LBRT - Earnings call transcript Q3 2019

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Operator

Good morning, and welcome to the Liberty Oilfield Services Third Quarter 2019 Earnings Conference Call. [Operator Instructions] Please note that this event is being recorded.

Some of our comments today may include forward-looking statements, reflecting the company's view about future prospects, revenues, expenses or profits. These matters involve risks and uncertainties that could cause actual results to differ materially from our forward-looking statements. These statements reflect the company's beliefs based on current conditions that are subject to certain risks and uncertainties that are detailed in company's earnings release and other public filings.

include and also measures. today comments non-GAAP operational financial Our may and EBITDA, on substitute These to and including other EBITDA measures for be pre-tax of similar measures a non-GAAP measures, not adjusted return companies. comparable are capital GAAP not employed of call EBITDA and net which the earnings are calculation presented and adjusted as employed is to on its release, return in pre-tax capital income website. available discussed reconciliation EBITDA the A of on on this company's

the conference Please turn to I Liberty's Wright. would to now Chris over go CEO, like ahead.

Chris Wright

discuss that through joining operational Good of you morning, started to quarter. you XXXX have thank third the everyone to market results. headwinds quarter solid results our impact and Liberty's in us. delivered for We're We're another happy the pleased to face mid-way today quarter macro with of

year is The to Revenue up the and diluted million, EBITDA of second year. earnings third Liberty second adjusted $XXX were quarter share XXXX. this each $X.XX down $XX fully XX% earlier quarter decreased quarter in decreased to X% compared the to the quarter compared the the of $X.XX, slowdown per as to million starting in in end XXXX.

in We $XX fleets, a balance frac and able greater which million cash liquidity oversupply cash end slowdown position, for quarter market was pressure. free completions had increase net positive million. was deliver our we million a of quarter were the the Strong $XXX $XXX as in an this both end pricing our of by debt drove generation to at $XXX cash-on-hand performance Available resulted in long-term flow to financial despite at than downward QX. of million cash and

maintaining the with superior Central are operations returns teams and sheet marketplace capital and capital. challenging the drive a on Liberty on excellence our while to investing navigate supply to returns executional coordination success through achieving chain Continued our cycle prudently on for strong to maintaining scheduling balance customers ability enables close invested of plus our long-term future.

XXXX, XX, returned achieved significant capital $XX free of For employed the flow and million XX% to return on we pre-tax approximately September months XX generated our shareholders. ended cash

Liberty As and continues been win and a the strong This have on Liberty helps cements are customers operations, for win for barrel production innovations of market. driving high-efficiency relationships a which that technology bring and our the our always, focus built team customers. to them most cost-effective the to with we

wells offset helps sizing reduce well monitoring impending Well in service, One optimal Real-time fleets. example pressure data efficient and our new frac real-time interactions. allows frac fleets of this combined for frac which necessary develop to for wells rigged-in data Watch in the the with and pumps is managing spacing parent-child monitor short-term well development and sensing pad strategies offset provides on to

projected XXXX months stages Our nine for of than we first the marginally be the XXXX. results differential year-over-year. In nine demand pumped strong frac year industry of reflect are months XXXX, sand up the same Total North volume to a for the services. full did in throughout we America of Liberty's first frac of only

half frac industry required implies which in in of of services. a have of a decrease by to The leading gains of pricing demand XX% further XX% so raised efficiency is in the on fleets, number each activity to frac the fleet However, reduction XXXX stages across pressure the frac by XX%, frac pace slowing fleets. for or completed resulting the active second

will completions in affect and expenditure completions utilization. slowdown schedule face industry the cause maybe fleet negatively budgets. to capital constraints the more than gaps was severe We in this it This expect year capital operators last manage overall year QX that as and fix completion

of availability dependent XXXX, we are industry commodity for the Liberty for on price, new capacity in pipeline budget and strong visibility activity capital into start will in believe Future activity the for thoughts customers' basin. in year. the our projections of the multiple initial offtake demand on Based each including fleets factors, be

plans expand currently we no count. our fleet have to However,

reduction actively the supply retirements equipment the down This better staff not is of in expect We equipment. improve balances be are is supply but frac in market market, seeing to even and holding of in frac continues pricing to would We fleets with pricing. staffed helpful, the frac fleets there until older of of oversupply demand. which announcements permanent an

focused also maximizing day issues and been Governance from first is focused and hydraulic Liberty fracturing. Liberty at in ESG in always an on on to mover socially Liberty environmental is a alignment. practices transparency conscious have one. and driving compensation approach

diesel customers advance with demonstrated quiet reduced engine run to since start gas X on solutions emission market-leading our Liberty have partnered Tier clean new-built been by Every emissions. ESG as dramatically the latest fleet has fleets. the from generation is our with natural We either to XXXX able or low

existing driven in with ESG about our Tier to dialogue profile fuel move will to oilfield. of constant looking some we provide in of as the and part as to X DGB dual maintenance customers latest normal power and units XXXX forward, fleets in operations upgrade frac technology We're are how the natural the available engines. such, gas These cycle

specific efficient live are solutions that systems in traffic few. and we face. all challenges we've to in and safe a into fluid These with the Liberty partner’s leading unique industry work that developed are just the the communities partnerships provide is operator safe a provide insight The and and that best dust aspects. Being necessary and to management in to how emissions name ESG, focused noise environmentally goes leader operations, and include beyond on mitigation,

win for capital our in liberty a to in are on both competitive provides with and focus opportunity technology for and advantage. continues to generating systems fracture technology grow a continue the We execution, premium that diversity, service returns the investment our on drives believe our operational win DNA strong and company basin people, to Our customer coupled employed. which driving and quality, design Liberty customers. innovations

collection the Our relationships comprehensive earlier. fuel favorable us our sheet parent-child Well Watch financial database position efforts strong analysis environment. well include outlook proprietary expanded mentioned analysis on with data balance and today's challenging Liberty's in techniques multivariate monitoring results, long-term and efforts to well and have

shareholder this reinvesting to a in industry matures the committed benefits We're revolution appropriate. at shareholders cash opportunities and rates as compounding cash as is value high the to by us flow and country by the Liberty the whole. our sheer return of that brings and to as returning front of excited

to Stock, I will now Michael to discuss financial results. over the CFO hand our our call

Michael Stock

our We're as quarter challenging third Good Liberty The that the morning, performance team times customers during of everyone. the for team one at continues the partner. pleased to execute with in their Liberty level of drives one unparalleled the industry. to

third The from tax $XX decreased million third XX% the XXXX quarter in after decreased to in to revenue $XXX million same the X% income Net quarter million quarter XXXX. $XXX of compared share to the in in third second diluted of Fully share the the quarter. per to in second to quarter earnings quarter $X.XX $X.XX $XX million compared XXXX. a decreased XX%

from second the decreased quarter the margin adjusted in and quarter pressure in utilization in Third driver EBITDA annualized quarter an quarter market. compared million percentage fleet by million second the gross in adjusted equipment $XX.X was decline per quarterly to million to second third fleet pricing the of million the a in oversupply the in was due and slowing EBITDA half $XX.X X EBITDA point $XX in The driven in drop was quarter. of XX% in margin. per the gross the to major The reduction $XX

million. for Interest million fees $XX noncash totaled expense X% for revenues million quarter, the administrative $X.X compared and and quarter. expense to $X.X of associated included and General of quarter prior compensation totaled the $X.X million or in the stock-based

$X.X in million million. the no $X quarter at on under borrowings cash the of that was second expense million a compared At facility ABL quarter net tax total income million. we quarter. balance with liquidity ended million $XXX the of end, position facility, quarter drawn a $XX credit available $XXX to Third the totaled $XXX cash and including had million We

investment to profitability. sustaining define cash cash expected per drive flow expected fleet adjusted Sustaining flows through is EBITDA our and maintenance is less from we fleet of a flow is measure at end the We the returns annual per focused returns. sustaining the annualized metric Liberty fleet company will CapEx fleet. per use a cycle day fleet cash per

per During year-to-date EBITDA annualized the million. fleet adjusted $XX.X was third quarter, our

As fleet. per previously for our expected announced, this million capital maintenance approximately annual year $X is

prudent we As the will and returns growth discussed a returning to strong maintaining appropriate. where best in to seek of for have strategy shareholders, compelling previously long-term balance shareholders investing our a sheet, follow opportunities capital in we order

share and unitholders for dividend quarter, the our distributions to $X.X a million. of we $X.XX third shareholders of In dividends total per and distributions to paid

of stock on XX, we per for same XXXX announced use of of as also on share on be to Directors A December X, approved holders of $X.XX paid October A payment Class of Our Liberty LLC, Board December to per the units which has dividend of of record date. cash been common record unit a at holders distribution $X.XX XX, XXXX. XXXX

fuel ability the us unique reduce delivery our lowest to more site such to optimize combined and cost all our positive in to build maintenance, Liberty equipment Liberty's technology on reduce accurately our and natural application logistics. deliver of our requirements a repairs us ability best-in-class of same laser empowers customer us powers the to its forward, our returns. logistics innovation cost drive gas, mission customers. operational company the to and clients. look deliver we work enables This our As savings to We're to areas, our to to and close management of for operations to industry sustain that's provide solutions significant positioned and coordination about we services efficiency well are solutions effective partners to delivering to with aspects focused This singular advanced as cost how with and improved returns. efficiency focus very pumping cost leading due allows is continue of forecast our multiple to

before Q&A. I'll turn the open to And back we with call that, to Chris

Chris Wright

efficient been driven fleets driver are is Less announced of capacity, been active of market has trends frac efficiency capacity permanent of disposal our frac capacity these of leader While the necessary the for significant balance. in marketplace. of and have positive market biggest are oversupply to equipment. current competitors has currently from with Both increased frac and The trends being fleets. older many crews the oversupplied idled the efficiency. Liberty frac emerging, frac a are of

also early XX% oil plateau XXXX, markets the The U.S. significantly. which over and production roughly oil has count we year, declined U.S. surprisingly not rig growth production prices. in see declined provide With the tighten on oil in upward may help of has oil U.S. last trend, could this rate bias

U.S. healthier are a timing and as significant While towards fleets oil appear we making is downward and to be frac both oil of gas uncertain, facing industry progress supply pressure.

the is was As I time. the disciplined more inevitable built only cure survive but times the day quarter, said to not advantage from Liberty take cycles. market to and tough of one, twofold, last investing

market our cycles of the and our Liberty as relationships. During share, well XXXX-XXXX and dislocations downturn, the actions significantly our recovery. challenges. opportunities advantage our to market unique market customer during supplier grow top advantage These short, play can took present grew as deepened subsequent to In capacity

I'll Q&A. now open up for it

Operator

session. Simmons will go Energy. [Operator from now First Daniel Instructions] question-and-answer is with ahead. the We John question begin Please

John Daniel

guys. Hey,

you to -- many Can having quantify more be with First how engine outfitted dig these comment just Tier it’s might basically doing want engines? earlier you about fleets DGB us for into -- made conversion. the X on

we to at to fleets then, Tier Tier DGB? Tier X And X DGB convert or X Tier secondly, X

Chris Wright

trade-offs of So John, those. in there's all

one converting or all on one I'd least could the on it demand. that. you be circumstances. with which So, what at older on depends all two Tier will X And Tier to circumstances. then, be be on say likely, fleet X transition It It depends we'll depends the to DGB very answer is more But the short fleets. market. actual which than convert depends we'll

John Daniel

was on utilization? then, XX I but effective the effective possible to in color just give QX. utilization want the QX And at the to and active look of know Got fleets it some is it.

Chris Wright

QX, say There's solid. through was it would slips. I always schedule changes quite and

utilization. strong take So, most from quarter and theoretical it of certain then it was then sort quite of and full white starting QX numbers enables amount space. to would well, come struggle lower say, later not as as We're And in limits I there. through of with the guys who

John Daniel

Okay. Got it. I'll keep and it back jump two to in.

Chris Wright

Thanks, John.

Michael Stock

Thanks, John.

Operator

Sean is question next from with Please JPMorgan. Meakim go The ahead.

Sean Meakim

Good you. Thank morning.

Chris Wright

Good Sean. morning,

Michael Stock

Good morning, Sean.

Sean Meakim

fleets. capacity to active frac are your remarks, Hey, point in Chris your on -- opening creating efficiencies within the random

suppose, I of see the be in there you forward, to run? is still specifically more opportunity looking service to much How how out there much for that cycle So there? seems efficiency. And the room do Permian where most

Chris Wright

would years The stop is into returns. of coming have to I should of ago. fruit, diminishing say a people that Most frankly definitely we're low-hanging period gone. been doing

going growth certainly in been think efficiency We've fleets. it's pushed about at that. than competent is run-up few I in a lot years. rate old forward got a from huge here the slower significantly less a in down or past We

itself That of frac no changes the operational with raises average efficiency fleets. in

So Permian now, are in now you've almost running, been a efficiency I fleets got and you've customers the higher leaner of more our on throughput are got focused would they that board throughput. across outstanding. say number the has quality,

of any we have probably today. basin fact, In highest it's the

look, always get to to going So we're strive better.

huge but the the increases years you've two than years. little a get think seen I in see two don't next average see I think you'll the efficiency last in Liberty frac you'll better,

Sean Meakim

leverage Thank just a makes lot the demand compared relative to quarters of confidence the then be much kind a in next you Is maintenance fleet And operating XXXX? that in XXXX XQ exit may a should XQ curious, EBITDA And have comment strong this on per release and worse I comparison -- we think comment And for just how to XXXX? in or XQ think how here? of influence if of couple sense. that of the is what you. the about

Chris Wright

we based in based are strong QX With QX. in on on the of XXXX come we're today demand where that's

the but year is be busier just don't than are in this year. end We that's meaningfully We we normal. tough. at We new the of QX quarter, as the significant last slowdown a did think have marketplace think we'll the we current in

right is the with in see as to all strengthen grow goal the to want we add share market. keep customers opportunities relationships fleets for market as Our keep we our a our softening and customers busy alive;

Michael Stock

seeing to been up Yes. it's Sean, I think way pick did is same the it I year. going last here you're of of we're think what all utilization see that Kind but at budget finding, QX. the that's well so to a softer, constraints everybody also but on as bit different causing private definitely little capital a times is side, problem exhaustion that

you're going the but see same -- pick So to utilization up.

of is the clients. on how leads wild think market I out probably during the the and QX the where is that moment under really what negotiation card market kind the at something at that's through dynamics all is supply moment to is of price. roll the dependent of sort Price phase sort much this pricing negotiations for

activity same So from in as the will maybe year I little hopefully see And very we industry. is drop like the think QX at pickup to moment, but side. to activity, -- question of not we'll from the difference see the seeing We're going as for days going in the relative But see -- far a by to the with more. seeing The we're similar to the only looks looseness much up. coming yes, see activity shall QX in it in across there -- we're discipline too we're QX. think next that QX what's from price last earning be that I into QX a bit year QX

Sean Meakim

stacking there fleets? for question yourself last could see year that. in you it's if just is which you One next scenario -- a Thank I

Chris Wright

unlikely. think I that not its We've think unlikely before, I done it's so Sean.

we of soft build a macro Our and and than whole and we relationships different the the at follow our get markets that take the do. grow earnings, full expect I we goal market don't in control return here. to what share, We marketplace better is downturn meaningfully customer and to change a our as in downturn a on of through marketplace capital wouldn't hence strategy our view cycle pricing

Sean Meakim

Thanks helpful. a lot. Very

Chris Wright

You bet, Sean.

Operator

Wolfe is question Gendron Next go with from the ahead. Please Blake Research.

Blake Gendron

morning. good thanks, Hey,

we're visibility Just just going that the in flow make retrenchment of free just years given the next given seasonality for want buybacks year have next? comments Were E&P we're capital to returns, now spending on about you allocation buybacks in your perhaps expect half. back of coming to sense, outside of downturn. Do cash terms kind that wait-and-see follow the up the over and in mode in compete a the that the

Chris Wright

Yes.

the the think there in qualifier you it added at right I end.

in perspective, now, highly what buybacks mode not this we're right it's cycle You know valuation but look a right unfolds. now attractive where exactly how unclear

So in to side. cautious face better on the of the significant uncertainty we err

Blake Gendron

and has wondering just about disposing been I or the us a of of lot the that peers an And about comments that given you sense. market horsepower, perspective come idea much you've in tier of evaluate how That perspective is recently shale a to imagine past from would I'm all now. also horsepower vocal made we're four and consolidator the in major and -- can your market. fuel we've from Okay. of makes dual pretty then availability scrapping When basins? horsepower intensity heard you you across seeing equipment either the viable a give to the

Chris Wright

-- whole a industry the have proportion dual of as probably would we We significantly I than higher fuel the highest. a like say

on at percentage everything Tier well as Our so pretty much X high meaningfully we two is look those is spectrums. lower pretty

and circumstances you've sets. and yes, it's and the has make those or makes at what single the look engage. we're different equipment a of how it's whole it's maybe the the close getting lot But what equipment to future fits forward -- out But not number, whole package, total But potentially there's takes at so a different in that it sense. value that's yes doesn't. unique things the it sense got We everything for to We going appeal. And asset what's you're profile most a there. of look right, that for

Blake Gendron

taking for questions. Thanks my Okay.

Chris Wright

Thanks, Thanks. Blake.

Operator

with Please ahead. from Anderson Barclays. is question David go next The

David Anderson

Yeah, good morning, Chris.

about kind few You just talked kind by minutes and managing comments this. the of cycles your of your ago a to approach through

smooth now of a again -- years of really a kind of big kind next be second spending half is from soon that of this seeing on second kind see seeing to we're sort which about trend approach to smooth we're crazy The the of how making first you we're And to is there your pattern market? the two be of out to sort as from year. year way it E&Ps how going the kind looks in change E&Ps? do you that half here, of think in seems does of any this to row change Is a spending out? -- which terms How sort

Chris Wright

It's a great question.

have spending We to had front you're going it's in causes historically set budget, degree dislocations the to a rewarded not for little to of load right, growth, right? amount different -- on spend is bit. not you're to or logical E&Ps, a you're just production And the to that that get If going you're we smaller today. incentives be have that had that certainly the industry later year just

time still company, do private a There's to privates, that's some right? offsetting you're this as I'm with going the large think a think of opposite. If you'll a I factors. amount see activity the among pattern you I if see

to back schedules. to equipment by get is activity, available because load then, it's going I'm easier on

see you'll some there. So I think offset

have activity not larger led total they don't sheet a majors scale percent You've a They're spending CapEx constant become more mentality. size balance a and have giant of part to development right now, a of but the and has to that the going They they're are levels. same and flatter growing that a got also rapidly. the

and also continuous safety they the benefits think efficiency I for operations. recognize running

that, in now. is think with that would but right companies that true or of done everyone midsize struggling it that but publics historically suite sort I have know of are that's say there I recognizes smaller a

probably probably Some think little privates and year adapt I of majors this, year. a year industry magnitude with the challenge after a seeing becomes there I dislocation think to two has mitigates again I gets this last think -- got we is saw bit the to that that basic another of But or that better you've probably the but time, there. we're and

David Anderson

answer. Interesting Great. Thanks.

certain working looking this to about stranger things about potentially think of regulatory she out potential Are federal next how fracking could kind of over kind of Do on out you that's or what your for kind sure play Can there woman to exposure around? lands? being to of too there out And environment lot do you says no federal at XX You're administration Colorado a premature? think of you that happen the course just lately maybe, talk and customers thinking on lands. could yet the months? change it ban in even talk wants is moving operator’s about -- start in

Chris Wright

them, part would the wild certainly, in – Well could that federal everybody cards I lands there. what places with the actively considered. our customers what one meaningful happen, of River Powder And out New consider, The considers Delaware. the say certainly are Basin Mexico is of

Fortunately, certainly the private of in the Delaware and shale in the lands. on dominantly vast they're basins, majority

of not there lands, not they're large trivial Basin. there's the except are activity federal in but -- part River So they're Powder scope, they're in nowhere

of Powder created. then plant state of tons has And units federal get the and large Even that private there's land. these long-term course

It up non-federal in that activity a big certainly, a lands, meaningful in to takes shift change industry battle, I their cause will But think So some collapse time activity it be we people a that. saw land. would on doesn't planning certainly a would sentiment problem be to federal evolve and after have come onto would but Certainly, election. around negative. opens soon a and it

I think that's highly unlikely.

David Anderson

your guess you're settle think It'll you yet? of dislocation, are any already seeing but kind to of cause just you making out. what curious, certainly changes their was I it'll customer's I plans is saying

Chris Wright

changing no pivot. probably But know, I going if are which they're I to one's how today. do considering many -- say think would we happens, drill locations don't I this

on other ability thing have more rigs You you'd you it buffer, capital hold think that most But very not areas. to my it that a dried and negative. running have federal disruption that my put be massive a have would anyone's if long-term up, an would I've But to expenditures that. it or little I in would keep be get locations I would a -- plan to now, all could think permits got It plans. people's my don't navigate and that be to

David Anderson

All right.

it. with So they're B. thanks a All coming appreciate up plan right, I Chris.

Chris Wright

Yes.

You bet.

Operator

from go with is ahead. Fargo. question Wells Voie Please Chris Next

Christ Voie

Good morning guys.

Chris Wright

morning. Good

Chris Voie

so curious, like was to XQ that XX.X. decent GB the bit it Just out sounds at probably so $XX fleet little fleet utilization not of EBITDA about bad. XX but end, per million per came at kind weaker

similar If you think about be the pricing environment give it's EBITDA that you you maybe where got XQ would shake can utilization I how higher, right per lower a currently, you take kind fleet it much now to for that where of get if a was EBITDA fleet going per us lower rebound might bit landed work starting pricing out? will utilization discussions in XXXX, but be? and of likely sense in to and imagine, are somewhat a

Michael Stock

Chris. Yes.

year towards get we'll think, beginning we of these as is on each comment get we probably that something I the is discussions. this through

of still there's moving far a goes. parts I as think lot as pricing

right through is, think, doing that's of QX. you're we QX seeing sort the have as and been utilization that I of seeing that and pressure move we're -- sort you're bit is just of the we've What a through of so a downward in some this way pricing. there's in relatively refilling of But still fill all up price negative not budget you're utilization some -- on as pricing with sort work environment of that's a you're a sort we of some of folks it's the particularly a you're refilling them. with fact great exhaustion, year,

There's there's probably parts majority to away moment on the bit have a QX, discussions we'll moment. ongoing far that into maybe So, little at rebound pricing the the and moving fleets lot for a on of but see. at will on going of

Chris Voie

to than then XX previous fleet taking pricing that hard half that XXXX? of that And the It you the off odds work first picture would've now to in of was that it future. the in seems market to until especially higher feet, the of place pricing that hold it's around in likely and foreseeable to XXXX, Okay. improved. been that Are to put you commentary your like terms wanted

Michael Stock

Jump general last They're to not mean the look four that XXXX you was starting no. going more the January. conditions, likely be I likely year in it in that asked than market if months to if total, at at start ago, yes, you more but us of

think it where means currently more XX. is, market year I will likely start the next the it running

As market. from who pricing and somebody time that's the bring they we've a client. could of But have star long could we see expansion to us we period at with new as but I got mean, XX as a been just some that for clients work and clients, some and that, wanting key fleets have need some leaving potential -- we'd capacity, long-term that we'll discussion we discussions be it go. we've demand with

Christ Voie

XX% a rebound just your of Okay. that squeeze of decent there'll one -- have western that I up base set a means work the poaching seems on from in down had fleets potentially far you'd go by like the XQ, XX% base to to the or could based are think XQ. in, you drop to companies like industry more there currently? optimal which Is it I upgrade reported in probably that customer you incumbents have if general be -- might in thus one maybe XX% quick And mean fleets

Chris Wright

taken. No. There's that be means there's to for pie share When then whole the market always room shrinks improvement.

where whole like talking strategic to yourself that. today, things it's also why want like want no, be? about that. best things the you position We're do to How cycle? thinking So, a where and -- That's about always what's we're you do but do through -- the

down cycle, coming what the were we aggressively was were fleets road putting At was looking at today economics. was. ahead the what then out bad the bottom what But we not XXXX of into

things. it's trade-offs cautious. as expand well. of we've build today going not is near a think there's But not of fleet going bottom ball from got have. saying pretty we're I'm crystal see not right always and other meaningfully today but those are. where be things. collection one fleets, Liberty where Current nowhere we view like we're now, it's grow new now, to that XXXX pricing will to current Now, But clear you there's the going of to ones -- there a our where not I We're we are in we're other we of

Christ Voie

Okay. Thank you.

Chris Wright

You bet, Chris. Thanks.

Operator

question Please Pickering go George Holt is next Tudor from & O'Leary from The is ahead. with Co.

George O'Leary

Chris. Good morning, Michael. Good morning,

Chris Wright

Good morning, George.

George O'Leary

connections those trends and of chat push? we else associated fracs simul then folks you or jobs of that using guys to the with completion the two, at kind frac hear about on increasing seeing or little well always you necessarily frac on these either the you are iron to guys are of that. around hearing and with One, completion items using of whereby started notable then again using Chris just them I top heard looking and Of change number of in some mono kind but guys very know and more of crop just are late, line new, revisiting, once design. these a are design you leading-edge You in revisiting the not changes more or familiar on reduce up choose anything bit seeing and them more folks trying jobs well

Ron Gusek

them as I now. earlier started good see and year mono frac. down line Chris this idea is something we question to that in Morning about is on been road throw the focused this think maybe We some then locations. we've innovation I'll take we mono thoughts I'll while little forward that line and the Certainly, on love George, going see Ron. our of more Yes. let simul a a for

I And there's small iron look as well, frac the think we that. no that of are piece is when number a cost R&M connections at. a that HSE all part fleet, you to at things like like of treating to also look things to significant reducing and that

And every to as you there certainly, as continue ways spend about more this to our find well. an think improve when ability to day, opportunity we pumping efficiency, minutes to see

that but through working field. tried there, forward. line well system mono feel the guys heads solution line to solution exactly us. the interfacing Liberty for certainly, I yes, together of focus still with for number together different see with is So is we like to right wire to the the expect a what going with look going the deployment think from scenarios We've on continued going in that the be of We're

Chris Wright

Yes.

And some exciting stuff there also on simul fracs.

on we long frac interactions. a growth talked have fact are a done frac is definitely on more customer tools area frac frac I well. today and that developing right kind different pads When is think even we speak You're We've on in in confirmation stuff of as patterns we've history publicly We'll and impact don't elaborate very a that your with to that. probably one about interactions going there that simul of central the you're or before. get as and

develop the the But yes, underground plumbing customers forth overall in are next innovative, be do the we've step technology, world we what definitely today, about a very and resources ideas optimize and forward, more how got. bouncing might back

area, a goes on. that you're fun but you'll that it's there's yes right, George more going as hear lot about time and area sure I'm in on still So

George O'Leary

Thanks very then, numbers me. maybe Great. question Chris. much one and Okay. the Ron for for color And just

get skis differently? my Or $XXX to our that for placeholder time million engine, XXXX the is last mentioned have not seems to there CapEx years now? you thinking be we given should have that decent DGB something but a tier fleet to in maintenance with all just think XXXX, growth a over in or you for way the CapEx in are so reasonable provided to you models it, somewhat in guys here, some still initiatives about as think CapEx about it the -- As initiatives upgrade four two wanting closer frame comments the is

Michael Stock

No. George, that. yes, we're about putting on -- we're talking

DGB the that future, As CapEx you in the also -- in and investing try we're said whether this around upgrades. and investing long-term year, the fleet of we for probably design, about ideas said it's average or connects lines -- maintenance do to working with quick you always $X lower investing mono on we'll or million drive but as

which So, maintenance technology is the million see between of investments market this which we year, that somewhere spent, was $XXX and probably in CapEx we of yes, a range sort fleet range unless baseline plus that CapEx which change. we of million announced good $X of maintenance

George O'Leary

the Great. Thanks for color Michael guys. and

Michael Stock

you. Thank

Operator

Mulvehill Please go The of next is ahead. Chase America. with Bank question from

Chris Wright

might mute. not you mute. know -- or be on Still if you Chase, if you're we're hearing don't still I off on dropped you,

Let us move onto the can Chase call then next question, if you like and in. back

Operator

The Please Capital. next ahead. question is of from AltaCorp Waqar Syed go

Waqar Syed

quarter quarter, stages with does in call. for for morning. my compare that the help Could third taking you the did that how Good second quarter? with you us the Thanks

Michael Stock

as the pump go it don't we Stage we pump I in you – little numbers, release and a can links out don't confusing we to just from find anything from stage. a really stage a stage there four-hour Waqar, think gets know – one-hour you sizes different because Yes. world.

So to general just activity say, of just like sort lower. flat to would slightly was just I probably order of say,

said, with guided we were QX And in lower on as in the was were slowdown end very, activity than through As slightly very a quarter. of QX just we think a in the we QX, end efficient QX. I back

Waqar Syed

or Fair of terms looking than quarter can crew, first then is quarter to similar do year? next think better at look in of of You third it it enough. that? worse the year, dumper to the we're when going this And

Michael Stock

think little I to had levels see probably Look, we QX kind you'll QX. got just sort a the Again, so But QX be slowdown similar of general of on – obviously similar fairly At winter. is of end pumped in to where the in actuals pricing say, – QX back average I'd in is. hours the QX. activity the could there's winter probably you've harsher

Waqar Syed

Okay.

in is about so the so quarter fourth you how quarter the third know below far pricing fourth the or much in quarter levels? And what

Michael Stock

Yeah.

again, clients takeaway as a on just fleets surprise least discussed kind starting because back there's long-term into like because to some of got couple of ran pricing look of issues in got on And had frac a you've clients, and the for up move fleets. we couple your is a who for of obviously conference, So, of at the one your had December. them at issues, which when out we exhaustion means you've said people the Barclays budget at pressure oversupply as of we QX tough one is to

kind a just lot is your lower than of flavor the So in like – kind you of stuff of fully a lot of work it's much therefore utilized different a pricing filling fleets.

So, as goes. it's a – quarters those apples there's average as comparing pears far far like as sort as and of two pricing

Waqar Syed

Thanks very helpful. much. That's

Chris Wright

Thanks, Waqar.

Operator

is Bank go Mulvehill Please America. from Chase with ahead. question of Next

Chase Mulvehill

me can now? Hey, hear all you

Chris Wright

Chase. ahead Go

Michael Stock

giving you we're again. more Chase

or in can't but got You you've out more. determine competition, take

Chase Mulvehill

Yeah.

to back don't had know in. Sorry, dial I happened. what

guess, help so if And I better XQ. frame you XQ, think about can we just maybe

do just sequential how you what said and that You or last top like quarter year, it sequentially means a from think bad it'll could in a of think fourth but of be understand it you you when twice us help as get? it'll decline worse line think from be bad the kind profitability then perspective about

Michael Stock

Yeah. Michael. it's Chase,

about QX the us. think I mean, you're commented mean, be last turned it from It I remarks QX think will could be but points worse. similar QX I it'll be down were I it I our than to think really prepared in last slightly on or the line. was we I – QX top XX time for industry right, whole down, worse

there QX. we if then as rebounded higher. You've could it That's Q-over-Q it's it guidepost down sands, a little got the in that move be as guidepost. to change then not you're was – of a EBITDA so on using just bad and little that bit And more self-sourced XX%

Chase Mulvehill

kind do the fleet million your if look we you first bit looks little All about kind I that of half in framing back were EBITDA. per back XQ, maybe EBITDA if the in maybe just kind talked number? like half per EBITDA Is I into of as to things we I if being is the off tapering Okay. on of it fleet some to look of how of was things quarter? kind dial good about annualized release be the profitability if And a try math get we right pretty the and guess, the the right. it that at $X just in should fourth half,

Michael Stock

about. really It's moves don't we Yeah. something I not mean, discuss. everything

right? go – total when number before remarks of and everything I we goes right try just quarter-to-quarter have wrong. in we've demand I Also, we at year. about can done the a think I we right? be it off back kind if little can mean, prepared You million the times point. It it can that when high we $XX a look earned talked everything a fleets can goes vary of it – to think that issues, or operational of at goes while like can be when

of of look it's We at way very results sort longer honestly, basis, much. to them quarterly So the at a – than on even really not look on that. we time period like a

saying So don't we just wouldn't – of really discuss we into a way – long don't we results. quarter

Chase Mulvehill

And engine work fleets back paybacks? to a you it one dropped the it two have have visibility you to around to is two Okay. Understood. missed back talk questions All four put guess to convert tier fleets then off. and a I the tier that maybe then right. DGB the I your may Did the that DGB? And cost to maybe I to coming about

Michael Stock

Right.

– X non-DGB DGB brand mean, below uptick than just to – I a of a really major not price. engine and XX% Tier a engine the the like a engine. It's a sort is in more brand-new standard So, compared probably

a to happens proactively. in bring them always part fleets that the So look normal hours what run of is cycle and we maintenance on fleets at – up they've their we of those XX,XXX and those coming as bring number engines

particular rebuilt rebuilt good a it pump out engine out and relatively on as low that it back gets cost is as back go in a may shape and if it's that tier go Now, got X. relatively

four that talking and a to rebuilds rebuild engine on just you're If now about becomes rebuild DGB. it's it's it of something side tier a got cost crack if maybe was you'll that upgrade now then $XXX,XXX got $XXX,XXX a it that of significant – block, north

So it have we actually basis. pump-by-pump

generally same. got their that It's I works and the think is plug-and-play everything, the the everything some of is the difference right? lineup. a degree same lot of to all companies So unique Liberty with equipment effect

DGB back into pump just rebuild with as fleet Tier easily or fleet, the a X match. as was Tier a that roll X So mix was it Tier one getting Tier and that can a a if DGB, X into can we X X specific rolls Tier you rebuilt as

Chase Mulvehill

Tier versus weigh did converting you electric And Okay. DGB? to X fleet

Ron Gusek

Yeah. We headed Chase, that are certainly down roads. have and weighed Ron. this is certainly both

pros think cons things. we've of had and significant focus already But initiative said I on the have scenarios. we side of understanding we've these development a the going on as e-fleet also now on of a both

fleet to the on And last the an of now benefits road trade-offs X four companies E&P and the the so what weeks a versus DGB be what e-fleet are Tier exactly might out been probably understand helping we've there.

deliver there were I savings that are work standard lower lower under we've with capital in out fuel can gas very, operating a think cost upfront. potentially greenhouse the in emissions significantly e-fleet understand even have and conditions a in than footprint solution with that than those around misconceptions offer cases been an I line places some would profile at Tier the folks better compelling very we X many helping that a can we engines or think there emissions DGB has for that to

one options e-fleet. option in think that I X going in to is find DGB now thought or customers have that so who had them, we're going two front to very them what front had of Tier only viable have And we're of they maybe

in of our is on a so road, each X that different the there of in fit think see and Tier the that those e-fleets possibility will you'll and for sometime down fastest well. reasonable Rate technology for both deployment coming first I obviously opportunity looks And ultimately those of be Liberty's that world. going is work as technologies on still there an DGB but right there's probably world

Chase Mulvehill

Okay. the over. it color. Perfect. turn I appreciate I’ll back

Chris Wright

Thanks Chase.

Operator

Please with Gengaro Stifel. ahead. Next from question is go Stephen

Stephen Gengaro

gentlemen. morning Good Thanks.

Chris Wright

morning. Good

Stephen Gengaro

on just a I to You've wanted get your lot. covered views this.

to expectations serviceable, them So, was announcements sort become equipment at have couple out clearly, and look a basically hard your cost there operate and that being it but fleets of retired the there's your think how of kind been over of under you sort like next profitably. the now? the their competitors, and maintenance onerous I attrition was there, of of maybe fleet just one noted bleeds of When months, investment down think right of industry sort you of of about your and industry kind looks fleet what kind severe what the fleet positioning given for are XX

Chris Wright

Predictions are hard, particularly about the future.

you leave if market if that can logic, So, lot it the conditions, pretty you you've that straight the fleet, XX months. at just point depends math got you it's look people a strong, the got the going encouraging looks stuff -- basin, fight to Or, But at fleet actually hit a you'll super -- in going that's will put for look lose, on but and straight will rational, last standing, fleets of on the do you're they've right? the it I XX going reasons lousy a market the you is next and man running. but think other not and maybe market can Band-Aids if it. keep you're you've to economically leave to keep the spend last it's the and got to it the money

in positive economic and that the rational we're market be it going into, causes we and it I get it people -- stress tends to more tends think real that softer do actually some a a could get think for because marketplace decisions. to

that's relatively is, technology a new then cycle permanently systems. large and guess from the our new we'll slightly new out. amount upgrade there's And market pushed -- of of amount months say, capital XX and there's So, and I an out a fair capacity would now a see and

a going space, XX would XX to of marketplace So, prediction. transformation I the and next the frac think, that's I suspect the over in meaningful But we're to months. the a see players

it's So don't vague. -- purposely

have could as won't been. So, be I wrong as I

Stephen Gengaro

year of should next on I mentioned just months. mean, as -- a The kind we're just per follow quarter you CapEx, that, the number the over right or pretty your sticky maintenance having two? XX fourth be enough that million the up of quick trying figure trouble to $X out with next year

Chris Wright

Stephen? Say again it

Stephen Gengaro

know, here, or you CapEx fleet, that I you are referenced but go number $X maintenance think per Your remains around think that right as around all $X I million. remains at seeing higher it forward we you XXXX, trend fleet. per million

Michael Stock

-- right. is the we XX% maintenance cost. technology Yes. think tick that with remains as right? in we code, about budget. of think long-term zip technology That's yes, we X% the what or I forward it'll think I maybe or that some out it move you Stephen, same we them in zip But cap as put get the upgrade I think probably upgrades, if code

Stephen Gengaro

Very gentlemen. you, good. Thank

Chris Wright

Thank you.

Operator

from with FBR. Next ahead. Please Thomas B. question Riley Curran is go

Thomas Curran

guys. morning Good

Chris Wright

morning, you doing? Good How are Thomas.

Thomas Curran

to your have of presence rationalization, their Good. Have part Chris, competitors they'll from a of as opportunity just expect started no an or that you arise revealed Bakken. see the you longer their fleet would already withdrawal announced one in to?

Chris Wright

players customer bases. different have Different

have position -- a been So on basin. a see a the there. margins, it's Bakkens little say, good very leaving basin. competitive basin the good positive in marketplace it's there a been We a know a -- long time. the to in I good It's original we capacity the basin, players We've for but are us.

margin, or but targeting positive, anything a to the our not a on strategy customer we're maybe or that. like -- not So, slight change going

Thomas Curran

last to And And in did compare then Right. part in that legacy jobs XQ it's curious. of what XQ And percentage frackonomics? of and involved was your I how your of deep Ron, there year? XQ because routes

Ron Gusek

it I'd year-over-year remains say relatively flat.

service frackonomics probably I et level cetera. provide our from think of standpoint, some we engineering

done XX%, XX% like maybe package that complete on us to and other eyes work would we them. we're maybe for the our second a they from design that of at the the providing of set ground are and engineering the world internally it in up to providing So, and varies customers from review have extreme,

Thomas Curran

of -- there months, past as conveyed combat, differentiator? technology consistently several real just which out any your you're And emerging ruthlessly environment bid advantage? has When if bid, in in then the competitive which by hand-to-hand greatest of the Darwinian this offerings the is natural

Ron Gusek

those the an our are the But and Well, the have ones location us efficiency bundle on for of technology peers. think and technologies that I that for to proving I assist to sure. is the one -- in a played any to ones biggest that relative improvement role are think differentiation we continue that that ultimately that's approach the Liberty our probably take led

Chris Wright

and a well a understand between efforts has long-term there doing which that how you but and fracs, strong how the it's a and interaction lot lot of watch to this fractures what -- to thing, customers spacing if engineering but recently they a themselves are develop there interest, think, -- I that's a do of as frac more well, interest got rolled a optimal Liberty other of to to off mitigate approach there's now you in size to that's the real-time, both have But is wells measure might out want start. thing. got technology

Thomas Curran

Thanks Helpful. questions. for taking my

Chris Wright

You bet. you, Thank Thomas.

Operator

Energy. ahead. question is up from follow Please with The a Daniel next go John Simmons

John Daniel

Thank you in. back for me pulling

X. of electric yet? versus Tier and path the if how few of say dual leased you so, you many if here. Can ones quick you're a you noted, Just would? looking or you have bought turbines type And Ron at any what guys turbine

Ron Gusek

the are how us. John. say not we technology backside. of still turbines that focused to That's or specific working then this Right piece of we a for as the certainly part would the the play to out pump any world ultimately have can bought on and yet, I exactly leased understand now we're that

look is around we've what in over work There to going are operations. lot on profile, to requirements done a We're thinking what pad like questions a in look that basis emissions of and like. power the demand the of obviously parallel understanding the year going a about supply from a terms day-by-day on of are

power become we've want understand efficiency important of to our there doesn't in are some about think ultimately to variables known come And course that terms selecting ensuring a We've for. supply. we of that then affect

work there So firm point but no at in that lots going space decisions on this time. in of

Chris Wright

I fleet relative line that's if think the be to in really industry you're that changes frac don't power is where available large places thing one we I see to widely power. trade-offs technology you going see can on going but the think off electrification. run John,

the of fracking strong. off run line very can power, advantages you electric If are

But preference weaker they're they're as get we're many in it's We -- be they're you on line If ton electric little some Ron do if And they -- could excited areas of think that they a opportunity and said we'll better some maybe thing. it's kind areas a power, areas a that. not as are -- fleets today in in make frac about sets. and seeing idea. of

John Daniel

for plans of the Chris. their And Okay. to all We're majors you Big E&Ps' eventual somewhat I contributes hopeful think, that picture growth rebalancing initiatives. continue question that we're cap to about an all mega market. hoping growth

I'm plans any just same haven't be at curious, say makes companies curve? learning the to sense all of somewhat figured impact gains, we the as the concerned the overstating that are these growth they as you out their completion thus get might independents up if yet that efficiency

Chris Wright

They down weaknesses. and incredibly now right There's we may of strengths different work be They're judicious who's their and one movements these technology way that the efficient with curve. in safe. very enormous majors, but companies. It's more in base

there. no approach others can't to they more reason and there's And maybe then get there, that get getting won't the are cautious

So different things high-quality people. super companies -- but It's way a very are yes, but are speed it done with is changing strong the of a different profile. there

percent performance much on I think think going So what's down of think I larger they years the a be their will I will conventional and road be awesome.

John Daniel

Okay. one. Last

on to the on really fleet one's no spot. a up Just elected attrition put you because follow

try its I'll permanently will I'll Liberty get guess first So that -- be guy. when fleets retired? I see But

Chris Wright

it's gray a Again question. zone there. Good

and look originally. upgraded like a were be You may may ton technologies they lower see so older oldest fleets our they that -- not

So call retired rebuilt. if you want -- that or can significantly you

Michael Stock

of from sort really Yes. of of John X-mile majority right? fleet XX,XXX-psi that work. of of the that hours -- been laterals would time of day the for So Majority vertical that post designed built like has a sort horizontal fleet the beginning sort was of XX sort we

from XXXX was you I think guess, this stuff if So about onwards. designed

the on shorter trying on, it to were permanent that -- that trailers. we're couple We back spectrum and pump not of to end lighten that So that trying the of are a try make gets we're fleets so right? up first where of equipment loads people load, end

You have transmission, et Allison the cetera.

think and that got really of Cat, very to Cat, I you've changing. as don't pretty they get a Cat forward, of of sort couple to see them overhaul. move really that of sort making maybe move fleets really will So have we a a But there early rest like significant

You X, to a the Tier same. place have can stays upgrade the radian you upgrade might But -- the really you package. rest to of

we're fact So the luckier haven't in work right happens. way the little in entered different, we gotten little for we that we a entered we're the market, that really at a time major the time the change a get the

John Daniel

Okay. you your for Thank time. Fair enough.

Chris Wright

Thank you, John.

Michael Stock

Thank you, John.

Operator

to like any This Chris turn conference over closing concludes back our question-and-answer the Wright remarks. session. I would to for

Chris Wright

thank day. every make who I single is want it the of forward you wish talking Safety proud to I of all happen look your our folks the in to hour for possible. every with wonderful the thank us, partner. months. be three day. to sincerely passionate that list and of on to also every team investors, suppliers all I'm top customers, We Liberty it make

Operator

concluded. now Conference today's for you attending Thank presentation.

You disconnect. may now

Liberty Energy (LBRT) 1 Nov 192019 Q3 Earnings call transcript