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Liberty Oilfield Services First Quarter 2022 Results

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   |    Thursday,April 21,2022

Liberty Oilfield Services Inc. reported first quarter 2022 financial and operational results.

Summary Results and Highlights:

  • Revenue of $793 million increased 16% sequentially
  • Net loss1 was $5 million, or $0.03 fully diluted loss per share
  • Adjusted EBITDA2 of $92 million
  • Integration of PropX logistics and software solutions improved frac operations in the first quarter
  • Liberty wireline completed the longest-ever lateral length and deepest measured depth well onshore in North America
  • Multiple operational pumping records, including 75 hours of continuous plug and perf pump time

Conference Call Highlights

  • "The frac services market is seeing robust activity improvement and a tightening of the supply demand balance. Drilled but uncompleted well, inventory has stabilized, after a steep continuous decline from pandemic elevated levels. Available frac capacity is nearing full utilization and demand has increased, and supply is limited due to continued equipment attrition, labor shortages, supply chain constraints, and very low investment in recent years. Today, profitability of active frac fleets across the industry are still below healthy levels. But trending strongly. We need to see and we will work to drive healthy returns in the frac industry to match the already robust returns of our customers."
  • "Seven years of underinvestment in oil and gas production capacity was accompanied by an even more dramatic drought in investment in new frac fleet capacity. The brief 2017 to 2019 up cycle was all the about redeploying fleets built earlier in the decade with relatively modest new fleet construction. Much of that older equipment has now been scrapped. The emerging cycle is likely to last longer and be characterized by a much slower and more modest rise in active frac fleets."
  • "[The] supply, demand market today is quite tight. This tightening last fall and I think as we said in our last call, is meaningfully tighter in December than it was in October and that trend has continued. And there's just not that much spare capacity left. So do you get to the very near the end of whatever can easily be deployed is already deployed. Yeah, you have a tight market and we have today a tight market. So our expectation of a 10% revenue gain, something like that Q over Q. The biggest component of that is just increasing activity. Obviously, in the first quarter there is always weather, seasonal issues that shave a few percentage points off revenue. This year, maybe that was magnified a little bit by the trucker sand struggles, particularly, very early on in the quarter. So GAAP Q2 is seasonally a better quarter as far as revenue and generally, we will drop the bottom line. So I would say, activity is the biggest piece but continued migration of pricing upwards across our fleet is a component of that as well."

 

Chris Wright, Chief Executive Officer, said: "We entered 2022 with the right people, asset base and strategy to execute in a tightening frac market, and we are pleased to deliver strong first quarter results. This quarter demonstrated the benefits of our vertical integration strategy as we successfully navigated an operationally challenging environment. Last year we expanded our services to include wireline and became a major sand producer, obtaining two large mines in the Permian Basin. We enhanced our technological advantages through the acquisition of PropX with wet sand handling and industry-leading last-mile proppant delivery solutions. Together with our ongoing development of digiFrac electric fleets, these advancements provide customers with differential frac services. The integration of our acquisitions in 2021 came at a short-term financial cost, but these actions are already paying significant dividends in 2022.

“Liberty revenue increased 16% sequentially as we leveraged our vertically integrated portfolio to better mitigate the early quarter impacts of sand and logistics challenges, notably in the Permian basin. We are encouraged by the progress we’ve made in the first quarter. Looking ahead, our collaborative approach with our customers and continued investment in innovation positions us well for the future,” continued Mr. Wright.

Outlook

Restrained global investment since the last oil and gas downturn has led to supply challenges at a time where worldwide demand for energy is growing and expected to surpass pre-pandemic levels in 2022. Relatively low and declining oil and gas inventories have led to persistent upward pressure on commodity prices, even prior to the Russian invasion of Ukraine. Although Russian export volumes of oil and gas have been only modestly impacted so far, uncertainty regarding potential future impacts of sanctions and buyer aversion to Russian hydrocarbons presents significant risk to future supply and demand balances. The modest, below stated plan, increases in OPEC supply and release of global emergency oil reserves are simply not enough to supply a rebounding world economy. North American oil and gas are critical in the coming years.

Tight oil and natural gas markets, coupled with geopolitical tensions in many key oil and gas producing regions, have all eyes on North American supply. The North American economy is proving more resilient to today’s global challenges in significant part due to a secure supply of natural gas. North America is well positioned to be the largest provider of additional oil and gas supply that powers the global economy and enables the modern world.

The frac services market is seeing robust activity improvement and a tightening of the supply-demand balance. Drilled but uncompleted well inventory has stabilized after a steep, continuous decline from pandemic-elevated levels. Available frac capacity is nearing full utilization as demand has increased and supply is limited due to continued equipment attrition, labor shortages, supply chain constraints and very low investment in recent years.

As the market tightened last fall, our customers recognized that the unfolding recovery would increase the importance of having the highest quality partners able to navigate turbulent times and deliver operational excellence. Today’s operational challenges include labor shortages, sand supply tightness and logistics bottlenecks. Liberty customers are seeing differential execution in this difficult environment, in part due to vertical integration from our OneStim and PropX acquisitions.

“In the second quarter, we expect approximately 10% sequential revenue growth, driven by increased activity and continued incremental improvement in net service price. These factors are expected to drive higher margins in the second quarter, partly offset by ongoing inflationary pressures,” commented Mr. Wright.

“In keeping with our company’s expanded scope, we are updating our name to Liberty Energy. Energy enables everything we do, and our passion is to energize the world. Our many technical innovations and investment in vertical integration sets us up nicely to continue creating additional value for our customers and Liberty. We continue to invest in the early part of this cycle, to grow our competitive advantage and capitalize on strategic opportunities to benefit our shareholders over the long term,” continued Mr. Wright.

First Quarter Results

For the first quarter of 2022, revenue increased 16% to $793 million from $684 million in the fourth quarter of 2021.

Net loss1 (after taxes) totaled $5 million for the first quarter of 2022 compared to net loss(after taxes) of $57 million in the fourth quarter of 2021. The net loss for the quarter was negatively impacted by $9 million related to loss on disposal of assets and remeasurement of liability under tax receivable agreements (TRA).

Adjusted EBITDA2 increased 345% to $92 million from $21 million in the fourth quarter. Please refer to the reconciliation of Adjusted EBITDA (a non-GAAP measure) to net income (a GAAP measure) in this earnings release.

Fully diluted loss per share was $0.03 for the first quarter of 2022 compared to a loss of $0.31 for the fourth quarter of 2021.

Balance Sheet and Liquidity

As of March 31, 2022, Liberty had cash on hand of $33 million, and total debt of $212 million including $108 million drawn on the ABL credit facility, net of deferred financing costs and original issue discount. The term loan requires only a 1% annual amortization of principal, paid quarterly. Total liquidity, including availability under the credit facility, was $222 million as of March 31, 2022.


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