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Liberty Slims Down Staff, Capex, Fleets; Execs Take Further 10% Pay Cut (30% Total)

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   |    Friday,April 03,2020

Liberty Oilfield Services Inc. has reduced the size of its workforce, the number of active frac fleets deployed, capital expenditures and its general and administrative cost structure in response to significantly lower customer activity.

The amount of jobs being cut was not immediately clear, but it had just over 2,500 employees according to its latest filing.

Exec Taking Deeper Salary Reduction

Additionally, the company is making further cuts to the salaries for its top executives, lowering their pay by 30% (an increase from its prior reduction of 20%, which was reported in mid-March).

This is in addition to the cancellation of cash variable compensation programs for the year which equate to a reduction of approximately 66% in annual cash compensation versus 2019. Liberty’s directors have agreed to reduce their cash retainer for Board service by 30%, effective April 1, 2020.

Capex Cut by 50%

Liberty is also cutting 2020 total capital expenditures to be in the range of $70 to $90 million, a reduction of approximately 50% from our previous expectation.

The Company continues to expect its 2020 capital expenditures to be weighted to the first half of the year.

Dividend Suspended

Liberty is suspending future quarterly dividends until business conditions warrant reinstatement. Disciplined capital deployment is a core Liberty principle and we look forward to resuming dividend payments when appropriate. The Company plans to provide a more detailed update on operating and financial conditions in conjunction with its earnings release for the first quarter of 2020.

Liberty CEO Chris Wright commented, “The health and safety of people always comes first. Liberty has been a leader in responding to the COVID-19 pandemic to protect the safety of our team, their families and all those we interact with. The COVID-19 pandemic has led to the world’s largest oil demand destruction that will reset oil and gas development activity levels over the next year or more. We have never before reduced our workforce, always charting a different path. We deeply regret that today’s circumstances necessitate that we make significant cuts to our workforce and restructure the compensation for those remaining. I commend the whole Liberty team for always going above and beyond. I want to sincerely thank the Liberty team members who are leaving for their contributions and sincerely hope that we have the opportunity to work together in the future.

"These industry conditions are unprecedented. Hence, we are taking bold, decisive action to position Liberty to survive this downturn and come out in a stronger competitive position, just as we did during the previous downturn. We are playing the long game. The next few months are likely to be the most trying as storage constraints are blowing out differentials across all basins, leading to significant interruptions in frac activity. We currently expect that industry wide activity in the second quarter will be down more than 50% from first quarter levels. We are working closely with our customers to help them deal with these interruptions. There is likely to be an increase in industry activity from second quarter levels in the later part of the year, but it will be at a reduced level from the activity before the COVID pandemic. Our top tier customers value the Liberty partnership, innovations and efficiency that enhances their operations during these challenging times. All of our key customer partnerships will be strengthened during this crisis. We are grateful for the efforts and dedication of our employees, customers and suppliers who together will navigate these troubled waters.”

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