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 start 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 Vohria, Strategic Finance and Investor Relations Lead. Please go ahead.

Thank you, Ed. Good morning and welcome to the Liberty Energy fourth quarter and full year 2023 earnings call. Joining us on the call are Chris Wright, 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 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, adjusted pre-tax 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 and the calculations of adjusted pre-tax return on capital employed and cash return on capital invested as discussed on this call are included in our press release available on our investor relations website. I would now like to turn the call over to Chris.

Good morning, everyone, and thank you for joining us to discuss our full year and fourth quarter 2023 operational and financial results. Liberty delivered a second consecutive year of record earnings per share. Our portfolio of advanced technology and vertical integration enhanced our superior service quality and drove record breaking operational efficiencies. We delivered full year adjusted pre-tax return on capital employed of 40% and cash return on capital employed of 34%, both exceeding the prior year. Revenue was $4.7 billion in 2023. Net income of $556 million increased 39% year over year, and our fully diluted earnings per share rose by 49% year-over-year to $3.15. Our EPS grew faster than net income due to reduced share count, showcasing the power of our buyback program. We concluded the year with adjusted EBITDA of $1.2 billion at the high end of our mid-year guidance range, and we significantly increased our cash flow. We went public six years ago after a record year in 2017. Since then, we have tripled our revenue, quadrupled our EBITDA, and more than quadrupled our pre-tax net income. These financial records were made possible by the simply outstanding operational performance of Team Liberty. Every quarter in 2023 set a new quarterly pumping efficiency record. I couldn't be more proud to be on this team. Strong free cash flow generation supported our leading return of capital program. Since program reinstatement in July 2022, we have distributed $375 million to shareholders through buybacks and cash dividends. We have already retired 12% of the shares outstanding when we announced the program in July 2022. equivalent to 33% of the shares issued for the acquisition of Schlumberger's one STEM business three years ago. We also upsized our share repurchase authorization by 50% to $750 million and increased our quarterly dividend by 40% beginning in Q4 2023. Liberty brings together leading pump technology, mobile power generation, and CNG fuel supply, a unique value proposition to maximize efficiency, reduce emissions, and lower fuel costs. By the end of 2024, we expect 90% of our fleets will be primarily powered by natural gas. The success of our technology transition is buttressed by dependable natural gas fuel supply through Liberty Power Innovations. We plan to double LPI's capacity in 2024 to meet rising demand. Liberty is unique in the industry to own the technology and assets for the complete value chain in the move to natural gas and grid powered frac. Our strong belief is that controlling everything from fuel and logistics to power production and pump technology will drive our competitive advantage further and deliver industry-leading returns. This is a distinctly different approach compared to some frac companies who lease technology and contract power generation and gas supply from other providers. The reason Liberty has been the most successful frac company of the last decade is our ability to innovate faster than the rest of the industry and drive strong returns for both our customers and shareholders. Natural gas is by far the fastest growing energy source in the world. Consistent with this is the rising demand to power frack fleets with natural gas. Eleven years ago, we deployed our first dual fuel fleet, recognizing the growing importance of natural gas as a lower emission, lower cost, reliable fuel source. We then set out to design and build our 100% natural gas powered DigiFleets fit for the rigors of the oil field. This required a novel approach as some operators desire solutions to match their ambitions of developing a microgrid to augment their oil field operations, while others aim simply to lower emissions and fuel costs. Our efforts culminated in two complimentary pump technologies that comprise our DigiFleets. and satisfy these multifaceted demands with the most innovative and capital-efficient solution. Mobility requirements, coupled with varying power demands based on job design, led to our development of DigiPower mobile generators that can be scaled up or down, providing the highest thermal efficiency and lowest emissions modular solutions in the industry. Today, there's a lack of natural gas transportation and logistics infrastructure to meet the just-in-time needs of the frac site. We launched and are rapidly growing LPI to solve this challenge and provide a virtual pipeline of natural gas to our fleets and other customer needs. While innovation from pumps to power generation to gas logistics are independently compelling investments, Together, these comprise a complete infrastructure to deliver a service unmatched in the industry. The success of our Digi technologies and LPI in 2023 marked a turning point for Liberty. The demand pull for our Digi fleets continues to gain steam. We now have four Digi fleets deployed across two basins, with two more being rolled out as we speak. By the end of the year, the combination of Digi fleets and dual fuel fleets will make up 90% of our total fleet composition, dramatically shifting our diesel to gas consumption and driving demand for LPI services. Entering 2024, the fundamental outlook for the frac industry is stable. Service prices remain relatively steady as the supply of marketed fleets was right-sized in response to lower completion activity. Many fleets exited the market both from accelerated attrition of older equipment and the deliberate idling of underutilized fleets to match customer demand. Operators continue to demand technologies that provide significant emissions reductions and fuel savings. Liberty's digitechnologies, LPI business, integrated service offering, and scale position us as the provider of choice. Against this backdrop, demand for Liberty services is positioned to rise, albeit slowly, from current levels. Engineering and innovation have led to improved shale wells via completion design optimization, faster completion, and longer laterals, all helping to offset the gradual decline in average reservoir quality being drilled. The trend toward higher intensity fracs raises demand for horsepower, serving to keep frac assets utilized and drive service company returns. Range-bound oil prices have not meaningfully changed E&P operator plans to deliver flat or at most modest production growth. As North American oil production reaches record levels, more frac activity will be required simply to offset production declines. Near-term natural gas markets are under pressure, but domestic power demand growth and increased LNG exports are expected to lead to a more robust 2025. Long-term demand for reliable, affordable energy continues to rise with increasing global living standards. North American operators have been and are likely to continue to be the largest provider of incremental oil and gas supply globally. These trends should support a durable multi-year cycle ahead for services. Looking to the first quarter, we anticipate flattish sequential revenue and adjusted EBITDA, driven by seasonal trends and a cautious start for EMP activity. This is expected to be followed by a modest increase in R activity in subsequent quarters. For the full year, we expect strong free cash flow generation and continued investment in DIGI technologies and our LPI business. We are confident that our technology transition better positions us to deliver superior services to our customers and durable returns over cycles. Global energy demand continues to rise as the world's 7 billion less energized aspire to attain the energy-rich lifestyles of the lucky 1 billion. Liberty's growing technical and service quality prowess brings us growing business opportunities to help expand the supply of reliable, affordable energy to meet these demands. Our investment in and partnership with FERVO, an enhanced geothermal energy company, has been going very well. Pioneering the shale revolution ultimately came down to engineering and creating a complex underground plumbing network of hydraulic fractures dense enough to harvest natural gas and oil from ultra-low permeability rocks. Several of us at Liberty were lucky to be involved at the beginning in solving this technical challenge that unleashed the shale revolution. The results has been a transformation of the global energy and geopolitical landscape in ways previously unimagined. Shale technology made natural gas the fastest growing global source of energy over the last 12 years. The shale revolution also made oil the second fastest growing source of energy over the same time period. More on this in my closing remarks. Our partnership with Vrbo, which began informally several years ago, involves the same technical and implementation challenges. To harvest vast quantities of heat from underground rocks also requires a precisely engineered underground network of fractures. Heat conduction through rocks is very slow, analogous to ultra-low permeability. But convective heat transfer from fracture faces can be scaled up to high rates. Hence, the solution is a dense network of underground fractures which connect cold water injector wells with hot water and steam producer wells. Another new large-scale energy resource is becoming accessible via the innovations from the shale revolution. We are excited about our furboat partnership and how far this next generation of geothermal will travel in the years ahead. Another application of Liberty shale technology expertise is our partnership with Tamborin to crack the code in Australia's Beteloo shale gas basin. The geology and geography are different, of course, but the fundamental challenge is the same. We are excited about the upside if our partnership can succeed in bringing huge new gas resources to Australia and the nearby Asian LNG markets. Liberty history has been all about innovation and partnership. Our future will be, too. Earlier this month, we launched the Bettering Human Lives Foundation to address the most urgent challenges of energy access. The foundation strives to increase access to clean cooking fuels by supporting technology development and entrepreneurs in Africa. We are excited by the prospect of uplifting women, children, and communities by improving health, safety, and quality of life. With that, I'd like to turn the call over to Michael Stock, our CFO, to discuss our financial results and outlook.