UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~March 31, 2021

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File No. 001-38081

Liberty Oilfield Services Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

81-4891595

(State or Other Jurisdiction of
Incorporation or Organization)

(I.R.S. Employer
Identification No.)

950 17th Street, Suite 2400

Denver, Colorado

80202

(Address of Principal Executive Offices)

(Zip Code)

(303) 515-2800

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to section 12(b) of the Act:

Title of each class

Trading symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.01

LBRT

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒ ☐			Accelerated filer ☐☒			Non-accelerated filer ☐			Smaller reporting company ☐

Emerging growth company ☐ (Do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act): ☐ Yes ☒ No

As of ~~July 24, 2020,~~April 23, 2021, the ~~registrant~~Registrant had ~~84,853,162~~169,890,097 shares of Class A Common Stock and ~~28,080,525~~10,280,825 shares of Class B Common Stock outstanding.

Our Class A Common Stock is traded on the New York Stock Exchange under the symbol “LBRT.” There is no public market for our Class B Common Stock.

Table of Contents

TABLE OF CONTENTS


		Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive (Loss) Income	3
	Condensed Consolidated Statements of Changes in Equity	34
	Condensed Consolidated Statements of Cash Flows	45
	Notes to Condensed Consolidated Financial Statements	56

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2022
Item 3.	Quantitative and Qualitative Disclosure about Market Risk	2928
Item 4.	Controls and Procedures	2928

PART II	OTHER INFORMATION	3029
Item 1.	Legal Proceedings	3029
Item 1A.	Risk Factors	3029
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3229
Item 3.	Defaults Upon Senior Securities	3229
Item 4.	Mine Safety Disclosures	3229
Item 5.	Other Information	3229
Item 6.	Exhibits	3330
SIGNATURES		3431

Table of Contents

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q ~~(the “Quarterly~~(“Quarterly Report”) and certain other communications made by us ~~contains~~contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange of 1934, as amended (the “Exchange Act”), including statements about our growth including from the OneStim Acquisition (as defined below), expected performance, future operating results, oil and natural gas demand and prices, future global economic conditions, the impacts of the COVID-19 pandemic, improvements in operating procedures and technology, the business strategies of our customers, in addition to other estimates, ~~beliefs,~~ and ~~expected performance.~~beliefs. For this purpose, any statement that is not a statement of historical fact should be considered a forward-looking statement. We may use the words ~~“expect,”~~ “estimate,” “outlook,” “project,” ~~“plan,”~~ “position,” ~~“may,~~“potential,” “likely,” “believe,” “anticipate,” “plan,” “expect,” “intend,” “achievable,” “anticipate,” “may,” “will,” “continue,~~” “potential,” “likely,~~” “should,” “could” and similar expressions to help identify forward-looking statements. We cannot assure you that our assumptions and expectations will prove to be correct. Important factors could cause our actual results to differ materially from those indicated or implied by forward-looking ~~statements.~~statements, including but not limited to the risks described in this Quarterly Report and other filings that we make with the U.S. Securities Exchange Commission (the “SEC”). We undertake no intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise and readers should not rely on the forward-looking statements as representing the Company’s views as of any date subsequent to the date of the filing of this ~~Quarterly~~Annual Report. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events.

~~Forward-looking statements may include statements about:~~

•~~our business strategy;~~

•~~our operating cash flows, the availability of capital, and our liquidity;~~

•~~our future revenue, income, and operating performance;~~

•~~our ability to sustain and improve our utilization, revenue, and margins;~~

•~~our ability to maintain acceptable pricing for our services;~~

•~~our future capital expenditures;~~

•the level of capital spending by oil and gas companies, including significant recent reductions in capital expenditures by oil and gas producers in response to commodity prices and dramatically reduced demand;

•~~our ability to finance equipment, working capital, and capital expenditures;~~

•~~competition and government regulations;~~

•~~our ability to obtain permits and governmental approvals;~~

•~~pending legal or environmental matters;~~

•~~trends and volatility in oil and natural gas prices, and our ability to manage through such volatility;~~

•~~acquisitions;~~

•~~general economic conditions;~~

•~~credit markets;~~

•~~demand for services in our industry;~~

•~~our ability to successfully develop our research and technology capabilities and implement technological developments and enhancements;~~

•~~uncertainty regarding our future operating results;~~

•~~return of capital to stockholders;~~

•the severity and duration relating to the impacts of the novel strain of coronavirus (“COVID-19”) pandemic and related economic repercussions on our business, operations and personnel and the resulting severe disruption in the oil and gas industry and negative impact on demand for oil and gas, which is negatively impacting our business;

•operational challenges relating to the COVID-19 pandemic and efforts to mitigate the spread of the virus, including logistical challenges, protecting the health and well-being of our employees, remote work arrangements, performance of contracts and supply chain disruptions; and

•~~plans, objectives, expectations, and intentions contained in this Quarterly Report that are not historical.~~

We caution you that these forward-looking statements are subject to risks and uncertainties, most of which are difficult to predict and many of which are beyond our control. These risks include, but are not limited to, decline in demand for our services, the cyclical nature and volatility of the oil and natural gas industry, a decline in, or substantial volatility of, oil and natural gas commodity prices, environmental risks, regulatory changes, the inability to comply with the financial and other covenants and metrics in our Credit Facilities (as defined herein), cash flow and access to capital, the timing of development expenditures, and the other risks described under “Item 1A. Risk Factors” in this Quarterly Report, as well as in our Annual

~~Table of Contents~~

~~Report on Form 10-K for the year ended December 31, 2019 (the “Annual Report”) and contained in our other filings with the U.S. Securities and Exchange Commissions (the “SEC”).~~

All forward-looking statements, expressed or implied, included in this Quarterly Report are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that we or persons acting on our behalf may issue.

~~iii~~ii

Table of Contents

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements ~~(Unaudited)~~

LIBERTY OILFIELD SERVICES INC.

Condensed Consolidated Balance Sheets

(~~Dollars in~~In thousands, except share data)

(Unaudited)


		June 30, 2020		December 31, 2019			March 31, 2021			December 31, 2020
Assets	Assets								Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	124,504	$	112,690	Cash and cash equivalents	$	69,534		$	68,978
Accounts receivable—trade, net of allowances for credit losses of $2,930 and $1,053, respectively		58,569		204,413
Accounts and notes receivable—related party		1,314		9,629
Accounts receivable—trade, net of provision for credit losses of $773 and $773, respectively						Accounts receivable—trade, net of provision for credit losses of $773 and $773, respectively	200,711			244,433

Unbilled revenue	Unbilled revenue	8,636		38,868		Unbilled revenue	135,753			69,516

Inventories	Inventories	81,167		88,547		Inventories	129,338			118,568
Prepaid and other current assets		25,500		34,827
Prepaid and other current assets (including $4,417 and $24,708, respectively, from related parties)						Prepaid and other current assets (including $4,417 and $24,708, respectively, from related parties)	47,887			65,638
Total current assets	Total current assets	299,690		488,974		Total current assets	583,223			567,133
Property and equipment, net	Property and equipment, net	613,136		651,703		Property and equipment, net	1,105,938			1,120,950
Other assets		30,704		34,339

Finance lease right-of-use assets	Finance lease right-of-use assets	32,921		55,337		Finance lease right-of-use assets	36,155			38,733
Operating lease right-of-use assets	Operating lease right-of-use assets	74,669		53,076		Operating lease right-of-use assets	69,996			75,878
Deferred tax assets						Deferred tax assets	43,514			5,360
Other tax asset						Other tax asset	77,949			81,888
Total assets	Total assets	$	1,051,120	$	1,283,429	Total assets	$	1,916,775		$	1,889,942
Liabilities and Equity	Liabilities and Equity					Liabilities and Equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable		$	27,381	$	117,613
Accrued liabilities:
Accrued vendor invoices		10,854		42,753
Operational accruals		9,496		26,753
Accrued salaries and benefits		8,021		28,805

Accrued interest and other (including payables to related parties of $2,878 and $1,329, respectively)		8,487		10,643

Current portion of long-term debt, net of discount of $1,397 and $1,341, respectively		353		409
Accounts payable (including $1,699 and $0, respectively, to related parties)						Accounts payable (including $1,699 and $0, respectively, to related parties)	$	184,799		$	193,338
Accrued liabilities (including $2,811 and $0, respectively, to related parties)						Accrued liabilities (including $2,811 and $0, respectively, to related parties)	166,193			118,383
Current portion of long-term debt, net of discount of $1,380 and $1,386, respectively						Current portion of long-term debt, net of discount of $1,380 and $1,386, respectively	370			364
Current portion of finance lease liabilities	Current portion of finance lease liabilities	15,633		23,646		Current portion of finance lease liabilities	19,197			20,580
Current portion of operating lease liabilities	Current portion of operating lease liabilities	20,727		15,873		Current portion of operating lease liabilities	22,990			23,481
Total current liabilities	Total current liabilities	100,952		266,495		Total current liabilities	393,549			356,146
Long-term debt, net of discount of $1,745 and $2,485, respectively, less current portion		105,596		105,731
Long-term debt, net of discount of $711 and $1,054, respectively, less current portion						Long-term debt, net of discount of $711 and $1,054, respectively, less current portion	105,317			105,411
Deferred tax liability	Deferred tax liability	14,887		19,659		Deferred tax liability	0			0
Payable pursuant to tax receivable agreements, including payables to related parties of $20,579 and $23,797, respectively		45,678		48,481
Payable pursuant to tax receivable agreements (including $52,997 and $27,173, respectively, to related parties)						Payable pursuant to tax receivable agreements (including $52,997 and $27,173, respectively, to related parties)	84,668			56,594
Noncurrent portion of finance lease liabilities	Noncurrent portion of finance lease liabilities	12,898		24,884		Noncurrent portion of finance lease liabilities	9,752			11,318
Noncurrent portion of operating lease liabilities	Noncurrent portion of operating lease liabilities	51,152		36,687		Noncurrent portion of operating lease liabilities	45,754			50,430
Total liabilities	Total liabilities	331,163		501,937		Total liabilities	639,040			579,899
Commitments & contingencies (Note 13)

Commitments & contingencies (Note 15)						Commitments & contingencies (Note 15)	0			0
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred Stock, $0.01 par value, 10,000 shares authorized and NaN issued and outstanding	Preferred Stock, $0.01 par value, 10,000 shares authorized and NaN issued and outstanding	—		—		Preferred Stock, $0.01 par value, 10,000 shares authorized and NaN issued and outstanding	0			0
Common Stock:	Common Stock:					Common Stock:
Class A, $0.01 par value, 400,000,000 shares authorized and 84,853,084 issued and outstanding as of June 30, 2020 and 81,885,384 issued and outstanding as of December 31, 2019		848		819
Class B, $0.01 par value, 400,000,000 shares authorized and 28,080,525 issued and outstanding as of June 30, 2020 and 30,638,960 issued and outstanding as of December 31, 2019		281		307
Class A, $0.01 par value, 400,000,000 shares authorized and 169,260,130 issued and outstanding as of March 31, 2021 and 157,952,213 issued and outstanding as of December 31, 2020						Class A, $0.01 par value, 400,000,000 shares authorized and 169,260,130 issued and outstanding as of March 31, 2021 and 157,952,213 issued and outstanding as of December 31, 2020	1,692			1,579
Class B, $0.01 par value, 400,000,000 shares authorized and 10,280,825 issued and outstanding as of March 31, 2021 and 21,550,282 issued and outstanding as of December 31, 2020						Class B, $0.01 par value, 400,000,000 shares authorized and 10,280,825 issued and outstanding as of March 31, 2021 and 21,550,282 issued and outstanding as of December 31, 2020	103			216
Additional paid in capital	Additional paid in capital	435,885		410,596		Additional paid in capital	1,212,354			1,125,554
Retained earnings		94,817		143,105
(Accumulated deficit) retained earnings						(Accumulated deficit) retained earnings	(10,915)			23,288
Accumulated other comprehensive income						Accumulated other comprehensive income	1,318			0
Total stockholders’ equity	Total stockholders’ equity	531,831		554,827		Total stockholders’ equity	1,204,552			1,150,637
Non-controlling interest	Non-controlling interest	188,126		226,665		Non-controlling interest	73,183			159,406
Total equity	Total equity	719,957		781,492		Total equity	1,277,735			1,310,043
Total liabilities and equity	Total liabilities and equity	$	1,051,120	$	1,283,429	Total liabilities and equity	$	1,916,775		$	1,889,942

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

LIBERTY OILFIELD SERVICES INC.

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019		2020		2019			2021		2020
Revenue:	Revenue:									Revenue:
Revenue	Revenue	$	88,362	$	537,322	$	560,706	$	1,066,153	Revenue	$	550,852	$	472,344
Revenue—related parties	Revenue—related parties	—		4,825		—		11,142		Revenue—related parties	1,180		0
Total revenue	Total revenue	88,362		542,147		560,706		1,077,295		Total revenue	552,032		472,344
Operating costs and expenses:	Operating costs and expenses:									Operating costs and expenses:
Cost of services (exclusive of depreciation and amortization shown separately below)	Cost of services (exclusive of depreciation and amortization shown separately below)	89,518		426,444		482,234		855,743		Cost of services (exclusive of depreciation and amortization shown separately below)	498,935		392,716
General and administrative	General and administrative	18,064		23,989		46,677		46,077		General and administrative	26,359		28,613
Severance and related costs		9,057		—		9,057		—
Depreciation and amortization		44,931		40,368		89,762		78,755
Loss on disposal of assets		334		143		232		1,366
Transaction, severance and other costs										Transaction, severance and other costs	7,621		0
Depreciation, depletion and amortization										Depreciation, depletion and amortization	62,056		44,831
Gain on disposal of assets										Gain on disposal of assets	(720)		(102)
Total operating costs and expenses	Total operating costs and expenses	161,904		490,944		627,962		981,941		Total operating costs and expenses	594,251		466,058
Operating (loss) income	Operating (loss) income	(73,542)		51,203		(67,256)		95,354		Operating (loss) income	(42,219)		6,286
Other (income) expense:	Other (income) expense:									Other (income) expense:
Interest income	Interest income	(24)		(298)		(287)		(463)		Interest income	(1)		(263)
Interest income—related party	Interest income—related party	(45)		(706)		(232)		(706)		Interest income—related party	0		(187)
Interest expense	Interest expense	3,725		4,601		7,783		8,948		Interest expense	3,755		4,058
Total interest expense		3,656		3,597		7,264		7,779
Total interest expense, net										Total interest expense, net	3,754		3,608
Net (loss) income before income taxes	Net (loss) income before income taxes	(77,198)		47,606		(74,520)		87,575		Net (loss) income before income taxes	(45,973)		2,678
Income tax (benefit) expense	Income tax (benefit) expense	(11,363)		7,083		(11,102)		13,143		Income tax (benefit) expense	(7,357)		261
Net (loss) income	Net (loss) income	(65,835)		40,523		(63,418)		74,432		Net (loss) income	(38,616)		2,417

Less: Net (loss) income attributable to non-controlling interests	Less: Net (loss) income attributable to non-controlling interests	(20,064)		18,491		(19,367)		34,279		Less: Net (loss) income attributable to non-controlling interests	(4,411)		697
Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(45,771)	$	22,032	$	(44,051)	$	40,153	Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(34,205)	$	1,720

Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders per common share:	Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders per common share:									Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders per common share:
Basic	Basic	$	(0.55)	$	0.32	$	(0.53)	$	0.59	Basic	$	(0.21)	$	0.02
Diluted	Diluted	$	(0.55)	$	0.32	$	(0.53)	$	0.58	Diluted	$	(0.21)	$	0.02
Weighted average common shares outstanding:	Weighted average common shares outstanding:									Weighted average common shares outstanding:
Basic	Basic	83,292		68,404		82,472		67,918		Basic	163,207		81,651
Diluted	Diluted	83,292		114,338		82,472		114,277		Diluted	163,207		114,952

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

LIBERTY OILFIELD SERVICES INC.

Condensed Consolidated Statements of ~~Changes in Equity~~Comprehensive (Loss) Income

(~~Amounts in~~In thousands)

(Unaudited)

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Retained Earnings
Total Stockholders’ Equity
Non-controlling Interest Total Equity
Balance—December 31, 2019 81,885 30,639 $ 819 $ 307 $ 410,596 $ 143,105 $ 554,827 $ 226,665 $ 781,492
Exchange of Class B Common Stock for Class A Common Stock 2,558 (2,558) 26 (26) 18,201 — 18,201 (18,201) —
Effect of exchange on deferred tax asset, net of liability under tax receivable agreements — — — — 454 — 454 — 454
$0.05/share of Class A Common Stock dividend — — — — — (4,244) (4,244) — (4,244)
$0.05/unit distributions to non-controlling unitholders — — — — — — — (1,532) (1,532)
Other distributions and advance payments to non-controlling interest unitholders — — — — (1) — (1) (804) (805)
Stock based compensation expense — — — — 6,172 — 6,172 2,235 8,407
Vesting of restricted stock units 414 — 4 — 472 — 476 (879) (403)
Restricted stock and RSU forfeitures (4) — (1) — (9) 7 (3) 9 6
Net loss — — — — — (44,051) (44,051) (19,367) (63,418)
Balance—June 30, 2020 84,853 28,081 $ 848 $ 281 $ 435,885 $ 94,817 $ 531,831 $ 188,126 $ 719,957

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Retained Earnings
Total Stockholders’ Equity
Non-controlling Interest Total Equity
Balance—December 31, 2018 68,360 45,207 $ 684 $ 452 $ 312,659 $ 119,274 $ 433,069 $ 307,745 $ 740,814
Exchange of Class B Common Stock for Class A Common Stock 1,637 (1,637) 16 (16) 11,413 — 11,413 (11,413) —
Effect of exchange on deferred tax asset, net of liability under tax receivable agreements — — — — 896 — 896 — 896
$0.10/share of Class A Common Stock Dividend — — — — — (7,107) (7,107) — (7,107)
$0.10/unit distributions to non-controlling unitholders — — — — — — — (4,358) (4,358)
Other distributions and advance payments to non-controlling interest unitholders — — — — — — — (547) (547)
Share repurchases (1,303) — (13) — (13,017) — (13,030) (4,068) (17,098)
Stock based compensation expense — — — — 6,451 — 6,451 — 6,451
Vesting of restricted stock units 268 — 3 — (303) — (300) (739) (1,039)
Restricted stock and RSU forfeitures — — — — — 2 2 — 2
Net income — — — — — 40,153 40,153 34,279 74,432
Balance—June 30, 2019 68,962 43,570 $ 690 $ 436 $ 318,099 $ 152,322 $ 471,547 $ 320,899 $ 792,446


	Three Months Ended March 31,
	2021		2020
Net (loss) income	$	(38,616)	$	2,417
Other comprehensive (loss) income
Foreign currency translation	1,410		0
Comprehensive (loss) income	$	(37,206)	$	2,417
Comprehensive (loss) income attributable to non-controlling interest	(4,319)		697
Comprehensive (loss) income attributable to Liberty Oilfield Services, Inc.	$	(32,887)	$	1,720

See Notes to Condensed Consolidated Financial Statements.

Table of Contents

LIBERTY OILFIELD SERVICES INC.

Condensed Consolidated Statements of Changes in Equity

(In thousands, except per unit and per share data)

(Unaudited)


	Shares of Class A Common Stock	Shares of Class B Common Stock	Class A Common Stock, Par Value		Class B Common Stock, Par Value		Additional Paid in Capital		Retained Earnings (Accumulated Deficit)		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity		Non-controlling Interest		Total Equity
Balance—December 31, 2020	157,952	21,550	$	1,579	$	216	$	1,125,554	$	23,288	$	0	$	1,150,637	$	159,406	$	1,310,043
Exchange of Class B Common Stock for Class A Common Stock	11,269	(11,269)	113		(113)		82,753		—		—		82,753		(82,753)		0
Offering Costs	—	—	—		—		(773)		—		—		(773)		(75)		(848)
Effect of exchange on deferred tax asset, net of liability under tax receivable agreements	—	—	—		—		4,954		—		—		4,954		—		4,954
Deferred tax impact of ownership changes from issuance of Class A Common Stock	—	—	—		—		(4,519)		—		—		(4,519)		—		(4,519)
Other distributions and advance payments to non-controlling interest unitholders	—	—	—		—		—		—		—		—		548		548

Stock based compensation expense	—	—	—		—		4,515		—		—		4,515		432		4,947
Vesting of restricted stock units	38	—	0		—		(130)		—		—		(130)		(56)		(186)
Restricted Stock and RSU Forfeitures	—	—	—		—		—		2				2		—		2
Currency translation adjustment	—	—	—		—		—		—		1,318		1,318		92		1,410
Net loss	—	—	—		—		—		(34,205)		—		(34,205)		(4,411)		(38,616)
Balance—March 31, 2021	169,259	10,281	$	1,692	$	103	$	1,212,354	$	(10,915)	$	1,318	$	1,204,552	$	73,183	$	1,277,735


	Shares of Class A Common Stock	Shares of Class B Common Stock	Class A Common Stock, Par Value		Class B Common Stock, Par Value		Additional Paid in Capital		Retained Earnings		Accumulated Other Comprehensive (Loss) Income		Total Stockholders’ Equity		Non-controlling Interest		Total Equity
Balance—December 31, 2019	81,885	30,639	$	819	$	307	$	410,596	$	143,105	$	0	$	554,827	$	226,665	$	781,492


$0.05/share of Class A Common Stock dividend	—	—	—		—		—		(4,244)		—		(4,244)		—		(4,244)
$0.05/unit distributions to non-controlling unitholders	—	—	—		—		—		—		—		—		(1,532)		(1,532)
Other distributions and advance payments to non-controlling interest unitholders	—	—	—		—		—		—		—		—		(804)		(804)

Stock based compensation expense	—	—	—		—		3,001		—		—		3,001		1,123		4,124
Vesting of restricted stock units	35	—	0		—		67		—		—		67		(67)		0

Net income	—	—	—		—		—		1,720		—		1,720		697		2,417
Balance—March 31, 2020	81,920	30,639	$	819	$	307	$	413,664	$	140,581	$	0	$	555,371	$	226,082	$	781,453

See Notes to Condensed Consolidated Financial Statements.

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LIBERTY OILFIELD SERVICES INC.

Condensed Consolidated Statements of Cash Flows

(~~Dollars in~~In thousands)

(Unaudited)


		Six Months Ended June 30,							Three Months Ended March 31,
		2020		2019			2021		2020
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net (loss) income	Net (loss) income	$	(63,418)	$	74,432	Net (loss) income	$	(38,616)	$	2,417
Adjustments to reconcile net income to net cash provided by operating activities:	Adjustments to reconcile net income to net cash provided by operating activities:					Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	Depreciation and amortization	89,762		78,755		Depreciation and amortization	62,045		44,831
Loss on disposal of assets		232		1,366
Interest expense on finance lease liability		—		1,350
Gain on disposal of assets						Gain on disposal of assets	(720)		(102)
Amortization of debt issuance costs	Amortization of debt issuance costs	1,106		1,105		Amortization of debt issuance costs	569		548
Inventory write-down	Inventory write-down	770		—		Inventory write-down	0		674
Non-cash lease expense	Non-cash lease expense	1,999		2,828		Non-cash lease expense	981		518
Stock based compensation expense	Stock based compensation expense	8,407		6,451		Stock based compensation expense	4,947		4,124

Deferred income tax (benefit) expense		(11,268)		6,895
Loss on tax receivable agreements		169		—
Deferred income taxes						Deferred income taxes	(9,645)		0
Gain on tax receivable agreements						Gain on tax receivable agreements	0		(37)
Provision for credit losses	Provision for credit losses	4,678		—		Provision for credit losses	0		2,523
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Accounts receivable and unbilled revenue	Accounts receivable and unbilled revenue	171,398		(113,559)		Accounts receivable and unbilled revenue	(20,977)		(93,477)
Accounts receivable and unbilled revenue—related party	Accounts receivable and unbilled revenue—related party	8,314		(462)		Accounts receivable and unbilled revenue—related party	(100)		8,239
Inventories	Inventories	6,610		(26,785)		Inventories	(10,497)		257
Other assets	Other assets	21,410		18,151		Other assets	17,375		7,450
Accounts payable and accrued liabilities	Accounts payable and accrued liabilities	(142,643)		53,343		Accounts payable and accrued liabilities	22,166		22,789
Accounts payable and accrued liabilities—related party		—		(1,000)
Payment of operating lease liability		(895)		(5,157)

Initial payment of operating lease liability						Initial payment of operating lease liability	0		(523)
Net cash provided by operating activities	Net cash provided by operating activities	96,631		97,713		Net cash provided by operating activities	27,528		231
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment and construction in-progress	Purchases of property and equipment and construction in-progress	(70,460)		(130,408)		Purchases of property and equipment and construction in-progress	(25,361)		(45,395)
Proceeds from sale of assets	Proceeds from sale of assets	463		344		Proceeds from sale of assets	1,574		317
Net cash used in investing activities	Net cash used in investing activities	(69,997)		(130,064)		Net cash used in investing activities	(23,787)		(45,078)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Repayments of borrowings on term loan	Repayments of borrowings on term loan	(875)		(438)		Repayments of borrowings on term loan	(438)		(438)
Payments on finance lease obligations	Payments on finance lease obligations	(4,965)		(6,794)		Payments on finance lease obligations	(2,326)		(2,470)
Class A Common Stock dividends	Class A Common Stock dividends	(4,262)		(6,885)		Class A Common Stock dividends	0		(4,090)
Per unit distributions to non-controlling interest unitholders	Per unit distributions to non-controlling interest unitholders	(1,532)		(4,357)		Per unit distributions to non-controlling interest unitholders	0		(1,532)
Other distributions and advance payments to non-controlling interest unitholders	Other distributions and advance payments to non-controlling interest unitholders	(2,783)		(547)		Other distributions and advance payments to non-controlling interest unitholders	548		(2,782)
Tax withholding on restricted stock unit vesting		(403)		(1,039)
Share repurchases		—		(18,398)

Restricted stock unit vesting						Restricted stock unit vesting	(202)		0
Payments of equity offering costs						Payments of equity offering costs	(848)		0
Net cash used in financing activities	Net cash used in financing activities	(14,820)		(38,458)		Net cash used in financing activities	(3,266)		(11,312)
Net increase (decrease) in cash and cash equivalents		11,814		(70,809)
Net increase (decrease) in cash and cash equivalents before translation effect						Net increase (decrease) in cash and cash equivalents before translation effect	475		(56,159)
Translation effect on cash						Translation effect on cash	81		0
Cash and cash equivalents—beginning of period	Cash and cash equivalents—beginning of period	112,690		103,312		Cash and cash equivalents—beginning of period	68,978		112,690
Cash and cash equivalents—end of period	Cash and cash equivalents—end of period	$	124,504	$	32,503	Cash and cash equivalents—end of period	$	69,534	$	56,531
Supplemental disclosure of cash flow information:	Supplemental disclosure of cash flow information:					Supplemental disclosure of cash flow information:
Cash paid for income taxes		$	—	$	1,042

Cash paid for interest	Cash paid for interest	$	5,649	$	5,575	Cash paid for interest	$	2,642	$	2,927
Non-cash investing and financing activities:	Non-cash investing and financing activities:					Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities	Capital expenditures included in accounts payable and accrued liabilities	$	7,855	$	10,353	Capital expenditures included in accounts payable and accrued liabilities	$	27,494	$	19,636

See Notes to Condensed Consolidated Financial Statements.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 1—Organization and Basis of Presentation

Organization

Liberty Oilfield Services Inc. (the “Company”) was incorporated as a Delaware corporation on December 21, 2016, to become a holding corporation for Liberty Oilfield Services New HoldCo LLC (“Liberty LLC”) and its subsidiaries upon completion of a corporate reorganization (the “Corporate Reorganization”) and planned initial public offering of the Company (“IPO”). The Company has no material assets other than its ownership of units in Liberty LLC (“Liberty LLC Units”). Please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2019,~~2020, filed with the SEC on February ~~27, 2020~~24, 2021 (the “Annual Report”) for additional information on the Corporate Reorganization and IPO that were completed on January 17, 2018.

The Company, together with its subsidiaries, is a multi-basin provider of hydraulic fracturing services and goods, with a focus on deploying the latest technologies in the technically demanding oil and gas reservoirs in which it operates, principally in North Dakota, Colorado, Louisiana, Oklahoma, New Mexico, Wyoming, Texas and ~~Texas.~~the provinces of Alberta and British Columbia, Canada.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements were prepared using generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q, Regulation S-X, and ~~Regulation S-X.~~the rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”). Accordingly, these financial statements do not include all information or notes required by ~~GAAP~~generally accepted accounting principles for annual financial statements and should be read together with the annual financial statements and notes thereto included in the Company’s Annual Report.

The accompanying unaudited condensed consolidated financial statements and related notes present the condensed consolidated financial position of the Company as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, and the results of operations, cash flows, and equity of the Company as of and for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020. The interim data includes all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for the interim period. The results of operations for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 are not necessarily indicative of the results of operations expected for the entire fiscal year ended December 31, ~~2020.~~2021. Further, these estimates and other factors, including those outside the Company’s control, such as the impact of sustained lower commodity prices, could have a significant adverse impact to the Company’s financial condition, results of operations and cash flows.

All intercompany amounts have been eliminated in the presentation of the unaudited condensed consolidated financial statements of the Company. ~~Comprehensive income is not reported due to the absence of items of other comprehensive income or loss during the periods presented.~~ The Company’s operations are organized into a single reportable segment, which consists of hydraulic fracturing services and goods.

Note 2—Significant Accounting Policies

~~Recently Adopted Accounting Standards~~

~~Credit Losses~~Transaction, Severance and Other Costs

~~In June 2016,~~The Company incurred transaction related costs in connection with the ~~Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13,~~ ~~Financial Instruments-Credit Losses (Topic 326)~~: ~~Measurement of Credit Losses on Financial Instruments~~ (“ASU 2016-13”), which changes the impairment model for most financial assets and certain other instruments. Specifically, this new guidance requires using a forward looking, expected loss model for tradeOneStim Acquisition (as defined below). Such costs include investment banking, legal, accounting and other ~~receivables, held-to-maturity debt securities, loans,~~professional services provided in connection with closing the transaction, and ~~other instruments. Under ASU 2016-13, a company recognizes,~~are expensed as ~~an allowance,~~incurred.

Foreign Currency Translation

The Company records foreign currency translation adjustments from the ~~estimate~~process of ~~lifetime expected credit losses, which is expected to result in more timely recognition of such losses.~~

~~On January 1, 2020,~~translating the ~~Company adopted ASU 2016-13 using the modified-retrospective approach, which allows for a cumulative-effect adjustment to the consolidated condensed balance sheet as~~functional currency of the ~~beginning~~financial statements of its foreign subsidiary into the U.S. dollar reporting currency. The Canadian dollar is the functional currency of the ~~first reporting period~~Company’s foreign subsidiary as it is the primary currency within the economic environment in which the ~~guidance is effective. Periods prior to~~subsidiary operates. Assets and liabilities of the ~~adoption~~subsidiary’s operations are translated into U.S. dollars at the rate of exchange in effect on the balance sheet date ~~that~~and income and expenses are ~~presented for comparative purposes~~translated at the average exchange rate in effect during the reporting period. Adjustments resulting from the translation of the subsidiary’s financial statements are ~~not adjusted.~~reported in other comprehensive income.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Recently Adopted Accounting Standards

Simplification of Accounting for Income Taxes

In December 2019, the FASB issued ASU No. 2019-12, Simplification of Accounting for Income Taxes, which simplifies the accounting for income taxes by providing new guidance to reduce complexity and eliminate certain exceptions to the general approach to the income tax accounting model. The Company ~~continuously evaluates customers based~~adopted this guidance effective January 1, 2021, which did not have a material impact on risk characteristics, such as historical losses and current economic conditions. Due to the cyclical nature of the oil and gas industry, the Company often evaluates its customers’ estimated losses on a case-by-case basis. While there was no impact to the financial statements as a result of adoption of ASU 2016-13, as a result of deteriorating economic conditions for the oil and gas industry brought on by the COVID-19 pandemic, during the three and six months ended June 30, 2020, the Company recorded a provision for credit losses of $2.2 million and $4.7 million, respectively, included in general and administrative expenses in the accompanying unaudited condensed consolidated statement of operations, in accordance with the new standard. Refer to “Credit Risk” within Note 7—Fair Value Measurements and Financial Instruments for additional disclosures required under ASU 2016-13.financial statements.

~~Fair Value Measurement~~Codification Improvements

In ~~August 2018,~~October 2020, the FASB issued ASU ~~2018-13,~~No. 2020-10, ~~Fair Value Measurement (Topic 820): Disclosure Framework-Changes~~Codification Improvements, which clarifies various topics, including the addition of existing disclosure requirements to the ~~Disclosure Requirements~~relevant disclosure sections. This update does not change GAAP, and therefore, does not result in a significant change in the Company’s accounting practices. The guidance is effective for ~~Fair Value Measurement~~ ~~(“ASU 2018-13”), which eliminates, adds and modifies certain~~fiscal periods beginning after December 15, 2020, as the amendment pertains to disclosure ~~requirements for fair value measurements.~~items only. The Company adopted ~~ASU 2018-13 on~~the new rules effective January 1, ~~2020~~2021 and ~~determined~~ the adoption of this standard did not impact the Company’s condensed consolidated financial statements. Refer to Note 7—Fair Value Measurements and Financial Instruments for the disclosures required under ASU 2018-13.

~~Leases~~

~~In April 2020, the FASB issued FASB Staff Q&A~~ ~~Topic 842 and Topic 840:Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic~~ (“the Q&A”), which allows companies to elect to recognize the impact of COVID-19 rent concessions, including rent deferrals, within the current period, rather than recognizing these concessions as a lease modification in accordance with lease guidance, ASU No. 2016-02, ~~Leases (Accounting Standard Codification (“ASC”) Topic 842)~~, if the total lease payments of the modified lease are substantially the same as or less than the total original lease payments. According to the Q&A, entities are to make an election to account for lease concessions related to the effects of the COVID-19 pandemic consistent with how those concessions would be accounted for under Topic 842 and ASC Topic 840, Leases as though enforceable rights and obligations for those concessions existed. The adoption of the Q&A did not have a material impact on the accompanying unaudited condensed consolidated financial statements.

Recently Issued Accounting Standards

Reference Rate Reform

In March 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform, which provides temporary optional guidance to companies impacted by the transition away from the London Interbank Offered Rate (“LIBOR”). The guidance provides certain expedients and exceptions to applying GAAP in order to lessen the potential accounting burden when contracts, hedging relationships, and other transactions that reference LIBOR as a benchmark rate are modified. This guidance is effective upon issuance and expires on December 31, 2022. The Company is currently assessing the impact of the LIBOR transition and this ASU on the Company’s financial statements.

~~Severance and Related Costs~~

Note 3—The OneStim Acquisition

On ~~April 2,~~August 31, 2020 the Company ~~announced~~and certain of its subsidiaries entered into the certain Master Transaction Agreement (the “Transaction Agreement”) with Schlumberger Technology Corporation and Schlumberger Canada Limited (collectively “Schlumberger”), pursuant to which the Company acquired certain assets and liabilities of Schlumberger’s OneStim® business, which provides hydraulic fracturing pressure pumping services in onshore United States and Canada (such entire business of Schlumberger “OneStim,” and the portion of OneStim acquired pursuant to the Transaction Agreement the “Transferred Business”) in exchange for 57,377,232 shares of the Company’s Class A Common Stock, par value $0.01 per share (the “Class A Common Stock”) and a non-interest bearing demand promissory note (the “Canadian Buyer Note” and such acquisition, the “OneStim Acquisition”). The Canadian Buyer Note was settled for 8,948,902 shares of Class A Common Stock, and a total of 66,326,134 shares of Class A Common Stock were issued in connection with the OneStim Acquisition. Effective December 31, 2020, Schlumberger owns approximately 37.0% of the Company’s issued and outstanding shares of common stock, including Class A Common Stock and the Company’s Class B Common Stock, par value $0.01 per share (the “Class B Common Stock,” and together with the Class A Common Stock, the “Common Stock”). In connection with the issuance of 66,326,134 shares of Class A Common Stock, Liberty LLC also issued 66,326,134 Liberty LLC Units to the Company.

The OneStim Acquisition was completed for total consideration of approximately $683.8 million based on the value of the Canadian Buyer Note and the closing price of the Class A Common Stock on December 31, 2020. The Company accounted for the OneStim Acquisition using the acquisition method of accounting. The aggregate purchase price noted above was allocated to the major categories of assets acquired and liabilities assumed based upon their estimated fair value on the date of the acquisition. The estimated fair values of certain assets and liabilities, including accounts receivable, require significant judgments and estimates. The majority of the measurements of assets acquired and liabilities assumed, are based on inputs that are not observable in the market and thus represent Level 3 inputs.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

In accordance with ASC Topic 805, an acquirer is allowed a period, referred to as the measurement period, in which to complete its accounting for the transaction. Such measurement period ends on the earliest date that the acquirer (i) receives the information necessary or b) determines that it ~~reduced~~cannot obtain further information, and such period may not exceed one year. As the size of its workforce and its general and administrative cost structure, as well as other cost cutting measures, in response to significantly lower customer activity. Payments made to employees leavingOneStim Acquisition closed on December 31, 2020 the Company is in the process of completing the initial purchase price allocation, particularly as it relates to current assets and current liabilities, which are subject to certain minimum working capital contribution requirements under the Transaction Agreement. Such minimum working capital contribution calculations are subject to review and adjustment in order to determine final settlement. In addition, certain inventories are considered provisional until the Company has completed physical inventory counts at each warehouse.

The following table summarizes the fair value of the consideration transferred in the OneStim Acquisition and the preliminary allocation of the purchase price to the fair value of the assets acquired and liabilities assumed (which are included within the accompanying unaudited condensed consolidated balance sheet as of December 31, 2020) as of December 31, 2020, the date of the closing of the OneStim Acquisition:


($ in thousands)
Total Purchase Consideration:
Consideration	$	683,822

Accounts receivable and unbilled revenue	$	128,602
Inventories	33,245
Prepaid and other current assets	30,859
Property and equipment (1)	559,716
Intangible assets (included in other assets in the accompanying unaudited condensed consolidated balance sheet as of December 31, 2020) (2)	54,000
Total identifiable assets acquired	806,422
Accounts payable	75,522
Accrued liabilities	47,078
Total liabilities assumed	122,600
Total purchase consideration	$	683,822

(1) Useful lives ranging from two to greater than 25 years, see Note 5—Property and Equipment

(2) Definite lived intangibles with an average amortization period of five years

Transaction costs, costs associated with issuing additional equity and integration costs were recognized separately from the acquisition of assets and assumptions of liabilities in the OneStim Acquisition. Transaction costs consist of legal and professional fees and pre-merger notification fees. Equity offering costs consist of expenses incurred related to the Special Meeting of Stockholders, including the costs to prepare the required filings associated with such meeting, held on November 3, 2020. Integration costs consist of expenses incurred to integrate OneStim’s operations, aligning accounting processes and procedures, and integrating its enterprise resource planning system with those of the Company. Merger and integration costs are expensed as incurred, and equity offering costs were recorded as a reduction to additional paid in capital.

Transaction costs were $7.6 million, for the three months ended March 31, 2021, and are recorded toas a component of transaction, severance and ~~related~~other costs in the accompanying unaudited condensed consolidated statements of operations. Equity offering costs totaled $1.6 million for the year ended December 31, 2020 and are recorded as a reduction to additional paid in capital in the accompanying unaudited condensed consolidated balance sheets.

The Company’s unaudited condensed consolidated statements of operations for the three ~~and six~~ months ended ~~June 30,~~March 31, 2020 presented herein does not include any results from OneStim operations as the OneStim Acquisition closed on December 31, 2020. The Company’s unaudited condensed consolidated financial statements include results from OneStim operations for full three months ended March 31, 2021.

The following combined pro forma information assumes the OneStim Acquisition occurred on January 1, 2020. The pro forma information presented below is for illustrative purposes only and does not reflect future events that occurred after December 31, 2020 or any operating efficiencies or inefficiencies that may result from the OneStim Acquisition. The information is not necessarily indicative of results that would have been achieved had the Company ~~also adopted a more flexible cost structure, including employee furloughs.~~ controlled OneStim during the period presented.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Three Months Ended March 31,
(unaudited, in thousands)	2020
Revenue	$	1,067,451
Net loss	(466,533)
Less: Net loss attributable to non-controlling interests	(106,910)
Net loss attributable to Liberty Oilfield Services Inc. stockholders	$	(359,623)
Net loss attributable to Liberty Oilfield Services Inc. stockholders per common share:
Basic	$	(2.43)
Diluted	$	(2.43)
Weighted average common shares outstanding:
Basic	147,978
Diluted	147,978

Note 4—Inventories

Inventories consist of the following:


	March 31,		December 31,
($ in thousands)	2021		2020
Proppants	$	15,178	$	13,658
Chemicals	15,660		16,434
Maintenance parts and other	98,500		88,476
	$	129,338	$	118,568

The Company ~~pays all insurance and benefit costs for employees while on furlough, and such costs are also included in severance and related costs.~~

~~Reclassifications~~

~~Certain amounts~~did 0t record any write-down to the inventory carrying value during the three months ended March 31, 2021. As of March 31, 2020, the lower of cost or net realizable value analysis resulted in the ~~prior period financial statements have been reclassified~~Company recording a write-down to ~~conform to~~inventory carrying values of $0.7 million, included as a component in cost of services in the ~~presentation~~unaudited condensed consolidated statement of operations for the ~~current period financial statements. These reclassifications had no effect on the previously reported net income.~~three months ended March 31, 2020.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note ~~3—Inventories~~

~~Inventories consist of the following:~~

June 30, December 31,
($ in thousands) 2020 2019
Proppants $ 7,226 $ 14,013
Chemicals 5,769 10,076
Maintenance parts 68,172 64,458
$ 81,167 $ 88,547

During the three and six months ended June 30, 2020, the lower of cost or net realizable value analysis resulted in the Company recording a write-down to inventory carrying values of $0.1 million and $0.8 million, respectively, which is included as a component in cost of services in the unaudited condensed consolidated statement of operations.

~~Note 4—~~5—Property and Equipment

Property and equipment consist of the following:


		Estimated useful lives (in years)	June 30,			December 31,			Estimated useful lives (in years)		March 31,			December 31,
($ in thousands)	($ in thousands)				2020			2019		Estimated useful lives (in years)			2021			2020
Land	Land	N/A	$	5,400		$	5,400	Land	N/A		$	38,448		$	38,346
Field services equipment	Field services equipment	2-7	1,003,695			978,418		Field services equipment	2-7		1,309,525			1,249,933
Vehicles	Vehicles	4-7	59,977			60,290		Vehicles	4-7		58,545			59,741
Buildings and facilities	Buildings and facilities	5-30	31,631			29,930		Buildings and facilities	5-30		156,499			156,109
Office equipment, furniture, and software		2-7	6,639			6,623
Mineral reserves								Mineral reserves	>25		78,793			78,793
Office equipment and furniture								Office equipment and furniture	2-7		6,946			6,840
			1,107,342			1,080,661					1,648,756			1,589,762
Less accumulated depreciation and amortization			(539,377)			(455,687)
Less accumulated depreciation and depletion								Less accumulated depreciation and depletion			(678,198)			(622,530)
			567,965			624,974					970,558			967,232
Construction in-progress	Construction in-progress	N/A	45,171			26,729		Construction in-progress	N/A		135,380			153,718
			$	613,136		$	651,703				$	1,105,938		$	1,120,950

Depreciation expense for the three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ was $~~42.3~~56.7 million and ~~$37.4~~$41.7 million, respectively. ~~During~~Depletion expense for the ~~six~~three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019, the Company recognized depreciation expense of $83.9~~was $0.3 million and ~~$73.1 million,~~$0, respectively.

During the ~~six months~~year ended ~~June 30,~~December 31, 2020, as a result of negative market indicators including the COVID-19 pandemic, the increased supply of low-priced oil, and customer cancellations, the Company concluded these triggering events could indicate possible impairment of property and equipment. The Company performed a quantitative and qualitative impairment analysis and determined that no impairment had occurred as of March 31, 2020. As of ~~June 30, 2020~~March 31, 2021, the Company concluded that no additional triggering events occurred and the conclusion reached at March 31, 2020 is still appropriate. Such analysis required management to make estimates and assumptions based on historical data and consideration of future market conditions. Given the uncertainty inherent in any projection, heightened by the possibility of unforeseen additional effects of COVID-19, actual results may differ from the estimates and assumptions used, or conditions may change, which could result in impairment charges in the future.

Note 5—6—Leases

The Company has operating and finance leases primarily for vehicles, equipment, railcars, office space, and facilities. The terms and conditions for these leases vary by the type of underlying asset.

Certain leases include variable lease payments for items such as property taxes, insurance, maintenance, and other operating expenses associated with leased assets. Payments that vary based on an index or rate are included in the measurement of lease assets and liabilities at the rate as of the commencement date. All other variable lease payments are excluded from the measurement of lease assets and liabilities, and are recognized in the period in which the obligation for those payments is incurred.

The components of lease expense for the three months ended March 31, 2021 and 2020 were as follows:


	Three Months Ended March 31,
($ in thousands)	2021		2020
Finance lease cost:
Amortization of right-of-use assets	$	1,795	$	2,654
Interest on lease liabilities	537		596
Operating lease cost	7,267		5,471
Variable lease cost	557		795
Short-term lease cost	309		0
Total lease cost	$	10,465	$	9,516

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~Additionally, in June 2020, the Company entered into one sublease agreement with a third party for a leased property that the Company no longer occupies.~~

~~The components of lease expense for the three and six months ended June 30, 2020 and 2019 were as follows:~~

Three Months Ended June 30, Six Months Ended June 30,
($ in thousands) 2020 2019 2020 2019
Finance lease cost:
Amortization of right-of-use assets $ 2,139 $ 2,611 $ 4,793 $ 4,977
Interest on lease liabilities 462 699 1,058 1,350
Operating lease cost 6,199 5,053 11,670 10,264
Variable lease cost 776 603 1,571 1,607
Sublease (income) (16) — (16) —
Total lease cost, net $ 9,560 $ 8,966 $ 19,076 $ 18,198

~~Supplemental~~Supplemental cash flow and other information related to leases for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 and ~~2019~~2020 were as follows:


		Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended March 31,
($ in thousands)	($ in thousands)	2020		2019		2020		2019		($ in thousands)	2021		2020
Cash paid for amounts included in measurement of liabilities:	Cash paid for amounts included in measurement of liabilities:									Cash paid for amounts included in measurement of liabilities:
Operating leases	Operating leases	$	5,052	$	2,752	$	10,484	$	10,550	Operating leases	$	6,430	$	5,432
Finance leases	Finance leases	2,957		3,512		6,023		6,794		Finance leases	2,863		3,066
Right-of-use assets obtained in exchange for new lease liabilities:	Right-of-use assets obtained in exchange for new lease liabilities:									Right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	Operating leases	14,428		625		19,654		70,055		Operating leases	31		5,226
Finance leases	Finance leases	—		6,718		—		64,139		Finance leases	0		0

During the three months ended ~~June 30, 2020~~March 31, 2021, the Company amended certain finance leases, the change in terms of which caused the leases to be reclassified to operating leases. In connection with the amendments, the Company wrote-off finance lease right-of-use assets and liabilities of ~~$17.6~~$0.8 million and ~~$15.0~~$0.6 million, respectively, and recognized operating lease right-of-use assets and liabilities of ~~$14.5~~$0.7 million and ~~$11.9~~$0.5 million, respectively. There was no gain or loss recognized as a result of these amendments.

Lease terms and discount rates as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were as follows:

June 30, 2020

December 31, 2019

March 31, 2021

December 31, 2020

Weighted-average remaining lease term:

Operating leases

5.8 years

6.4 years

Operating leases

5.9 years

Finance leases

1.1 years

1.3 years

Finance leases

1.3 years

1.5 years

Weighted-average discount rate:

Operating leases

5.1

5.4

Operating leases

4.7

4.8

Finance leases

5.2

Finance leases

5.8

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~~LIBERTY OILFIELD SERVICES INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Future minimum lease commitments as of ~~June 30, 2020~~March 31, 2021 are as follows:


($ in thousands)	($ in thousands)	Finance		Operating		Sublease Income		($ in thousands)	Finance		Operating
Remainder of 2020		$	8,266	$	11,751	$	(103)
2021		17,454		23,970		(171)
Remainder of 2021								Remainder of 2021	$	18,323	$	20,409
2022	2022	4,135		15,445		—		2022	8,491		19,069
2023	2023	—		7,572		—		2023	4,356		8,513
2024	2024	—		5,193		—		2024	0		5,782
2025								2025	0		4,155
Thereafter	Thereafter	—		19,878		—		Thereafter	0		21,981
Total lease payments	Total lease payments	29,855		83,809		(274)		Total lease payments	31,170		79,909
Less imputed interest	Less imputed interest	(1,324)		(11,930)		—		Less imputed interest	(2,221)		(11,165)
Total	Total	$	28,531	$	71,879	$	(274)	Total	$	28,949	$	68,744

Excluded from the future minimum lease commitments above is $2.6 million of lease payments for new operating leases executed during the three months ended March 31, 2021, not yet commenced as of March 31, 2021.

The Company’s vehicle leases typically include a residual value guarantee. For the Company’s vehicle leases classified as operating leases, the total residual value guaranteed as of ~~June 30, 2020~~March 31, 2021 is ~~$7.0~~$8.7 million; the payment is not probable and therefore has not been included in the measurement of the lease liability and right-of-use asset. For vehicle leases that are classified as ~~financing~~finance leases, the Company includes the residual value guarantee, as estimated in the lease agreement, in the financing lease liability.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note 6—7—Accrued Liabilities

Accrued liabilities consist of the following:


($ in thousands)	March 31, 2021		December 31, 2020
Accrued vendor invoices	$	87,762	$	61,210
Operations accruals	47,310		28,932
Accrued benefits and other	31,121		28,241
	$	166,193	$	118,383

Note 8—Debt

Debt consists of the following:


		June 30,		December 31,			March 31,		December 31,
($ in thousands)	($ in thousands)	2020		2019		($ in thousands)	2021		2020
Term Loan outstanding	Term Loan outstanding	$	109,091	$	109,996	Term Loan outstanding	$	107,778	$	108,215

Revolving Line of Credit						Revolving Line of Credit	0		0
Deferred financing costs and original issue discount	Deferred financing costs and original issue discount	(3,142)		(3,826)		Deferred financing costs and original issue discount	(2,091)		(2,440)
Total debt, net of deferred financing costs and original issue discount	Total debt, net of deferred financing costs and original issue discount	$	105,949	$	106,140	Total debt, net of deferred financing costs and original issue discount	$	105,687	$	105,775
Current portion of long-term debt, net of discount	Current portion of long-term debt, net of discount	$	353	$	409	Current portion of long-term debt, net of discount	$	370	$	364
Long-term debt, net of discount and current portion	Long-term debt, net of discount and current portion	105,596		105,731		Long-term debt, net of discount and current portion	105,317		105,411
		$	105,949	$	106,140		$	105,687	$	105,775

On September 19, 2017, the Company entered into 2 credit agreements for a revolving line of credit up to $250.0 million (the “ABL Facility”) and a $175.0 million term loan (the “Term Loan Facility”, and together with the ABL Facility the “Credit Facilities”).

ABL Facility

Under the terms of the ABL Facility, up to $250.0 million may be borrowed, subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory. ~~On May 29, 2020~~Based upon the Company amended the ABL Facility to allow accounts receivables that are more than 90 but less than 120 days past their original invoice date to be included in the determination of eligible accounts receivables, up to a limit of $37.5 million when combined with receivables that are more than 60 but less than 90 days past their due date to be included in the borrowing base. The expanded borrowing base terms are in effect from May 1, 2020 through AugustMarch 31, ~~2020.~~

~~As of June 30, 2020,~~2021 financial statements, the borrowing base ~~was calculated to be $83.2~~is currently $189.7 million, and the Company had 0 borrowings outstanding, except for a letter of credit in the amount of ~~$0.3~~$0.8 million, with ~~$82.9~~$188.9 million of remaining availability. Borrowings under the ABL Facility bear interest at LIBOR or a base rate, plus an applicable LIBOR margin of 1.5% to 2%2.0% or base rate margin of 0.5% to 1%1.0%, as defined in the ABL Facility credit agreement. The ~~average monthly~~ unused commitment is subject to an unused commitment fee of 0.375% to 0.5%. Interest and fees are payable in arrears at the end of each month, or, in the case of LIBOR loans, at the end of each interest period. The ABL Facility matures on the earlier of (i) September 19, 2022 and (ii) to the extent the debt under the Term Loan Facility remains outstanding, 90 days prior to the final maturity of the Term Loan Facility, which matures on September 19, 2022. Borrowings under the ABL Facility are collateralized by accounts receivable

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~~LIBERTY OILFIELD SERVICES INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

and inventory, and further secured by the Company, Liberty LLC, and R/C IV Non-U.S. LOS Corp. (“R/C IV”), a Delaware corporation and a subsidiary of the Company, as parent guarantors.

Term Loan Facility

The Term Loan Facility provides for a $175.0 million term loan, of which ~~$109.1~~$107.8 million remained outstanding as of ~~June 30, 2020.~~March 31, 2021. Amounts outstanding bear interest at LIBOR or a base rate, plus an applicable margin of 7.625% or 6.625%, respectively, and the weighted average on borrowings was 8.6% as of ~~June 30, 2020.~~March 31, 2021. The Company is required to make quarterly principal payments of 1% per annum of the outstanding principal balance, commencing on December 31, 2017, with final payment due at maturity on September 19, 2022. The Term Loan Facility is collateralized by the fixed assets of Liberty Oilfield Services LLC (“LOS”) and its subsidiaries, and is further secured by the Company, Liberty LLC, and R/C IV, as parent guarantors.

The Credit Facilities include certain non-financial covenants, including but not limited to restrictions on incurring additional debt and certain distributions. Moreover, the ability of the Company to incur additional debt and to make

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

distributions is dependent on maintaining a maximum leverage ratio. The Term Loan Facility requires mandatory prepayments upon certain dispositions of property or issuance of other indebtedness, as defined, and annually a percentage of excess cash flow (25% to 50%, depending on leverage ratio, of consolidated net income less capital expenditures and other permitted payments, commencing with the year ending December 31, 2018). Certain mandatory prepayments and optional prepayments are subject to a prepayment premium of 3% of the prepaid principal declining annually to 1% during the first three years of the term of the Term Loan Facility.

The Credit Facilities are not subject to financial covenants unless liquidity, as defined in the respective credit agreements, falls below a specific level. ~~During a covenant measurement period under~~Under the ABL Facility, the Company is required to maintain a minimum fixed charge coverage ratio, as defined in the credit agreement governing the ABL Facility, of 1.0 to 1.0 for each period if excess availability is less than 10% of the borrowing base or $12.5 million, whichever is greater. ~~During a covenant measurement period under~~Under the Term Loan Facility, the Company is required to maintain a minimum fixed charge coverage ratio, as defined, of 1.2 to 1.0 for each trailing twelve-month period if the Company’s liquidity, as defined, is less than $25.0 million for at least five consecutive business days.

~~Based on liquidity as defined in the respective agreements, the~~The Company was ~~not subject to financial~~in compliance with these covenants as of ~~June 30, 2020 and thus was in compliance as of June 30, 2020.~~March 31, 2021.

Maturities of debt are as follows:


($ in thousands)	($ in thousands)			($ in thousands)

Remainder of 2020		$	875
2021		$	1,750
Remainder of 2021				Remainder of 2021	$	1,313
2022	2022	$	106,466	2022	106,465
2023	2023	$	—	2023	0
2024	2024	$	—	2024	0
2025				2025	0
		$	109,091		$	107,778

Note 7—9—Fair Value Measurements and Financial Instruments

The fair values of the Company’s assets and liabilities represent the amounts that would be received to sell those assets or that would be paid to transfer those liabilities in an orderly transaction aton the reporting date. These fair value measurements maximize the use of observable inputs. However, in situations where there is little, if any, market activity for the asset or liability aton the measurement date, the fair value measurement reflects the Company’s own judgments about the assumptions that market participants would use in pricing the asset or liability. The Company discloses the fair values of its assets and liabilities according to the quality of valuation inputs under the following hierarchy:

•Level 1 Inputs: Quoted prices (unadjusted) in an active market for identical assets or liabilities.

•Level 2 Inputs: Inputs other than quoted prices that are directly or indirectly observable.

•Level 3 Inputs: Unobservable inputs that are significant to the fair value of assets or liabilities.

The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is

~~Table of Contents~~

~~LIBERTY OILFIELD SERVICES INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

inconsequential to the overall fair value, or if corroborating market data becomes available. Assets and liabilities that are initially reported as Level 2 are subsequently reported as Level 3 if corroborating market data is no longer available. Transfers occur at the end of the reporting period. There were no transfers into or out of Levels 1, 2, and 3 during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 and ~~2019.~~2020.

The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, notes receivable, accounts payable, accrued liabilities, long-term debt, and finance and operating lease obligations. These financial instruments do not require disclosure by level. The carrying values of all of the Company’s financial instruments included in the accompanying unaudited condensed consolidated balance sheets approximated or equaled their fair values ~~at June 30, 2020~~on March 31, 2021 and December 31, ~~2019.~~2020.

•The carrying values of cash and cash equivalents, accounts receivable and accounts payable (including accrued liabilities) approximated fair value ~~at June 30, 2020~~on March 31, 2021 and December 31, ~~2019,~~2020, due to their short-term nature.

•The carrying value of amounts outstanding under long-term debt agreements with variable rates approximated fair value ~~at June 30, 2020~~on March 31, 2021 and December 31, ~~2019,~~2020, as the effective interest rates approximated market rates.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Nonrecurring Measurements

Certain assets and liabilities are measured at fair value on a nonrecurring basis. These ~~assets~~items are not measured at fair value on an ongoing basis but ~~are~~may be subject to fair value adjustments in certain circumstances. These assets and liabilities include those acquired through the OneStim Acquisition, which are required to be measured at fair value on the acquisition date in accordance with ASC Topic 805. See Note 3—The OneStim Acquisition.

Other assets measured at fair value on a nonrecurring basis consist of ~~notes receivable—related party~~a note receivable from the Affiliate, as defined and described in Note ~~12—~~14—Related Party Transactions. The note was initially recorded for the trade receivables, created in the normal course of business, due from the Affiliate as of the Agreement Date, as defined in Note ~~12—~~14—Related Party Transactions. There were no identified events or changes in circumstances that had a significant adverse effect on the fair value of the ~~note~~notes receivable. ~~The note is~~These notes are classified as Level 3 in the fair value hierarchy as the inputs to the determination of fair value are based upon unobservable inputs. The note was paid in full in January ~~2020, and as of June 30, 2020 and December 31, 2019, notes receivable—related party from the Affiliate totaled~~ $0 a~~nd $2.5 million, respectively.~~2020.

Recurring Measurements

The fair values of the Company’s cash equivalents measured on a recurring basis pursuant to ~~ASC~~Accounting Standards Codification (“ASC”) 820-10 Fair Value Measurements and Disclosures are carried at estimated fair value. Cash equivalents consist of money market accounts which the Company has classified as Level 1 given the active market for these accounts. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company had cash equivalents, measured at fair value, of ~~$108.3~~$21.3 million and ~~$86.9~~$21.3 million, respectively.

Nonfinancial assets

The Company estimates fair value to perform impairment tests as required on long-lived assets. The inputs used to determine such fair value are primarily based upon internally developed cash flow models and would generally be classified within Level 3 in the event that such assets were required to be measured and recorded at fair value within the unaudited condensed consolidated financial statements. Although a triggering event occurred during the ~~six~~three months ended ~~June 30,~~March 31, 2020 (see Note 4—5—Property and Equipment), no such measurements were required as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020.

Credit Risk

The Company’s financial instruments exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables.

The Company’s cash and cash equivalent balances on deposit with financial institutions total $~~124.5~~69.5 million and ~~$112.7~~$69.0 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively, which exceeded FDIC insured limits. The Company regularly monitors these institutions’ financial condition.

The majority of the Company’s customers have payment terms of 45 days or less.

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~ 2020, and for the three months ended March 31, 2021 and March 31, 2020, customer A, customer B, customer C, and customer CD accounted for ~~60%~~ ~~and customer E accounted for 12%~~ the following percentages of ~~total~~the Company’s consolidated accounts receivable and unbilled revenue ~~respectively.~~ and consolidated revenues, respectively:


	Portion of total of consolidated accounts receivable and unbilled revenue as of				Portion of consolidated revenues for the three months ended March 31,
	March 31, 2021		December 31, 2020		2021		2020
Customer A	10	%	0	%	10	%	0	%
Customer B	0	%	11	%	0	%	0	%
Customer C	0	%	11	%	0	%	0	%
Customer D	0	%	0	%	0	%	15	%

The Company mitigates the associated credit risk by performing credit evaluations and monitoring the payment patterns of its customers. ~~During the three months ended June 30, 2020, customer A, customer B, customer C, and customer D accounted for 53%~~ of total revenue, and during the three months ended June 30, 2019, no customers accounted for more than 10% of total revenue. During the six months ended June 30, 2020 and 2019, customer A accounted for 15% and customer F accounted for 10% of total revenue, respectively.

As of ~~June 30, 2020~~March 31, 2021 the Company had ~~$2.9~~$0.8 million ~~in allowance~~provision for credit losses. ~~In connection with~~Subsequent to the adoption of ASU 2016-13 (see “Credit Losses” within Note 2—Significant Accounting ~~Policies)~~Policies—Recently Adopted Accounting Standards) on ~~January 1, 2020, the Company~~

1114

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

January 1, 2020, the Company recognized a ~~$2.5~~$4.9 million ~~allowance~~provision for credit losses, to the Company’s accounts receivables in consideration of both historic collection experience and the expected impact of ~~currently~~ deteriorating economic conditions for the oil and gas ~~industry.~~

~~The Company recorded a provision for credit losses of $2.2 million during~~industry at the ~~three months ended June 30, 2020 that was primarily related to~~time, and one customer that entered bankruptcy proceedings during the ~~second quarter of 2020.~~year.

The Company applied historic loss factors to its receivable portfolio segments that were not expected to be further impacted by current economic developments, and an additional economic conditions factor to portfolio segments anticipated to experience greater losses in the current economic environment. The majority of the Company’s provision for credit losses relates to one customer currently in bankruptcy for which expected credit losses were individually evaluated. While the Company has not experienced significant credit losses in the past and has not yet seen material changes to the payment patterns of its customers, the Company cannot predict with any certainty the degree to which the impacts of COVID-19, including the potential impact of periodically adjusted borrowing base limits, level of hedged production, or unforeseen well shut-ins may affect the ability of its customers to timely pay receivables when due. Accordingly, in future periods, the Company may revise its estimates of expected credit losses.

As of December 31, 2019, the Company had recorded a $1.1 million allowance for credit losses related to one specific entity engaged in the business of oil and gas exploration and production that filed for bankruptcy.


($ in thousands)
~~Allowance~~Provision for credit losses aton December 31, ~~2019~~2020	$	~~1,053~~773
Credit Losses:
Current period provision	~~4,678~~0
Amounts written off ~~net of recoveries~~	~~(2,801)~~0
~~Allowance~~Provision for credit losses ~~at June 30, 2020~~on March 31, 2021	$	~~2,930~~773

Note 8—10—Equity

~~Restricted Stock Awards~~

Restricted stock awards are awards of Class A Common Stock that are subject to restrictions on transfer and to a risk of forfeitures if the award recipient is no longer an employee or director of the Company for any reason prior to the lapse of the restrictions.

~~The following table summarizes the Company’s unvested restricted stock activity for the six months ended June 30, 2020:~~


	~~Number of Shares~~	~~Grant Date Fair Value per Share~~⁽¹⁾
~~Outstanding at December 31, 2019~~	~~268,205~~	$	—
~~Vested~~	~~(29,249)~~	—
~~Forfeited~~	~~(4,387)~~	—
~~Outstanding at June 30, 2020~~	~~234,569~~	$	—

(1) Prior to the IPO and Corporate Reorganization, Liberty Oilfield Services Holdings LLC (“Liberty Holdings”) issued Class B units of Liberty Holdings (“Legacy Units”). The Legacy Units were determined to have a de minimis grant-date fair value based on their assigned benchmark values. In connection with the Corporate Reorganization, the unvested Legacy Units were exchanged for 1,258,514 shares of restricted stock with the same terms and requisite vesting conditions. The shares of restricted stock retain the grant date fair value of the Legacy Units.

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~~LIBERTY OILFIELD SERVICES INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Restricted Stock Units

Restricted stock units (“RSUs”) granted pursuant to the Long Term Incentive Plan (“LTIP”), if they vest, will be settled in shares of the Company’s Class A Common Stock. RSUs were granted with vesting terms up to five years. Changes in non-vested RSUs outstanding under the LTIP during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 were as follows:


		Number of Units	Weighted Average Grant Date Fair Value per Unit			Number of Units	Weighted Average Grant Date Fair Value per Unit
Non-vested as of December 31, 2019		1,734,535	$	16.97
Non-vested as of December 31, 2020					Non-vested as of December 31, 2020	2,183,034	$	10.90
Granted	Granted	1,132,770	7.10		Granted	566,280	12.68
Vested	Vested	(590,432)	17.31		Vested	(38,460)	10.74
Forfeited	Forfeited	(34,931)	15.01		Forfeited	(19,685)	8.58
Outstanding at June 30, 2020		2,241,942	$	11.92
Outstanding as of March 31, 2021					Outstanding as of March 31, 2021	2,691,169	$	11.29

Performance Restricted Stock Units

Performance restricted stock units (“PSUs”) granted pursuant to the LTIP, if they vest, will be settled in shares of the Company’s Class A Common Stock. PSUs were granted with a three year cliff vesting schedule, subject to a performance target compared to an index of competitors’ results over the three year period ~~from January 1, 2019 through December 31, 2021 for PSUs granted~~as designated in ~~2019 and from January 1, 2020 through December 31, 2022 for PSUs granted in 2020.~~the award. The Company records compensation expense based on the Company’s best estimate of the number of PSUs that will vest at the end of the performance period. If such performance targets are not met, or are not expected to be met, no compensation expense is recognized and any recognized compensation expense is reversed. Changes in non-vested PSUs outstanding under the LTIP during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 were as follows:

Number of Units Weighted Average Grant Date Fair Value per Unit
Non-vested as of December 31, 2019 329,277 $ 14.93
Granted 392,948 9.62
Vested — —
Forfeited — —
Outstanding at June 30, 2020 722,225 $ 12.04

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)


	Number of Units	Weighted Average Grant Date Fair Value per Unit
Non-vested as of December 31, 2020	722,225	$	12.04
Granted	575,870	12.98
Vested	0	0
Forfeited	0	0
Outstanding as of March 31, 2021	1,298,095	$	12.46

Stock-based compensation is included in cost of services and general and administrative expenses in the Company’s unaudited condensed consolidated statements of operations. The Company recognized stock based compensation expense of $~~4.3~~4.9 million and ~~$8.4~~$4.1 million for the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, ~~respectively. The Company recognized stock based compensation of $3.6 million and $6.5 million for the three and six months ended June 30, 2019,~~ respectively. There was approximately $~~24.2~~28.4 million of unrecognized compensation expense relating to outstanding RSUs and PSUs as of ~~June 30, 2020.~~March 31, 2021. The unrecognized compensation expense will be recognized on a straight-line basis over the weighted average remaining vesting period of ~~two years~~2. years.

Dividends

On April 2, 2020, the Company suspended future quarterly dividends until business conditions warrant reinstatement.

The Company paid quarterly cash dividends of $0.05 per share of Class A Common Stock on March 20, 2020 to stockholders of record as of March 6, 2020. Liberty LLC paid a distribution of ~~$5.6~~$5.6 million, or $0.05 per Liberty LLC Unit, to all holders of Liberty LLC Units as of March 6, 2020, ~~$4.1~~$4.1 million of which was paid to the Company. The Company used the proceeds of the distribution to pay the dividend to all holders of shares of Class A Common Stock as of March 6, 2020, which totaled $4.1 million. Additionally, as of March 31, 2021 and December 31, 2020, the Company ~~accrued $0.2~~had $0.4 million and $0.4 million of accrued dividends payable related to restricted ~~shares~~stock and RSUs to be paid upon ~~vesting.~~vesting, respectively. Dividends related to forfeited restricted shares and RSUs will be forfeited.

Share Repurchase Program

On September 10, 2018 the Company’s board of directors authorized a share repurchase plan to repurchase up to $100.0 million of the Company’s Class A Common Stock through September 30, 2019. On January 22, 2019, the Company’s board of directors authorized an additional $100.0 million under the share repurchase plan through January 31, 2021.

During the three months ended March 31, 2021, and 2020 0 shares were repurchased under the share repurchase program.

As of March 31, 2021, no amounts remained authorized for future repurchases of Class A Common Stock under the share repurchase program.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~During the~~ ~~six~~ ~~months ended June 30, 2020, 0 shares were repurchased under the share repurchase program.~~ During the six months ended June 30, 2019, Liberty LLC purchased and retired 1,303,003 Liberty LLC Units from the Company for $18.4 million, and the Company repurchased and retired 1,303,003 shares of Class A Common Stock for $18.4 million, or $14.66 average price per share. The repurchase in the six months ended June 30, 2019 completed the share repurchase amount authorized on September 10, 2018. Of the total amount of Class A Common Stock repurchased, 117,647 shares were repurchased or returned from R/C Energy IV Direct Partnership, L.P., R/C IV Liberty Holdings, L.P., and Riverstone/Carlyle Energy Partners IV, L.P. (“R/C”). For further details of this related party transaction, see Note ~~12—Related Party Transactions.~~

~~As of June 30, 2020, $98.7 million remained authorized for future repurchases of Class A Common Stock under the share repurchase program.~~

~~Note 9—~~11—Net (Loss) Income per Share

Basic net ~~(loss)~~ income per share measures the performance of an entity over the reporting period. Diluted net ~~(loss)~~ income per share measures the performance of an entity over the reporting period while giving effect to all potentially dilutive common shares that were outstanding during the period. The Company uses the “if-converted” method to determine the potential dilutive effect of its Class B Common Stock and the treasury stock method to determine the potential dilutive effect of outstanding restricted stock and restricted stock units.

The following table reflects the allocation of net ~~(loss)~~ income to common stockholders and net ~~(loss)~~ income per share computations for the periods indicated based on a weighted average number of common stock outstanding:


		Three Months Ended						Six Months Ended							Three Months Ended
(In thousands)	(In thousands)	June 30, 2020		June 30, 2019		June 30, 2020		June 30, 2019		(In thousands)	March 31, 2021		March 31, 2020
Basic Net (Loss) Income Per Share	Basic Net (Loss) Income Per Share									Basic Net (Loss) Income Per Share
Numerator:	Numerator:									Numerator:
Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(45,771)	$	22,032	$	(44,051)	$	40,153	Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(34,205)	$	1,720
Denominator:	Denominator:									Denominator:
Basic weighted average common shares outstanding	Basic weighted average common shares outstanding	83,292		68,404		82,472		67,918		Basic weighted average common shares outstanding	163,207		81,651
Basic net (loss) income per share attributable to Liberty Oilfield Services Inc. stockholders	Basic net (loss) income per share attributable to Liberty Oilfield Services Inc. stockholders	$	(0.55)	$	0.32	$	(0.53)	$	0.59	Basic net (loss) income per share attributable to Liberty Oilfield Services Inc. stockholders	$	(0.21)	$	0.02
Diluted Net (Loss) Income Per Share	Diluted Net (Loss) Income Per Share									Diluted Net (Loss) Income Per Share
Numerator:	Numerator:									Numerator:
Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(45,771)	$	22,032	$	(44,051)	$	40,153	Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(34,205)	$	1,720
Effect of exchange of the shares of Class B Common Stock for shares of Class A Common Stock	Effect of exchange of the shares of Class B Common Stock for shares of Class A Common Stock	—		13,992		—		25,825		Effect of exchange of the shares of Class B Common Stock for shares of Class A Common Stock	0		632
Diluted net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	Diluted net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(45,771)	$	36,024	$	(44,051)	$	65,978	Diluted net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(34,205)	$	2,352
Denominator:	Denominator:									Denominator:
Basic weighted average shares outstanding	Basic weighted average shares outstanding	83,292		68,404		82,472		67,918		Basic weighted average shares outstanding	163,207		81,651
Effect of dilutive securities:	Effect of dilutive securities:									Effect of dilutive securities:
Restricted stock	Restricted stock	—		556		—		578		Restricted stock	0		268
Restricted stock units	Restricted stock units	—		1,808		—		1,717		Restricted stock units	0		2,394
Class B Common Stock	Class B Common Stock	—		43,570		—		44,064		Class B Common Stock	0		30,639
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	83,292		114,338		82,472		114,277		Diluted weighted average shares outstanding	163,207		114,952
Diluted net (loss) income per share attributable to Liberty Oilfield Services Inc. stockholders	Diluted net (loss) income per share attributable to Liberty Oilfield Services Inc. stockholders	$	(0.55)	$	0.32	$	(0.53)	$	0.58	Diluted net (loss) income per share attributable to Liberty Oilfield Services Inc. stockholders	$	(0.21)	$	0.02

In accordance with GAAP, diluted weighted average common shares outstanding for the three ~~and six~~ months ended ~~June 30, 2020~~March 31, 2021 exclude ~~29,392 and 30,015, respectively,~~16,333 weighted average shares of Class B Common Stock, ~~246~~ and ~~257, respectively,~~3,326 weighted average shares of restricted stock ~~and 1,914 and 2,124, respectively, weighted average shares of restricted stock units.~~

~~Table of Contents~~units, as including them would be antidilutive.

~~LIBERTY OILFIELD SERVICES INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

Note ~~10—~~12—Income Taxes

The Company is a corporation and is subject to U.S. federal, state, and local income tax on its share of Liberty LLC’s taxable income. Beginning in January 2021, as a result of the OneStim Acquisition (see Note 3), the Company is also subject to Canada federal and provincial income tax on its foreign operations. The Company’s selection of an accounting policy with respect to both the global intangible low taxed foreign income (“GILTI”) and base erosion and anti-abuse tax (“BEAT”) rules is to compute the related taxes in the period the entity becomes subject to either GILTI or BEAT. Undistributed earnings of foreign subsidiaries are considered to be indefinitely reinvested, and no taxes have been accrued on these earnings.

The effective ~~combined U.S. federal and state~~global income tax rate applicable to the Company for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 was ~~14.9%~~16.0%, compared to ~~15.0%~~9.7% for the period ended ~~June 30, 2019.~~March 31, 2020. The Company’s effective tax rate is significantly less than the statutory federal tax rate of 21.0% primarily ~~because no taxes are payable by~~due to the ~~Company for~~effect of foreign operations and the non-controlling interest’s share of Liberty LLC’s pass-through results for federal, state, and local income tax ~~reporting.~~reporting, upon which no taxes are payable by the Company. The Company recognized an income tax benefit of ~~$11.4~~$7.4 million ~~and~~ an~~$11.1~~d expense of $0.3 million during the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, respectively. ~~The Company recognized income tax expense~~

Table of ~~$7.1 million and $13.1 million during the three and six months ended June 30, 2019, respectively.~~Contents

~~On March 27, 2020,~~LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Per the Coronavirus Aid, Relief and Economic Security (“CARES”) Act ~~was~~ enacted ~~and signed into law. The CARES Act contains modifications to the rules around federal income tax~~on March 27, 2020, net operating ~~loss~~losses (“NOL”) ~~rules. The CARES Act permits NOL carryovers and carrybacks to offset 100% of taxable income for taxable years beginning before 2021. In addition, the CARES Act allows NOLs~~ incurred in 2018, 2019 and 2020 tomay be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. ~~Certain provisions of the CARES Act impact the 2019 income tax provision computations of~~In 2021, the Company ~~and are reflected in the period of enactment. The Company has applied~~will apply for and ~~received the~~expects to receive a NOL carryback refund to recover ~~a portion~~$5.5 million of cash taxes paid by the Company in ~~2018 of $9.3 million, a portion of which will be due to TRA Holders (as defined below) and is~~2018. This amount has been reflected as a receivable in prepaids and other current ~~TRA payable.~~assets in the accompanying unaudited condensed consolidated balance sheets.

Tax Receivable Agreements

In connection with the IPO, on January 17, 2018, the Company entered into 2 Tax Receivable Agreements (the “TRAs”) with R/C Energy IV Direct Partnership, L.P. and the then existing owners that continued to own Liberty LLC Units (each such person and any permitted transferee, a “TRA Holder” and together, the “TRA Holders”). The TRAs generally provide for the payment by the Company of 85% of the net cash savings, if any, in U.S. federal, state, and local income tax and franchise tax (computed using simplifying assumptions to address the impact of state and local taxes) that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the IPO as a result, as applicable to each TRA Holder, of (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holder’s Liberty LLC Units in connection with the IPO or pursuant to the exercise of redemption or call rights, (ii) any net operating losses available to the Company as a result of the Corporate Reorganization, and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under the TRAs.

During the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021, redemptions of Liberty LLC Units and shares of Class B Common Stock resulted in an increase of ~~$2.6~~$28.1 million in amounts payable under the TRAs, and a net increase of ~~$3.0~~$33.0 million in deferred tax assets, all of which were recorded through equity. During the ~~six~~three months ended ~~June 30, 2019,~~March 31, 2020, there were no redemptions of Liberty LLC Units and shares of Class B Common ~~Stock resulted in an increase of $5.1 million in amounts payable under the TRAs, and a net increase of $6.0 million in deferred tax assets, all of which were recorded through equity.~~ Stock.

At ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company’s liability under the TRAs was ~~$51.1~~$84.7 million and ~~$50.3~~$56.6 million, respectively, ~~a portion~~all of which is presented as a component of ~~current~~long term liabilities, ~~of $5.4 million and $1.8 million, respectively, a portion of which is presented as a component of long-term liabilities of $45.7 million and $48.5 million, respectively,~~ and the related deferred tax assets totaled ~~$52.9~~$87.0 million and ~~$49.9~~$54.0 million, respectively.

The Company made a tax benefit payment of $2.0 million to the Company’s TRA Holders, related to tax benefits realized during the calendar year ended December 31, 2019 and payable pursuant to the Company’s TRAs during the six months ended June 30, 2020.

Note ~~11—~~13—Defined Contribution Plan

The Company sponsors a 401(k) defined contribution retirement plan covering eligible employees. The Company has historically made matching contributions at a rate of $1.00 for each $1.00 of employee contribution, subject to a cap of 6% of the employee’s salary and federal limits. However, ~~effective~~on April 1, 2020, in connection with other cost savings measures undertaken in response to declining demand for frac services as a result of the impacts of the COVID-19 pandemic, the Company suspended its matching contribution. Effective January 1, 2021 the Company restored its 6% matching contribution. ~~Prior to April 1, 2020, the Company made matching contributions at a rate of $1.00 for each $1.00 of employee contribution, subject to a cap of 6% of the employee’s salary and federal limits.~~ Contributions made by the Company ~~wer~~w~~e $0~~ere ~~and $3.9~~$3.9 million ~~for~~and $4.2 million for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $4.2 million and $8.0 million for the six months ended June 30, 2020 and 2019,~~ respectively.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

Note ~~12—~~14—Related Party Transactions

As of March 31, 2021 Schlumberger owned 66,326,134 shares of Class A Common Stock of the Company, or approximately 37.0% of the issued and outstanding shares of common stock of the Company, including Class A Common Stock and Class B Common Stock. Under the Transaction Agreement, to the extent the net working capital, as defined in the Transaction Agreement, of the Transferred Business is less than $54.6 million, the difference shall be payable in cash to the Company. Additionally, the Company and Schlumberger agreed to an $8.0 million true-up payment related to the estimated costs to bring certain assets to full working condition, which was collected during the three months ended March 31, 2021. As of March 31, 2021 and December 31, 2020, the Company recorded an estimated receivable from Schlumberger of $4.4 million and $24.7 million related to these true-up payments, respectively. Additionally, in conjunction with closing the OneStim Acquisition, the Company entered into a transition services agreement with Schlumberger under which Schlumberger provides certain administrative transition services until the Company fully integrates the acquired business. The Company incurred $5.2 million of fees payable to Schlumberger for such transaction services during the three months ended March 31, 2021, and expects expenses incurred after March 31, 2021 to be immaterial.

Following the OneStim Acquisition, in the normal course of business, the Company purchases chemicals, proppant and other equipment and maintenance parts from Schlumberger and its subsidiaries. During the three months ended March 31, 2021 total purchases from Schlumberger were approximately $11.1 million, and as of March 31, 2021 amounts due to Schlumberger were $1.7 million and $2.8 million included in accounts payable and accrued liabilities, respectively, in the unaudited condensed consolidated balance sheet.

Prior to the Corporate Reorganization, one of the members of Liberty Holdings contributed a portion of its member interest in Liberty Holdings to R/C IV. Subsequently, in conjunction with the Corporate Reorganization, R/C IV was contributed to Liberty LLC. R/C IV had net operating loss carryforwards for federal and state income tax purposes which resulted in the recognition of a $2.9 million payable pursuant to the TRAs. During the ~~year~~three months ended ~~December~~March 31, ~~2019,~~2021, R/C IV Liberty Holdings, L.P. exercised its redemption right and redeemed ~~9,605,786~~10,269,457 shares of Class B Common Stock resulting in an increase in tax basis, as described under “Tax Receivable Agreements” in Note—1012 Income Taxes, and recognition of ~~$22.3~~$25.8 million in amounts payable under the TRAs. During the year ended December 31, 2020, R/C IV Liberty Holdings, L.P. exercised its redemption right and redeemed 4,016,965 shares of Class B Common Stock resulting in an increase in tax basis, as described under “Tax Receivable Agreements” in Note—12 Income Taxes, and recognition of $6.1 million in amounts payable under the TRAs. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the Company’s ~~current~~ liabilities under the TRAs payable to R/C IV Liberty Holdings, L.P. and R/C IV were ~~$2.9~~$53.0 million and ~~$1.3~~$27.2 million, respectively, included ~~in accrued interest and other and non-current liabilities were $20.6 million and $23.8 million, respectively,~~ in payable pursuant to tax receivable agreements in the accompanying unaudited condensed consolidated balance sheets.

Liberty Resources LLC, an oil and gas exploration and production company, and its successor entity (collectively, the “Affiliate”) has certain common ownership and management with the Company. The amounts of the Company’s revenue related to hydraulic fracturing services provided to the Affiliate for the three months ended ~~June 30,~~March 31, 2021 and 2020 was $1.2 million and ~~2019 was~~ $0 ~~and $4.8~~$0.0 million, ~~respectively, and $0 and $11.1 million for the six months ended June 30, 2020 and 2019,~~ respectively.

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019, $1.3~~2020, $0.1 million and ~~$7.1~~$0.0 million, respectively, of the Company’s accounts receivable—~~related party~~trade was with the Affiliate. On June 24, 2019 (the “Agreement Date”), the Company entered into an agreement with the Affiliate to amend payment terms for outstanding invoices due as of the Agreement Date to be due on July 31, 2020. On September 30, 2019, the agreement was amended to extend the due date ~~for~~of the remaining amounts outstanding to October 31, ~~2020.~~2020 subject to interest at 13% annual yield. Amounts outstanding from the Affiliate as of the Agreement Date were ~~$15.6~~$15.6 million. The ~~amount~~amounts outstanding, including all accrued interest, was paid in full in January 2020. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, no amounts were outstanding under the amended payment terms from the ~~Affiliate are~~ $0 and $2.5 million, respectively, all of which is presented in accounts and notes receivable—related party in the accompanying unaudited condensed consolidated balance sheet. The balance outstanding is subject to interest at 13% annual percent yield, retroactively applied to the respective invoice date.

Affiliate. During the three ~~and six~~ months ended ~~June 30,~~March 31, 2021 and 2020, interest income from the Affiliate ~~was~~was $0 and $0.2 million, respectively, and accrued interest as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 was $0. $0. Receivables earned for services performed after the Agreement Date continue to be subject to normal 30-day payment terms, provided that any amount unpaid after 60 days ~~will be~~is subject to 13% interest.

~~Liberty Holdings entered into an advisory agreement dated December 30, 2011 with R/C, in which R/C agreed to provide certain administrative advisory services to Liberty Holdings. The Company incurred~~ 0 service fees during the three and six months ended June 30, 2020 and 2019. The advisory services agreement was terminated pursuant to an agreement effective as of January 11, 2018. On January 11, 2018, Liberty Holdings, R/C, and other parties entered into a Master Reorganization Agreement that, among other things, crystallized the “waterfall” provisions of Article VI of the Third Amended and Restated Limited Liability Agreement of Liberty Holdings, dated October 11, 2016 (the “Holdings LLC Agreement”) in connection with the IPO. As part of this crystallization, R/C and affiliated entities (collectively, the “R/C Affiliates”) received shares of Class A Common Stock, including 117,647 shares of Class A Common Stock (such 117,647 shares referred to as the “Issued Shares”) to compensate R/C Affiliates for certain accrued preferred returns but which would not have been issued had the $2.0 million in fees owed under the advisory agreement been paid in cash. Had this fee been paid in cash on or prior to January 11, 2018, R/C and Liberty Holdings acknowledge that R/C Affiliates would not have received the Issued Shares in the crystallization pursuant to the provisions of the Holdings LLC Agreement. Subsequently, during the fourth quarter of 2018, R/C asserted that certain provisions of the termination of services agreement provided for R/C to receive $2.0 million in cash as payment of those accrued fees. To resolve this matter, the Company agreed to pay R/C Affiliates $2.0 million in cash in exchange for the purchase, at the IPO price, or return of the Issued Shares and $0.3 million for interest and the settlement of the matter. Accordingly, $2.3 million was recorded as accrued liabilities—related party in the accompanying condensed consolidated balance sheet as of December 31, 2018 and subsequently paid in January 2019. The purchased and returned shares of Class A Common Stock were canceled and retired, and the Company does not expect to incur future expense related to the advisory agreement or termination thereof.

During 2016, Liberty Holdings entered into a future commitment to invest and become a non-controlling minority member in Proppant Express Investments, LLC (“PropX Investments”), the owner of Proppant Express Solutions, LLC (“PropX”), a provider of proppant logistics equipment. LOS ~~was~~is party to a services agreement (the “PropX Services Agreement”) whereby LOS ~~was~~is to provide certain administrative support functions to PropX, and LOS ~~was~~is to purchase and lease proppant logistics equipment from PropX. The PropX Services Agreement was terminated on May 29, ~~2018,~~2018; however the Company continues to lease equipment from PropX. During the three months ended March 31, 2021 and 2020, the Company leased proppant logistics equipment for $2.0 million and $2.6 million, respectively.

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LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

~~Company continues to purchase and lease equipment from PropX under certain lease agreements. For the three months ended June 30, 2020 and 2019, the Company leased proppant logistics equipment for~~P ~~$1.9 million~~ and $2.4 million, respectively. During the six months ended June 30, 2020 and 2019, the Company leased proppant logistics equipment for $4.5 million and $4.9 million, respectively. The Company purchased no proppant logistics equipment for the three and six months ended June 30, 2020 and 2019. Payablesayables to PropX as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019~~2020 were ~~$0.7~~$0.8 million ~~and~~and $0.8 million, respectively. In April 2020, the Company and PropX amended certain logistics equipment leases to provide for a reduced monthly rate for the remaining inital lease term, which resulted in a $1.1 million reduction in lease payments over the remaining initial portion of the lease term, while also extending the term of those leases for an additional year. Further, in June 2020, the Company and PropX amended certain logistics equipment leases to defer rent for the month of June 2020 with the deferred payment becoming due without interest in the month following the end of the initial term, resulting in an additional $0.7 million reduction in lease payments in June 2020. The amendments resulted in a $3.0 million increase in the operating lease liability and $3.0 million increase in the operating right-of-use-asset (see Note 2–Significant Accounting Policies for additional information).

Note ~~13—~~15—Commitments & Contingencies

Purchase Commitments (tons ~~and gallons~~ are not in thousands)

The Company enters into purchase and supply agreements to secure supply and pricing of proppants, and related proppant transportation, as well as chemicals. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the agreements ~~provide pricing and committed supply sources for~~commit the Company to purchase ~~4,158,750~~1,145,791 and ~~7,978,300~~1,580,750 tons, respectively, of proppant through February 1, 2022. Amounts above also include commitments to pay for transport fees on minimum amounts of ~~proppants or railcars.~~proppants. Certain proppant supply agreements contain a clause whereby in the event that the Company fails to purchase minimum volumes, as defined in the agreement, during a specific time period, a shortfall fee may apply. Additionally, related proppant transload service commitments extend through 2025.

~~As of June 30, 2020 and December 31, 2019, the Company also had agreements that provide pricing and committed supply source for the purchase of~~ ~~1,221,000~~ ~~and 3,339,534 gallons, respectively, of chemicals through December 31, 2020.~~

Future proppant, ~~including rail car transport,~~transload and ~~chemical~~mancamp commitments ~~based on Company forecasts~~ are as follows:


($ in thousands)	($ in thousands)			($ in thousands)
Remainder of 2020		$	62,684
2021		83,571
Remainder of 2021				Remainder of 2021	$	46,357
2022	2022	18,701		2022	19,765
2023	2023	9,524		2023	10,004
2024	2024	10,268		2024	10,748
2025				2025	5,744
Thereafter	Thereafter	7,664		Thereafter	0
		$	192,412		$	92,618

Certain supply agreements contain a clause whereby in the event that the Company fails to purchase minimum volumes, as defined in the agreement, during a specific time period, a shortfall fee may apply. In circumstances where the Company does not make the minimum ~~purchases~~purchase required under the contract, the Company and its suppliers have a history of amending such minimum purchase contractual terms and in rare cases does the Company incur ~~such~~ shortfall fees. If the Company were unable to make any of the minimum purchases and the Company and its suppliers cannot come to an agreement to avoid such fees, the Company could incur shortfall fees in the amounts of ~~$44.1~~$31.7 million, ~~$48.9~~$19.8 million, ~~$18.6~~$10.0 million, ~~$9.5~~$10.7 million, ~~$10.3~~$5.7 million, and ~~$7.7 million~~ for the remainder of ~~2020~~2021 and years ended ~~2021,~~ 2022, 2023, 2024, and ~~thereafter,~~2025, respectively. Based on forecasted levels of activity, the Company does not currently expect to incur significant shortfall fees.

Included in the commitments for the remainder of 2021 are $9.6 million of payments expected to be due to Schlumberger, in conjunction with transition services provided by Schlumberger, in the second quarter of 2021 for the use of certain light duty trucks, heavy tractors and field equipment used to various degrees in OneStim’s frac and wireline operations. The Company is in negotiations with the third party owner of such equipment to lease or purchase some or all of such aforementioned vehicles and equipment, subject to agreement on terms and conditions. No gain or loss is expected upon consummation of any such agreement.

Litigation

Securities Class Actions

On March 11, 2020, Marshall Cobb, on behalf of himself and all other persons similarly situated, filed a putative class action lawsuit in the state District Court of Denver County, Colorado against the Company and certain officers and board members of the Company along with other defendants in connection with the IPO (the “Cobb Complaint”). The Cobb Complaint alleges that the Company and certain officers and board members of the Company violated Section 11 of the Securities Act of 1933 by virtue of inaccurate or misleading statements allegedly contained in the registration statement filed in connection with the IPO and requests unspecified damages and costs. The Cobb Plaintiffs also allege control person liability claims under Section 15 of the Securities Act of 1933 against certain officers and board members of the Company and other defendants.

~~Table of Contents~~

~~LIBERTY OILFIELD SERVICES INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

On April 3, 2020, Marc Joseph, on behalf of himself and all other persons similarly situated, filed a putative class action lawsuit in the United States District Court in Denver, Colorado against the Company and certain officers and board members of the Company along with other defendants in connection with the IPO and requests unspecified damages and costs (the “Joseph Complaint,” and collectively with the Cobb Complaint, the “Securities Lawsuits”). The Joseph Complaint, which is based on similar factual allegations made in the Cobb Complaint, alleges that the defendants violated Sections 11 and 12(a)(2) of the Securities Act of 1933 by virtue of inaccurate or misleading statements allegedly contained in the registration statement and

Table of Contents

LIBERTY OILFIELD SERVICES INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

prospectus filed in connection with the IPO. The Joseph Complaint also alleges control person liability claims under Section 15 of the Securities Act of 1933 against certain officers and board members of the Company and other defendants.

The Company has hired counsel and plans to vigorously defend against the allegations in the Securities Lawsuits.

Other Litigation

In addition to the matters described above, from time to time, the Company is subject to legal and administrative proceedings, settlements, investigations, claims and actions. The Company’s assessment of the likely outcome of litigation matters is based on its judgment of a number of factors including experience with similar matters, past history, precedents, relevant financial and other evidence and facts specific to the matter. Notwithstanding the uncertainty as to the final outcome, based upon the information currently available, management does not believe any matters, including those listed above, in aggregate will have a material adverse effect on its financial position or results of operations.

The Company cannot predict the ultimate outcome or duration of any lawsuit described in this report.

Note ~~14—Selected Quarterly Financial Data~~16—Subsequent Events

~~The following tables summarizes~~There were no significant subsequent events requiring disclosure or recognition other than those disclosed in these notes to the unaudited condensed consolidated ~~changes in equity for the three months ended June 30, 2020 and 2019:~~

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Retained Earnings
Total Stockholders’ equity
Noncontrolling Interest Total Equity
Balance—March 31, 2020 81,920 30,639 $ 819 $ 307 $ 413,664 $ 140,581 $ 555,371 $ 226,082 $ 781,453
Exchanges of Class B Common Stock for Class A Common Stock 2,558 (2,558) 26 (26) 18,201 — 18,201 (18,201) —
Effect of exchange on deferred tax asset, net of liability under tax receivable agreements — — — — 454 — 454 — 454
Other distributions and advance payments to noncontrolling interest unitholders — — — — (1) — (1) — (1)
Stock based compensation expense — — — — 3,171 — 3,171 1,112 4,283
Restricted stock and RSU forfeitures (4) — (1) — (9) 7 (3) 9 6
RSU Vesting 379 — 4 — 405 — 409 (812) (403)
Net loss — — — — — (45,771) (45,771) (20,064) (65,835)
Balance—June 30, 2020 84,853 28,081 $ 848 $ 281 $ 435,885 $ 94,817 $ 531,831 $ 188,126 $ 719,957

Shares of Class A Common Stock Shares of Class B Common Stock Class A Common Stock, Par Value Class B Common Stock, Par Value Additional Paid in Capital Retained Earnings
Total Stockholders’ equity
Noncontrolling Interest Total Equity
Balance—March 31, 2019 68,744 43,570 $ 687 $ 436 $ 314,967 $ 133,877 $ 449,967 $ 305,515 $ 755,482
$0.05/share of Class A Common Stock dividend — — — — — (3,588) (3,588) — (3,588)
$0.05/unit distribution to noncontrolling interest unitholders — — — — — — — (2,179) (2,179)
Other distributions and advance payments to noncontrolling interest unitholders — — — — — — — (325) (325)
Stock based compensation expense — — — — 3,571 — 3,571 — 3,571
RSU Vesting 218 — 3 — (439) — (436) (603) (1,039)
Restricted stock and RSU forfeitures — — — — — 1 1 — 1
Net income — — — — — 22,032 22,032 18,491 40,523
Balance—June 30, 2019 68,962 43,570 $ 690 $ 436 $ 318,099 $ 152,322 $ 471,547 $ 320,899 $ 792,446

financial statements

~~Table of Contents~~

~~LIBERTY OILFIELD SERVICES INC.~~

~~Notes to Condensed Consolidated Financial Statements~~

~~(Unaudited)~~

~~Note 1~~5~~—Subsequent Events~~

The Company has evaluated events through the filing of this Quarterly Report and determined that no subsequent events have occurred that would require recognition or disclosure in the unaudited consolidated financial statements.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes. The following discussion contains “forward-looking statements” that reflect our future plans, estimates, beliefs, and expected performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of a variety of risks and uncertainties, including those described in “Cautionary Note Regarding Forward-Looking Statements,” the Annual Report under the heading “Item 1A. Risk Factors,” and in ~~“Part~~"Part II – Other Information, Item 1A.–Risk ~~Factors”~~Factors" included ~~herein.~~therein. We assume no obligation to update any of these forward-looking statements.

Overview

We are an independent provider of hydraulic fracturing services and goods to onshore oil and natural gas exploration and production (“E&P”) companies in North America. We have grown from one hydraulic fracturing fleet in December 2011 to 24 fleets in the first quarter of 2020, including the addition of one fleet in January 2020. In response to market conditions described below, in April 2020, we reduced our headcount consistent with the temporary idling of approximately half of our frac fleets.

We provide our services primarily in the Permian Basin, the Eagle Ford Shale, the DJDenver-Julesburg Basin (the “DJ Basin”), the Williston Basin, the San Juan Basin and the Powder River Basin. Following the completion of the OneStim Acquisition (as defined below) we now also provide services in the Haynesville Shale, the SCOOP/STACK, the Marcellus Shale, Utica Shale, and the Western Canadian Sedimentary Basin. Additionally, we operate two sand mines in the Permian Basin.

On December 31, 2020, the Company acquired certain assets and liabilities from Schlumberger’s OneStim® business, which provides hydraulic fracturing pressure pumping services in onshore United States and Canada, including its pressure pumping, pumpdown-perforating and Permian frac sand business. See Note 3—The OneStim Acquisition to the unaudited condensed consolidated financial statements included in “Item 1. Financial Statements”. Effective December 31, 2020, Schlumberger owned 37.0% of the issued and outstanding shares of Common Stock. The combined company delivers best-in-class completion services for the sustainable development of unconventional resource plays in the United States and Canada onshore markets.

We believe the following characteristics both distinguish us from our competitors and are the foundations of our business: forming ongoing partnerships of trust and innovation with our customers; developing and utilizing technology to maximize well performance; and promoting a people-centered culture focused on our employees, customers and suppliers. We have developed strong relationships with our customers by investing significant time in fracture design collaboration, which substantially enhances their production economics. Our technological innovations have become even more critical as E&P companies have increased the completion complexity and fracture intensity of horizontal wells. We are proactive in developing innovative solutions to industry challenges, including developing: (i) our proprietary databases of U.S. unconventional wells to which we apply our proprietary multi-variable statistical analysis technologies to provide differential insight into fracture design optimization; (ii) our Liberty Quiet Fleet® design which significantly reduces noise levels compared to conventional hydraulic fracturing fleets; (iii) hydraulic fracturing fluid systems tailored to the specific reservoir properties in the basins in which we operate; and (iv) our dual fuel dynamic gas blending fleets that allow our engines to run diesel or a combination of diesel and natural gas, to optimize fuel use, reduce emissions and lower costs. We foster a people-centered culture built around honoring our commitments to customers, partnering with our suppliers and hiring, training and retaining people that we believe to be the best talent in our field to drive innovation, enabling us to be one of the safest and most efficient hydraulic fracturing companies in the United States.

Recent Trends and Outlook

~~During~~Bouyed by worldwide vaccine distribution campaigns and fiscal and monetary stimulus, global economic growth expectations are increasingly more constructive. A rise in energy demand has paralleled the ~~first quarter,~~economic recovery, with strong leading economic indicators suggesting that these trends should continue during 2021. There is still risk driven by the ~~COVID-19 pandemic emerged~~resurgent virus spread in India, Brazil and put significant downward pressure on the global economy and oil demand and prices, leading North American operators to announce significant cuts to planned 2020 capital expenditures. The reduced activity levelsseveral European countries which has led to a ~~plunging rig count~~reinstatement of containment measures, unlike the U.S. and ~~the most abrupt curtailment of frac activity ever.~~

~~The extent and duration~~U.K. where another wave of the ~~continued~~Covid pandemic has been kept at bay. A tightening in oil supply and demand has developed, with a steady draw of global ~~impact~~oil inventory signifying that most of the ~~COVID-19 pandemic~~increased OPEC+ production is ~~unknown. While economic activity has increased from~~currently being absorbed by higher global demand.

WTI prices largely stabilized in the ~~April lows, concerns about a COVID-19 resurgence have tempered the pace~~second half of a full return of social and commercial activity. With continued uncertainty surrounding the magnitude and timing of oil demand recovery, the Organization of the Petroleum Exporting Countries (“OPEC”) and non-OPEC supply concerns, and ongoing investor pressure for better returns by E&P companies than those achieved over the last decade, we are unable to predict the degree and duration of many factors that may impact our future operating results. These factors include, but may not be limited2020, relative to the effectiveness of global and regional efforts to combat COVID-19; sovereign and market responses to the continuing effects of the pandemic; and business and consumer behavior as lockdown measures are relaxed. The volatile global economic conditions stemming from the pandemic, the liquidity situation for North American oil producers and the reaction of international oil producers could also exacerbate the risk factors identified in the Annual Report and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020. The impacts of the COVID-19 pandemic may also materially adversely affect our results in a manner that is either not currently known or that we do not currently consider to be a significant risk to our business. See also the risk factor relating to COVID-19 disclosed in “Item 1A.–Risk Factors” of this Quarterly Report.

In response to these developments, the continued duration and ultimate severity of which is unknown, we have taken the following steps to protect our employees, customers and business. During February 2020 we formed a COVID-19 response team to implement safety procedures and contingency plans at both our customer locations and in our facilities to ensure our ability to continue providing safe and efficient services to our customers, while protecting the health of both employees and customers.

We have been proactive in protecting our business during these unprecedented events. We moved quickly to preserve cash and protect our balance sheet and announced strategic actions to align our cost structure with demand for frac services. Regrettably, for the first time in the Company’s history we undertook a reduction of our personnel and staffed fleet count by approximately 50%. We also suspended variable compensation plans and our 401(k) match, implemented base salary reductions, executive and director compensation reductions, operating cost rationalization, reduction of planned 2020 capital expenditures, and suspended our quarterly dividend. Further, we implemented a company-wide employee furlough plan that flexes our cost structure to align with the uncertain level of frac demand we experiencedvolatility observed during the second quarter of 2020. In the first quarter of 2021, WTI averaged $58.09, compared to $42.52 in fourth quarter of 2020. The recovery of energy demand is also reflected in incremental improvement to rig count, as the most recent domestic onshore rig count for North America averaged 378 in the first quarter of 2021, up from the average in the fourth quarter of 2020 of 297, according to a report by Baker Hughes, a GE company.

~~Prior~~We believe the frac market could experience flat to slightly rising demand for frac services in 2021, based on current visibility into customer plans. Demand of publicly-traded operators is expected to be relatively level during the ~~emergence~~year, whereas private operator demand may increase during the balance of the ~~COVID-19 pandemic, the pricing dynamic for hydraulic fracturing services entering into 2020 was challenging. Demand for hydraulic fracturing services and goods is predominantly influenced~~year, if supported by the level of drilling and completion activity by E&P companies, which, in turn, depends largely on the current and anticipated profitability of developing oil and natural gas reserves, the availability of capital to E&P companies, and takeaway capacity in each basin. During 2018 and 2019, and continuing into 2020, E&P companies have increasingly come under investor pressure for better returns than those achieved over the last decade which has negatively impacted the demand for fracturing services. As a result, debt and equity capital markets, which previously funded drilling and completions activity beyond E&P companies’ operating cash flow, tightened, causing an increased level of capital discipline that has resulted in a lower level of drilling and completions expenditures. 2019 E&P capital expenditures were lower than those in 2018, and going into 2020 capitalcommodity prices. Against this backdrop,

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~~expenditures were expected~~the Company expects to ~~be less than 2019. During March and April 2020,~~maintain its current fleet count during 2021, with the potential of adding more fleets later in ~~response~~the year if economics improve. Increased efficiencies that lower our cost of delivery coupled with a gradual, modest rise in frac pricing are the factors that can drive improved fleet profitability, however our ability to ~~falling oil prices from excess worldwide supply and exacerbated by~~recognize profitability improvements is dependent on the ~~unprecedented decline in demand for oil as a result~~continuation of the global response to the COVID-19 pandemic, North American E&P companies announced significant planned 2020 capital expenditure budget reductions widely forecast to be 40% lower than 2020 capital expenditure budgets originally announced during the December 2019 to January 2020 reporting cycle.

Total industry horizontal frac stages in North America were up marginally in 2019, 6% from 2018, compared to a 34% increase in 2018 from 2017, according to Coras Research, LLC. However, efficiency gains across the industry have raised the number of frac stages completed by each fleet, which implies a decrease in the active frac fleets needed to meet demand. The slowing pace of frac activity led to progressively lower demand for frac fleets through the second half of 2019, resulting in pricing pressure on our services. The substantial oversupply of frac equipment in the second half of 2019 was the pricing backdrop for 2020 dedicated fleet negotiations. While the Company and many of its competitors have announced reductions in fleet count in response to COVID-19 induced market developments, the timing, depth and duration of fleet count reductions, combined with the demand factors described above, will impact pricing for hydraulic fracturing services in future periods.

~~The~~current commodity price of West Texas Intermediate (“WTI”) crude oil has decreased from 2019. In the second quarter of 2020, the price of WTI averaged $27.96 compared with an average of $45.34 for the first quarter of 2020 and an average of $59.88 for the second quarter of 2019. Additionally, in the second quarter of 2020, the horizontal rig count in North America averaged 353 compared to 703 in the first quarter of 2020 and 868 in the second quarter of 2019, according to a report by Baker Hughes, a GE company. Subsequent to June 30, 2020, the price of WTI has averaged $40.76 through July 27, 2020, however rig counts continue to decline and the most recent Baker Hughes horizontal rig count for North America was 215 rigs reported as of July 24, 2020.

While the market for completion services has rebounded slightly from lows experienced during the second quarter, worldwide demand and supply for oil remain in flux due to the effects of COVID-19. We cannot predict with any certainty when demand for, or pricing of, our frac services will meaningfully increase. However, we would not expect these factors to improve until there is a recovery for worldwide demand for oil that is not overwhelmed by an increase in oil supply. While we anticipate our activity levels in the third quarter 2020 will modestly improve, based on our current visibility into our customers’ plans for the remainder of 2020, we believe decreased levels of demand as compared to pre-COVID-19 activity levels will likely persist at least through the remainder of 2020.environment.

Results of Operations

Three months ended ~~June 30, 2020~~March 31, 2021 compared to three months ended ~~June 30, 2019~~March 31, 2020

Three months ended June 30,
Description 2020 2019 Change
(in thousands)
Revenue $ 88,362 $ 542,147 $ (453,785)
Cost of services, excluding depreciation and amortization shown separately 89,518 426,444 (336,926)
General and administrative 18,064 23,989 (5,925)
Severance and related costs 9,057 — 9,057
Depreciation and amortization 44,931 40,368 4,563
Loss on disposal of assets 334 143 191
Operating (loss) income (73,542) 51,203 (124,745)
Interest expense, net 3,656 3,597 59
Net (loss) income before income taxes (77,198) 47,606 (124,804)
Income tax (benefit) expense (11,363) 7,083 (18,446)
Net (loss) income (65,835) 40,523 (106,358)
Less: Net (loss) income attributable to non-controlling interests (20,064) 18,491 (38,555)
Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders $ (45,771) $ 22,032 $ (67,803)

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	Three months ended March 31,
Description	2021		2020		Change
	(in thousands)
Revenue	$	552,032	$	472,344	$	79,688
Cost of services, excluding depreciation and amortization shown separately	498,935		392,716		106,219
General and administrative	26,359		28,613		(2,254)
Transaction, severance and other costs	7,621		—		7,621
Depreciation, depletion and amortization	62,056		44,831		17,225
Gain on disposal of assets	(720)		(102)		(618)
Operating (loss) income	(42,219)		6,286		(48,505)
Interest expense, net	3,754		3,608		146
Net (loss) income before income taxes	(45,973)		2,678		(48,651)
Income tax (benefit) expense	(7,357)		261		(7,618)
Net (loss) income	(38,616)		2,417		(41,033)

Less: Net (loss) income attributable to non-controlling interests	(4,411)		697		(5,108)
Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders	$	(34,205)	$	1,720	$	(35,925)

Revenue

Our revenue ~~decreased~~increased $~~453.8~~79.7 million, or ~~83.7%~~16.9%, to $~~88.4~~552.0 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$542.1~~$472.3 million for the three months ended ~~June 30, 2019. As mentioned above in Recent~~March 31, 2020, due to additional fleets deployed and to a lesser extent, new service offerings, both as a result of the OneStim Acquisition (see “Recent Trends and ~~Outlook,~~Outlook”). The increase in ~~April 2020, we reduced our staffed fleet count~~revenue from additional fleets deployed was partially offset by ~~approximately 50% and have further implemented furloughs~~a decrease in frac market pricing for the three months ended March 31, 2021 compared to match customer activity levels which are expected to remain suppressed in the coming months as customers have adjusted their completion plans in light of market imbalances resulting from the COVID-19 pandemic. Average active fleets decreased 80.0% to 4.6 from 23.0 average active fleets deployedpre-pandemic pricing during the three months ended June 30, 2020 and 2019, respectively. Further, revenue per average active fleet decreased 18.6% to $19.2 million for the three months ended June 30, 2020 compared to $23.6 million for the three months ended June 30, 2019, attributable to deterioration in the market as previously discussed.March 31, 2020.

Cost of Services

Cost of services (excluding depreciation and amortization) de~~creased~~increased $~~336.9~~106.2 million, or ~~79.0%~~27.0%, to $~~89.5~~498.9 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$426.4~~$392.7 million for the three months ended ~~June 30, 2019, which is consistent with the decrease~~March 31, 2020. The increase in ~~operations~~expenses was primarily related to additional fleets deployed and ~~revenues discussed above. The decrease in expense is primarily attributed~~ to a ~~decrease in material costs~~lesser extent, new service offerings, both as a result of ~~$203.2 million or 80.6% due to~~ the lower volumes of materials consumed, $54.2 million or 87.7% decrease in repairs and maintenance costs due to the decrease in pump hours, and a $63.2 million or 74.0% decrease in personnel costs due to the reduction in headcount, furlough and flexible cost structure, as well as the temporary suspension of bonus and 401(k) match programs.OneStim Acquisition.

General and Administrative

General and administrative expenses de~~creased~~ ~~$5.9~~decreased $2.3 million, or ~~24.7%~~7.9%, to $~~18.1~~26.4 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$24.0~~$28.6 million for the three months ended ~~June 30, 2019~~March 31, 2020, primarily ~~related to an decrease in personnel costs of $5.5 million~~ due to ~~the reduction in headcount, furlough and flexible cost structure, as well as the temporary suspension of bonus and 401(k) match programs offset by and increase in allowance~~$2.5 million provision for credit losses ~~of $2.2 million. Additionally, general and administrative expense included $3.1 million of share based compensation expense~~recorded during the three months ended ~~June 30,~~March 31, 2020 ~~compared~~related to ~~$2.4~~application of ASU 2016-13 Financial Instruments-Credit Losses on Financial Instruments to the Company’s accounts receivables as of March 31, 2020 in consideration of both historic collection experience and the expected impact of currently deteriorating economic conditions for the oil and gas industry.

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Transaction, Severance and Other Costs

Transaction costs were $7.6 million for the three months ended ~~June 30, 2019.~~

~~Severance and Related Costs~~

~~Severance and related costs increased $9.1 million, or 100%, to $9.1 million for the three months ended June 30, 2020~~March 31, 2021 compared to $0 for the three months ended ~~June 30, 2019. The Company reduced its workforce~~March 31, 2020. Such costs were incurred in ~~April 2020~~connection with the OneStim Acquisition and commenced furlough schedules for remaining employees in May 2020. The Company recorded $7.4 million in one-time severance costs in the three months ended June 30, 2020. Additionally, the Company paid insuranceincluded transition services, investment banking, legal, accounting and other ~~benefits of $1.7 million for employees while they are on furlough. The Company did not lay-off or furlough any employees in during 2019.~~professional services.

Depreciation and Amortization

Depreciation and amortization expense increased~~$4.6~~ $17.2 million,, or ~~11.3%~~38.4%, to ~~$44.9 million~~ ~~for the three months ended June 30, 2020 compared to $40.4~~$62.1 million for the three months ended ~~June 30, 2019, due~~March 31, 2021 compared to ~~one additional hydraulic fracturing fleet and additional support equipment deployed in the twelve months ended June 30, 2020.~~

~~Loss on disposal of assets~~

~~Loss on disposal of assets increased $0.2 million to $0.3~~$44.8 million for the three months ended ~~June 30, 2020~~March 31, 2020. The increase in 2021 was due to to the addition of active fleets and other property acquired in the OneStim Acquisition.

Gain on disposal of assets

Gain on disposal of assets increased $0.6 million to a gain of $0.7 million for the three months ended March 31, 2021 compared to a gain of $0.1 million for the three months ended ~~June, 2019, attributed to the disposition~~March 31, 2020. The Company regularly sells equipment that is no longer in use as a part of ~~assets, primarily related to light duty vehicles.~~normal course fleet and equipment management.

Operating (Loss) Income

We realized an operating loss of ~~$73.5~~$42.2 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to operating income ~~$51.2~~of $6.3 million for the three months ended ~~June 30, 2019,~~March 31, 2020, a decrease of ~~$124.7~~$48.5 million, or ~~243.6%~~771.6%. The decrease is primarily due to ~~the $453.8~~a $128.2 million ~~or 83.7%, decrease in total revenue only partially offset by a $329.0 million decrease~~increase in total operating expenses, offset by an $79.7 million increase in total revenue, the significant components of which are discussed above. ~~The decline in operating income was significantly impacted by reduced customer work as a result of the COVID-19 pandemic and steep decline in oil prices in March and April of 2020.~~

Interest Expense, net

Interest expense, net was consistent between periods, increasing slightly by $0.1 million during the three months ended ~~June 30, 2020~~March 31, 2021 compared to the three months ended ~~June 30, 2019.~~March 31, 2020, primarily due to a decrease in interest income, partially offset by lower interest expense on the credit facilities.

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Net (Loss) Income before Income Taxes

We realized net loss before income taxes of $~~77.2~~46.0 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to net income before income taxes of ~~$47.6~~$2.7 million for the three months ended ~~June 30, 2019.~~March 31, 2020. The decrease is primarily attributable to an increase in costs greater than the increase in revenue, as discussed above, related to the lag in pricing recovery as activity continues to recover.

Income Tax (Benefit) Expense

We recognized an income tax benefit of $7.4 million for the three months ended March 31, 2021, an effective rate of 16.0%, compared to expense of $0.3 million for the three months ended March 31, 2020, an effective rate of 9.7%. The decrease in tax expense is primarily attributable to a decrease in revenue, as discussed above, related to the decrease in pricing and activity.

~~Income Tax (Benefit) Expense~~

~~We recognized~~ ~~a tax benefit of~~ ~~$11.4 million~~ f~~or the three months ended June 30, 2020, at an effective rate~~ of ~~14.7%~~, ~~compared to $7.1 million, at an effective rate of 14.9%, recognized during the three months ended June 30, 2019. This~~ ~~decrease~~ ~~in income tax expense is attributable to the net~~ ~~decrease~~ ~~in operating income, the significant components of which are discussed above.~~

Although the Company’s tax rate was 14.9% for the six months ended June 30, 2020, the Company expects the effective tax rate to be approximately 16.5% for the full year ended December 31, 2020. The rate is lower for the six months ended June 30, 2020 due to discrete items recorded related to stock based compensation and the Company’s response to the CARES Act. The CARES Act allowed the Company to carry back NOLs incurred during the year ended December 31, 2019 which allowed for the recognition of tax attributes during the three months ended June 30, 2020.

~~Six months ended June 30, 2020 compared to six months ended June 30, 2019~~

Six months ended June 30,
Description 2020 2019 Change
(in thousands)
Revenue $ 560,706 $ 1,077,295 $ (516,589)
Cost of services, excluding depreciation and amortization shown separately 482,234 855,743 (373,509)
General and administrative 46,677 46,077 600
Severance and related costs 9,057 — 9,057
Depreciation and amortization 89,762 78,755 11,007
Loss on disposal of assets 232 1,366 (1,134)
Operating (loss) income (67,256) 95,354 (162,610)
Interest expense, net 7,264 7,779 (515)
Net (loss) income before income taxes (74,520) 87,575 (162,095)
Income tax (benefit) expense (11,102) 13,143 (24,245)
Net (loss) income (63,418) 74,432 (137,850)
Less: Net (loss) income attributable to non-controlling interests (19,367) 34,279 (53,646)
Net (loss) income attributable to Liberty Oilfield Services Inc. stockholders $ (44,051) $ 40,153 $ (84,204)

~~Revenue~~

Our revenue decreased $516.6 million, or 48.0%, to $560.7 million for the six months ended June 30, 2020 compared to $1.1 billion for the six months ended June 30, 2019. As mentioned above in Recent Trends and Outlook, in April 2020, we reduced our staffed fleet count by approximately 50% and have further implemented furloughs to match customer activity levels which are expected to remain suppressed in the coming months as customers have adjusted their completion plans in light of market imbalances resulting from the COVID-19 pandemic. Average active fleets decreased 39.4% to 13.7 from 22.6 average active fleets deployed during the six months ended June 30, 2020 and 2019, respectively. Further, revenue per average active fleet decreased 14.1% to $40.9 million for the six months ended June 30, 2020 compared to $47.7 million for the six months ended June 30, 2019, attributable to deterioration in the market as previously discussed.

~~Cost of Services~~

Cost of services (excluding depreciation and amortization) decreased $373.5 million, or 43.6%, to $482.2 million for the six months ended June 30, 2020 compared to $855.7 million for the six months ended June 30, 2019, which is consistent with the decrease in operations and revenues discussed above. The decrease in expense is primarily attributed to a decrease in material costs of $227.3 million or 44.0% due to the lower volumes of materials consumed, $62.2 million or 53.2% decrease in repairs and maintenance costs due to the decrease in pump hours, and a $59.3 million or 35.1% decrease in personnel costs due to the reduction in headcount as well as the temporary suspension of bonus and 401(k) match programs.

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~~General and Administrative~~

General and administrative expenses increased $0.6 million, or 1.3%, to $46.7 million for the six months ended June 30, 2020 compared to $46.1 million for the six months ended June 30, 2019 primarily related to an increase in allowance for credit losses of $4.7 million offset by a combined $4.1 million reduction in bonus and 401(k) employer contributions. Additionally, general and administrative expense included $6.1 million of share based compensation expense during the six months ended June 30, 2020 compared to $4.4 million for the six months ended June 30, 2019.

~~Severance and Related Costs~~

Severance and related costs increased $9.1 million, or 100%, to $9.1 million for the three months ended June 30, 2020 compared to $0 for the three months ended June 30, 2019. The Company reduced its workforce in April 2020 and commenced furlough schedules for remaining employees in May 2020. The Company recorded $7.4 million in one-time severance costs in the three months ended June 30, 2020. Additionally, the Company paid insurance and other benefits of $1.7 million for employees while they are on furlough. The Company did not lay-off or furlough any employees in during 2019.

~~Depreciation and Amortization~~

Depreciation and amortization expense increased $11.0 million, or 14.0%, to $89.8 million for the six months ended June 30, 2020 compared to $78.8 million for the six months ended June 30, 2019, due to one additional hydraulic fracturing fleet and additional support equipment deployed in the twelve months ended June 30, 2020.

~~Loss on disposal of assets~~

Loss on disposal of assets decreased $1.1 million to $0.2 million for the six months ended June 30, 2020 compared to $1.4 million for the six months ended June 30, 2019, attributed to the disposition of assets, primarily related to light duty vehicles.

~~Operating (Loss) Income~~

We realized an operating loss of $67.3 million for the six months ended June 30, 2020 compared to operating income of $95.4 million for the six months ended June 30, 2019, a decrease of $162.6 million, or 170.5%. The decrease is primarily due to the $516.6 million, or 48.0%, decrease in total revenue only partially offset by a $354.0 million decrease in total operating expenses, the significant components of which are discussed above. The decline in operating income was significantly impacted by reduced customer work as a result of the COVID-19 pandemic and steep decline in oil prices in March and April.

~~Interest Expense, net~~

~~Interest expense, net was consistent between periods, decreasing slightly by $0.5 million during the six months ended June 30, 2020 compared to the six months ended June 30, 2019.~~

~~Net (Loss) Income before Income Taxes~~

We realized net loss before income taxes of $74.5 million for the six months ended June 30, 2020 compared to net income before income taxes of $87.6 million for the six months ended June 30, 2019. The decrease is primarily attributable to a decrease in revenue, as discussed above, related to the decrease in pricing and activity.

~~Income Tax (Benefit) Expense~~

We recognized an income tax benefit of $11.1 million for the six months ended June 30, 2020, at an effective rate of 14.9%, compared to income tax expense of $13.1 million, at an effective rate of 15.0%, recognized during the six months ended June 30, 2019. This decrease in income tax expense is attributable to the net decrease in operating income, the significant components of which are discussed above.

Comparison of Non-GAAP Financial Measures

We view EBITDA and Adjusted EBITDA as important indicators of performance. We define EBITDA as net income before interest, income taxes, ~~and~~ depreciation and amortization. We define Adjusted EBITDA as EBITDA adjusted to eliminate the effects of items such as non-cash stock based compensation, new fleet or new basin start-up costs, fleet lay-down costs, costs of asset acquisitions, gain or loss on the disposal of assets, asset impairment charges, ~~allowance for credit losses,~~bad debt reserves and ~~nonrecurring~~non-recurring expenses that management does not consider in assessing ongoing performance.

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Our board of directors, management, investors, and lenders use EBITDA and Adjusted EBITDA to assess our financial performance because it allows them to compare our operating performance on a consistent basis across periods by removing the effects of our capital structure (such as varying levels of interest expense), asset base (such as depreciation and amortization), and other items that impact the comparability of financial results from period to period. We present EBITDA and Adjusted EBITDA because we believe they provide useful information regarding the factors and trends affecting our business in addition to measures calculated under GAAP.

Note Regarding Non-GAAP Financial Measures

EBITDA and Adjusted EBITDA are not financial measures presented in accordance with GAAP. We believe that the presentation of these non-GAAP financial measures will provide useful information to investors in assessing our financial performance and results of operations. Net income (loss) is the GAAP measure most directly comparable to EBITDA and Adjusted EBITDA. Our non-GAAP financial measures should not be considered as alternatives to the most directly comparable GAAP financial measure. Each of these non-GAAP financial measures has important limitations as an analytical tool due to

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exclusion of some but not all items that affect the most directly comparable GAAP financial measures. You should not consider EBITDA or Adjusted EBITDA in isolation or as substitutes for an analysis of our results as reported under GAAP. Because EBITDA and Adjusted EBITDA may be defined differently by other companies in our industry, our definitions of these non-GAAP financial measures may not be comparable to similarly titled measures of other companies, thereby diminishing their utility.

The following tables present a reconciliation of EBITDA and Adjusted EBITDA to our net income, which is the most directly comparable GAAP measure for the periods presented:

Three months ended ~~June 30, 2020~~March 31, 2021 compared to three months ended ~~June 30, 2019:~~March 31, 2020: EBITDA and Adjusted EBITDA

Three Months Ended June 30, Six Months Ended June 30,
Description 2020 2019 Change 2020 2019 Change
(in thousands)
Net income $ (65,835) $ 40,523 $ (106,358) $ (63,418) $ 74,432 $ (137,850)
Depreciation and amortization 44,931 40,368 4,563 89,762 78,755 11,007
Interest expense 3,656 3,597 59 7,264 7,779 (515)
Income tax expense (11,363) 7,083 (18,446) (11,102) 13,143 (24,245)
EBITDA $ (28,611) $ 91,571 $ (120,182) $ 22,506 $ 174,109 $ (151,603)
Fleet start-up and lay-down costs 4,499 406 4,093 4,499 1,460 3,039
Loss on disposal of assets 334 143 191 232 1,366 (1,134)
Provision for credit losses 2,155 — 2,155 4,678 — 4,678
Severance and related costs 9,057 — 9,057 9,057 — 9,057
Adjusted EBITDA $ (12,566) $ 92,120 $ (104,686) $ 40,972 $ 176,935 $ (135,963)


	Three Months Ended March 31,
Description	2021		2020		Change
	(in thousands)
Net (loss) income	$	(38,616)	$	2,417	$	(41,033)
Depreciation and amortization	62,056		44,831		17,225
Interest expense, net	3,754		3,608		146
Income tax (benefit) expense	(7,357)		261		(7,618)
EBITDA	$	19,837	$	51,117	$	(31,280)
Stock based compensation expense	4,947		4,124		823

Asset acquisition costs	7,621		—		7,621
Gain on disposal of assets	(720)		(102)		(618)
Provision for credit losses	—		2,523		(2,523)


Adjusted EBITDA	$	31,685	$	57,662	$	(25,977)

EBITDA was $~~(28.6)~~19.8 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$91.6~~$51.1 million for the three months ended ~~June 30, 2019.~~March 31, 2020. Adjusted EBITDA was $~~(12.6)~~31.7 million for the three months ended ~~June 30, 2020~~March 31, 2021 compared to ~~$92.1~~$57.7 million for the three months ended ~~June 30, 2019.~~March 31, 2020. The decreases in EBITDA and Adjusted EBITDA resulted from ~~decreases~~lower margins during 2021 attributable to weaker pricing in ~~revenue only partially offset by a decreases in operating expenses. See~~ ~~factors described under~~ the ~~captions~~ ~~Revenue~~ ~~and~~ ~~Cost of Services~~ ~~above.~~

EBITDA was $22.5 million for the six months ended June 30, 2020 compared to $174.1 million for the six months ended June 30, 2019. Adjusted EBITDA was $41.0 million for the six months ended June 30, 2020 compared to $176.9 million for the six months ended June 30, 2019. The ~~decreases~~ ~~in EBITDA and Adjusted EBITDA resulted~~frac market as demand recovers from ~~decreases~~ ~~in revenue only partially offset by a decreases in operating expenses. See~~ ~~factors described under the captions~~ ~~Revenue~~ ~~and~~ ~~Cost of Services~~ ~~above.~~mid-2020 lows.

Liquidity and Capital Resources

Overview

~~Historically, our~~Our primary sources of liquidity since our IPO have been cash flows from operations, ~~proceeds from our IPO,~~ and borrowings under our Credit Facilities. We expect to fund operations and organic growth with ~~cash on hand,~~ cash flows from operations and available borrowings under our Credit Facilities. We may incur additional indebtedness or issue equity ~~securities~~ in order to fund growth opportunities that we pursue via ~~acquisition.~~acquisition, such as with the OneStim Acquisition. Our primary uses of capital have been capital expenditures to support organic growth and funding ongoing operations, including maintenance and fleet upgrades.

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In response to the COVID-19 pandemic, we took significant steps to enhance our financial position through an uncertain duration of reduced activity levels. We reduced our planned 2020 capital expenditures budget by approximately 50% to between $70 and $90 million. We reduced our fleet and personnel count by approximately 50% and significantly reduced cash compensation costs through a combination of suspended variable compensation plans and matching 401(k) contributions as well as reductions to base salaries. We suspended our quarterly dividend in April 2020. We also implemented a furlough program that enables the Company to better align personnel costs with customer activity levels. While the Company is unable to accurately foresee future impacts from the COVID-19 pandemic, including the potential impact of periodically adjusted borrowing base limits, levels of hedged production, or unforeseen well shut-ins on our customers’ ability to timely pay receivables when due, we believe our financial resources and liquidity levels, along with various contingency plans to reduce costs, are sufficient to manage the impact currently anticipated from the pandemic.

Cash and cash equivalents increased by ~~$11.8~~$0.6 million to ~~$124.5~~$69.5 million as of ~~June 30, 2020~~March 31, 2021 compared to ~~$112.7~~$69.0 million as of December 31, ~~2019, while working capital excluding cash decreased $35.6 million. We have no debt maturities beyond a 1% quarterly amortization payment of $0.4 million until September of 2022.~~2020. We believe that our operating cash flow and available borrowings under our Credit Facilities will be sufficient to fund our operations for at least the next twelve months.

Cash Flows

The following table summarizes our cash flows for the periods indicated:


		Six Months Ended June 30,											Three Months Ended March 31,
Description	Description	2020		2019		Change		Description	2021		2020		Change
		(in thousands)											(in thousands)
Net cash provided by operating activities	Net cash provided by operating activities	$	96,631	$	97,713	$	(1,082)	Net cash provided by operating activities	$	27,528	$	231	$	27,297
Net cash used in investing activities	Net cash used in investing activities	(69,997)		(130,064)		60,067		Net cash used in investing activities	(23,787)		(45,078)		21,291
Net cash used in financing activities	Net cash used in financing activities	(14,820)		(38,458)		23,638		Net cash used in financing activities	(3,266)		(11,312)		8,046
Net increase (decrease) in cash and cash equivalents		$	11,814	$	(70,809)	$	82,623

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Analysis of Cash Flow Changes Between the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

Operating Activities. Net cash provided by operating activities was ~~$96.6 million~~ ~~for the six months ended June 30, 2020, compared to $97.7~~$27.5 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2021, compared to $0.2 million for the three months ended March 31, 2020. The~~$1.1~~ $27.3 million de~~crease~~ decrease in cash from operating activities is primarily attributable to ~~a $516.6~~$8.0 million ~~decrease in revenues offset by a $354.0 million decrease in operating expense and a~~ ~~$64.2 million~~ ~~increase in~~ cash generated due to de~~creases~~changes in working capital for the ~~six~~ three months ended ~~June 30, 2020, compared~~March 31, 2021, compared to ~~$75.5~~$54.7 million cash used due to ~~increases~~changes in working capital for the ~~six~~three months ended ~~June 30, 2019.~~ March 31, 2020. This increase of $62.7 million was partially offset by the increase in cash operating expenses of $111.6 million exceeding the $79.7 million increase in revenues.

Investing Activities. Net cash ~~used in~~ ~~investing activities was~~ ~~$70.0 million~~ ~~for the six months ended June 30, 2020, compared to $130.1 million for the six months ended June 30, 2019. The~~ ~~decrease~~ ~~in n~~et cash used in investing activities ~~is attributable~~was $23.8 million for the three months ended March 31, 2021, compared to ~~a decrease~~$45.1 million for the three months ended March 31, 2020. Cash used in investing activities was higher during the three months ended March 31, 2020 in line with the expected annual spend for pre-pandemic activity levels, compared to more limited capital ~~expenditures in an effort to reduce~~ spending ~~and~~during the ~~reduced fleet count.~~three months ended March 31, 2021.

Financing Activities. NetNet cash used in financing activities was ~~$14.8~~$3.3 million for the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, compared to net cash used in financing activities of ~~$38.5~~$11.3 million for the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020. The ~~$23.6 million~~decrease in cashused in financing activities was primarily due to ~~an $18.4~~a $5.6 million decrease ~~in share repurchases and a $5.4 million reduction~~ in dividends and per unit distributions to ~~noncontrolling~~non-controlling interest unitholders as a result of the suspension of the dividend in April 2020. Additionally, other distributions and advance payments to non-controlling interest unitholders was a net receipt of $0.5 million during the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021, compared to net payment of $2.8 million during the ~~six~~three months ended ~~June 30, 2019.~~March 31, 2020 due to a decrease in payments made under the TRAs. Partially offsetting these decreases was $0.8 million paid for equity offering costs during the three months ended March 31, 2021.

ABL Facility

The Company’s ABL Facility provides for a line of credit up to $250.0 million, subject to certain borrowing base limitations based on a percentage of eligible accounts receivable and inventory.

~~As of June 30, 2020,~~Based upon the March 31, 2021 financial statements, the borrowing base ~~was calculated to be $83.2~~is currently $189.7 million, and the Company had no borrowings outstanding, except for a letter of credit in the amount of ~~$0.3~~$0.8 million, resulting in ~~$82.9~~$188.9 million of availability. Borrowings under the ABL Facility bear interest at LIBOR or a base rate, plus an applicable LIBOR margin of 1.5% to 2.0% or base rate margin of 0.5% to 1.0%, as defined in the ABL Facility credit agreement. The average monthly unused commitment is subject to an unused commitment fee of 0.375% to 0.5%. Interest and fees are payable in arrears at the end of each month, or, in the case of LIBOR loans, at the end of each interest period. The ABL Facility matures on the earlier of (i) September 19, 2022 and (ii) to the extent the debt under the Term Loan Facility remains outstanding, 90 days prior to the final maturity of the Term Loan Facility, which matures on September 19, 2022. Borrowings under the ABL Facility are collateralized by accounts receivable and inventory, and further secured by the Company, Liberty LLC, and R/C IV Non-U.S. LOS Corp., a Delaware corporation and a subsidiary of the Company, as parent guarantors.

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Income Taxes

The Company is a corporation and is subject to U.S. federal, state, and local income tax on its share of Liberty LLC’s taxable income. The Company is also subject to Canada federal and provincial income tax on its foreign operations.

The Company recognized an income tax benefit of ~~$11.1~~$7.4 million, effective combined ~~U.S. federal and state~~global income tax rate applicable to the Company of ~~14.9%~~16.0%, for the ~~six~~three months ended ~~June 30, 2020~~March 31, 2021 compared to income tax expense of ~~$13.1~~$0.3 million, a combined effective rate of ~~15.0%~~9.7%, for the ~~six~~three months ended ~~June 30, 2019. Although the Company’s tax rate is 14.9% for the six months ended June 30, 2020, the Company expects the effective tax rate to be approximately 16.5% for the full year ended December~~March 31, 2020. The rate is lower for the six months ended June 30, 2020 due to discrete items recorded related to stock based compensation and the Company’s response to the CARES Act. The CARES Act allowed the Company to carry back NOLs incurred during the year ended December 31, 2019 which allowed for the recognition of tax attributes during the six months ended June 30, 2020.

The Company’s effective tax rate is significantly less than the statutory federal tax rate of 21.0% primarily because ~~no taxes are payable by the Company for~~of foreign operations and the non-controlling interest’s share of Liberty LLC’s pass-through results for federal, state, and local income tax ~~reporting.~~reporting, upon which no taxes are payable by the Company.

Per the CARES Act, net operating losses (“NOL”) incurred in 2018, 2019 and 2020 may be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes. In 2021, the Company will apply for and expects to receive a NOL carryback refund to recover $5.5 million of cash taxes paid by the Company in 2018. This amount has been reflected as a receivable in prepaids and other assets in the accompanying unaudited condensed consolidated financial statements.

Tax Receivable Agreements

In connection with the IPO, on January 17, 2018, the Company entered into two TRAs with the TRA Holders. The TRAs generally provide for the payment by the Company of 85% of the net cash savings, if any, in U.S. federal, state, and local income tax and franchise tax (computed using simplifying assumptions to address the impact of state and local taxes) that the Company actually realizes (or is deemed to realize in certain circumstances) in periods after the IPO as a result, as applicable to each of the TRA Holders, of (i) certain increases in tax basis that occur as a result of the Company’s acquisition (or deemed

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acquisition for U.S. federal income tax purposes) of all or a portion of such TRA Holders’ Liberty LLC Units in connection with the IPO or pursuant to the exercise of the right of each Liberty Unit Holder (the “Redemption Right”), subject to certain limitations, to cause Liberty LLC to acquire all or a portion of its Liberty LLC Units for, at Liberty LLC’s election, (A) shares of our Class A Common Stock at the specific redemption ratio or (B) an equivalent amount of cash, or, upon the exercise of the Redemption Right, the right ~~of Liberty Inc.~~the Company (instead of Liberty LLC) to, for administrative convenience, acquire each tendered Liberty LLC Unit directly from the redeeming Liberty Unit Holder (the "Call Right") for, at its election, (1) one share of Class A Common Stock or (2) an equivalent amount of cash, (ii) any net operating losses available to the Company as a result of the Corporate Reorganization, and (iii) imputed interest deemed to be paid by the Company as a result of, and additional tax basis arising from, any payments the Company makes under the TRAs.

With respect to obligations the Company expects to incur under the TRAs (except in cases where the Company elects to terminate the TRAs early, the TRAs are terminated early due to certain mergers, asset sales, or other changes of control, or the Company has available cash but fails to make payments when due), generally the Company may elect to defer payments due under the TRAs if the Company does not have available cash to satisfy its payment obligations under the TRAs or if its contractual obligations limit its ability to make such payments. Any such deferred payments under the TRAs generally will accrue interest. In certain cases, payments under the TRAs may be accelerated and/or significantly exceed the actual benefits, if any, the Company realizes in respect of the tax attributes subject to the TRAs. The Company accounts for amounts payable under the TRAs in accordance with ~~ASC~~Accounting Standard Codification Topic 450, Contingencies ("ASC Topic 450").

If the Company experiences a change of control (as defined under the TRAs) or the TRAs otherwise terminate early, the Company’s obligations under the TRAs could have a substantial negative impact on its liquidity and could have the effect of delaying, deferring or preventing certain mergers, asset sales, or other forms of business combinations or changes of control. There can be no assurance that we will be able to finance our obligations under the TRAs.

During the three months ended March 31, 2021, redemptions of Liberty LLC Units and shares of Class B Common Stock resulted in an increase of $28.1 million in amounts payable under the TRAs, and a net increase of $33.0 million in deferred tax assets, all of which were recorded through equity. During the three months ended March 31, 2020 there were no redemptions of Liberty LLC Units and shares of Class B Common Stock.

Critical Accounting Policies and Estimates

The unaudited condensed consolidated financial statements are prepared in accordance with GAAP, which require us to make estimates and assumptions (see Note 2—Significant Accounting Policies to the unaudited condensed consolidated ~~and combined~~ financial statements included in the Annual Report). We believe that some of our accounting policies involve a higher degree of judgment and complexity than others. As of December 31, ~~2019,~~2020, our critical accounting policies included business combinations, leases, revenue recognition, estimating the recoverability of accounts receivable, inventory valuation, accounting for income taxes, and accounting for long-lived assets. These critical accounting policies are discussed more fully in the Annual Report.

Effective January 1, ~~2020,~~2021 the Company ~~adopted ASU 2016-13,~~ ~~Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments~~ ~~(see~~commenced operations in Canada and therefore added a critical accounting policy for foreign currency translation (see Note 2—Significant Accounting Policies to the unaudited condensed consolidated financial statements included in this Quarterly Report).

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~~In April 2020, the Company adopted FASB Staff Q&A Topic 842 and Topic 840:~~ ~~Accounting for Lease Concessions Related to the Effects of the COVID-19 Pandemic~~ ~~(see Note 2—Significant Accounting Policies to the condensed consolidated financial statements included in this Quarterly Report).~~

There have been no other changes in our evaluation of our critical accounting policies since December 31, ~~2019.~~2020.

Off Balance Sheet Arrangements

We have no material off balance sheet arrangements as of ~~June 30, 2020,~~March 31, 2021, except for purchase commitments under supply agreements as disclosed above under “Item 1. Financial Statements—Note ~~13—~~15—Commitments & Contingencies.” As such, we are not materially exposed to any other financing, liquidity, market, or credit risk that could arise if we had engaged in such financing arrangements.

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Item 3. Quantitative and Qualitative Disclosure about Market Risk

~~Interest Rate Risk~~Our consolidated financial statements are expressed in U.S. dollars, but, effective January 1, 2021, a portion of our operations is conducted in a currency other than U.S. dollars. The Canadian dollar is the functional currency of the Company’s foreign subsidiary as it is the primary currency within the economic environment in which the subsidiary operates. Changes in the exchange rate can affect our revenues, earnings, and the carrying value of our assets and liabilities in our consolidated balance sheet, either positively or negatively. Adjustments resulting from the translation of the subsidiary’s financial statements are reported in other comprehensive income (loss). For the three months ended March 31, 2021, the Company recorded foreign currency translation adjustments to net loss of $1.4 million.

Other exposures to market risk have not changed materially since December 31, 2020. For quantitative and qualitative disclosures about market risk, in addition to foreign currency translation, see Part II, Item 7(a), “Quantitative and Qualitative Disclosures About Market Risk,” in the Annual Report. ~~Our exposure to market risk has not changed materially since December 31, 2019.~~

Since December 31, 2019, industry conditions have deteriorated and resulted in us facing the possibility of making shortfall payments under our supply agreements. Please refer to Note 13—Commitments and Contingencies included in “Part I, Item 1. Financial Statements” for further discussion regarding purchase commitments and potential shortfall fees. Otherwise, our exposure to market risk has not changed materially since December 31, 2019.

Item 4. Controls and Procedures

In accordance with Rules 13a-15 and 15d-15 of the Exchange Act, we carried out an evaluation, under the supervision and with the participation of management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this report. Based on that evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of ~~June 30, 2020~~March 31, 2021 to provide reasonable assurance that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the ~~U.S. Securities and Exchange Commission (the “SEC”).~~SEC. Our disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

During the quarter ended March 31, 2021, we integrated the entities acquired in the OneStim Acquisition, on December 31, 2020. In connection with the integration, we updated documentation of our internal controls over financial reporting, as necessary, to reflect modifications to business processes and accounting procedures impacted.

There were no other changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the quarter ended ~~June 30, 2020~~March 31, 2021 that have materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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PART II: OTHER INFORMATION

Item 1. Legal Proceedings

Securities Class Actions

Information relating to legal proceedings is described in Note 1315 - Commitments & Contingencies to our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report, and the information discussed therein is incorporated by reference into this Part II, Item 1.

Item 1A. Risk Factors

In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in the Annual Report ~~our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020,~~ and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results.

~~We were the target of a cybersecurity attack in early 2020 and additional cybersecurity incidents could have adverse effects on our business and operations.~~

As previously disclosed, we face cybersecurity risks given our dependence on digital technologies. We rely on digital platforms to record and process financial and operating data. In early 2020, we experienced a denial of service cyberattack that targeted a portion of our non-financial data. We immediately shutdown critical systems, diagnosed the root cause of the attack and then methodically returned systems online. This cyberattack disrupted certain non-financial aspects of our internal system for a period of less than one day, while limited and non-critical portions of our systems were kept offline for up to one week in order to properly evaluate the breach. We determined that this cyberattack did not materially affect any of our operations. We engaged in extensive data evaluation for potential damage and concluded that minimal to no data loss had occurred as a result of this cyberattack; nevertheless, our non-financial systems may experience future service interruptions or degradation currently not anticipated due to this cyberattack. Furthermore, it is possible that additional analysis of the cyberattack could identify other types of data accessed and corrupted and we may not be able to locate and recover such data. We may need to expend additional resources to protect against security breaches or to redress problems evidenced by this cyberattack and potential future breaches. Additional incidents of cyberattacks or the failure to detect these attacks and appropriately respond to additional incidents could magnify the severity of the adverse effects on our business. We cannot assure you that all potential causes of the cyberattack There have been ~~identified, remediated, and will not occur again; additional measures may be needed to prevent a similar incident~~no material changes in the ~~future and such measures may not be sufficient to prevent other types of cyber incidents.~~

~~The COVID-19 pandemic has significantly reduced demand for our services, and has had, and may continue to have, a material adverse effect on our operations, business and financial results.~~

As previously disclosed, we face risks related to public health crisis, including the ongoing COVID-19 pandemic. Although our operations have been deemed essential by the Department of Homeland Security, the effects of the COVID-19 pandemic, including travel bans, prohibitions on group events and gatherings, shutdowns of certain businesses, curfews, shelter-in-place orders and recommendations to practice social distancing in addition to other actions taken by both businesses and governments, have resulted in a significant and swift reduction in international and U.S. economic activity. These effects have adversely affected the demand for oil and natural gas, and, as a result, our services. Exacerbating matters, OPEC (including Saudi Arabia) and Russia (together with OPEC and other allied producing regions (“OPEC+”) initially struggled to reach an agreement to impose limits on the production of crude oil, resulting in a significant surplus of oil. While OPEC+ eventually agreed in April to cut production, downward pressure on commodity prices has continued and may continue for the foreseeable future. The collapse in the demand for oil caused by this unprecedented global health and economic crisis, coupled with the current oil oversupply, has had, and may continue to have, a material adverse impact on the demand for our services. The declinerisk factors from those described in our ~~customers’ demand for our services has had, and is likely to continue to have, a material adverse impact on our financial condition, results of operations and cash flows.~~

While the full impact of the COVID-19 outbreak is not yet known, we are closely monitoring the effects of the pandemic on our customers, operations, and employees. These effects have included, and may continue to include, adverse revenue and net income effects, financial health of our customers and therefore their ability to drill and complete wells or pay for services provided, financial health of our suppliers and therefore their ability to deliver necessary goods and services, disruptions to our operations, and ultimately the financial health and results of the Company. As we cannot predict the duration or scope of the COVID-19 pandemic, the anticipated negative financial impact to our operating results cannot be reasonably estimated, but it may last for an extended period of time. We anticipate that 2020 will be a challenging year for the industry, as our customers continue to reduce their capital budgets, and, as a result, we expect a significant decline in activity and a corresponding reduction in revenue.

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The extent to which our operating and financial results are affected by COVID-19 will depend on various factors and consequences beyond our control, such as the duration and scope of the pandemic, additional actions by businesses and governments in response to the pandemic, and the speed and effectiveness of responses to combat the virus. COVID-19, and the volatile regional and global economic conditions stemming from the pandemic, could also aggravate the other risk factors that we identify in the Annual Report ~~and contained in~~or our other SEC filings. COVID-19 may also materially adversely affect our operating and financial results in a manner that is not currently known to us or that we do not currently consider to present significant risks to our operations.

~~We are exposed to counterparty credit risk. Nonpayment and nonperformance by our customers, suppliers or vendors could adversely impact our operations, cash flows and financial condition.~~

Weak economic conditions and widespread financial distress, including the significantly reduced global and national economic activity caused by the COVID-19 pandemic, could reduce the liquidity of our customers, suppliers or vendors, making it more difficult for them to meet their obligations to us. We are therefore subject to heightened risks of loss resulting from nonpayment or nonperformance by our customers, suppliers and vendors. Severe financial problems encountered by our customers, suppliers and vendors could limit our ability to collect amounts owed to us, or to enforce the performance of obligations owed to us under contractual arrangements. In the event that any of our customers was to enter into bankruptcy, we could lose all or a portion of the amounts owed to us by such customer, and we may be forced to cancel all or a portion of our service contracts with such customer at significant expense to us. For example, one of our customers entered bankruptcy proceedings during the three months ended June 30, 2020, which resulted in our recording of approximately $1.3 million for credit losses.

In addition, nonperformance by suppliers or vendors who have committed to provide us with critical products or services could raise our costs or interfere with our ability to successfully conduct our business. All of the above may be exacerbated in the future as the COVID-19 outbreak and the governmental responses to the outbreak continue. These factors, combined with volatile prices of oil and natural gas, may precipitate a continued economic slowdown and/or a recession.

Federal, state and local legislative and regulatory initiatives relating to hydraulic fracturing as well as governmental reviews and investment practices for such activities may serve to limit future oil and natural gas exploration and production activities and could have a material adverse effect on our results of operations and business.

Currently, hydraulic fracturing is generally exempt from regulation under the SDWA UIC program and is typically regulated by state oil and gas commissions or similar agencies. However, federal agencies have conducted investigations or asserted regulatory authority over certain aspects of the process. For example, in late 2016, the EPA released its final report on the potential impacts of hydraulic fracturing on drinking water resources, concluding that “water cycle” activities associated with hydraulic fracturing may impact drinking water resources under certain circumstances. Additionally, the EPA has asserted regulatory authority pursuant to the SDWA’s UIC program over hydraulic fracturing activities involving the use of diesel and issued guidance covering such activities, as well as published an Advance Notice of Proposed Rulemaking regarding Toxic Substances Control Act reporting of the chemical substances and mixtures used in hydraulic fracturing. The EPA also published final CAA regulations in 2012 and 2016 governing performance standards, including standards for the capture of methane and VOC emissions released during oil and natural gas hydraulic fracturing. However, in September 2019, the EPA proposed an amendment to the methane and VOC standards that would remove the methane-specific requirements that currently apply in favor of relying on the emission limits for VOCs. Moreover, in 2016, the EPA published an effluent limit guideline final rule prohibiting the discharge of produced water from onshore unconventional oil and natural gas extraction facilities to publicly owned wastewater treatment plants. The BLM published a final rule in 2015 that established new or more stringent standards relating to hydraulic fracturing on federal and Native American lands, but the BLM rescinded the 2015 rule in late 2017; however, litigation challenging the BLM’s decision to rescind the 2015 rule remains pending in federal district court.

From time to time, legislation has been introduced, but not enacted, in Congress to provide for federal regulation of hydraulic fracturing and to require disclosure of the chemicals used in the hydraulic fracturing process and with the upcoming presidential election in 2020, hydraulic fracturing has been a frequent topic of the candidates. For example, former candidate Senator Bernie Sanders (D-VT), introduced a bill in the Senate on January 28, 2020 that, if enacted as proposed, would ban hydraulic fracturing nationwide by 2025.Further, presidential candidate Joe Biden has announced varying positions on hydraulic fracturing which suggest that if he is elected as President, his administration would likely seek, at a minimum, to ban new permits that allow hydraulic fracturing on federal lands and waters. At this time, it remains unclear how a new administration will address hydraulic fracturing. In the event that new federal restrictions relating to the hydraulic fracturing process are adopted in areas where we or our customers conduct business, we or our customers may incur additional costs or permitting requirements to comply with such federal requirements that may be significant and, in the case of our customers, also could result in added restrictions, delays or curtailments in the pursuit of exploration, development, or production activities, which would in turn reduce the demand for our services.

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Moreover, some states and local governments have adopted, and other governmental entities are considering adopting, regulations that could impose more stringent permitting, disclosure and well-construction requirements on hydraulic fracturing operations, including states where we or our customers operate. For example, Texas, Colorado and North Dakota among others have adopted regulations that impose new or more stringent permitting, disclosure, disposal, and well construction requirements on hydraulic fracturing operations. States could also elect to place prohibitions on hydraulic fracturing following the approach taken by the States of Maryland, New York and Vermont. Local land use restrictions, such as city ordinances, may also restrict drilling in general and/or hydraulic fracturing in particular.

Additionally, certain interest groups in Colorado opposed to oil and natural gas development generally, and hydraulic fracturing in particular, have from time to time advanced various options for ballot initiatives that, if approved, would revise either statutory law or the state constitution in a manner that would effectively prohibit or make such exploration and production activities in the state more difficult or expensive in the future. For example, in each of the November 2014, 2016 and 2018 general election cycles, ballot initiatives have been pursued, with the 2018 initiative making the November 2018 ballot, seeking to increase setback distances between new oil and natural gas development and specific occupied structures and/or certain environmentally sensitive or recreational areas that, if adopted, may have had significant adverse impacts on new oil and natural gas developments in the state. However, in each election cycle thus far, the ballot initiative either did not secure a place on the general ballot or, as was the case in November 2018, was defeated. More recently, despite Colorado’s adoption of SB 181 during 2019, one or more interest groups in the state have filed new ballot initiatives with the state in January 2020, in hopes of extending drilling setbacks from oil and natural gas development. In the event that ballot initiatives or other regulatory programs arising out of protests or opposition by non-governmental organizations are adopted and result in more stringent limitations on the production and development of oil and natural gas in areas where we or our customers conduct operations, whether in Colorado or in another state, we may incur significant costs to comply with such requirements or our customers may experience restrictions, delays or curtailments in the permitting or pursuit of exploration, development, or production activities, which could reduce demand for our services. Such compliance costs or reduced demand for our services could have a material adverse effect on our business, prospects, results of operations, financial conditions, and liquidity.

~~A theme of avoiding or limiting investment in companies that engage in hydraulic fracturing has entered into capital markets.For example, in July 2020, Deutsche Bank announced that it would no longer finance oil and gas projects that use hydraulic fracturing in countries with scarce water supplies.~~Moreover, in 2017, BNP Paribas announced that it would no longer invest in companies whose principal business activity is developing oil and gas from shale, where hydraulic fracturing is typically essential to effective development.While a substantial number major banks and financing sources remain active in investments related to hydraulic fracturing, it is possible that the investment avoidance or limitation theme could expand in the future and restrict access to capital for companies like us.

Increased regulation and attention given to the hydraulic fracturing process could lead to greater opposition to, and litigation concerning, oil and natural gas production activities using hydraulic fracturing techniques. Additional legislation or regulation could also lead to operational delays for our customers or increased operating costs in the production of oil and natural gas, including from the developing shale plays, or could make it more difficult for us and our customers to perform hydraulic fracturing. The adoption of any additional ~~laws or~~ regulations regarding hydraulic fracturing or a furtherance of themes of investment avoidance or limitation in hydraulic fracturing could potentially cause a decrease in the completion of new oil and natural gas wells and an associated decrease in demand for our services and increased compliance costs and time.~~Such a decrease could have a material adverse effect on our liquidity, consolidated results of operations, and consolidated financial condition.~~

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

~~Not applicable.~~Our mining operations are subject to regulation by the federal Mine Safety and Health Administration under the Federal Mine Safety and Health Act of 1977. Information concerning mine safety violations or other regulatory matters required by section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act and Item 104 of Regulation S-K is included in Exhibit 95 to this report.

Item 5. Other Information

None.

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Item 6. Exhibits

The exhibits required to be filed by Item 6 are set forth in the Exhibit Index included below.

INDEX TO EXHIBITS

Exhibit

Number

Description

1.1

Underwriting Agreement, dated February 8, 2021, by and among Liberty Oilfield Services Inc., R/C Energy IV Direct Partnership, L.P., R/C IV Liberty Holdings, L.P. and Morgan Stanley & Co. LLC (1)

2.1

Master ~~Reorganization~~Transaction Agreement, dated as of ~~January 11, 2018,~~August 31, 2020, by and among ~~Liberty Oilfield Services Inc., Liberty Oilfield Services Holdings LLC,~~Schlumberger Technology Corporation Limited, Liberty Oilfield Services New HoldCo LLC, LOS Canada Operations Inc. and ~~the other parties named therein~~Liberty Oilfield Services Inc. ~~(1)~~(2)

3.1

Amended and Restated Certificate of Incorporation of Liberty Oilfield Services Inc. ~~(1)~~(3)

3.2

Amended and Restated Bylaws of Liberty Oilfield Services Inc. ~~(2)~~(4)

4.1

~~Stockholder Agreement, dated as of January 17, 2018, by~~Amended and ~~among Liberty Oilfield Services Inc., R/C IV Liberty Oilfield Services Holdings, L.P., R/C Energy IV Direct Partnership, L.P., and other parties names therein~~ ~~(1)~~

~~4.2~~

Restated Stockholders Agreement, dated as of ~~July 23, 2019,~~December 31, 2020, by and among Liberty Oilfield Services Inc., R/C IV Liberty Holdings, L.P. ~~and~~, R/C Energy IV Direct Partnership, L.P. and Schlumberger. ~~(3)~~(5)

10.1

~~Third Amendment to Credit~~Amended and Restated Registration Rights Agreement, dated ~~May 29,~~as of December 31, 2020, by and among Liberty Oilfield Services ~~LLC, Liberty Oilfield Services~~ Inc., ~~Liberty Oilfield Services New Holdco LLC, R/C IV Non-U.S. LOS Corp, Wells Fargo Bank, National Association, as Administrative Agent,~~the Schlumberger Parties, and the ~~lenders signatory thereto~~Holders. ~~(4)~~(5)

31.1

Certification of Chief Executive Officer pursuant to Exchange Act Rule 13a-14(a) *

31.2

Certification of Chief Financial Officer pursuant to Exchange Act Rule 13a-14(a) *

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 **

Mine Safety Disclosures *

101.INS

XBRL Instance Document *

101.SCH

XBRL Taxonomy Extension Schema Document *

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document *

101.LAB

XBRL Taxonomy Extension Label Linkbase Document *

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document *

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document *

(1)

Incorporated by reference to the registrant’s Current Report on Form 8-K, filed on ~~January 18, 2018.~~February 11, 2021.

(2)

Incorporated by reference to the registrant’s ~~Amendment No. 1 to the~~ Current Report on Form ~~8-K/A,~~8-K, filed on ~~January 22, 2018.~~September 1, 2020.

(3)

Incorporated by reference to the registrant’s Current Report on Form 8-K, filed on ~~July 29, 2019.~~January 18, 2018.

(4)

Incorporated by reference to the registrant’s Amendment No. 1 to the Current Report on Form 8-K/Am filed on January 22, 2018.

(5)

Incorporated by reference to the registrant’s Current Report on Form 8-K, filed on ~~June 3, 2020.~~

January 4, 2021.

Filed herewith.

Furnished herewith.

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Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.


			Signature
			/s/ Christopher A. Wright
Date:	~~July 30, 2020~~April 29, 2021	By:	Christopher A. Wright
			Chief Executive Officer (Principal Executive Officer)

			/s/ Michael Stock
Date:	~~July 30, 2020~~April 29, 2021	By:	Michael Stock
			Chief Financial Officer (Principal Financial Officer)

			/s/ Ryan T. Gosney
Date:	~~July 30, 2020~~April 29, 2021	By:	Ryan T. Gosney
			Chief Accounting Officer (Principal Accounting Officer)

3431