Class A Common Stock through and including July 31, 2026. During the three and nine months ended September 30, 2024, the company repurchased and retired shares of Class A Common Stock for $39.4 million and $99.1 million, respectively, under this program.

Operational Highlights and Outlook

Despite the challenging market conditions, Liberty Energy has continued to invest in innovative technologies and solutions to support its customers and drive long-term growth. The company’s key operational highlights include:

• Deployment of its digiTechnologies, including the digiFrac and digiPrime pumps, which have approximately 25% lower CO2e emission profile than the company’s Tier IV dual-fuel fleets.
• Launch of Liberty Power Innovations LLC (LPI), an integrated alternative fuel and power solutions provider, to support the transition to the company’s digiFleets and the broader industry shift towards lower-cost and lower-emissions technologies.
• Ongoing development of proprietary databases and multi-variable statistical analysis technologies to provide differential insight into fracture design optimization for customers.
• Continued investment in its Liberty Quiet Fleet design, which significantly reduces noise levels compared to conventional hydraulic fracturing fleets.
• Expansion of its integrated supply chain, including proppant, chemicals, equipment, natural gas fueling services, logistics, and integrated software, to promote wellsite efficiency and productivity.

Looking ahead, the company expects the oil and natural gas markets to remain uncertain, with global oil demand forecasted to grow by approximately one million barrels per day in 2024 and 2025. While global oil production may be in a surplus in 2025, oil prices are expected to remain relatively rangebound and supportive of North American E&P activity.

In the natural gas markets, the commissioning of LNG export facilities in the U.S. and Canada is expected to stimulate gas activity in 2025 and support natural gas demand. However, higher natural gas prices may not be sustained should they incentivize the reversal of producer curtailments.

Amid this backdrop, Liberty Energy is well-positioned to navigate the market conditions with its innovative technologies and solutions. The company remains focused on developing and deploying its digiTechnologies, supporting the industry’s transition to lower-emissions technologies, and leveraging its integrated supply chain to drive efficiency and productivity for its customers.

Conclusion

Liberty Energy has demonstrated its resilience in the face of challenging market conditions, continuing to invest in innovative technologies and solutions to support its customers and drive long-term growth. While the company has faced headwinds in its financial performance, it remains committed to its strategic initiatives and is well-positioned to capitalize on the evolving energy landscape.