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 Anjali Voria, Strategic Finance and Investor Relations Lead. Please go ahead.

Thank you, Alison. Good morning, and welcome to the Liberty Energy Second Quarter 2023 Earnings Conference Call. Joining us on the call are Chris Wright, Chief Executive Officer, Ron Gusick, President, Michael Stock, Chief Financial Officer, and Ryan Godney, Chief Accounting 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 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, and adjusted 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 adjusted pre-tax return on capital employed, as discussed on this call, are presented in our earnings release, which is available on the investor section of our website. I will now turn the call over to Chris.

Good morning, everyone, and thank you for joining us for our second quarter 2023 operational and financial results. We executed on another quarter with strong financial results, and I'm especially proud of our operations team. for safely delivering the highest quarterly average daily pumping efficiency in our history, a high bar raised higher. Liberty achieved adjusted EBITDA of 311 million and fully adjusted, fully diluted earnings per share of 87 cents. Our success in growing our long-term competitive advantage is illustrated by our trailing 12-month adjusted pre-tax return on capital employed of 44%. Strong cash generation enables long-term investment, together with a strong return of capital program. In the second quarter, we returned $69 million to shareholders through the repurchase of 2.7% of shares outstanding, plus our quarterly dividends. Since the reinstatement of our return of capital program in July of 2022, including the initial $250 million buyback authorization and a subsequent upsize to $500 million in January, we have now returned $287 million to shareholders through cash dividends and the retirement of 9.7% of outstanding shares. We completed the initial repurchase authorization and now have 240 million of our buyback authorization remaining. The compounding effect of our last 12 months of share buybacks is evidenced by the 57% year-over-year increase in fully diluted earnings per share on a 45% increase in net income. We created a unique competitive position where we can take advantage of accretive, cyclical and secular investment opportunities, generating high returns while returning cash to shareholders and maintaining a strong balance sheet. We have a very simple philosophy of investing early in the cycle in strategic areas where we can leverage our expertise, bring differential technologies and services to our customers, improve efficiencies and create future competitive advantages. A latest example is the launch of our new division, Liberty Power Innovations. LPI provides CNG fuel and field gut fast processing services to deliver a reliable source of natural gas fuel in support of the rollout of our suite of DIGI technologies. Just as Liberty was founded as a solution to service quality challenges 11 years ago, LPI was an organic idea stemming from the need to find a solution to unreliable gas supply. LPI has made tremendous strides in the last few months. We've successfully integrated the April acquisition of SIREN into the LPI platform and have already seen a growing customer base for both drilling and completion needs. We're also on track to meaningfully increase our gas compression capacity in the Permian Basin in the third quarter and enter the DJ Basin later this year, readying ourselves with enough capacity to execute on a profitable multi-year growth plan. Our delivery and logistics capabilities are also growing with transportation equipment on order, increasing our fleet of CNG trailers and logistics services to deliver reliable fuel supply. We also have field gas processing and treating, which began in the Haynesville in support of our frac services. We have since added two additional field gas processing customers in the Permian. We're excited by the long-term business potential of the LPI platform. not only will it allow us to secure the supply chain of fuel that drives our DigiFleet technology transition, but it also positions us to take advantage of expanded opportunities beyond completions and eventually grow beyond the oil field. We're investing today for the future growth of the business by bringing together the right people and right technology to build a differential offering. Liberty was an early driver in the industry shift from diesel to natural gas technologies a decade ago. And today, the importance of natural gas-fueled equipment is more widely appreciated as a means to lower fuel costs and emissions. We continue to transition our fleet towards our natural gas-fueled Digi technologies. These technologies expand our earnings potential without meaningfully changing the customer's total well costs. with the savings from the diesel to natural gas arbitrage. As a reminder, we deployed our first DigiFleet comprising Digifrac electric pumps in the first quarter, and we're in the process of deploying our second DigiFleet, which is slightly delayed as a result of supply chain challenges. Our third and fourth fleet will follow during the second half of this year. We're also building DigiPrime hybrid pumps, anchored by the most efficient 100% natural gas engine available. These capital-efficient pumps can be used as the primary source of horsepower on location, alongside a few Digifrac electric pumps that will manage transient load and precision rate control. This fleet configuration will have the most efficient gas consumption, emissions, and fleet capital in the market. Digitechnologies, are liberty's platform for the future crack markets in north america are at a steady healthy activity levels after moderating a bit from late 2022 as commodity prices retreated from the 2022 peak crude oil prices are now at pre-russia ukraine war levels which has spurred private operators in oilier basins to reduce activity lower natural gas prices have also led to a curtailment of activity in gas basins. During the second quarter, we saw reduced fracked activity that resulted in increased white space on our calendar, resulting from customers changing development schedules, idiosyncratic drilling delays, and the redeployment of fleets from gassy to oilier basins. Even with these disruptions, the Liberty Operations team achieved a new quarterly record in average daily pumping efficiency. When our fleets were on location, our performance was the best it's been in our history, with more fleets safely pumping more minutes of the day than ever before. Looking ahead, activity in the second half is expected to be slightly lower than the first half. If our customer scheduled work reductions become larger, we may reduce active fleet count by one to three fleets in the second half of the year to balance demand. We will consolidate work to maximize the utilization of our crews. Our goal is to maintain the safest, most efficient operations, and we will do so by balancing the right numbers of crews to meet EMP customer demand. As we look forward, the rig count shows signs of stabilization as EMP operators are already benefiting from lower well costs from consumable inputs. and some are evaluating plans to pull forward completions activity. Lower operator well costs are not service price driven, but rather input costs, such as drill pipe, steel casing, cement, sand, and fuel. Liberty is working with our customers to help lower their costs while maintaining our margins. Our wet sand handling and delivery technologies are enabling proximity mining reducing total costs and environmental impact by shrinking the distance and truckloads required to move sand to the well site while eliminating the use of natural gas from the sand drying process. Our wet sand handling technology is agnostic to wet and dry sand, allowing us to provide our customers with the most cost-efficient source of sand for their wells. We also have other logistic initiatives underway to generate sustainable cost reductions for EMPs and increased returns for our shareholders. More broadly, global oil markets are signaling a constructive outlook on a tightening supply-demand balance. OPEC Plus supply cuts in recent months are beginning to take hold, and markets are anticipating a subsequent draw on global oil inventories. In the U.S., Slowing production growth, a drawdown of oil inventories, and a likely shift to refilling U.S. strategic petroleum reserves all aid the outlook. Despite recessionary risks, demand for oil remains resolute given several factors, including global travel trending towards pre-COVID levels, robust demand from India, and strength in emerging markets. China has also reached its highest level for oil demand in history, despite having grown at a slower pace than predicted a year ago. Underinvestment in global production capacity supports a resolute multi-year cycle for oil and gas. Relative to prior cycles, crack demand has a natural floor as the large majority of completions activity is simply offsetting normal production declines. operators are largely adhering to flat or very modest production growth targets. This combination underpins higher base levels of fracked fleet utilization and more insulation from commodity price volatility than in prior cycles. The current, more consolidated industry is also better prepared to navigate near-term softness in completions activity by reducing active fleet counts to balance the market and protect margins. In the second half of 2023, demand for crack fleets is expected to parallel recent recount trends at approximately a one-quarter lag. Natural gas markets likely don't meaningfully increase activity until 2024 in advance of rising LNG and Mexico exports. We anticipate North American completions activity will moderate in the second half of the year versus the first half. Service companies are reducing fleets in response, supporting a balanced frac market and largely stable pricing environment. Our internal bottoms-up industry analysis already shows a decline of industry frac demand for nearly 30 active fleets, and the industry has successfully navigated this softer activity. Liberty is well-positioned to navigate these trends. While Liberty may reduce fleets to adjust to lower activity levels should they persist, we do not expect meaningful change in service prices. Crack utilization has moderated but still remains high, and we see a strengthening macro in 2024. We expect continued healthy free cash flow and capital returns to our shareholders through opportunistic share repurchases and dividends. With that, I'd like to turn the call over to Michael Stock, our CFO, to discuss our financial results and outlook.