Liberty (LBRT) 2025年第二季度收益电话会议记录

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DATE

星期四，2025年7月24日 上午10点 ET

CALL PARTICIPANTS

- President — Ron Gusek

- Chief Financial Officer — Michael Stock

Full Conference Call Transcript

Ron Gusek: Good morning, everyone, and thank you for joining us to discuss our second quarter 2025 operational and financial results. Liberty delivered an exceptional second quarter amidst increased macroeconomic uncertainty and energy sector volatility. Revenue and adjusted EBITDA increased 7% and 8% sequentially, respectively, against an industry backdrop of softening completions activity. This strong performance is a direct reflection of the outstanding contributions of our team, safely driving record efficiencies and increased utilization that more than offset industry pricing headwinds. Our outstanding performance with lasting customer loyalty and reinforces our position as the fleet of choice in a competitive market. Tariff policies, the accelerated unwind of OPEC plus production and geopolitical tension drove renewed uncertainty in the energy sector.

During the quarter, we collaborated as partners with our customers to drive greater efficiencies, which is likely to grow our market share as activity pulls back in the second half of 2025. Amidst market pressures and near-term reductions in customer activity, we are planning to modestly reduce our deployed fleet count and reposition this horsepower to support expanded demand from long-term partners for our simul-frac offering. We are leveraging our full suite of completion products and services, including frac, wireline, sand, chemicals, logistics, fueling services and top-tier engineering and diagnostic tools to drive increased engagement with our customers. We have created a unique competitive position that allows us to stay agile in dynamic markets.

We are excited to bolster our technology leadership with rapid progress on our cutting-edge digiPrime enhancement with the industry's first variable speed natural gas reciprocating engine. This is truly the next wave of technology in frac fleet design. We now have 2 variable speed digiPrime units pumping in the field that have together completed over 1,700 hours of testing in the high- pressure environment of West Texas. These units provide precision rate control and increased torque, increasing both operational and capital efficiency. This latest technology advancement expands our ability to offer a 100% natural gas solution. Our successful development and field testing during the second quarter reflect our commitment to continued innovation in high-efficiency, low- emission technologies.

Three years on from our first digiFleet deployment, the results continue to exceed expectations. The platform is delivering substantial, measurable benefits, most notably in the durability and performance of key components. One of the core advantages of operating on 100% natural gas is the reduced wear and tear on engine components compared to diesel. Natural gas combustion produces fewer particulates, extends oil life and significantly reduces engine stress, factors that contribute to engine lifespans expected to be 2 to 3x longer than conventional diesel and dual fuel-powered systems. We are already seeing this play out in the field. Digifleet power ends are lasting twice as long as conventional power ends while managing significantly higher load.

Similarly, fluid ends are achieving twice the horsepower hours of their conventional counterparts. These early results are clear evidence of the operational and capital efficiency gains enabled by our digiFleet. They directly support our mission to deliver the lowest total cost of service to our customers while setting a new standard for sustainable performance in the field. We also completed a successful field trial of the industry's first last mile sand slurry system. The system performed as designed, consistently exceeding delivery volumes in conjunction with our proprietary water handling system. By transporting sand slurry via pipe, it is expected to reduce costs, improve delivery reliability and decrease dust, emissions and road maintenance for our customers.

Growing demand from data centers and industrial users necessitates a collaborative approach to address power service requirements that increasingly surpass the traditional utility offering. During the second quarter, we announced 2 strategic alliances for the development of power facilities. In Pennsylvania, we are collaborating with Range Resources and Imperial Land Corporation to provide power services to anchor a strategically located industrial park tailored for scalable development with advantaged access to Marcellus natural gas. In Colorado, our strategic alliance with AltitudeX Aviation Group will support a proposed development at the Colorado Air and Space Port powered by a Liberty Microgrid.

These partnerships address the barriers that commercial and industrial developers face, including access to suitable land, integrated power management solutions and reliable fuel supply. Together, we offer a turnkey solution that combines on-site generation, market integration and infrastructure readiness to meet the evolving needs of high-demand users. Our recently announced collaboration with Oklo represents an exciting path towards delivering integrated next-generation power solutions for sophisticated large load customers. This comprehensive approach combines the speed to market of Liberty's Forte distributed natural gas power and high-performance load management solution to meet immediate demand with a path to integrate grid power management and baseload small modular nuclear reactors with Oklo's Aurora powerhouses.

This complete solution is designed for data centers, industrial sites and utility scale facilities, providing rapid deployment, enhanced grid optimization and long-term price stability. This ultimately enables a seamless path to reduce carbon intensity without sacrificing reliability and flexibility. Liberty was an early investor in Oklo, committing $10 million in 2023. After evaluating companies and technologies across the advanced nuclear space, we identified Oklo's innovative business model, small and scalable design and differentiated technology as an important strategic solution to meet the growing power demands of large-scale energy users. We are thrilled to be aligned at a pivotal moment where collaboration can drive meaningful impact.

Together, we will deliver an unprecedented fully integrated power and grid management solution, offering large-scale energy users a new level of reliability, scalability and flexibility that simply hasn't existed before. While oil markets continue to evolve in response to dynamic global economic and geopolitical developments, North American production has remained relatively stable. As the world's largest supplier of oil and natural gas, U.S. producers continue to play a vital role in delivering reliable energy to global markets, supporting domestic industrial activity and power demand and providing strategic leverage in the geopolitical landscape.

Recent events ranging from shifting tariff policies to rising regional hostilities and mixed economic signals affecting global oil demand have not yet driven a meaningful North American production response. Larger, well-capitalized producers with strong balance sheets and highly efficient operations enjoy healthy well economics, enabling them to weather commodity price volatility. Intra-quarter price fluctuations created hedging opportunities, further tempering supply side reactions. Producers are targeting a relatively flat production profile, sustaining a baseline of frac activity to offset the natural decline of producing wells. Completions activity is anticipated to gradually slow during the second half of the year, reflecting disciplined capital deployment and contributing to market pricing pressures on services.

This slowdown in activity is expected to accelerate equipment cannibalization and attrition, which fundamentally improves the supply and demand dynamics within the services industry over the cycle. Today's larger producers require a technically superior offering to meet the rising demand for efficiencies and engineering support that few service companies are positioned to deliver. Liberty's unmatched portfolio breadth, integrated services and technical innovation uniquely enable us to deliver greater value to our customers and drive outperformance. As we look ahead, the strategic investments we have made in completions through cycles enhances our ability to support customers in an evolving landscape.

We are leveraging our integrated suite of completion services, cutting-edge technologies, industry-leading partnerships and the dedication of our exceptional team to navigate market uncertainties. Within our power business, LPI delivers a robustly engineered end-to-end energy solution, uniquely integrating on-site generation and load management, ISO market participation and advantaged retail supply, creating a comprehensive flexible approach that redefines reliability and cost efficiency in deregulated regions. We are excited by LPI's future growth and its ability to contribute to our track record of delivering superior long-term returns while balancing disciplined investment with a strong balance sheet through cycles. I will now turn the call over to Michael to discuss our financial results and outlook.

Michael Stock: Good morning, everyone. I'm pleased to share that we achieved solid financial results despite the ever-changing macro landscape of the second quarter. Liberty's activity levels climbed quarter-over-quarter despite industry-wide frac activity declines observed during the period. We saw a resulting increase in our market share, a trend we expect to continue in the back half of the year given our differential service offering and expected relative outperformance. We also made significant progress in our power business, cultivating long-term relationships that will drive future successes. In the second quarter, revenue of 2025 -- revenue was $1 billion compared to $977 million in the prior quarter.

Our results increased 7% sequentially as higher activity in nearly all our business lines more than offset pricing headwinds and softer conditions in the Permian sand market. Second quarter net income of $71 million compared to $20 million in the prior quarter. Adjusted net income of $20 million compared to $7 million in the prior quarter and excludes $51 million of tax-effected gains on investments. Fully diluted net income per share was $0.43 compared to $0.12 in the prior quarter. Adjusted net income per diluted share was $0.12 compared to $0.04 in the prior quarter. Second quarter adjusted EBITDA was $181 million compared to $168 million in the prior quarter, an 8% sequential increase.

General and administrative expenses totaled $58 million in the second quarter compared to $66 million in the prior quarter, which included a noncash stock-based compensation of $6 million. G&A decreased $7 million from the prior quarter, primarily due to accelerated modified stock-based compensation associated with Chris' departure in the first quarter. Other income items totaled $58 million for the quarter, inclusive of $68 million on gains and investments, offset by interest expense of approximately $10 million. Second quarter tax expense was $24 million, approximately 25% of pretax income. Cash taxes were $20 million.

In the second half of 2025, we now expect tax expense rate to be approximately 25% of pretax income and approximately no payment on cash taxes in the second half of the year. We ended the quarter with a cash balance of $20 million and a net debt of $140 million. Net debt decreased by $46 million from the prior quarter. Second quarter uses of cash included capital expenditures and $13 million of cash dividends. Amidst market uncertainties, we elected to refrain from share buybacks to allow a period of assessment while focusing on the execution of our long-term strategic plans. We will continuously monitor evolving macroeconomic conditions and remain flexible and value-focused in our buyback approach.

Total liquidity at the end of the quarter, including availability under the credit facility was $276 million. Subsequently, in July 2025, Liberty expanded its credit facility in support of strategic growth in power generation with a $225 million increase in our aggregate commitments to $750 million, subject to borrowing base limitations. Net capital expenditures were $134 million in the second quarter, which included investments in digiFleet, capitalized maintenance spending, LPI infrastructure and other products. We had approximately $3 million of proceeds from asset sales in the quarter and $51 million of proceeds from the sale of equity securities.

We now expect total capital expenditures for 2025 of approximately $575 million, approximately $75 million less than planned, roughly evenly distributed between reduced completions CapEx and delays in delivery of power generation relative to expectations in January. As we approach 2026, we will assess market volatility and implications for completions CapEx while continuing to lean into the growth potential of our Power business. After a strong uptick in the second quarter, we expect third quarter revenue and EBITDA to soften sequentially. Many service providers that had already experienced white space during the second quarter were quick to respond unconstructively, resulting in pricing headwinds.

As a result, the macroeconomic developments over the last 3 months, we are withdrawing our full year EBITDA target range provided in January, and we'll provide additional color on our fourth quarter expectations on our next earnings update. In spite of the anticipated frac market softness, we are encouraged by the opportunities ahead and our ability to create value. We are confident in our ability to demonstrate continued outperformance. We are working diligently alongside our customers to provide best-in-class service and engineered solutions that respond to evolving well economics and drive more entrenched relationships with these customers.

Our power opportunities continue to expand, and we're excited by the relationships we are building that will position us to deliver comprehensive integrated long-term solutions. We are deeply committed to generating superior returns for our shareholders over the cycles. I will now turn the call back to the operator for Q&A, after which Ron will have some closing comments.

Operator: [Operator Instructions] Our first question will come from Stephen Gengaro with Stifel.

Stephen David Gengaro: So 2 for me that are probably connected, and we get asked this a lot, so I'll ask you. When we think about the power generation side of the business, can you talk about, one, sort of what the current sor