Liberty Energy Inc.

Welcome to the Liberty Energy Earnings Conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. 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 And Jolie Voria, Strategic Finance and Investor Relations Lead. Please go ahead.

Thank you, Dave. Good morning and welcome to the Liberty Energy Second Quarter 2022 Earnings Conference Call. Joining us on the call are Chris Rice, Chief Executive Officer, Ron Gusick, President, and Michael Stock, Chief Financial Officer. Before we begin, I would like to remind all participants that some of our comments today may include forward-looking statements reflecting the company's view about future prospects, revenue, 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 relief and other public filings. Our comments today also include non-GAAP financial and operational measures. These non-GAAP measures, including EBITDA, adjusted EBITDA, and pre-tax return on capital employed are not a substitute for GAAP measures and may not be comparable to similar measures of other companies. A reconciliation of net income to EBITDA and adjusted EBITDA, and the calculation of pre-tax return on capital employed, as discussed on this call, are presented on our earnings release, which is available on our website. I will turn the call over to Chris. Thanks, Angelique.

Good morning, everyone, and thank you for joining us. I'm proud to discuss our second quarter of 2022 operational and financial results. The second quarter was a busy and exciting time as the Liberty team continued to deliver differential quality services in today's robust but operationally challenged environment. This translated into a notable milestone of fleet financial performance at levels that were last seen in 2018 as measured in annualized adjusted EBITDA per fleet. The hard work and dedication of our employees combined with deep relationships with our partners across the value chain, enabled us to achieve strong operational efficiency in an environment still impacted by supply chain challenges. In the second quarter, revenue was $943 million, a 19% sequential and 62% year-over-year increase. Net income for the quarter was $105 million. or 55 cents per fully diluted chair. Adjusted EBITDA for the quarter was 196 million, 114% increase over the prior quarter. Liberty's first half of 2022 is starting to reveal the value creation from our 2021 acquisitions and our insistence upon getting the business integrations done right, consistent with our focus on long-term results. We've positioned the company to deliver top-tier performance through cycles with a focus on free cash flow generation and maximizing returns. We're driving cash flow expansion that allows us to fund compelling organic investments to grow our competitive advantage while also returning cash to shareholders. Our strong financial results and a constructive outlook support the reinstatement of our return of capital program. beginning with a board-approved $250 million share buyback program. Our guiding principle is to maximize the value of a Liberty share. We believe the flexibility afforded by a share repurchase program gives us the ability to opportunistically act on a dislocated stock price, calibrated by market and business conditions. While the global economic recovery outlook has softened on reverberating impacts from higher inflation, rising interest rates, and the Russian invasion of Ukraine, oil and gas markets remain constructive. Eight years of underinvestment in upstream oil and gas production exacerbated by inept global policy initiatives aimed at incentivizing an energy transition has created a mismatch of supply and demand. Today, historically low global oil and gas inventories, limited OPEC spare production capacity, and a dearth of refining capacity are colliding with increased energy demand. Oil and natural gas demand growth is coming from the post-pandemic recovery in travel, China's emergence from its enforced COVID lockdowns, plus seasonal demand factors. These are all further magnified by the Russia-Ukraine conflict and the potential for sanctions imposed on Russian oil exports, coupled with Russia's decision to constrain natural gas pipeline exports to Europe. The greatest risk to our marketplace is a severe recession that leads to a drop in global demand for oil and natural gas. A moderate recession typically leads only to a slowing in the rate of demand growth for oil and natural gas, which would likely not be overly disruptive to our customers' activity given today's low inventory levels and tight supply and demand balances. The recovery in oil supply appears to be under greater threat than oil demand. North America is positioned to be the largest provider of incremental oil and gas supply, Today, E&P operators are evaluating the opportunity to deploy incremental capital in North America to modestly grow production while remaining focused on shareholder priorities. The fundamental demand call in North American oil and gas supply is strong. Supply is restricted by a tight frack market where equipment, supply chain, and labor constraints limit frack fleet availability and service quality available to our customers. Many frac companies are struggling to execute in today's environment. Moreover, operators desire ESG-friendly frac fleet technologies that provide the opportunity for both significant emissions reductions and large fuel savings. Liberty is uniquely positioned with the technology, scale, and vertical integration to meet demand for service quality and best-in-class technology. The freight market is near full utilization, and few service providers have the fleet capacity and supply chain reach to satisfy E&P operators' goals. Liberty was disciplined in restraining fleet reactivations in the post-COVID era of muted returns. Pricing has now recovered to where Liberty, in support of our customers' long-term development needs, is reactivating several of our recently acquired available fleets from the one steam transaction. Importantly, these long-term dedicated customers seek additional next generation fleets that are simply not available today in the market. And Liberty is providing an avenue to serve those customers and simultaneously drive free cash flow from these existing fleets to reinvest in our fleet modernization program and free cash flow. Liberty is also partnering with key customers on the deployment of two additional DigiPrac electric fleets in early 2023. Demand is very strong for the technically superior design Liberty developed throughout the downturn that drives better safety and efficiency, a rare commodity in a tight market. The strong track market and specific conversations with our customers give us confidence in the demand for Liberty services into the coming year. In the third quarter, we expect approximately 10% sequential revenue growth, primarily driven by fleet reactivations and modest net pricing increases. Third quarter margins are expected to improve from contribution of incremental fleets and modest price improvements, partially offset by ongoing supply chain, operational and inflationary pressures. Since the 2020 downturn, We have made the decision to refrain from reactivating fleets without the economics and longevity of business to support the onboarding of a new crew and the capital associated with restoring equipment. Today, we are one of the few players in the market with the equipment available to support a rising demand for frac services. We are also one of the only players with the supply chain capacity to support these services. as sand and other materials remain in short supply. Reactivating fleets is a long term strategic decision. They are not spot fleets, but rather fleets that will go to high quality, dedicated customers that are interested in a road to next generation solutions over time. Today, next generation equipment is in short supply and will remain so for the foreseeable future. To maintain the development program, producers seeking a frack crew are willing to take equipment available to support their operations in the near term. For Liberty, reactivated fleets are largely well-maintained Tier 2 diesel equipment that came with the one-stem acquisition. These fleets are coming online at favorable prices that support the hiring and training of a new crew for the long term, our next generation technology expansion program, and increasing our free cash flow generation. For a minimal capital outlay, the unit economics of these fleets generate free cash flow that provide a source of funding for investment in our fleet modernization program. Over the long term, next generation fleets will replace older technologies. While we already have one of the largest dual fuel fleets available, our equipment makeup will evolve to an entirely next-generation fleet over time. The fleet reactivations are not market share-driven decisions, but are investments in driving the increase in value of a share of Liberty stock by investing at the right time with the right economics. We are also excited to announce a $10 million investment in Furbo Energy, a next-generation geothermal technology company that develops geothermal assets for dispatchable, reliable, baseload grid power with low carbon intensity. With this investment, Liberty expands into supporting geothermal resource development, leveraging our extensive expertise in subsurface engineering and pressure pumping assets to help create dense underground networks to mine the Earth's heat for electricity production. We chose this investment opportunity because of our belief in the concept viability, the quality of FERBO's team, and the size of the potential resource already captured. Unconventional geothermal applications offer a potential pragmatic solution for a reliable source of low carbon electricity, and we're excited to be part of the journey. Our team is diligently working to support a world where we are seeing the greatest threat to energy security, reliability, and affordability in decades. Yesterday, we released our 2022 Veterans Human Lives Report, placing today's global energy security crisis in proper context and showcasing Liberty's leadership in clean energy technology innovation. Our drive is to bring awareness to the importance of energy access, expanding further into the topics of geopolitics, food security, and the four pillars of the modern world, cement, steel, plastics, and fertilizer, all critically enabled by hydrocarbons. ESG has always been part of our DNA since day one, and we bring to focus our innovation and investment in digital technology, engine technology, sand, logistics and supply chains, as well as our robust governance, and the people and culture that bind us. With that, I'd like to turn the call over to Michael Stock, our CFO, to discuss our financial results.