Q4 2019 Earnings Call

Good morning, everyone and thank you for joining us today to discuss our fourth-quarter and full-year 2019 operational and financial results. We are pleased not delivered solid Financial results in 2019 given a market backdrop that became more challenging as the year progressed for the full year 2019 GIF you with 2.0 billion in 8% decrease from 2.2 billion in 2018. Net income totaled $75 million in the full year and full year adjusted. Ebitda was $277 billion a 37% decline from 438 million and 2018. Annualized wage for fleet was 12.2 million compared to twenty point six million in the prior year.

Results were driven.

By challenging price environment and offset in increase in the average number of practical each deployed during the year and improved track of fission see continued strong cash generation in 2019 enabled us to invest for growth returned forty 1 million in cash to shareholders in the form of quarterly dividends distributions and the repurchase 1.2% of our total shares outstanding at the outset of the Year while investing in growing our market share and organically growing our Fleet count from 20 to fleets at the end of 18 to 24 ft at the beginning of 2023 tax return on Capital employed with 10% for the full year 2019.

All of this was achieved while improving our balance sheet to a positive net cash position at the year-end the sequential slowdown of completions in the fourth quarter was more pronounced than that experienced during the same period in 2018 as operators manage completions to fix Capital expenditures and some were constrained by Capital markets. These constraints cause gaps in the completion schedule and negatively affected overall Fleet utilization despite these challenging conditions during the fourth quarter Liberty achieve positive cash flow from operations without structural changes to our Fleet count for Workforce. We have visibility into the strong customer demand for Liberty's differential services at the start of the first quarter oil burning for a bit to best position ourselves moving into twenty-twenty.

this demand

And the commission or 24th Fleet in January a testament to the level of dedicated customer interest for our best-in-class fleets for the fourth quarter of 2019 Revenue decreased 23% to $398 million from $515 million in the third quarter of 2019. Net loss after taxes decrease to $18 million in the fourth quarter compared to net income of $19 million in the third quarter fourth quarter adjusted ebitda decreased 55% to Thirty million from seventy million in the third quarter annualized adjusted even up her fleet was five point two million in the fourth quarter compared to 12.1 million in the third quarter.

The pricing Dynamic entering 20/20 is challenging total industry Frac stages in North America were up only marginally year-over-year in 2019. I ever efficiency gains across the industry have raised a number of products stages completed by each Fleet by 10 to 20% Which implies a decrease of at least 10% off in the act of fraud fleets needed to meet demand the slowing pace of productivity that progressively lower demand for practice leads through the second half of 2019 resulting pricing pressure on Services the substantial oversupply of Frac equipment in the second half of 2019 was the pricing backdrop for twenty twenty dedicated Fleet negotiation with a supply of status staffed fracturing fleets across the industry fell meaningfully in late 2019 while this trend is helpful in the long-term we believed

impact of attrition his

Not yet supported Improvement in pricing for services at the start of twenty-twenty without Improvement in pricing increased profitability will have to come from technology increase efficiency and improve processes future activity projections for the industry are dependent on multiple factors, including commodity prices availability of capital and takeaway capacity in each Basin for Liberty fleets demand is strong in 2020. And we chose to activate our 24th Fleet earlier this year as part of growing a business with larger customers to support their long-term development programs. Liberty is always employed a strategy of investing for the future based on long-term fundamentals are competitively advantaged portfolio of Highly efficient environmentally friendly practice leads coupled with our financial strength allows us to navigate periods of challenging wage.

and to take advantage when

Cycle turns favorable a significant Topic at the Forefront of investor and customer conversations within the industry is environmental social and governance concerns, which Liberty is focused on since day one. We pride ourselves on advancing solutions that are beneficial to all stakeholders our customers our communities and our employees governance and compensation practices at Liberty have always been focused on transparency and maximizing alignment Liberty is also a first-mover in driving and environmental and socially conscious approach to hydraulic fracturing.

We be can't be began deploying dual-fuel Frac fleets in 2013 introduced our game-changing quiet fleets and 2016 and we're an early test partner with caterpillars on both tear for diesel and tear for dynamic gas blending engines. We continue our aggressive efforts in developing. Next-generation fact leads to both reduce our environmental impacts and reduced-cost customer costs by displacing diesel fuel with natural gas. We are in conversations with many customers about Liberties Next Generation fleets and recently came to terms to build Fleet 25 a tier 4 DG be quiet Fleet for an existing customer under a long-term agreement.

It takes special.

Circumstances in today's market to build capacity, but this was just such a case.

We don't view EST fleets Especial fleets. They are simply the way we do business. ESC concerns are not a box checked for Liberty. They are simply embedded in our DNA as we continue to review future Capital outlay decisions. We undertook the comprehensive study on next-generation fact leads under various operating conditions off in order to better understand the pros and cons of next-generation options preparing practice leads the Liberty team prepared a white paper in partnership with OEM manufacturers off that compares to here for diesel tear for dual-fuel and turbine powered electric brad fleets and it is available for download at our website. The comparison looked at a mission profiles fuel costs operational considerations and capital costs for each of the three options.

The results of the analysis under field operating scenarios was that with?

Current Technologies TR4 dual-fuel fleets provide the most effective combination of fuel savings reduced emissions footprint operational efficiency and capital cost greenhouse gas emissions are currently lowest for the dual-fuel technology as our total overall emissions week long, we expect to deploy both dual-fuel fleets in the near-term and potentially Next Generation electric fleets in the future.

During the 2015 to 2016 downturn Liberty played offense. We grew our market share and invested in in our technology systems and culture. We were well positioned to take advantage of an improving Market We are following the same strategy this time while the timing of an improvement in market conditions remains uncertain we expect to make significant progress in twenty-twenty across all fronts customers culture operations technology and next-generation completes. I will now hand the call over to Michael stock our CFO to discuss our financial results in more detail.

Morning, everyone. We're pleased with the performance of our team in the fourth quarter and the full year 2019 and there's a challenging Market backdrop and for the full year 2019 Revenue declined. I send to 2 billion from 2.2 million and 2018 results were driven by a challenging price environment more than offsetting a 7% increase in the average number of Frank fleets deployed in the year. They didn't come totaled $75 billion for the full year due to a new Lansing Gap accounting related to the relative timing of exchanges from class be two years.

And would have been calculated without the exchanges between the two classes of shares for your adjusted. Even I was 277 million a 37% decline from 438 million and 2015 and you leave it out to sleep was 12.2 million compared to twenty point six million in the prior.

As Chris pointed out the continuation of strong cash generation in 2019, and they would us to invest in growth returned forty 1 million in cash to shareholders in the form of dividends distributions of the repurchase of 1.2% of our total shares outstanding at the outset of the Year pre tax return on Capital employed was 10% for the full year. All of this was achieved while improving it balance sheet to a positive needs cash position at year end. We're very pleased with the operational efficiencies gained during the year and the solid Financial results are. Of signal an oversupply a friend capacity in the market and the resulting pricing pressures the sequential slow down and completions in the fourth quarter was disruptive as operators manage completions to fax capital expenditure budgets and some were constrained by Capital markets these Capital constraints cause Gap in the completion of schedule and negatively affected overall free Fleet utilization.

the oversupply of French

Which was a negative drag on spicing for pricing for spot work available to fill in gaps related to Dedicated operators scheduling issues despite these challenging conditions during the fourth quarter of Liberty achieved positive cash flow from operations that structural changes to our Fleet candle Workforce to the visibility. We had into strong customer demand for Liberty's differential services and the start of the first name.

The fourth quarter of 2019 Revenue decreased 23% of $398 million from $550 million in the third quarter of nineteen net loss after tax decreased fifty million in the fourth quarter compared to net income of 19 million in the third quarter fully diluted net loss per share was fifteen cents in the fourth quarter compared to fully diluted earnings per share of fifteen cents in the third quarter of 2019 fourth-quarter adjusted ebitda decreased 57% to Thirty million from seventy million in third-quarter and annualized just hook it up to sleep was 5.2 million and 1/4 quarter compared to 12.1 million in the third quarter.

General and administrative

Experience total $90 billion for the full year of 2019 or 5% of revenues and included non-cash stock-based compensation expense of 9.2 million dollars.

G&A expenses total 26 million for the quarter or 7% of revenues and included non-cash stock-based compensation of two point five million dollars net interest expense and associated with total 14.7 million for the four year 2019 and 3.2 million for the fourth quarter income tax expense total 14.1 million for the full year 2019 and was a three point 1 million benefit for the fourth quarter. We ended the gear with a cash balance of 130 million dollars and a net cash position of seven billion dollars a year. We had no borrowings drawn on the abl credit facility and total liquidity including a hundred and seventy 1 million available under the credit facility was $283 million dollars.

Liberty's Financial results favorable long-term Outlook strong balance sheet support our balanced strategy of disciplined growth and returning Capital to our stockholders. There is committed compounding stockholder value by reinvesting cash flow at higher rates of return a returning cash to stockholders as appropriate during the year ended Thirty One December 2019, the company paid quarterly cash dividend that distributions to stockholders and unit holders of approximately twenty-three million dollars now board of directors announced on January 22nd, 2020 a cash dividend of $0.05 per share with the class a common stock to be paid on March 20th, 2022 holders of record as of March 6th, 2020 and in distribution of five cents per unit has also been approved for holders of units at Liberty-Eylau see what you use the same record and payment date.

As Chris discussed the pricing Dynamics for 2020 a challenging due to the supply-demand imbalance of the French market and the latter half of 2019 this imbalance as being fixed by a reduction of six, but this takes time and it's not affecting pricing for work in twenty twenty years. We see a frame Market looks more positive over the next few years and this is the driver for 20 20 and Bobby decisions and the current pricing environment with current efficiencies. We're projecting the Eva directive frankly will be down slightly in the full year twenty-twenty. We compared to the full year 2019 at approximately ten million per active Friendly's in mid 2019. We took delivery of that 24 Fleet and held it out of the market and to a combination of the right customer with dedicated activity levels and projected returns supported activation. This league was placed in service in January with a dedicated customer.

In 2019. We also announced the commitment to purchase Next Generation tear for dual-fuel engines to upgrade to fleets and 20/20. If you'd a strong customer demand, we've adjusted these plans and one set of these engines will be used to build a twenty fifth Fleet.

We speak to.

Netflix binges and 20/20 to be approximately $165 million which includes 45 million for the completion of three twenty five eighty-five million dollars for maintenance capital of about thirty-five million dollars for technology Fleet efficiency improvements facilities in general Capital 325 will be deployed before the end of the second quarter with a long-term dedicated customer. We believe or redirecting the use of the T afford your fuel engines for a 25th lead in this example of optimizing our capital outlay for the highest level 2 returns.

We enter 20/20 the clear commitment to a value proposition designed to report reward shareholders and stakeholders alike through commodity Cycles. We believe that investing in the future wage is sustained focused on Technology Innovation combined with highly efficient operations in our strong balance sheet positions Liberty to deliver greater value for shareholders through the cycles. I will now turn it back to Chris before Thursday open secure and a oil production growth has slowed meaningfully over the last year and we believe this trend will continue with the anticipated 2023 action in e&p capex. It is unclear right now, whether the coronavirus will meaningfully disrupt the oil demand this growth this year in any case increase investment restrained by producers and private companies should lead to an improved supply-demand balance in both the oil market and practically Market.

ESG is a far broader subject than often discussed our industry like any industry has abroad.

Range of benefits and costs that should be considered for example over two billion people still suffer energy poverty lacking reliable access to electricity and clean cooking fuels lack of access to clean cooking fuels alone kills more people every year than AIDS and malaria combined energy poverty is also a major contributor to the other Global scourges hunger malnutrition and lack of access to clean water the folks at Liberty that are strongly motivated to play our part in combating energy poverty in the US and around the globe which would dramatically improve the lives of millions to gather with major environmental progress via reduce deforestation pressure and cleaner air as wood and crop residue burning is replaced with phone number.

Cleaner fuels like liquid petroleum gas poverty remains both the greatest threat to humans and to the environment in addition to contributing to the industry's role in combating energy poverty Liberty continues our mission to reduce the impacts of energy production and nearby communities and the broader environment since our founding Liberty has been a leader in practices and are committed to continue to push the industry forward. Well now open the line for questions.

We will now begin the question-and-answer session to ask a question. You may press * then 1 on your touchtone phone. If you are using a speaker phone, please pick up your handset before pressing the key. If at anytime your question has been addressed and you would like to withdraw your question, please press * then two months. Our first question is from Chase from Bank of America, please go ahead. Hey, good morning gentleman. Well, I guess first if we can kind of, you know, talk about the 25th Fleet. I just want to make sure that I heard you right this was an Uber Fleet or were you actually upgrading, you know, some of the the pumps George able to squeeze another Fleet out. So I just want to make sure I'm getting this right.

it is a new-build fleet, you know, we'd ordered pumps that we're going to upgrade across our Fleet, but the demand from existing customers and

And the significant interests with across our customer base and New Generation EST fleets. Let us to make the decision. This is an additional Fleet a new-build plate. Okay, and and on the pumps that you should plan to replace with a new cat pumps. Are you still upgrading those as well?

Will be change will be upgrading one of one set of the pumps rather than two. Wonderfully rather than two and then other Fleet will just continue in its rotation as a tier 2 diesel got it. Okay, and and the 24th and 25th Fleet. It sounds like the 24th Fleet started in one Q. So can you confirm that and then What's the timing for the 25th Fleet? And then what Basin? Yes, I'm chased the 24th Fleet did start in the queue one sort of, you know sort of in the middle of January started out to I think the 25th sleep when we starting in Q2. I'd say probably middle to the end is probably Windows is scheduled at the moment. That'll come and clear as we get through the build cycle. We we don't really coming on the basis. But yeah and the month we have a general migration at Liberty to grow our capacity in the Permian. We're not we're not necessarily shrinking elsewhere, but our birth.

Net ads are in the program.

Got it. All right. So one quick one, you know you talked about the the ten million of annualized Fleet for for this year, you know, could you talk about the trajectory of kind of how we get there, you know, do you get ten million in the first quarter or is this, you know, a gradual progression and you end up, you know getting above that by the time, you know, you get two three Q of this year. Yeah, Jason in generally, you know, you know, you always have a little bit of you know, kind of seasonal challenges and you know week or so slow start up, you know, the beginning of the year so say, you know, January will be you know, we'll be there that run rate Q2 and Q3 obviously over that run rate. I think you for you know, likely will have a few challenges around the capital constraints as we have seen for the last two years. I don't think they'll kind of works its way out of the system this year. So I think that'll be sort of the runway to be a you know, like a slight, you know a small bell curve as far as they go a little bit higher in the middle of the year in the summer quarters little bit lower in q1 and Q2 fall and a little bit of a game.

She is chasing customer profile that that should mitigate somewhat to drop in Q4. Although that's we don't think that's going away. We expect you for it to be down again this year, but I think we it should be a little different for us this year. Not quite as large of a drop was as we had this year and last year. Okay. All righty. I'll turn it back over. Appreciate the answer.

You guys have a good day.

Our next question is from what was that? What car say it from Alta corporate Capital? Go ahead. Thank you for taking my birth couple of questions here. Number one the 25th Fleet that you're adding. Is this a net ad for the customer the cannibalizing one of your Fleet office or one of your competitors, please.

What car it is in net add? It is in that end. What are the things we're doing right now with some of our larger customers growing our markets here at the center don't work. But this is a need for that specific righty increasing the completion account. Okay, and then the 45 million dollars investment that is, you know hard to justify with the ten million dollar if it is not returned Matrix the contribution from that keep going to be very different from the average for the fleet, you know in the past it's you know, normally 15 to 20 million dollars a bit up crew is what is required to justify a new Fleet. Are we still in the same kind of Economics range? Yes, the even of that new Fleet will definitely be higher than our average. We won't disclose specifics. But yeah that the return on that Fleet over the next few years, I think will be no different no lower than we've deployed fleets in the past four.

It was just a little color commentary on that one. I just we really don't think that the the return profile for the

This year which really was affected by the oversupply last year is really where we are. As far as with the balance Market is at the moment. So yeah, you you know, just we would say the vet those receivers are going to improve you know, with the other changes, you know in the next two years after that and that's where we look at we look at and they're sort of three year window. We look at the return profile or longer.

And then the the same question kind of applies to the 24th Fleet that you just picking up, you know, this feat was available to you last year as well. But the pricing was just down there is the return Matrix for the 25th 24th Street. Also the similar to the 25th, please the car we won't go into those details. But as we said all along it's a combination of the pricing and the the Strategic value of the customer the relationship or what it is. And so yes Fleet 24 the combination of price which will be above our average pricing and the customer and relationship. It's going forward compelled us to do it. We're we're quite excited about it. Yeah. We got our just $1,000 on that one as we see it in Q2 of last year. We had a view we knew that there was going to be this drop off of the back end of you know of last year 2019. So, you know that was going to be

Do that was going to be a challenge. So again with the

Changing customer mix, you know, we see that of being a little more steady this year and then the the study and thank you for first of all for the the very detailed good study on off the comparison between tier for dual-fuel and electric fleets and and traditional diesel engines. Now the economics of the fuel economics changed dramatically whether you use LNG C&G or fill gas, do you know for the 25th Fleet what the customer tends to use used in terms of in terms of fuel gas four people. It will be a combination that's being worked out. You know, we will in all the cases we can migrate to using as much filled gas as possible, but you can't necessarily come out of the gate across the field where you're going to authors and always have filled guests.

Okay, that's all I have for now. Thank you. Thanks for calling. Have a nice day.

Our next question is from Steven Genaro from stifel. Go ahead.

Thanks. Good morning. What was the I think two things if you don't mind just the the first to follow up on some of the prior questions when you think about the the team GB fleets particularly, let's talk about the 25th. If you don't mind, is there a willingness yet from the customer on these on a longer-term arrangement to age chair and some of the fuel cost savings you're bringing to the table or is it or is it still are the economic still just driven by efficiency? Absolutely that that that's one of the survivors there's two drivers for a customer and us to deploy one of these fleets one is it's going to be lower cost of operations and absolutely a sharing of that is fixed is not part of the economics of why it makes sense for them and why it makes sense for us.

And the other is is is is a lower cleaner emission profile. That's that that's almost independent of cost is also a driver for some customers but for us, you know to achieve that requires New Capital deployment, you got to have economics that that justified Steven just to clarify you see it efficiencies, you know, the new the new fleets are actually just the same as they just took their own place. They don't more efficient, right? So there is no inherent sort of increase in efficiency just because it's a t r 40 GB

Okay.

Thank you. And then two others one is when you look at the progression you provided some color. I think the chase on the ebitda progression just so I'm clear is the progression driven by utilization. Not any expected changes in price in 2020. Yeah, that was driven by really a utilization, you know Q one because we had to flee to the Northwest the north, you know have a little more weather challenges. Also, you have always have a slow slightly slower start the years of historically Q ones with the lower than your quarters. So yeah, that was without forcing. So pricing goes up that would that would increase the gym projections?

Great and and just one file and it's back to the the white paper you put out and I've been through it a few times and as you guys know, but when you when you think about conversations with customer and understanding the emissions profiles that you laid out do you get any customers yet saying? Yeah, but you know for issue reasons, it just sounds better off. It's electric or or how would those conversations got?

Yeah.

Look it is it is a complicated equation. It is not just a mathematical equation. So yes, yeah, there's there's Fielder's perception. I would say we don't have any customer that's not concerned about numbers. They're very concerned about numbers and and there hadn't been a good supply of actually the of those numbers out there. So it's a it's a it's a combination of those, you know wage. Is it what's there?

There is more than just numbers in in the decisions and you know, every everybody's got a little bit of a different take or different view, but I wouldn't say wild I wouldn't say wildly different.

Great. Thank you for the answers. You bet. Thanks.

Our next question is from Chris vuya from Wells Fargo. Go ahead. Good morning guys address. So first just to get a little more detail on the pricing a possible your revenues were down 23% Court of record in fourth-quarter. Just curious. If you can give a little color on how much of that was a pricing impact and then in terms of average pricing one Q at the expect that to be a little bit lower, you know, I think the range among better is probably zero to five percent. But just curious if you give a little color on pricing in the first quarter as well. Generally Chris when we talk about pricing we like to talk down here because then you can talk about dedicated pricing and as we've said little Lego dedicated pricing, you know, 2019 down to twenty twenty-five order 10% plus or minus down, you know rough numbers off. Obviously Q4. What you had is you had the Roloff dedicated Fleet Sales people were finishing up the capital budgets and you know some Capital constraints and you know debt Market issues. And so that that yep.

realization a good amount of that the South

Did a great job of refilling with with other people on spot work now, the spot pricing was very very low in Q4 because of the large oversupply of equipment and I sort of like, you know wanted to keep things working as sort of people working out where the demand was going to be in 2020. So it's really hard to compare pricing. You know, you generally I would say spot my spot pricing will bring you one over Q4 that we we don't do very much spot work other than we need to fill gaps because of these artificial constraints that happened in Q4. So that's that's sort of where we are on pricing. Okay, very helpful. Thanks. And then in terms of the first quarter I'd say on average most of your competitors are probably tracking may be up mid-single digits in the first quarter, but in general they have fewer active fleets down and kind of Consolidated work to those fleets in the fourth quarter. You're going to have a higher average fleets and and likely a strong rebound and efficiencies activity purfleet in the first quarter. Can you give us a choice?

How much you expect first you first quarter Revenue to be up?

Is that going to be like 10 to 15% or maybe just little color there? I think that's yeah. It's a very reasonable number. Thank you. Okay, right in the right ballpark. I'm great. Thanks. I'll turn it back. Thank you. Have a good day. Our next question is from James from S. I go ahead real. Good morning guys or James Chris curious about as you guys are evaluating new technologies and you and I have talked about some of the more recent things out there like 4:00 past. Do you see anything, you know on the horizon here that could be, you know, a big game-changer to efficiencies.

I don't know about Game Changer, you know, there's some of the things you and I have talked about. There's some other things we're working on. But but I would say there they took our incremental improvements, you know, we're looking for is incremental Improvement in efficiency cost and safety. Some may only hit one of those some will hit two or three of those but that's that's the goal in the in the developed systems and then roll them out and perfect them into it takes some time but we frankly that's one of the things we like about where we are Thursday. We we're not going to you know, flip a switch and make the Frack Market great and three months from now, but we have some things going on that make us feel pretty good about our competitive position and supply and demand with time will work itself out, you know, even tough to forward all that I'd say we actually feel pretty good about our business right now.

may sound weird good good to hear and then

To balance the you know, strategic nature of the business with the current pricing environment and the the really the the high focus you guys have on returns in the business office Lee with pricing where it is returns are under under pressure. You did a great job, you know with your returns in 2019, but it doesn't seems like it's more challenging yet. You're putting equipment in to the market and so long. It's a curious how you think about that. Are you willing to sacrifice a a bit on the return side for reasons because you see a better future out there or will you still be learning, you know above your cost of capital?

Good to see you say, you know, it's a cyclical business. So if you looked at how we play 2016 for example, no one no one ever positive returns, but we didn't play 2016 for 2016. We played 2016 for the coming few years. And so we took a different strategy cuz you know, we we want the highest returns we can at times but we won't make decisions to maximize return and this quarter or last quarter that will hurt the returns over the next few years when we build a fleet when we hire the people that is a many year commitment. Our goal is to maximize the return on that Capital deployed and that does not line up very well with Max, you know, we can lay a bunch of heads off and lay down least profitable fleets or whatever and boost numbers in the short term. But but that's just not the way we play the game. We want to maximize the Returns on our Capital invested off.

overtime and

And that's the that's the the same game or same story. Now this downturn is no we're approaching what we saw on the 15 or 16 sir. But I think the opportunities to get better to align with the right customers to make the right strategic decisions. They're they're the same. I mean, we had a lot of we we ended up saying no to several customer for fleets at the end of the year. It wasn't just you know, scrounging around to find enough so we could employ The Fleets we have we only brought Fleet 24 hours cuz we had lots of interests and we had you know, again fruitful dialogues about we're strategically and economically the right place to place this Fleet not just for today's pricing but that matters but what's your best Pathway to raise returns and profitability on those fleas through efficiency gains through an understanding of the way pricing will unfold with time. So, it's it's multi-year. Yep.

Turns on capital is what we look at it and have always looked at. Okay fair enough.

Stacey James

our next question is from Blake from Wolf research. Go ahead.

Hey, thanks. Good morning. Thanks for taking my questions. Wanted to follow up on james' last question. You talked about playing offense and 16 playing offense again here. I would say the big difference between now and then though is off, you know in seventeen eighteen. We saw a snapback inactivity took a lot of slack out of the market and and Pumpers, you know got pricing fairly easily in that regime. Now, you know, you're starting to see Ian PSD couple months an activity from the oil price and we might have a more moderated kind of flattish trajectory from here on out. So I guess kind of longer-term what gives you confidence that the share that you're gaining now is defensive or we'll just giving that you know investors will push back and say somebody else will go pumps and for for a lower price from like I said in a different way, are you putting more stock in the dedicated customer has the technology in your alignment with with customers on that front or you putting more stock in the supply-side attrition at some point getting better in 2020?

More in the former than the latter and and I agree with your comments. This is this downturn is in no way like the last downturn we do not expect the snap back in huge.

Growth in demand at all. And in fact, we wouldn't be supplied surprised to not see that number of fleets demanded not grow not grow but yet still have a marketable. So for us we we do believe we've time they'll be you we've seen the attrition happening. Now, we believe that will continue in the current economic conditions. But the biggest thing for us is to align with the right partners that are going to be strong going forward that are not just commodity buyers. Hey, we can you know, this guy's price list shows the pound of sand is cheaper than yours, you know. See you later and maybe we'll come back in the future. There's all different kinds of customers out there. So for us it's through time finding the customers that are strong and that's one of mutually beneficial partnership. I think by being the short-term buyer of cheapest pound of saying is not actually a long-term cost minimization strategies.

Operators look everyone plays a different strategy in different game and you know not not our role to question question.

How people make their decisions but so I I'd say the biggest thing for us is to strategically aligned with the right customers. We're going forward we can have growing and better economics and we can work with them to deliver the same thing to them. Okay understood and then as a follow-up here on the side first, you know, really appreciate the commentary and and sort of the global reach for oil change and I hope this is a a message that you know is is spread across all the peers across the group specifically with what you guys can do in the field with the SG. And as a result of the white paper the way that we read it is that there's one scenario in which you know, electric crack is potentially as competitive. If not more than dual fuel from an ESG standpoint and that's on on field gas wage. Um, so we know that from an emissions standpoint and from a an overall return standpoint dual-fuel is is more competitive thermal efficiency is better across a wider range of operating conditions. But what is your conversation with customer?

Around specifically investing in fuel gas infrastructure. What's the viability you think in the Permian? Is it something where every operator across all the the entire Basin can operate on a gas and then

And any conversation around customers buying the turbine and and power generation portion of this cuz that would greatly improve the economics of the E Fleet vs. To your Ford Edge as well. Thank you.

Yes, so the field gas vs. LNG in CNG. Is it Dynamic moving thing? No, I don't think will soon be a case where everyone will have filled gas. But you know, there's been precious little of that done, you know over the last week. We've been in the dual-fuel business for seven years. Now we've done we've I would say we've probably done a fair amount of the field gas used that's been done in the industry. It will grow it is growing but it's it's it's not as easy as it sounds the same. I I think I disagree a little bit with the comment on the electric supply who owns the turbine, for example, I mean, it's still capitalist, you know, it's capital in our book our Capital up there but but its capital that's deployed, So, you know, I don't know if there's an there's an easy fix to that. We we are not I want to be clear. We're not saying one Technologies forever the winner would ever we just evaluated what? Yep?

Putting today and what are the profiles of that? We have efforts in a few different areas to to change the

Things work today so that that report was a state of of the play of the stance today. But yes that that will move forward and that will change God. Yeah. I was I was talking more from the perspective of the service company buying the E Fleet if if the customer would take on that cost but that that makes a lot of sense. Of course, I appreciate the the commentary and the time and I'll turn it back.

Our next question is from Ian McPherson from Simmons. Go ahead.

I you know, I think if we accepted this principle that Liberty can continue to grow share in a market that is shrinking because of efficiency is off and pricing is still weak. It begs the question to me when fleets 26 and 27 or announced uh, if you have

You know the ability to deploy $24.25 and today's conditions. It seems the conditions aren't getting worse from here at least based on your playbook. So what are your thoughts on the next leg of growth and wage and um, whether that might come in to interview this year

Devil's in the details. No, no current plans very possibly no more fleets this year. But if the conditions are are compelling combination of strategy, I mean strategic relationships with the economics of it not just in the short run but in the longer-term it it'll make sense. But you know, there's there's a growing desire for the Next Generation fleets. Am I think for for us, you know growth if there is growth beyond what we've announced and nothing to says there will be one for for for compelling economic and partnership opportunities, We're in dialogues. We're in dialogues to do that. But we're well aware of the markets oversupplied card economics are are not great and that is a large check on our willingness to invest quite a large check.

I think it's Chris. That's it for me. Thank you. Yep. Thanks. Thanks to you.

Our next question is from Scott Gruber from City. Go ahead. Yes, good morning. I just really have one question to ask you to the previous line of questioning but it just strikes me that when I think about your offensive strategy now, is it more reflective of your life and that your competitive Advantage actually improves over time and maybe more so in a tough Market than a good Market that you can actually make money in a tough market and reinvest in your business and in your people and in technology While others can't and that's effectively, you know, the partner that your customers want. So to me, it just seems like the customer alignment is is important but it's more of an output than an input in terms of the the underpinnings of your strategies. Is that fair?

I think that's a reason.

We Fair statement of things. Yeah, but the ultimate goal for us the ultimate way to assure a high return on capital is to build a competitive Advantage. You know, we're all going to be dead in the same market right now and you're from now in ten years from now. So what we need to be able to do is be able to deliver a higher quality service, that's more desirable to our customers at a lower price. Right? I mean lower costs for us to deliver it. So yes efficiency scale the right customers the right Investments and Technologies. That's what will help us build an ability to do this to do do a better job than our competitors and cost us less to deliver it than our competitors. So yeah, I I think you said it think you said a well.

That was it for me. Thank you. Thanks. Thanks. Thanks.

Our next question is from Georgia. Larry from tph. Go ahead morning guys. You think about the first quarter of 2020 the commentary you guys have given on revenue and kind of annualized you've been. Targets has been helpful and and also the factory in response to chase this question was helpful, but just thinking about the first quarter is using the queue one of 19 a decent analog to think about the profitability Improvement or is the fact that maybe we had a little more benign of a winter season possibly at a faster start to activity than we've had the last two years. Should we think about the incremental margins is potentially being higher in q1 twenty then then they were and uh Q 119 or was there something that that mitigates that is the pricing pressure more pronounced than it was last year.

Yes, I think.

I'm pretty sure is a little more pronounced. Um, yeah Q one last year was a really efficient order. It was actually pretty benign form from that point of view. You know, I think we came out of the gate. Sort of took her than we you know, you would then average for the last five years. So in generally I would say I wouldn't Bank on that every year. So yeah, I think there was you know, I'd say yeah me or maybe two one rebound is going to be a little you know, less good than the key 119 one but you know, they might be a little more difference between Q2 and Q3 and q1 and twenty when they wasn't nineteen but it all averages across the board for the great that that's helpful and then the the dbgt or four fleets. I know you guys were an early mover in in ten that technology there which speaks to the push from your end on looking at these Investments that are positive from any EST standpoint, but also benefit your customer.

On the cost standpoint and potentially benefit you all as well. I was just curious how much demand pull is there from the customers for pressure Pumpers for you to impact these new technologies whether it's athletes or

Dbgt or for offering how much of its Liberty how much of its the customers?

But there there is a lot from the customer's you know, so it's a dialogue but you know, I think as you as you've heard from others, the problem is everybody wants to get better and cleaner and do all that stuff but the economics for their economics and their business is so challenged that you know, most want a better Fleet and they don't want to pay anymore. You know, I mean, that's that's where a lot of people are and that simply doesn't work. So the question is, you know, you gotta have that so customer interest and it's not for everybody. I would say a good majority of the customers out there. There are rural areas and this is not this is not an issue for them. Right? It's bigger players in the public eye or in areas near where there's a growing interest in it. But then that that the question the balance why we have way more dialogues than agreement to do something is to get better in that phone number.

Is is it good chunk of capital up front?

And you know, we're we're busy. It's just like they're in business so together, they'll be some deals done to move this way. But in a in a tough Market that we're in today that migration to next-generation practically probably goes relatively slowly probably goes relatively slowly.

It makes perfect sense. Thanks. Thanks very much, Chris. Thanks, Michael. You better thanks appreciate our next question is from Emily from coward Vale. Go ahead. Hey, good morning guys. Just a quick question. I may have missed it in the commentary earlier. If you could just go again with the gas cap ex break down for 20 20 if there's any incremental capex needed to put $25 to work or $24 for that matter 24s package extra camping's for that. I think $165 million for the full year of which $45 million is displayed in to finish up at least 25. The balance is in maintenance capex technology improved Fleet improvements. So as you can see, you know, year-on-year Catholics, but we just down slightly and obviously even though will be down slightly but cash flow generation will actually be real, you know, not too dissimilar your name.

You're on the free cash flow generation.

Perfect. Thanks.

Our next question is from Thomas current from B Riley. FBR. Go ahead. Good morning. Thanks for taking my questions on Liberties. I I noticed that you posted a series of primer videos to introduce and explain various completion technologies that you can or or expect to offer the set included a video in which Ron took a turn off as the star provided an overview of energy recovery is Vortex system. Would you update us on your latest thinking on and and expectations for Vortec? What's the earliest we might see you commercially introduced the first system and then how many Vortec units do you ultimately plan to deploy?

Oh, that's that's a good question. I'm we're always a little careful about what we say there of course energy recovery is a public company as well and they have not reported yet this quarter. So I have not provided any updated commentary. I will go so far as to say that that that testing is is ongoing we continue to continue to pump sand through through the vortec assembly in in their test facility in Katy and Thursday. We continue to be happy with the progress that they are making their. So, uh, you know at this point in time, I'm not going to comment on a on a potential time for commercialization but certainly would go so far as to say that wage and if we get to a point where we're happy with that technology commercially will deploy it rapidly across our fleets starting with those areas where we feel the benefits going to be realized as as quickly as possible.

That's helpful. Thanks, Ron and then shifting gears from

Horsepower construction to Contrition and and what most of your Rivals are doing Chris how much horsepower do you estimate has been permanently withdrawn from the industry's marketing Fleet. And and from here how much more do you expect to be retired? You know how much incremental horsepower do you think will be put out to pasture over the next six to nine months? I would say I don't know and I don't know, you know, that's how I you know, I don't know that it have any incremental inside to to what you have, you know, clearly a lot wage been retired. Some has been sent overseas a lot has been scrapped some are shrinking Fleet counts and using those extra horsepower to bolster them so that you know, they can keep efficiency up. So a lot of fleets have grown but you know, I think in the economic conditions were in today, you know, unless you have something else.

Special it's it's a tough return time and particularly if you're a you know bottom half player. So I I think the the tough Economic Times right now. I think that's necessary. You know, this is what will reduce Supply and bring discipline and investing these you know, cyclical businesses are cyclical for a reason and wage. This is the this is the necessary part of the cycle. Just as you know, when times are pretty good. So whatever the market place is, I don't have any particular Insight everyone, you know, sort of game-time decisions of what they're doing, but there's very very little building going on and and there's a you know, there's a lot of fleets being aged and work and shrunk so month supply is shrinking as there's just no way around that and that's what we need.

I appreciate the answers guys.

Thanks. Thank you. Appreciate your next question is from Chris volume from Wells Fargo. Go ahead and log back in just one more on on your calendar some of your competitors have commented on this. So I just wanted to get your take in terms of visibility. Should we think that your calendars for the first quarter is pretty much. And to what extent do you have visibility into the second quarter at this point? We haven't even larger percent. Now that are dedicated fleets then that we've had it's always been our model and it's even a larger total percent and more single customer dedicated Fleet. So yes, the first quarter calendar is full the second quarter calendar is full the third quarter calendar is full of stuff happens right people have issues with Wells or gathering systems. I mean, they'll be it doesn't mean our sales guys are taking a nap things things happen and we tend particulars new customers like will move.

Faster than they're used to moving we catch up to Riggs, you know, so then sometimes we have to supplement and we're and talk with other customers.

To step in and fill gaps some of the spot work we did in Q4 is the meet new customers. So, you know, it was a pretty poor a poor financial quarter for us in Q4, but some positive things happening to you for but yeah, Calendar's full, you know, as far as we can see we're still have some concerns for sure, you know later in the year and we're working now, you know try to get some of the private schools were to schedule their work, you know as much as they can at the end of the year.

Okay, that's helpful. Thanks and then just one more on pricing and and I think I understood this correctly. But I think it might be good for everyone to appreciate it. If I've got it, right. So the fact that you know, you're you're getting rid of the the terrible mix from spot pricing in the fourth quarter cuz that actually suggest that your average realized pricing and the first quarter will be higher than the fourth quarter off. You know, I haven't done something down those numbers that way but I would say yes. Okay. All right. Just want to make sure I understood. All right. Thank you. I'll turn it back.

This concludes our question-and-answer session. I would now like to turn the conference back over to Chris Wright for closing remarks Thursday today and your interest in and intriguing dialogue about Liberty. I want to sincerely thank the passionate wonderful folks on team Liberty that make it happen every hour of every day. I'm proud to be your partner safety is the top of the list for us all of us every single day. I also wish to thank our customers suppliers and investors who make it all possible. Have a nice day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.